ANNUAL
REPORT
3
CONTENT
INTRODUCTION
CORPORATE PROFILE
INVESTOR INFORMATION
MANAGEMENT BOARD
SUPERVISORY BOARD
CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT
SUPERVISORY BOARD REPORT
ECONOMIC ENVIRONMENT
ECONOMIC BACKGROUND
CROATIAN MARKET OVERVIEW
REGULATORY OVERVIEW
CHANGES IN REPORTING
BUSINESS REVIEW
SUMMARY OF KEY FINANCIAL INDICATORS – HT GROUP (INCLUDING CRNOGORSKI TELEKOM)
SUMMARY OF KEY FINANCIAL INDICATORS – HT GROUP IN CROATIA
SUMMARY OF KEY FINANCIAL INDICATORS – CRNOGORSKI TELEKOM STANDALONE
OVERVIEW OF SEGMENT PROFITABILITY
HT INC. FINANCIAL HIGHLIGHTS
CORPORATE SOCIAL RESPONSIBILITY
HT GROUP FINANCIAL STATEMENTS
CONSOLIDATED INCOME STATEMENT
CONSOLIDATED BALANCE SHEET
CONSOLIDATED CASH FLOW STATEMENT
CONSOLIDATED FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
RESPONSIBILITY FOR THE CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
CONSOLIDATED STATEMENT OF CASH FLOWS
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
Corporate profile
Investor information
Management board
Supervisory board
Corporate governance code
compliance statement
Supervisory board report
INTRO-
DUC-
TION
6 7
INTRODUCTION CORPORATE PROFILE
At a Glance
HT Group (Hrvatski Telekom d.d. (HT d.d. or the Company) and its
subsidiaries (together: HT Group)) is the leading provider of tele-
communications services in Croatia, offering fixed and mobile te-
lephony services, as well as wholesale, Internet and data services.
Hrvatski Telekom d.d., including its subsidiary companies, is the
leading provider of comprehensive information and communica-
tion solutions and services at the whole territory of the Republic
of Croatia. HT Group provides wide spectrum of fixed broadband
network products and services, mobile communications, inter-
net, IPTV, IoT services and data transfer services between devices
(M2M). Additionally, Group also provides integrated Information
and Communication Technology solutions (ICT) for business and
corporate customers and data transfer services (leased lines,
Metro-Ethernet, IP/MPLS).
History and Incorporation
Hrvatski Telekom d.d. is a joint stock company, majority owned by
Deutsche Telekom Europe B.V. It was incorporated on 28 Decem-
ber 1998 in the Republic of Croatia, pursuant to the provisions of
the Act on the Separation of Croatian Post and Telecommunica-
tions into Croatian Post and Croatian Telecommunications, by
which the business operation of the former HPT – Hrvatska pošta
i telekomunikacije (HPT s.p.o.) was separated and transferred into
two new joint stock companies, HT – Hrvatske telekomunikacije
d.d. (HT d.d.) and HP – Hrvatska pošta d.d. (HP d.d.). The Compa-
ny commenced operations on 1 January 1999.
Pursuant to the terms of the Act on Privatization of Hrvatske
telekomunikacije d.d. (AoP) (Official Gazette No. 65/99 and No.
68/01), on 5 October 1999, the Republic of Croatia sold 35% of
shares in HT d.d. to Deutsche Telekom AG (DTAG). On 25 October
2001, DTAG purchased further 16% of shares in HT d.d. and thus
became the majority shareholder with a 51% stake in the Company.
Pursuant to the Share Transfer Agreement, in December 2013,
DTAG transferred 51% of its shares in the Company to T-Mobile
Global Holding Nr. 2 GmbH. Pursuant to the Deed of issuance of
a share against non-cash contribution, in February 2014, T-Mo-
bile Global Holding Nr. 2 GmbH transferred 51% of the shares in
the Company, to CMobil B.V. In April 2015, CMobil B.V. changed
its registered name into Deutsche Telekom Europe B.V. The
above-mentioned transfers of shares were executed as a part of
the internal restructuring performed within DTAG and as a result
thereof, DTAG’s influence in HT d.d. remains unchanged.
In 2002, HT mobilne komunikacije d.o.o. (HTmobile) was estab-
lished as a separate legal entity and subsidiary wholly owned by
HT d.d. for the provision of mobile telecommunications services.
HTmobile commenced commercial activities on 1 January 2003
and in October 2004, the company’s registered name changed to
T-Mobile Croatia d.o.o. (T-Mobile).
On 1 October 2004, the Company was re-branded in T-HT, thus
becoming a part of the global T- family of Deutsche Telekom. This
evolution of corporate identity was followed by the creation of
trademarks for the two separate business units of the Group: the
fixed network operations business unit, T-Com – which provides
wholesale, Internet and data services; and the mobile operations
business unit, T-Mobile.
On 17 February 2005, the Government of the Republic of Croatia
transferred 7% of its shares in HT d.d. to the Fund for Croatian
Homeland War Veterans and Their Families, pursuant to the AoP.
In May 2006, the Company acquired 100% of shares of Iskon In-
ternet d.d., one of the leading alternative telecom providers in
Croatia.
As part of the continued privatization of HT d.d., on 5 October
2007, the Republic of Croatia sold 32.5% of HT ordinary shares
through an Initial Public Offering (IPO). Of the total shares includ-
ed in the IPO, 25% were sold to Croatian retail investors, while
7.5% were acquired by Croatian and international institutional
investors.
Following the sale of shares to current and former employees of
Hrvatski Telekom and Croatian Post in June 2008, the Govern-
ment of the Republic of Croatia reduced its holding from 9.5% to
3.5%, while private and institutional investors are holding a share
of 38.5% in total.
In October 2009, T-Mobile Croatia was merged into HT d.d., ef-
fective as of 1 January 2010. HT Group was organized into Res-
idential and Business unit. On 21 May 2010, the Company’s reg-
istered name was changed from HT – Hrvatske telekomunikacije
d.d. to Hrvatski Telekom d.d.
On 17 May 2010, HT d.d. completed the acquisition of IT services
company Combis d.o.o., extending its reach into the provision of
IT software and services for a client base that ranges from small
businesses to government departments.
In December 2010, according to the records stored in the Central
Depository & Clearing Company, the Republic of Croatia trans-
ferred 3.5% of its shares in the Company, to the Pensioners’ Fund.
On 12 December 2013, the Pensioners’ Fund transferred 3.5% of
shares in the Company to the account of the Restructuring and
Sale Center (Centar za restrukturiranje i prodaju – CERP). The Re-
public of Croatia established CERP in July 2013 as legal succes-
sor to the Government Asset Management Agency. As a result,
the Republic of Croatia again holds a stake in HT d.d. In Decem-
ber 2015, following the public auction, CERP sold 500,000 of its
shares in the Company (0.6% of HT d.d. share capital) via Zagreb
Stock Exchange trading system. Following this sale of shares
CERP reduced its holding from 3.5% to 2.9%.
In June 2014 HT took over management of OT-Optima Telekom
d.d. (Optima), following the completion of the pre-bankruptcy
settlement procedure. By the conversion of claims into share
capital and following the realization of a Mandatory Convertible
Loan instrument in July 2014, HT has acquired total of 19.1% of
Optima’s share capital.
Zagrebačka banka d.d., as the largest creditor of Optima, trans-
ferred controlling rights acquired in the pre-bankruptcy settle-
ment procedure to HT. Croatian competition agency (Agencija za
CORPORATE PROFILE
INTRODUCTION CORPORATE PROFILE
zaštitu tržišnog natjecanja -AZTN), has determined a set of mea-
sures defining the rules of conduct for HT with regard to manage-
ment and control over Optima. The duration of the concentration
of HT and Optima shall be limited to a period of four years, start-
ing from HT's acquisition of control over Optima.
On 3 November 2014 an extraordinary General Assembly of Op-
tima was held, at which the conversion of Tax Administration re-
ceivables into company capital was approved, thereby increasing
the share capital by a total amount of HRK 2,910,110.00. After the
registration of this change in the Court Registry in 2015, the own-
ership interest of HT in Optima decreased to 19.02%.
In July 2016, Optima’s Management Board adopted a strategic
decision on the merger of H1 Telekom d.d. (H1) with Optima in
order to achieve positive synergies among the companies and
to increase Optima’s value for its existing and new shareholders
(previous H1 shareholders). Accordingly, Optima submitted to
the AZTN an Application for Intended Concentration. Following the
aforementioned change in circumstances, HT submitted a request
to prolong the temporary management of Optima until 2021.
In June 2017, AZTN passed the decision by which the duration of
temporary management rights of Optima for HT is prolonged for
an additional three-year period, that is, until 10 July 2021. AZTN
has also reached the decision on conditional approval of the con-
centration pursuant to the Merger Agreement of the company H1
into Optima, concluded on 29 July 2016. Merger is executed in
such a way that the total assets of H1 are transferred to Optima,
thereby H1 ceases to exist as a separate legal entity, and in ex-
change for H1 shares previous H1 shareholders obtain shares of
Optima.
The procedure of the merger of H1 into Optima was completed
as at 1 August 2017, and for the purpose of the merger proce-
dure, an increase of share capital of Optima, for the amount of
58,864,560.00 HRK, was also carried out. Increase of share cap-
ital was carried out by issuing 5,886,456 new ordinary shares
that were transferred to previous shareholders of H1 Telekom.
After the registration of this change in the Court Registry in Au-
gust 2017, the ownership interest of HT in Optima decreased to
17.41%. Notwithstanding this decrease in ownership interest, con-
trolling rights transferred to HT pursuant to the Agreement with
Zagrebačka banka have remained unchanged.
At the beginning of January 2017, HT d.d. concluded a Share Pur-
chase Agreement with Magyar Telekom, Nyrt, based in Budapest,
Hungary. Under the agreement, Hrvatski Telekom acquires Mag-
yar Telekom’s 76.53% stake in Crnogorski Telekom A.D., based in
Podgorica, Montenegro, at a purchase price of EUR 123.5 million
(approximately HRK 933 million). Crnogorski Telekom is the larg-
est telecommunications company in Montenegro and provides a
full range of fixed and mobile telecommunications services.
On March 1st, 2018 HT d.d. concluded respective Agreements on
transfer of HT’s interest and shares in its subsidiaries and related
companies seated in Croatia, Iskon Internet d.d., OT-Optima Tele-
kom d.d., Combis, usluge integracija informatickih tehnologija,
d.o.o., Kabelsko distributivni sustav d.o.o. and E-tours d.o.o., to HT
holding, a limited liability company established and fully owned
by HT. Registration of transfers of interest and shares in all of
these companies was conducted during March 2018. Crnogorski
Telekom A.D. is also included in the portfolio of HT holding, as of
January 2017.
In September 2018, upon the obtaining of all necessary regulato-
ry approvals, HT d.d. concluded the sale transaction of its electric
energy business to the buyer RWE Hrvatska d.o.o. HT has been
offering retail electricity services to residential and business cus-
tomers as of December 2013.
In November 2018, HT d.d. concluded a Purchase Agreement
with the company HP-Hrvatska pošta d.d. on acquisition of 100%
stake in the company HP Produkcija d.o.o., provider of evotv ser-
vice. In February 2019 HAKOM approved HT’s takeover of HP
Produkcija d.o.o., thus enabling the closing of the transaction.
Registered name of HP Produkcija d.o.o. has been changed to HT
Produkcija d.o.o. in April 2019. Evotv is a simple service present at
the Croatian PayTV market as of 2012, enabled by using a digital
DVB-T signal which can be received through the existing antenna.
Within the strategy of restructuring non-core parts of HT’s busi-
ness operations, in November 2019 a Contract was concluded
with Uniline d.o.o. on transfer and sale of the share held by HT
holding d.o.o. in the company E-tours d.o.o. Transaction has been
closed on 31 December 2019.
In January 2020, as in accordance with the AZTN decision from
June 2017, HT started the sale process of all of its shares held
in the company Optima, through an Invitation for Submission of
Offers for the Acquisition of Shares in Optima, published in the
printed edition of the international financial herald Financial
Times. In December 2020, HT and Zagrebačka banka d.d. jointly
engaged the investment bank CREDIT SUISSE (DEUTSCHLAND)
AKTIENGESELLSCHAFT, with its registered seat in Frankfurt am
Main, Germany, for the continuation of the sale process of their
shares in the company Optima.
In July 2021, HT and Zagrebačka banka d.d. signed an agreement
with the company Telemach Hrvatska d.o.o. owned by Unit-
ed Group (United Group B.V., The Netherlands) on the sale and
purchase of the shares of the company Optima. The subject of
the transaction is sale of total of 54.31% shares of Optima out of
which 36.90% are owned by Zagrebačka banka, while 17.41% are
owned by HT holding d.o.o., a company in 100% ownership of HT.
The concentration of HT and Optima ceased as of 10 July 2021,
by which date management of HT over Optima ceased as well.
HT and Zagrebačka banka signed the Share Transfer Agreement
on 21 January 2022, whereby they transferred their shares in Op-
tima to the company Telemach. HT holding thus transferred its
17.41% stake and Zagrebačka banka transferred its 36.90% stake
in Optima to Telemach Hrvatska d.o.o., and Telemach Hrvatska
d.o.o. acquired the total of 54.31% of the stake in Optima.
In September 2021, Agreement on transfer of share held by HT
holding d.o.o. in Kabelsko distributivni sustav d.o.o. (KDS) was
concluded, between HT holding d.o.o. as the transferor company
and HT as the transferee company. HT and KDS concluded on 29
September 2021 the Agreement on merger of KDS into HT. On 1
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INTRODUCTION CORPORATE PROFILE
December 2021 the merger has been entered into the Court Reg-
ister of the Commercial Court in Zagreb, by which the merged
company KDS seized to exist and the acquiring company, HT,
became the universal legal successor of the merged company,
thus entering into all legal relationships of the merged company.
HT and HT Produkcija d.o.o. (HTP) concluded on 15 March 2022
the Agreement on merger of HTP into HT. On 1 June 2022 the
merger has been entered into the Court Register of the Commer-
cial Court in Zagreb, by which the merged company HTP seized to
exist and the acquiring company, HT, became the universal legal
successor of the merged company, thus entering into all legal re-
lationships of the merged company.
INVESTOR INFORMATION
In 2022, CROBEX declined by 4.8%. However, this decline is one
of the lower ones recorded on the equity markets, as many in-
ternational indices such as S&P500, Nasdaq, and DAX, declined
by double-digit numbers. The main drivers have been the war in
Ukraine, combined with high inflation as global economies broke
out of the pandemic.
2022 was another challenging year for the European telecom
sector, grappling with increased capital expenditure needs for
fiber investments and 5G, the emergence of new competitors,
regulatory uncertainty and the overall growth prospects.
HT share overperformed CROBEX and the telecommunications
index STOXX® Europe 600 in 2022, with the share price amount-
ing to HRK 177.50 at the end of the year.
INTRODUCTION INVESTOR INFORMATION
HT Share as compared to CROBEX and STOXX® Europe 600
Telecommunications Index, 31 December 2021 - 31 December 2022
%
Crobex STOXX® Europe 600 Telecommunications
HT Share
Share price performance
The HT share took first place in the top turnover share selection
according to the Zagreb Stock Exchange criteria. In 2022, the to-
tal regular turnover of HT shares on the Zagreb Stock Exchange
amounted to HRK 176.5 million (2021: HRK 188.8 million).
In 2022 HT received the Share of the Year award according to the
public's choice, for the third year in row. This achievement serves
as a clear validation that both the financial community and public
recognize the value we are generating for our shareholders.
Since its initial public offering in October 2007, HT shares have
traded on the Zagreb Stock Exchange, with Global Depositary Re-
ceipts trading on the London Stock Exchange until the delisting and
termination of the GDR facility on 6 October 2014. The shares will
continue to be listed and tradable on the Zagreb Stock Exchange.
Dividend policy
The dividend policy of the Company was set out in the prospectus
that accompanied its Initial Public Offering in October 2007 and
published on the website of the Company:
Any future dividend, declared and paid in respect of any year, shall
range from 50% to 100% of the Company’s distributable profits
earned in the immediately preceding year. Any annual dividend
shall depend on the overall financial position of the Company and
its working capital needs at the relevant time (including but not
limited to the Company’s business prospects, cash requirements,
financial performance, and other factors including tax and regu-
latory considerations, payment practices of other European tele-
communications operators and general economic climate).
10 11
INTRODUCTION INVESTOR INFORMATIONINTRODUCTION INVESTOR INFORMATION
Dividend for the 2021 financial year
On 25 April 2022, the General Assembly of the Company approved
a dividend payment to shareholders of HRK 8.00 per share. HRK 8
per share was paid out of the year-end profit of 2021, in the amount
of HRK 637,768,168.00.
In total, HRK 8 represents a dividend payout ratio of 95.8% from the
Company’s net profit. The dividend was paid in May 2022.
At the end of 2022, this represented a dividend yield of 4.5% on
HT’s closing price of HRK 177.50.
Dividend proposal for financial year 2022
As of 2015, HT announces a minimum target dividend for each year
at the start of that particular year, within the range as set out in our
dividend policy e.g. from 50% to 100% of the Company’s distribut-
able profits depending on its overall financial position and working
capital needs.
To comply with that commitment, in March 2022, HT announced
that it expected to pay out a minimum dividend of HRK 6 per share
out of 2022 net profit.
The Management Board and Supervisory Board of Hrvatski Tele-
kom d.d. propose to this year’s General Assembly the distribution
of the net profit from 2022 in a way that a part of net profit in the
amount of EUR 86.631.479,00 (HRK 652.724.878,53) shall be
paid out as dividend to shareholders, in the amount of EUR 1,10
(HRK 8.29) per share, a part of net profit in the amount of EUR
5.586.982,71 (HRK 42.095.121,23) shall be allocated to retained
earnings and the remainder of net profit in the amount of EUR 0,62
(HRK 4,67) shall be used to increase the share capital from Compa-
ny’s own capital, in order to express the share capital of the Com-
pany as a whole number.
The General Assembly is planned to be convoked for 10 May 2023.
According to the proposal, the abovementioned dividend will be
paid to shareholders on 22 May 2023 (payment date), registered at
the Central Depository and Clearing Company (SKDD) on 15 May
2023 (record date).
Dividend proposal for financial year 2023
The Management Board currently expects a minimum dividend of
EUR 0.80 per share for the financial year 2023.
Share Buyback Programme
The ongoing Share Buyback Programme (“Programme”) was
launched by the Management Board on 28 April 2021, in line with
authorization of the General Assembly as of 23 April 2021, with
commencement as of 29 April 2021 and lasting until 22 April 2026.
The maximum number of shares intended to be acquired within
this Programme is 3,000,000, while the maximum amount allo-
cated to the Programme is HRK 600,000,000.00. The purpose
of the Programme is to withdraw shares without a nominal value
without reducing the share capital, in accordance with the Article
352 paragraph 3 item 3 of the Companies Act, in which case the
stake of the remaining shares in the share capital increases and, in
a smaller part, to offer them to employees.
In April 2022 the Company transferred 14,663 Company`s shares
to managers, within the Company`s Share Award Plan (PDD) for
the managers.
In July 2022 the Management Board withdrew 1,271,667 acquired
Company shares without nominal value, without the share capital
of the Company being decreased, and the information on the new
number of shares has been aligned in the Articles of Association of
the Company. Thereby the total number of shares has decreased
from 80,047,509 shares to 78,775,842 shares without nominal val-
ue, while the remaining shares’ participation in the share capital is
being increased.
During 2022 the Company acquired at Zagreb Stock Exchange in
total 979,444 Company shares, representing 1.24% of the Com-
pany’s issued share capital. For this acquisition of Company
shares in 2022, the Company paid out an equivalent value of HRK
180,426,025.09. The total number of Company shares held on
December 31st, 2022, amounted to 19.952, in book value of HRK
3,556,931.12, representing 0.03% of the Company’s issued share
capital.
The Programme is running alongside the Company’s regular div-
idend payout policy, providing clear evidence of the Company’s
commitment to delivering value to its shareholders.
Shareholder Structure as at 31 December 2022
Deutsche Telekom Europe B.V. 53%
War Veterans’ Fund 6.9%
Restructuring and Sale Center (CERP)/
Republic of Croatia
2.9%
Private and other institutional investors 37.2%
Total number of shares issued: 78,775,842
Deutsche Telekom Europe B.V. is the majority shareholder in HT
with a 53% holding (Deutsche Telekom Europe B.V. is 100% owned
by Deutsche Telekom Europe Holding B.V. whose 100% owner
is Deutsche Telekom Europe Holding GmbH (former name was
T-Mobile Global Holding Nr. 2 GmbH). Deutsche Telekom Europe
Holding GmbH is 100% owned by Deutsche Telekom AG.
The Croatian War Veterans’ Fund owns 6.9%, with the Restructur-
ing and Sale Center (CERP)/Republic of Croatia holding 2.9%.
The remaining 37.2% is owned by Croatian citizens and other do-
mestic and foreign institutional investors. Raiffeisen Pension Funds
is the investor with the largest shareholding among private and in-
stitutional investors. As at 31 December 2022, Raiffeisen Pension
Funds had 11.2% of shares of the Company.
Financial Calendar
Date
Release of fourth quarter and full year
2022 un-audited results
February 23, 2023
Release of full year 2022 audited
results
Proposal on Utilization of Profit
March 23, 2023
Release of first quarter 2023 results April 28, 2023
The General Assembly of the Company May 10, 2023
Release of six months 2023 results July 27, 2023
Release of nine months 2023 results October 31, 2023
The above-mentioned dates are subject to change
General information on Shares
Share ISIN: HRHT00RA0005
Trading symbol at Zagreb Stock
Exchange:
HT
Trading symbol at Central Depository
and Clearing Company
HT-R-A
Reuters: HT.ZA
Bloomberg: HT CZ
Number of Shares: 78,775,842
Type: Ordinary share
Nominal value: No nominal value
Investor Relations
Hrvatski Telekom d.d.
Radnička cesta 21
10000 Zagreb
Tel.: +385 1 49 11080, +385 1 49 11114
Fax: +385 1 49 12012
E-mail: ir@t.ht.hr
12 13
KONSTANTINOS NEMPIS
President of the Management Board (CEO)
Konstantinos Nempis has held the position of Hrvatski Telekom
CEO since, 1 April 2019.
He has over 20 years of experience of working in the telecom-
munications industry, leading national and international teams
in Vodafone Greece and HQ and OTE Group in Greece, where he
held the position of the Chief Commercial Officer for Residential
Customers.
MANAGEMENT BOARD
MATIJA KOVAČEVIĆ
Member of the Management Board (CFO)
Matija Kovačević was appointed Management Board Member and
Chief Financial Officer effective as of 1 August 2022. In his role,
Matija is responsible for finance, internal audit, risk management,
procurement, real estate management and business transforma-
tion.
During his career he held several executive positions in Croatian
Telecom and Deutsche Telecom, gaining extensive international
experience. He was responsible for financial and business steering
and lead a range of transformation and operating model change
projects in Deutsche Telekom's subsidiaries in South-East Europe,
as well as controlling of European Head Office unit at Deutsche
Telekom.
INTRODUCTION MANAGEMENT BOARD
MARIJANA BAČIĆ
Member of the Management Board and Chief
Business Officer (COOB)
Marijana Bačić was appointed as Management Board Member
and Chief Operating Officer Business as of 1 September 2022.
In this position, she is responsible for Sales, Business Marketing,
Business Steering and Channel Management, ICT Business Devel-
opment.
During her twenty-year career at Hrvatski Telekom, she had a sig-
nificant role in developing Hrvatski Telekom’s innovative products
and solutions that improved the business of companies of all sizes
and took part in creating and implementing ICT business synergy
within the HT Group.
NATAŠA RAPAIĆ
Member of the Management Board and Chief
Operating Officer Residential (COOR)
Nataša Rapaić has held the position of Member of the Manage-
ment Board and Chief Operating Officer Residential since 2013,
before which she held several senior management positions with-
in HT Group, which she joined in 2003.
Throughout her career, she was an economic analyst in the Eco-
nomic Office at the Embassy of Spain, a financial analyst in the
investment department of the bank Grupo Caixa Galicia, and a
consultant at Madrid-based Europraxis Consulting working on
Telefónica Móviles projects.
INTRODUCTION MANAGEMENT BOARD
14 15
INTRODUCTION MANAGEMENT BOARD
IVAN BARTULOVIĆ
Member of the Management Board and Chief
Human Resources Officer (CHRO)
Ivan Bartulović has been Member of the Management Board and
Chief Human Resources Officer since 2019, and responsible for
strategic transformational management that lead to HT’s em-
ployer satisfaction and engagement reaching all-time highs.
Before joining Hrvatski Telekom he held senior management po-
sitions with Intesa Sanpaolo Bank, CEMEX Group and A1 Group,
and in case of the latter two was responsible for strategic HR ope-
rations on a multi-country level.
SINIŠA ĐURANOVIĆ
Management Board Member and Chief
Corporate Affairs Officer (CCO)
Siniša Đuranović was appointed Management Board Member
and Chief Corporate Affairs Officer (CCO) in December 2022.
In his role he is responsible for coordinating and managing the
Company’s corporate affairs in regard to strategy, M&A, legal
and regulatory affairs, wholesale, electronic communications in-
frastructure and business transformation.
During his career with Croatian Telecom, which started in 2000,
he has led regulatory and legal functions as well as strategic Cro-
atian Telecom and HT Group projects in Croatia and the region.
He is also a Chairman of the Board of Directors of Crnogorski
Telekom, Management Board member of HT holding d.o.o., Su-
pervisory Board member of the public company Hrvatske teleko-
munikacije d.d. Mostar, and Vice President of Croatian Employers
Association ICT section.
BORIS DRILO
Member of the Management Board and Chief
Technical and Information Officer (CTIO)
Boris Drilo has held the position of Member of the Management
Board and Chief Technical and Information Officer since 2017.
He is responsible for development and implementation of latest
mobile and fixed networks technologies and information and busi-
ness systems.
He previously held the position of HT’s Sector Director in the CTIO
area, and that of Member of the Management Board in charge of
technology and IT with Iskon Internet d.d., a company fully owned
by HT.
He joined Hrvatski Telekom in the 2012, from Ericsson Group,
where he had spent 12 years at managerial functions related to the
development and application of telecommunications networks
and new technologies.
He at the moment also performs the role of the Executive Board
Member with Croatian Employers’ Association.
16 17
INTRODUCTION MANAGEMENT BOARD
Company’s Shares Award Plan (PDD)
In 2021 the Company’s Shares Award Plan (PDD) was launched.
Company’s Shares Award Plan (PDD) is a voluntary compen-
sation tool under which a member of the Management Board
has the option to choose HT shares instead of a pay-out of cer-
tain percentage of Short-Term incentive (STI) achieved for the
previous year. PDD participants are entitled to a bonus shares
according to the ratio 7 awarded shares: 1 bonus share, and all
shares must be retained for an uninterrupted period of one year
(lock-up period).
Within the Company`s Share Award Plan (PDD) 2022 for the
managers, HT shares were transferred to Management Board
Members, as follows:
• President of the Management Board (CEO), Mr. Konstanti-
nos Nempis, acquired 1,623 shares
• Member of the Management Board and Chief Operating
Officer Residential (COO Residential), Mrs. Nataša Rapaić,
acquired 792 shares
• Member of the Management Board and Chief Technical
and Information Officer (CTIO), Mr. Boris Drilo, acquired
317 shares
• Member of the Management Board and Chief Human Re-
sources Officer (CHRO), Mr. Ivan Bartulović, acquired 251
shares
EU Game Changer
EU Game Changer Incentive Program is introduced in 2022 with
the goal to motivate managers to improve customer centricity
and the Company's profitability. EU Game Changer covers the
period from 1 January 2022 to 31 December 2025 with annual
payment instalments. Actual payments are determined by the
participant group, the number of years of consecutive overper-
formance and the average KPI target achievement for the re-
spective plan year.
Compensation paid out to the Management
Board members in 2022
Konstantinos Nempis, President of the Management Board and
CEO, was paid in 2022 a fixed and variable salary and Long-term
Incentive Plan (LTIP 2018) in gross amount of HRK 4,703,307.
Other benefits amounted gross to HRK 1,220,244 (company car
usage, rental cost, scholarship for children, pension fund and
other). The Christmas gift for children was paid in amount of
HRK 600 net.
Nataša Rapaić, Member of the Management Board and COO
Residential, was paid in 2022 a fixed and variable salary and
Long-term Incentive Plan (LTIP 2018) in gross amount of HRK
3,323,223. Other benefits amounted gross to HRK 41,923 (com-
pany car usage). The Christmas gift for child was paid in amount
of HRK 600 net.
Ivan Bartulović, Member of the Management Board and CHRO,
was paid in 2022 a fixed and variable salary in gross amount of
HRK 1,634,100. Other benefits amounted gross to HRK 33,865
Remuneration to the Management Board
The remuneration and evaluation of the work performed by the
Management Board have been conducted in accordance with
the Remuneration Policy for Members of the Management Board
that was adopted by the General Assembly of the Company as of
20 July 2020, with amendments adopted by the General Assem-
bly of the Company as of 23 April 2021. As of 2020, the Company
once a year submits to the General Assembly the Report on re-
muneration paid to the Members of the Supervisory Board and to
the Management Board Members in the previous business year.
Remuneration Policy and the above stated Report (published to-
gether with the Invitation to the General Assembly) are available
at the Company web pages at the following link https://www.t.ht.
hr/en/investor-relations/report-of-remuneration for a period of
ten years as of their adoption. Therefore, a brief overview of Re-
muneration Policies and payments made to Management Board
and Supervisory Board Members in 2022 is given within the An-
nual Report.
Annual target salary of Management Board Members consists of
fixed basic annual salary and performance related variable com-
ponent, the so-called Short-Term incentive (STI). The STI shall re-
ward the achievement of collective targets over an annual period.
Compensation system also encompasses long-term compensa-
tion elements, Long-Term Incentive (LTI) and EU Game Changer
Incentive Program, that can be awarded on top of the target sala-
ry and Share Matching Plan (SMP) as a voluntary long term com-
pensation instrument. The mandatory prerequisite for participa-
tion in the SMP is that the executive invests in the share named in
the specified plan.
Additionally, to acknowledge extraordinary individual perfor-
mance and achievements Supervisory Board can grant a Spot
Bonus as one-time payment within one calendar year.
Individual compensation agreements can include fringe benefits:
company car, accommodation cost, pension fund, scholarship for
children, other non-cash benefits and services, depending on in-
dividual circumstances of the person in question.
Long Term Incentive Plans for management
Long-term incentive plans (LTI) introduced in 2019, 2020, 2021
and 2022 exist at Group level.
LTI 2018 ended on 31 December 2021 and the Supervisory Board
has determined final target achievement and awarded amount of
HRK 4,006,932 which was paid to plan participants in June 2022.
The LTI (Long term incentive) plan initiated in 2022, covers the
period from 1 January 2022 to 31 December 2025.
Share Matching Plan (SMP), plan for the award of bonus shares
to managers, is active in 2022. The term of the 2022 SMP covers
the period from 1 July 2022 to 30 June 2026. Share Matching
Plan is obligatory for the President of the Management Board
and voluntary for Management Board members.
INTRODUCTION MANAGEMENT BOARD
(company car usage). The Christmas gift for children was paid
in amount of HRK 15,000 gross.
Boris Drilo, Member of the Management Board and CTIO was
paid in 2022 fixed and variable salary and Long-term Incentive
Plan (LTIP 2018) in gross amount of HRK 2,658,401. Other ben-
efits amounted gross to HRK 42,882 (company car usage). The
Christmas gift for children was paid in amount of HRK 1,200 net.
Daniel Darius Denis Daub, Member of the Management Board
and CFO until 31 July 2022, was paid in 2022 a fixed and vari-
able salary and Long-term Incentive Plan (LTIP 2018) in gross
amount of HRK 2,171,849. Other benefits amounted gross to
HRK 327,858 (rental cost, company car usage and other).
Matija Kovačević, Member of the Management Board and CFO
as of 1 August 2022, was paid in 2022 a fixed salary in gross
amount of HRK 364,044. Other benefits amounted gross to HRK
27,483 (company car usage and other).
Marijana Bačić, Member of the Management Board and COO
Business as of 1 September 2022, was paid in 2022 a fixed sal-
ary in gross amount of HRK 250,332. Other benefits amounted
gross to HRK 17,194 (company car usage). The Christmas gift for
children was paid in amount of HRK 600 net.
Siniša Đuranović has been appointed Management Board Mem-
ber and Chief Corporate Affairs Officer (CCO) as of 8 December
2022, therefore his first salary as Management Board Member
was paid out in January 2023.
Davor Tomašković, President of the Management Board and
CEO until 1 April 2019, was paid in 2022 Long-term Incentive
Plan (LTIP 2018) award in gross amount of HRK 585,535. With
this payment, all obligations towards Davor Tomašković based
on membership in the Management Board of the Company,
have been fulfilled.
Saša Kramar, Member of the Management Board and COO Busi-
ness until 1 January 2020, was paid in 2022 Long-term Incen-
tive Plan (LTIP 2018) award in gross amount of HRK 295,729.
18 19
INTRODUCTION SUPERVISORY BOARD INTRODUCTION SUPERVISORY BOARD
SUPERVISORY BOARD
Remuneration of the Supervisory Board
The remuneration of the Supervisory Board Members has been
determined in accordance with the Decision of the General As-
sembly on remuneration of members of the Supervisory Board as
of 20 July 2020.
The chairman of the Supervisory Board receives remuneration in
the amount of 1.5 of the average net salary of the employees of
the Company paid in the preceding month. To the deputy chair-
man, the amount of 1.25 of the average net salary of the employ-
ees of the Company paid in the preceding month is paid, while any
other member receives the amount of one average net salary of
the employees of the Company paid in the preceding month. To
a member of the Supervisory Board, who is in the same time the
Chairman of the Audit Committee of the Supervisory Board, in the
amount of 1.5 of the average monthly net salary of the employees
of the Company paid in the preceding month. A member of the
Supervisory Board, who is also a member of one board or com-
mittee of the Supervisory Board, receives a remuneration in the
amount of 1.25 of the average monthly net salary of the Compa-
ny's employees paid in the previous month. A member of the Su-
pervisory Board who is simultaneously a member of two or more
committees of the Supervisory Board receives a remuneration in
the amount of 1.5 of the average net salary of the Company's em-
ployees paid in the previous month. DT AG representatives do not
receive any remuneration for the membership in the Supervisory
Board due to a respective policy of DT AG.
Jonathan Richard Talbot Chairman
From 25 April 2017 (chairman of the Related Parties Transactions
Committee and chairman of the Compensation and Nomination
Committee)
Ivica Mišetić, Ph. D. Deputy Chairman
Member from 21 April 2008 until 24 April 2020 (Deputy Chairman
from 8 May 2008);
From 20 July 2020 (member of the Compensation and Nomination
Committee)
Vesna Mamić
Member, workers’
representative
From 1 January 2016
Dolly Predovic Member
From 29 April 2014 (member of the Audit Committee and member of
the Related Parties Transactions Committee)
Marc Stehle Member From 16 December 2015 (chairman of the Audit Committee)
Eirini Nikolaidi Member
From 25 April 2016 until 24 April 2020;
From 20 July 2020 (member of the Audit Committee)
Eva Somorjai-Tamassy Member
Until 1 October 2022 (member of the Compensation and
Nomination Committee)
Tino Puch Member Until 24 April 2022
Gordan Gledec Ph. D Member
From 20 July 2020 (member of the Related Parties Transactions
Committee)
Jonathan Abrahamson Member From 25 April 2022
The remuneration of individual Supervisory Board members paid in 2022 is as follows:
The period of 2022 in which the remuneration was paid
From To Gross 1 (in HRK)
Vesna Mamić Member 1 January 31 December 161,108 HRK
Dolly Predovic Member 1 January 31 December 230,788 HRK
Ivica Mišetić Deputy Chairman 1 January 31 December 241,662 HRK
Gordan Gledec Member 1 January 31 December 161,108 HRK
Total 794,666 HRK
20 21
CORPORATE GOVERNANCE CODE
COMPLIANCE STATEMENT
Croatian Telekom Inc. (hereinafter referred to as “HT” or “the Com-
pany”), in accordance with Article 250b, paragraphs 4 and 5, and
Article 272p of the Companies Act (“Official Gazette” Nos. 111/93,
34/99, 121/99, 52/00 – Decision of the Constitutional Court of
RoC, 118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12,
68/13, 110/15,40/19, 34/22 i 114/22), issues the Corporate Gover-
nance Code Compliance Statement.
In the year 2022, the Company applied the Corporate Gover-
nance Code adopted by the Croatian Financial Services Super-
visory Agency (HANFA) and the Zagreb Stock Exchange Inc. Za-
greb, in effect as of 1 January 2020, and it was published on the
web-site of the ZSE (www.zse.hr) and on the web-site of HANFA
(www.hanfa.hr).
The Company complies with the recommendations of the Code,
with the exception of those provisions that were not or are not
practical for the Company to implement at the relevant time or
the application of which is not foreseen given the applicable legal
framework. These exceptions are as follows:
• The Management Board adopted the following acts and
duly informed the Supervisory Board thereon but has not
requested its approval (Articles 6, 7, 58, 69 and 83 of the
Code). These acts have been published at the web pages of
the Company:
• Code of Conduct
• Policy on Avoiding Corruption and Other Conflicts of
Interest
• Guideline for Prevention of Conflicts of Interest
• HT Group Policy Corporate Responsibility
• Policy on Employee Relations
• Social Charter
Given that adoption of these acts falls under the managing of
the business affairs, Supervisory Board approval is not fore-
seen. In 2022 the Management Board adopted the new Pol-
icy on Employee Relations, informed the Supervisory Board
thereon and the Policy has been published at the web pages
of the Company. Remaining above listed acts have not been
amended, as there was no need to do so.
• The Supervisory Board has not formally set the target per-
centage of female members of the Supervisory Board and
the Management Board (Article 14 of the Code), however,
all international and domestic standards on gender repre-
sentation and equality are directly implemented. Women
currently make up for 38% of Supervisory Board member-
ship (prior to resignation of SB Member, Mrs. Éva Somor-
jai-Tamássy, with effect as of 1 October 2022, women made
up for 44.4% of SB membership) and 29% of Management
Board membership, with women also holding 39% of mana-
gerial positions, while 39% of all employees are women.
• The Compensation and Nomination Committee encom-
passes all of the tasks listed in Article 15 of the Code, except
for monitoring the Management Board during the selection
and appointment of senior management, which is the sole
responsibility of the Management Board of the Company, in
line with the good corporate practice of management au-
tonomy to independently decide on line management and
on their closest associates.
• The Supervisory Board has not formally developed its pro-
file which specifies a minimum number of members and
the combination of skills, knowledge and education, as well
as professional and practical experience (Article 20 of the
Code). The size of the Supervisory Board is proscribed by the
Companies Act in relation to the share capital amount, while
the exact number and members’ profile is determined by the
Company’s Articles of Association. Along with the criteria
from the Companies Act and the Articles of Association, the
criteria referred to in the Audit Act are also applied, and it is
taken into account that at least one member has to be an
expert in the field of accounting and/or audit.
• The Supervisory Board is not composed mostly of indepen-
dent members, but two out of nine Members are indepen-
dent. None of them are Chairman or Deputy Chairman of the
Supervisory Board (Article 22 of the Code).
• The Compensation and Nomination Committee and the
Audit Committee are not composed mostly of indepen-
dent members (Article 27 of the Code). One of three Audit
Committee members is an independent member, while the
Compensation and Nomination Committee has no indepen-
dent members. The majority of Related Parties Transactions
Committee Members are independent.
• The Company has not designated a Company secretary
(Article 33 of the Code). HT is constituted under the dual-
istic governance model, with separated management of
the business affairs and supervision over the managing of
business affairs, and the Secretary of the Management
Board and the Secretary of the Supervisory Board has been
appointed.
• The Supervisory Board has not evaluated the performance
of its individual Members (Article 39 of the Code), howev-
er, the Supervisory Board evaluated its effectiveness for
the business year 2022. In line with the Companies Act, the
General Assembly approves the manner in which the Super-
visory Board members supervised the management of the
business affairs of the Company and performed their other
tasks, by granting approval of actions for the previous busi-
ness year. An evaluation of individual results is planned for
implementation in the future, following the analysis of orga-
nizational prerequisites.
• Internal documents of the Company do not prohibit Man-
agement Board Members from holding more than two posi-
tions in the management or supervisory board of companies
not part of HT Group (Article 47 of the Code), instead the
provisions of the Companies Act are applied. HT MB mem-
bers cannot hold management board and supervisory board
positions in companies which are not part of HT Group and
which are performing the same business activities and com-
peting with HT.
• The Compensation and Nomination Committee encom-
passes all the tasks listed in Article 50 of the Code, howev-
er, decisions on remuneration to senior management and
the workforce as a whole are the sole responsibility of the
Management Board of the Company. The Supervisory Board
participates in approving total workforce costs by approv-
ing the annual business plan. When the Management Board
plans to adopt any bonus plan, i.e., amendments to employ-
ee remuneration or benefits, it requires a prior approval of
the Supervisory Board.
• The Company has not established a formal mechanism to
ensure for minority shareholders the possibility of asking
questions directly to President of the Management Board
and the Chairman of the Supervisory Board (Article 76 of the
Code). Given that the Company has around 153 thousand
shareholders, we deem that opening such direct communi-
cation channel would lead to their unjustifiable burden. The
Company set up mechanisms for shareholders to ask ques-
tions by e-mail address for investors (ir@t.ht.hr), with the
possibility to pose questions directly to the Management
Board and the Supervisory Board at the General Assembly.
• The Company has not made available on its website an-
swers to questions raised at the General Assembly (Article
82 of the Code). Raised questions and answers given are
included in the General Assembly Minutes, available to the
public in the Court Register. The Company shall consider a
future practicality of this option, within the applicable legal
framework, i.e., Companies Act and the Court Register Act
and the Regulations on the Manner of Entry of Data in the
Court Register.
• In line with the Companies Act, the Supervisory Board is
solely authorized for the adoption of decisions from its
area of responsibility, and the purpose of its Committees is
making recommendations and proposals in line with appli-
cable legal framework. Therefore, a direct communication
between the Chairman of a Supervisory Board Committee
and stakeholders, such as customers, suppliers, etc., is not
foreseen (Article 87 of the Code).
INTERNAL CONTROL AND RISK
MANAGEMENT
The principal responsibilities of the Audit Committee of the Su-
pervisory Board are the preparation of the decisions of the Super-
visory Board and the supervision of the implementation of such
decisions in relation to the controlling, reporting and audit activ-
ities within HT Inc. and the HT Group. The Audit Committee over-
sees the audit activities of the Company (internal and external),
discusses specific issues brought to the attention of the Audit
Committee by the auditors or the management team and makes
recommendations to the Supervisory Board. The Audit Commit-
tee is responsible for ensuring the objectivity and credibility of the
information and of the reports submitted to the Supervisory Board.
The Audit Committee is authorized to:
• Request the necessary information and supporting docu-
mentation from the management and senior employees of
the Company and from external co-workers;
• Participate at the meetings held within the Company on the
issues that fall under the scope of the activities and respon-
sibilities of the Audit Committee;
• Appoint advisors to the Audit Committee on a permanent
basis or on a case-by-case basis, if needed;
• Obtain, at the Company’s expense, external legal or other
independent professional advice on any matter within its
terms of reference provided that such advice is needed for
the fulfilment of the Committee’s scope of activities and re-
sponsibilities.
The Corporate Internal Audit of the Company performs an indepen-
dent audit and control function on behalf of the Management Board
and informs managers with comprehensive audit reports (findings
and proposed improvements). In July 2017, the Management Board
adopted an updated Internal Audit Charter, a strategic document for
internal audit performance which defines the framework and then
main principles necessary for the work of the internal audit function
in HT Inc. and the HT Group. Further updates to the Internal Audit
Charter were made in May 2018 and in February 2019.
The main tasks of Corporate Internal Audit as defined in the Internal
Audit Charter are evaluating whether:
• Risks relating to the achievement of HT Inc. and HT Group’s
strategic objectives are appropriately identified and managed,
• The actions of HT Inc. and HT Group’s officers, directors, em-
ployees and contractors are in compliance with HT Inc. and HT
Group’s policies, procedures, and applicable laws, regulations
and governance standards,
• The results of operations or programs are consistent with es-
tablished goals and objectives,
• Operations or programs are being carried out effectively and
efficiently,
• The established processes and systems enable compliance
with the policies, procedures, laws and regulations that could
significantly impact HT Inc. and HT Group,
• The information and the means used to identify, measure, anal-
yse, classify and report such information are reliable and have
integrity,
• The resources and assets are acquired economically, used effi-
ciently and protected adequately.
Financial risk management objectives and
policies
The Company is exposed to international service-based markets.
As a result, the Company can be affected by changes in foreign
exchange rates. The Company also extends credit terms to its
customers and is exposed to a risk of default. The significant risks,
together with the methods used to manage these risks, are de-
scribed in detail in the Notes to the financial statements (Note 39
Financial risk management objectives and policies).
SIGNIFICANT COMPANY SHAREHOLDERS
As at 31 December 2022, significant Company shareholders are
as follows:
INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT
22 23
• Deutsche Telekom Europe B.V. is the majority shareholder
with a 53 per cent holding. (Deutsche Telekom Europe B.V.
is 100% owned by Deutsche Telekom Europe Holding B.V.
whose 100% owner is Deutsche Telekom Europe Holding
GmbH (former name was T-Mobile Global Holding Nr.2
GmbH). Deutsche Telekom Europe Holding GmbH is 100%
owned by Deutsche Telekom AG.).
• The Croatian War Veterans' Fund owns 6.9 per cent of shares
of the Company.
• Centar za restrukturiranje i prodaju – CERP (Restructuring
and Sale Centre) of the Republic of Croatia (a legal succes-
sor to the Government Asset Management Agency) owns
2.9 per cent of shares of the Company.
• The remaining 37.2 per cent of shares are owned by Croatian
citizens and by domestic and foreign institutional investors.
Raiffeisen Pension Funds are investors with the largest share-
holding among the private and institutional investors. As at 31
December 2022, Raiffeisen Pension Funds owned 11.2 per cent
of shares of the Company.
An up to date list of the top ten shareholders of the Company can
be found on the Central Depository & Clearing Company web site
(start your search by entering HT-R-A in the browser).
Mr. Konstantinos Nempis, President of the Management Board
of Croatian Telecom Inc., owns 4,693 shares in total; Mr. Daniel
Daub, Management Board Member of Croatian Telecom Inc. un-
til 1 August 2022, owned 2,426 shares in total (position on the
last day of the term of office, i.e., on 31 July 2022); Mrs. Nataša
Rapaić, Management Board Member of Croatian Telecom Inc.,
owns 1,558 shares in total; Mr. Boris Drilo, Management Board
Member of Croatian Telecom Inc., owns 930 shares in total; Mr.
Ivan Bartulović, Management Board Member of Croatian Tele-
com Inc., owns 735 shares in total; Mr. Matija Kovačević, Manage-
ment Board Member of Croatian Telecom Inc., owns 285 shares in
total; Mrs. Marijana Bačić, Management Board Member of Croa-
tian Telecom Inc., owns 420 shares in total; Mr. Siniša Đuranović,
Management Board Member of Croatian Telecom Inc., owns 730
shares in total and Professor Gordan Gledec, Ph.D., Supervisory
Board Member of Croatian Telecom Inc., owns 63 shares in total.
APPOINTMENT OF THE MANAGEMENT
BOARD, THEIR FUNCTIONS AND
AMENDMENTS TO THE ARTICLES OF
ASSOCIATION
Members and President of the Management Board are appointed
and removed by the Supervisory Board. Their term of office is up
to five years, with the possibility of re-appointment. The Manage-
ment Board consists of between five and seven members. The
current composition of the Management Board includes seven
positions: President of the Management Board (CEO); MB Mem-
ber and Chief Financial Officer (CFO); MB Member and Chief Op-
erating Officer Residential (COO Residential); MB Member and
Chief Operating Officer Business (COO Business); MB Member
and Chief Technical and Information Officer (CTIO), MB Member
and Chief Corporate Affairs Officer (CCO) and MB Member and
Chief Human Resources Officer (CHRO).
The Company is offering fixed and mobile telephony services as
well as wholesale, Internet and data services, organized into two
main business units, Business and Residential.
The Management Board needs a prior approval from the Supervi-
sory Board for the proposal of any amendments to the Articles of
Association at the General Assembly.
AUTHORITIES OF THE MANAGEMENT BOARD
MEMBERS
Pursuant to the Companies Act and the Company's Articles of
Association, the Management Board has the responsibility for
managing the business affairs of the Company. It is obligated
and authorized to perform all the activities and to pass all the
resolutions that it considers necessary to successfully manage
the business affairs of the Company, subject to such approvals as
may be required from the Supervisory Board for certain matters
and decisions.
The Company may be represented by any two members of the
Management Board jointly.
The ongoing Share Buyback Programme (“Programme”) was
launched by the Management Board on 28 April 2021, in line
with authorization of the General Assembly as of 23 April 2021,
with commencement as of 29 April 2021 and lasting until 22
April 2026. The maximum number of shares intended to be ac-
quired within this Programme is 3,000,000, while the maximum
amount allocated to the Programme is HRK 600,000,000.00.
The purpose of the Programme is to withdraw shares without a
nominal value without reducing the share capital, in accordance
with the Article 352 paragraph 3 item 3 of the Companies Act, in
which case the stake of the remaining shares in the share capital
increases and, in a smaller part, to offer them to employees.
In April 2022 the Company transferred 14,663 Company’s shares
to managers, within the Company`s Share Award Plan (PDD) for
the managers.
In July 2022 the Management Board withdrew 1,271,667 ac-
quired Company shares without nominal value, without the share
capital of the Company being decreased, and the information on
the new number of shares has been aligned in the Articles of As-
sociation of the Company. Thereby the total number of shares has
decreased from 80,047,509 shares to 78,775,842 shares without
nominal value, while the remaining shares’ participation in the
share capital is being increased.
During 2022 the Company acquired at Zagreb Stock Exchange
in total 979,444 Company shares, representing 1.24% of the
Company’s issued share capital. For this acquisition of Compa-
ny shares in 2022, the Company paid out an equivalent value of
HRK 180,426,025.09. The total number of Company shares held
on December 31st, 2022, amounted to 19.952, in book value of
INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT
HRK 3,556,931.12, representing 0.03% of the Company’s issued
share capital.
THE COMPOSITION AND FUNCTIONS OF THE
SUPERVISORY BOARD
The Supervisory Board consists of nine members. Eight mem-
bers are elected by the General Assembly, and one is appointed
by the Workers’ Council as the representative of the Company's
employees. The Supervisory Board is responsible for the appoint-
ment and removal of Management Board members as well as for
supervising the management of the Company's business affairs.
Certain major transactions and the assumption of long-term in-
debtedness require the approval of the Supervisory Board.
The Supervisory Board established the Compensation and Nom-
ination Committee, the Audit Committee and the Committee for
Transactions with Related Parties.
GENERAL ASSEMBLY
Information on the manner of work of the General Assembly and
on shareholder’s rights are provided to shareholders within the
Invitation to the General Assembly which is publicly announced
and made available at the Company web pages, together with
the list of frequently asked questions. The Invitation contains, in
addition to decision proposals with adequate explanations, in-
structions for participation and voting at the General Assembly
and the overview of shareholder rights to ask questions, request
amendments to the agenda, submit counterproposals and the
right on information. All other information on the authorizations
and the work of the General Assembly and on shareholder’s rights
are publicly available in relevant regulations. All General Assem-
bly Decisions, together with voting results, are published at the
Company web pages.
Economic background
Croatian market overview
Regulatory overview
Changes in reporting
ECONOMIC
ENVIRON-
MENT,
MARKET
AND REG-
ULATORY
OVERVIEW
26 27
In 2022 competitive landscape intensified, as competitors offe-
red promotions in mobile and convergent tariffs. Despite this, HT
Group maintained its leading market position. All players conti-
nued with 5G network development and fiber rollout.
The acceleration of inflation with increasing electricity and com-
modity prices forced mobile players to raise prices for certain
mobile services from July 2022. All players made changes to
their mobile tariffs pricing by providing more data traffic or ad-
ditional add-on services.
After consolidation of the fixed line operator, Optima Telekom as
of February 2022, Telemach Croatia became the third integrated
market player. In September 2022 Telemach acquired Totalna TV
as well, intensifying competition in converged telecommunicati-
on services.
Investments in fixed and mobile networks continued to grow in
2022. Investments in high-capacity networks (VHCN) in Q3/2022
recorded 17% growth, while investments in mobile base stations
(BTS) saw 9% growth compared to the same period last year.
Continued investments in broadband access infrastructure are a
key enabler for further growth of high-speed broadband conne-
ctions and broadband traffic. The migration of users to fiber FTT-
H/B technology continued, primarily those who had previously
used copper pair internet access. The share of fixed broadband
connections with a speed more than 100 Mbit/s has also been
on the rise, reaching 34% of fixed broadband connections at the
end of September 2022. In Q3/2022, data traffic through fixed
and mobile networks increased by 26% compared to the previous
year.
CROATIAN MARKET OVERVIEW
ECONOMIC ENVIRONMENT CROATIAN MARKET OVERVIEW
Economic background
Croatia’s economy continued with economic growth in Q4/2022
(4% YoY), but at slower dynamics than in the first half of the year
(7.3% YoY). Q4 2022 growth is driven primarily by investment ac-
tivity, while biggest GDP component, household consumption,
significantly slowed down as consumer sentiment and expec-
tations have been affected adversely by the strong inflationary
pressures. Nevertheless, the real GDP growth at 6.3% for the
whole of 2022 could be described as impressive, as it is robust
and broad-based (household consumption up by 5.1% yoy, in-
vestments 5.8% yoy, government consumption 3% yoy, exports
25.4% and imports 25%).
1
During 2022 inflation rate trend was accelerating month by
month, peaking in November at 13.5% YoY, before slightly slow-
ing down in December 2022 (13.1% YoY). The annual inflation rate
in 2022 was 10.8% primarily driven by increases in prices of food,
housing, and energy& fuels
2
. In response to economic challenges,
Government launched HRK 5bn financial package in April, fol-
lowed up with Autumn package, worth nearly HRK 21bn (€2.8bn)
and which took effect from 1 October. The Autumn package is
focused on capping electricity prices until end of March 2023,
tax reliefs and fuel excise tax cuts, energy subsidies to vulnerable
households, students and agriculturists, and capping prices on
basic foods, on top of earlier measures such as limited increases
in gas and electricity tariffs and fuel price caps.
The tourism industry experienced a significant rebound in 2022,
with tourist arrivals and overnight stays increasing by 37% and
25%, respectively, compared to 2021. These figures are even
more impressive when compared to the record high season of
2019 with 91% of arrivals and 96% of tourist overnights being
achieved. Revenue from foreign tourists in the first nine months
of 2022 was €11.6bn, higher by 43% YoY and 23% higher than
in the first nine months of the record 2019. Excellent booking in
post-season also contributed to a record-breaking result in 2022.
Expected revenue generated by foreign tourists for FY2022 is
€13bn
3
.
The labour market experienced a drop in unemployment with a
simultaneous continuation of employment growth. Average reg-
istered unemployment rate in 2022 was 6.8% (1.2PP lower than
in 2021).
4
Like in many other EU countries, Croatia is facing the
increasing share of workers from third countries which clearly re-
flects the mismatch between supply and demand for the labour
force.
In October 2022 the Fitch rating agency confirmed Croatia's
credit rating at BBB+ with a stable outlook - the highest grade
ever received by the agency. The stable outlook reflects the
Fitch’s expectation that the Croatian economy will remain resil-
ient to external shocks, due in part to improved fiscal and external
positions and euro adoption in January 2023.
On January 1, 2023, Croatia achieved two major milestones as it
officially adopted the Euro and became a member of the Schen-
gen area. The conversion rate was set at 7.53450 kuna per 1 euro.
Croatia's entry into the Schengen area and the Eurozone is ex-
pected to further facilitate the trade of goods and services and
boost tourism.
ECONOMIC ENVIRONMENT ECONOMIC BACKGROUND
ECONOMIC BACKGROUND
Sources: Croatian Bureau of Statistics
Source: Croatian Bureau of Statistics
Source: Croatian National Tourist Board
Source: Croatian Bureau of Statistics
Source: HAKOM's press release, 9th December 2022
Source: HAKOM's press release, 9th December 2022
28 29
Analysis of relevant electronic
communications markets
Next round of market analysis of wholesale fixed
network access markets (ULL and BSA markets)
On 7 February 2022, HAKOM invited all interested parties to sub-
mit their proposals and opinions regarding the current situation
on retail and wholesale fixed network broadband access markets
and to comment upon the appropriateness of the current regula-
tory regime and/or deliver their proposals if they find it necessary
to impose regulatory changes.
This round of market analysis will include detailed geographical
analysis of the relevant wholesale markets which can, under cer-
tain circumstances, result with the imposition of less stringent
regulatory pressure upon HT/deregulation of HT in geographic
areas with the adequate level of competitiveness.
In January 2023 HAKOM published draft decisions on market
analysis of wholesale fixed network access for public consulta-
tion (ends on 20th March 2023). Published drafts are going into
direction of deregulation of fiber in urban areas.
Law on the Treatment of Illegally Constructed
Infrastructure
Proposal of the new Law on the Treatment of Illegally Construct-
ed Infrastructure aims to include in the Croatian legal system all
infrastructure on the territory of the Republic of Croatia that has
been illegally constructed or illegally reconstructed, among oth-
ers also the electronic communication infrastructure (ECI). As a
member of CEA (Croatian Employers’ Association), HT has been
called to participate in a working group established before the
competent Ministry in drafting of the new Law. Timeline of adop-
tion of the new law is not known at this time.
Ordinance on simple and other buildings and
works
By adopting amendments to the Ordinance on simple and other
buildings and works on 29 June 2022, the regulatory framework
for issuing permits for the ECI construction has been significantly
simplified. The changes are regarding small cells, mini-trenches,
street cabinets, replacement of equipment at base stations and
replacement of cables in cable ducts and air poles. The possibility
of building an ECI contrary to the spatial plan is also introduced if
the spatial plan is not harmonized with the ECI regulations.
Changes of the Law on Roads
Changes of the Law on Roads which entered into force at the be-
ginning of 2022, prescribe for electronic communications infra-
structure on public roads only the payment of fees prescribed by
the Law on Roads and excludes the current possibility of paying
high right of way fees.
However, in the period from 3 May 2022 until 1 August 2022,
more than 30 local municipalities submitted their proposals to
the Constitutional Court of Croatia for the initiation of the Con-
stitutional Court procedure (constitutional claims), claiming that
the above changes to the Law on Roads were contrary to the Cro-
atian Constitution and asking for their abolishment. On 27 Sep-
tember 2022 the Constitutional Court initiated the court proce-
dure based on these claims and issued a decision on temporary
suspension of the disputed provisions of the Law on Roads.
However, final decision of the Constitutional Court arrived in De-
cember 2022, whereby the Constitutional Court rejected all con-
stitutional claims on this matter and abolished its decision from
27 September 2022 on temporary suspension, thereby determin-
ing changes of the Law on Roads in line with the Constitution.
Spectrum assignment and fees
On 12 October 2022 HAKOM initiated the public auction proce-
dure for assignment of nationwide licenses for using radiofre-
quency spectrum in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz
and 2600 MHz radiofrequency bands and for assignment of re-
gional licenses for using radiofrequency spectrum in 3600 MHz
radiofrequency band.
HAKOM determined that HT fulfils all necessary conditions for
participation in the public auction procedure. Consequently, HT
qualified to participate in the public auction procedure at the
national level for the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz
and 2600 MHz radiofrequency bands. Only qualified applicants
are allowed to participate in the bidding procedure, making them
bidders in the bidding procedure. The bidding procedure started
on 16 January 2023.
In December 2022 HAKOM and the Ministry of the Sea, Transport
and Infrastructure (MMPI) passed new by-laws prescribing the
amounts of annual fees:
• By-law on payment of fees for carrying out of tasks of the
Croatian Regulatory Authority for Network Industries (Offi-
cial Gazette, No. 154/22; HAKOM),
• By-law on payment of fees for right to use of addresses,
numbers and radio frequency spectrum (Official Gazette,
No. 151/22; MMPI).
As a result of the new HAKOM by-law from 1 January 2023 the
annual RF spectrum fee for public communications network was
increased (58% fee increase for frequencies below 3800 MHz,
and 20% fee increase for frequencies above 3800 MHz) as well
as the fee for performing other tasks of HAKOM (125%).
Single maximum Union-wide mobile and fixed
voice termination rates
The new maximum wholesale mobile and fixed termination rates,
applicable to all EU Member States, are effective from 1 July
2021, in accordance with the European Commission Delegated
Regulation (EU) 2021/654.
Maximum mobile termination rate in EU is 0.2 eurocents per min-
REGULATORY OVERVIEW
ECONOMIC ENVIRONMENT REGULATORY OVERVIEW ECONOMIC ENVIRONMENT REGULATORY OVERVIEW
ute and will be achieved gradually by 2024, facilitated by a three-
year glide path. In 2024, all EU operators should apply the same
single maximum rate (0.2 eurocents per minute).
Applicable mobile termination rates in Croatia:
• HRK 0.0450 per minute
from 1 July 2021 to 31 December 2021
• HRK 0.0413 (EUR 0.55 cent) per minute
from 1 January 2022 to 31 December 2022
• EUR 0.4 cent per minute
from 1 January 2023 to 31 December 2023
• EUR 0.2 cent per minute from 1 January 2024.
Maximum fixed termination rate in EU is 0.07 eurocents per min-
ute. The Regulation includes a transitional period during 2021 to
allow for a gradual adjustment. From 2022, all fixed operators will
be subject to a maximum fixed termination rate of 0.07 eurocents
per minute.
Applicable fixed termination rates in Croatia:
• HRK 0.0057 per minute
from 1 July 2021 to 31 December 2021
• HRK 0.0053 (EUR 0.07 cent) per minute
from 1 January 2022.
The quoted rates do not apply to calls originating from country
numbers outside of the EU. However, there are two exemptions
from this rule:
• If a third country operator charges the EU operator with
equal or lower than those set by the Regulation,
• if a third country is listed in the Annex to the Regulation as a
country where termination rates are set on similar standards
as in the EU.
Roaming regulation
The new roaming regulation applicable from 1 July 2022 extends
the previous roaming rules until July 2032 and brings new addi-
tions to the regulation:
• lower wholesale roaming charges, impacting also retail
roaming surcharges amounts:
• for data services, the new regulation sets the following
wholesale caps: 2.00 EUR/GB in 2022, 1.80 EUR/GB in
2023, 1.55 EUR/GB in 2024, 1.30 EUR/GB in 2025, 1.10
EUR/GB in 2026 and 1.00 EUR/GB from 2027 onwards
• for calls: 0.022 EUR/min in 2022−2024 and 0.019 EUR/
min from 2025 onwards
• for SMS: 0.004 EUR/SMS in 2022−2024 and 0.003
EUR/SMS from 2025 onwards
• roaming providers’ obligation to deliver the same quality of
service (QoS) to their customers when roaming within the
EU as domestically, where technically feasible
• more transparency and additional obligations on QoS, ac-
cess to emergency services, use of value-added services
and on the use of roaming on non-terrestrial mobile net-
works (e.g., aircrafts, marine vessels).
HT as universal services operator
In June 2022 HAKOM adopted amendments to the Ordinance on
universal services in electronic communications, among others,
increasing USO speed to 7 Mbit/s download and 1 Mbit/s upload
(from current 4 Mbit/s download and 512kbit/s upload) as of 1
January 2023.
By its decision from 22 September 2022, HAKOM designated HT
as USO operator for the period of the following two years, starting
from 1 December 2022, for the following services:
• access services (of minimum download speed 4 Mbit/s un-
til 1 January 2023, and of minimum download speed of 7
Mbit/s starting from that date),
• public payphones,
• special measures for disabled,
• special tariffs for users with special social needs.
By its decision from 21 October 2022, HAKOM approved HT’s
prices and terms and conditions for USO products for the peri-
od of next 2 years. HT’s technologically neutral USO broadband
product, MAX net Mini, will be updated as from 1 January 2023,
to include new USO speed of 7 Mbit/s download and 1 Mbit/s up-
load.
Decision on new value of WACC for HT’
regulated wholesale products
On 22 November 2022 HAKOM defined new level of weighted
average cost of capital (WACC) in the amount of 4.71% and well
as the new level of additional risk premium (RP) for HT’s fiber net-
work in the amount of 1.55%.
Due to EU prescribed methodology that does not take into con-
sideration current economic situation of inflation and rise of all
costs, newly calculated WACC is lower than the previous one and
would lead to lowering of HT’s current wholesale prices, which is
why HT strongly argued against it. HT’s efforts in the end resulted
with significantly lower impact on HT in contrast to the initially
assumed: HT’s wholesale access price decrease of 4% in average,
as of 1 January 2023.
30 31
CHANGES IN REPORTING
ECONOMIC ENVIRONMENT CHANGES IN REPORTING
In September 2021, Agreement on transfer of share held by HT
holding d.o.o. in Kabelsko distributivni sustav d.o.o. (KDS) was
concluded, between HT holding d.o.o. as the transferor compa-
ny and HT as the transferee company. HT and KDS concluded
on 29 September 2021 the Agreement on merger of KDS into
HT. On 1 December 2021 the merger has been entered into the
Court Register of the Commercial Court in Zagreb, by which the
merged company KDS seized to exist and the acquiring com-
pany, HT, became the universal legal successor of the merged
company.
Based on the Merger Agreement concluded on 15 March 2022
between the company Croatian Telecom Inc. (hereinafter: HT Inc.
or the acquiring company) and the company HT Produkcija LLC
(hereinafter: HTP LLC or the merged company), and pursuant to
the Assembly decision of the merged company on approval of
the merger, on 1 June 2022 the merger has been entered into
the Court Register of the Commercial Court in Zagreb. By entry
of the merger into the Court Register, the merged company HTP
LLC seized to exist. The acquiring company, HT Inc., became the
universal legal successor of the merged company, thus entering
into all legal relationships of the merged company.
The Company has an ownership interest of 39.1% in its joint
venture HT d.d. Mostar which is incorporated in the Federation
of Bosnia and Herzegovina. Valuation of the investment showed
that the assessed recoverable amount is lower than the carrying
amount which resulted in impairment of the net book value of in-
vestment accounted for using the cost method in the Company
in the amount of HRK 95 million. As of 31 December 2022, the
investment is classified as asset held for sale.
IFRS 17 Insurance Contracts
IFRS 17 is mandatory for annual reporting periods beginning on or
after 1 January 2023. In HT there were no detected contracts on
which IFRS 17 would have a material impact.
Business highlights for HT d.d.
Main financials development for HT d.d.
BUSI-
NESS
REVIEW
34 35
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS HT GROUP INCLUDING CRNOGORSKI TELEKOM
Business highlights for HT d.d.
Business segment:
• Mobile
• Focus on migration on new Magenta 1 offer, aiming to cross-
sell existing customers base and increase its revenue
• Monetization on new flexible portfolio for larger cus-
tomer segment
• New mobile public portfolio for government institutions
• New service Cisco Internet Security for mobile network
• Introduction of T-Phone and T-Phone PRO mobile devices
• 5G speed increased from 1,5 Gbit/s to 2 Gbit/s
• Fixed
• Migration on new portfolio for fixed VSE customers with
M4M approach
• Introduction of new Business fiber Premium Modem en-
abling better BB experience
• Increase FTTH utilization - continuous migrations from cop-
per infrastructure to FTTH
• Continuous migration from xDSL to ProLine; positive devel-
opment on Professional data
• Best sport content offer enriched with acquisition of rights
for HNL (Croatian Football League) offering exclusivity on
our special MAXSport channels in our lineup and all com-
petitions under jurisdiction of HNS (Croatian Football Fed-
eration) for next 4 competition years - campaign focused on
content differentiation
• Launch of new CineStar Premiere TV package and Termi-
nation of SportKlub channels and replacement with Arena
7−10 channels
• System Solutions
• Continuous focus on profitable managed services business
and integrated solutions in the area of Business applica-
tions, Security, Infrastructure and IOT/Smart-city
• New services launched - web site and web shop creation &
maintenance for small and medium businesses; Fleet man-
agement new package for VSE companies introduced, fol-
lowed by launch of Fleet management mobile application
• Data center Zagreb 1 (Selska) became officially certified by
Uptime Institute Professional Services with “Tier III Certifi-
cation of Design Documents
• Installed the equipment and sensors for smart public Smart
lighting project in the City of Sveta Nedelja
• Selected as a supplier for info-display system (totems) to be
installed on bus stations in the City of Šibenik
• „Yellow Frame” award for the best program in the „Sustain-
able categories of cities and sustainable communities “
• „Choose a bicycle” project successfully ended, marked with
final media conference in Split
• Promo offers: Business week including Digital Business, My
Digital Office, Microsoft 365 and Premium fiscal cash register
Residential segment:
• Mobile
• Postpaid: M4M update of portfolio – continued promo
activities and best hardware offers focusing on MNP and
retention efforts
• Improved share of Core tariffs vs 2nd brand Bonbon with
channel and handset measures
• Xmas campaign: This Xmas make sure everyone is ok, S&D
launching an advent calendar with gifts for every day in the
Moj Telekom app and Special Xmas HW offer @great dis-
counts (Samsung & Xiaomi).
• Prepaid: launched first digital only e-Simpa options, sum-
mer offer of “Daily flat options” and strong visitors push to
manage market share
• Bonbon: refreshed offer with more GB and additional pack-
ages; Internet SIM launched
• Surprise and Delight offers continued (flat days POP and
PRP) to increase TRIM
• Swap and Save initiative with the aim of collecting and
disposing of old devices positively influencing on our
environment
• Fixed
• Best sport content offer enriched with acquisition of rights
for HNL (Croatian Football League) offering exclusivity on
our special MAXSport channels in our lineup and all com-
petitions under jurisdiction of HNS (Croatian Football Fed-
eration) for next 4 competition years - campaign focused on
content differentiation
• FTTH rollout: 200 Mbit/s speed for all existing customers
with possibility to upgrade to 500 Mbit/s with promo price
or 1 Gbit/s. Reaching +27% YoY FTTH customers growth.
• Fiber Internet on the leading network with SMART WI-FI -
attractive offers of devices for all HH members as part of
Back to school and Xmas campaign
• Introduced M4M price increase for all TV customers by cap-
italizing on premium content starting 15 August
• Launch of MAX 2 5G product – home Internet on fastest 5G
network
• Introduced Mini BB offer for upsell 1P to 2P with attrac-
tive offer
• Launch of new CineStar Premiere TV package and Termi-
nation of SportKlub channels and replacement with Are-
na7−10 channels
Other highlights:
• In March 2022 Hrvatski Telekom has been recognized by
Ethisphere, a global leader in defining and advancing the
standards of ethical business practices, as one of the 2022
World’s Most Ethical Companies. This is the first time that a
Croatian company has received such a recognition and has
met Ethisphere’s criteria for excellence across five catego-
ries including the ethics and compliance program, ethical
culture, corporate citizenship, governance and leadership.
• In May 2022 the prestigious Financial Times included Hr-
vatski Telekom on the list of European climate leaders for
2022. It is great recognition for quality corporate gover-
nance, implementation of sustainable development strate-
gy, continuous investment, development of highly efficient
infrastructure, and introduction of modern ICT services and
innovative network solutions based on which HT positively
contributes to environmental protection and more efficient
use of natural resources.
• HT won the HRIO (Croatian Sustainability Index) award in the
Community Relations category, awarded at the 14th Con-
ference on Sustainable Development. HRIO represents the
practice by which a company, more than legally prescribed
obligations, integrates sustainable development into the
decision-making system and thereby manages the impact
of its operations on the environment and society. Thus, good
business results cease to be the only criterion for evaluating
the success of a company.
• On 9 December 2022 the Zagreb Stock Exchange (ZSE)
awarded prizes in seven categories for the year 2022, where-
by the HT was once again awarded for “Share of the year”
and "Top Turnover Stock".
• HT won both umlaut “Best in test” awards for the mobile and
fixed network, confirming the status of the best and fast-
est mobile and fixed broadband network in Croatia. This is
the fifth time Hrvatski Telekom won the umlaut “Best in test”
award for the best mobile network, while also recording back-
to-back award for the best fixed broadband network as well.
• The quality of the HT in Q4 2022 mobile network was con-
firmed by winning the Ookla Speedtest Award certificate for
the best mobile network. Overall, in 2022, HT mobile network
was once again named as the best, fastest and network with the
best mobile coverage, and won three Ookla Speedtest Awards.
• Continued significant investments in network infrastructure:
• At the end of the 2022, 21% increase customer units
were covered by Fiber to the home (FTTH) network,
thus the leading market position of Hrvatski Telekom in
the implementation of fiber optical networks was also
achieved in 2022.
Main financials development
Revenue
Revenue in 2022 grew by HRK 252 million (4.3%) YoY, supported
by higher mobile non-service (HRK 106 million or 11.2%), mobile
service (HRK 94 million or 4.0%), fixed service (HRK 72 million or
3.8%), fixed non-service revenue (HRK 31 million or 6.0%), offset
by lower system solutions revenue (HRK 51 million or 26.1%).
Mobile service revenue
Mobile service revenue grew by HRK 94 million or 4.0%. Strong
postpaid and visitors’ revenue growth overcompensated decline
on prepaid and other mobile revenue.
Higher number of postpaid customers is a result of overall push
of successful and attractive More-4-More tariffs and handsets
as well as successful Bonbon campaigns resulting with solid
overall performance. After we refreshed postpaid portfolio and
increased competitiveness by including more GB and 5G in all
tariffs in Q2, in Q3 and Q4 we continued promo activities and
best hardware offers focusing on MNP and retention efforts, in-
creasing value and footfall. “Surprise and Delight” offers contin-
ued with unlimited weeks during the summer to boost TRIM, all
our mobile customers (both postpaid and prepaid) were able to
activate unlimited data days through “Moj telekom” app and use
benefits and discounts from our partners. FMS offer Gigabox contin-
ues to grow, providing our customers flat internet with mobility func-
tionality without MCD on service and with MCD on router.
Growth in business mobile customer base and postpaid ARPU is
result of upselling activities on existing customer base. Focus is on
migration to new mobile portfolio for VSE customers with More-4-
More approach and 5G speed increased from 1,5 Gbit/s to 2 Gbit/s
for better customer experience and to keep price premium position.
Lower number of prepaid customers compared to last year is a
result of continuous efforts in migration prepaid customers to
postpaid, overall contraction of prepaid market and strong com-
petition. On-going MNP and retention efforts in prepaid segment,
as well as focusing on additional value for HT prepaid custom-
ers, are being undertaken to mitigate the on-going decline. In Q2
both prepaid brands focused their activities on refreshing offer
- launched new e-Simpa options (more GB, 5G, cost control, no
call set up fee) and new Bonbon offer. In Q3, following repricing of
entire offer we continued activities with additional units, summer
offer of “Daily flat options” and strong visitors push to manage
market share. In Q4 bonbon launched new Internet SIM for cus-
tomers interested in data only service (without the possibility of
classic calls and SMS).
At the beginning of March, HT launched the Swap and Save ini-
tiative, aiming to collect and dispose old devices. Reducing the
amount of electronic waste and its disposal are environmental
priorities. HT, which has disposed more than 152,800 devices so
far, has decided to motivate customers by providing benefits for
each returned mobile phone when buying a new device.
Xmas campaign started with image communication: this Xmas
make sure everyone is ok, followed by S&D launching an advent
calendar with gifts for every day in the Moj Telekom app and Spe-
cial Xmas HW offer @great discounts (Samsung & Xiaomi).
Visitor roaming traffic in 2022 is higher than last year, due to
higher number of foreign users on HT network (less traveling
restrictions than last year related to COVID-19 pandemic) and
higher usage per customer. Compared to previous year, visitors
generated more voice originating minutes and more data traffic.
At the same time, on the wholesale cost side, HT's mobile cus-
tomers generated less voice originated minutes while roaming in
foreign countries and more data traffic which is driven partly by
higher volume of travel activity.
From 1 January 2022 regulated fixed termination rate (FTR) and
mobile termination rate (MTR) were further decreased because
of EU Commission Delegated Act.
Mobile non-service revenue
Mobile non-service revenue grew by HRK 106 million or 11.2%
supported by promotional activities boosting handset sale.
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS HT GROUP INCLUDING CRNOGORSKI TELEKOM
36 37
Fixed service revenue
Fixed service revenue grew by HRK 72 million or 3.8%, as a result
of growth in TV, professional data and BB revenue, which offset
lower voice and other fixed service revenue.
Voice decline is driven by the market trend of fixed to mobile and
IP substitution, regulation, and competitive dynamics. However,
HT continues with further pro- and reactive churn prevention of-
fers and activities.
HT continued with push of FTTH offer, 200 Mbit/s speed for all
existing customers with possibility to upgrade to 500 Mbit/s or
1 Gbit/s. HT will continue to invest in the development of the fi-
ber network and plans to expand the fiber optical internet zones.
Broadband customers can upgrade their connection with Pre-
mium Smart WiFi offer, Premium CPE modem and repeater as-
suring same internet speed in all parts of home and on multiple
devices. This offer ensures fast and reliable internet connection
at any time. Focus in 2022 was on push of broadband and TV
acquisitions supported through HNL and FTTH campaigns with
attractive offers of devices for all HH members as part of Back to
school and Xmas offer. Additionally, due to intensified competi-
tive pressure more aggressive promo offers are continued.
In 2022 MAXtv is still standard for the premium television service.
Richest content, premium picture quality, interactivity, new inter-
face and full integration with mobile devices provide customers
a unique TV viewing experience fully adapted to their habits. We
continued sales activities on DVBT-2 devices. Best sport content
offer is additionally enriched with acquisition of rights for HNL
(Croatian Football League) and all competitions under jurisdic-
tion of HNS (Croatian Football Federation) for next 4 competition
years. Launched two new channels with exclusive sport content,
MAXSport1 included in basic package and MAX Sport2 included in
sport package. Introduced price increase for all TV customers using
M4M concept based on our content offer (Arena, new MAXsport
channels with HNL, two Disney channels, NPVR) starting 15 August.
Fixed non-service revenue
Fixed non-service revenue grew by HRK 31 million or 6.0% due to
higher wholesale and other fixed non-service.
In 2022 successful sales of IP and data services continued despite
competitive wholesale market of data and IP services.
System Solutions
System Solutions revenue declined by HRK 51 million or 26.1%
due to focus on higher margin projects. Despite revenue de-
crease, EBITDA generated by System Solutions business has
increased in both absolute and relative terms compared to the
previous year.
In System Solutions focus is on profitable managed services busi-
ness and integrated solutions in area of Business applications,
Security, Infrastructure, and IOT/Smart City.
For the smart public lighting project that we are developing with
the City of Sveta Nedelja, HT won the „Yellow Frame“ award for the
best program in the „Sustainable categories of cities and sustainable
communities“. The initiative was organized by the Sustainable Croa-
tia initiative, National Geographic Croatia, and Adria Media Zagreb.
With final media conference held in Split, in December, the public
bike-sharing system project „Choose a bicycle!“ was successfully
brought to an end. A total of 41 new terminals and 242 mechanical
and electric bicycles were installed in Split, Trogir, Kaštela, Solin
and the municipalities of Dicmo, Klis, Podstrana, and Dugopolje.
The project was operationally carried out by Hrvatski Telekom
and partner Nextbike, while the project holder is the city of Split.
During November’s Business week offer HT had promo offers on:
Digital Business, My Digital Office and Microsoft 365.
Promotional offer on Premium Fiscal cash register, started at the
end of November, followed by digital campaign.
To increase awareness and support the Digital business service,
HT launched promo offer, also followed by digital campaign.
During whole Q4 HT had extended preparations and numerous
activities on Fiscalization services for Euro introduction so that cus-
tomers can make transition from HRK to EUR as easily as possible.
In December HT continued with digital campaign for Microsoft
365 with focus on business applications which are helping small
and medium businesses in their everyday activities (Teams, Plan-
ner, SharePoint, Bookings).
Operating expenses
Operating expenses increased by HRK 210 million or 6.4%
compared to 2021, mostly due to higher material and other cost,
partly offset by lower employee benefits expenses.
Profitability
EBITDA before exceptional items after leases
EBITDA before exceptional items after leases in 2022 grew by
HRK 32 million (1.3%) YoY as a result of higher net margin, which
compensated for inflationary pressures on operating expenses,
mainly related to energy costs.
Net profit
Net profit in 2022 grew by HRK 29 million (4.3%) YoY. Increase is
mostly a result of lower depreciation and better EBITDA, which
compensated for higher taxation and negative impact of net fi-
nancial result.
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS HT GROUP INCLUDING CRNOGORSKI TELEKOM BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS HT GROUP INCLUDING CRNOGORSKI TELEKOM
Financial position
Balance sheet
In comparison to 2021 year-end, there is increase in the total as-
set value of 0.05% or HRK 7 million mainly driven by higher pre-
payments, fixed assets and cash and cash equivalents, offset by
lower financial assets.
Total issued capital and reserves decreased by HRK 148 million
(1.2%) compared to 31 December 2021 mainly due to dividend
paid and treasury share buyback, partially offset by net profit for
the period.
Total non-current liabilities decreased by HRK 51 million (8.2%)
primarily due to lower lease liabilities.
Total current liabilities increased by HRK 206 million to HRK 1,430
million at 31 December 2022 primarily due to higher trade pay-
ables to third parties and income tax payable.
Cash flow
Cash flow from operating activities is HT’s principal source of
funds enabling the Company to finance capital investments and
dividend distributions.
CF from operating activities decreased by HRK 33 million (1%)
mainly affected by unfavorable working capital.
CF from investing activities increased by HRK 416 million (31%)
mainly affected by cash in from loan repayment.
CF from financing activities decreased by HRK 149 million (12%)
mainly affected by higher treasury buyback.
CAPEX after leases - HT Inc 2021 2022 % of change
A22/A21
CAPEX after leases* 1,478 1,479 1.3%
CAPEX after leases/ Revenue ratio 25.1% 24.4% -0,7 p.p.
Capital expenditure after leases (without Spectrum) for HT d.d.
*CAPEX after leases excluding Spectrum
CAPEX AL increase YoY is mainly due to Content capitalization
increase (signing of contract for Croatian football league – HNL).
In 2022, the strategic program for the implementation of next
generation fixed access network (NGA) in Fiber To The Home
(FTTH) topology continued.
During Q4 2022, within the program of the broadband infrastruc-
ture development co-financed by EU funds the FTTH network
was implemented, and construction was started on the entire
scope of the program.
At the end of the 2022, 21% increase customer units were cov-
ered by Fiber to the home (FTTH) network, thus the leading mar-
ket position of Hrvatski Telekom in the implementation of fiber
optical networks was also achieved in 2022.
Optical based access network (FTTx), which in addition to the
design of Fiber To The Home (FTTH) includes implementation of
the Fiber To The Building (FTTB) and Fiber To The Cabinet (FTTC)
using vectoring and super-vectoring technology, is available for
729 thousand households.
HT is focused on investments in the development of 5G network
which currently covers around 100 cities throughout Croatia and
more than 2 million people.
The quality of the HT in Q4 2022 mobile network was confirmed
by winning the Ookla Speedtest Award certificate for the best
mobile network. HT mobile network achieved the best annual
Speed Score result, which is a 26.9% improvement compared to
HT's result in 2021 and 21% better score compared to the compe-
tition's result. Overall, in 2022, HT mobile network was once again
named as the best, fastest and network with the best mobile cov-
erage, and won three Ookla Speedtest Awards. The awards are
the result of extensive in-depth research where Ookla analyzed
more than 600,000 user-run tests on Speedtest iOS and Android
mobile apps, as well as the results more than 344 million scans at
239,754 locations of all mobile operators in Croatia, during 2022.
The overall stability of the HT network is maintained at a high
level. During 2022, there were no network incidents of the most
severe category, while in other categories a further improvement
in overall stability was recorded compared to the previous year.
In 2022 activities on network functions virtualization and mi-
gration to the cloud with a focus on voice platforms have been
continuing. Pilot of the OTT TV platform cloudification has been
started.
The first phase of the Euro currency introduction project was
successfully completed. Operations were carried out on 25 net-
work and IT systems, and during the Q4 2022, according to plan,
double display of prices was implemented, and from January 1,
2023, the transition to the Euro as the main payment currency
was ensured.
CORPO-
RATE
SOCIAL
RESPON-
SIBILITY
40 41
Thanks to numerous initiatives dealing with key topics for employ-
ees, HT Group was the most awarded employer in 2022 and won
seven 'Employer Brand' awards for practices, projects, and activi-
ties carried out by employers, resulting in exceptional satisfaction,
experience, and employee engagement, and consequently a bet-
ter user experience.
Our excellence in human resource management, continuous im-
provement of work processes, and monitoring of global trends
was rated highly, thus confirming the Employer Partner status in
2022. In addition, as one of the best employers in Croatia, we re-
ceived additional confirmation of excellence with an "Above and
Beyond" certificate.
Health, disease prevention, and safety of employees are also one
of crucial tasks of Hrvatski Telekom. With the constant adaptation
of instructions and guidelines for work in the changing conditions
brought about by the pandemic, we continued in 2022 with the
active promotion of vaccination while encouraging employees to
behave responsibly to protect themselves, their loved ones, col-
leagues, and customer with whom they come into direct contact
during work. This is evidenced by the continuous activities carried
out during 2022:
• Implementation of a healthcare campaign on the topic "Vac-
cination against COVID-19 and other measures to prevent
the spread of the disease" in cooperation with the Croatian
Institute for Public Health and the Teaching Institute for
Public Health of Split-Dalmatia County.
• Country-wide organization of COVID-19 vaccinations/
re-vaccinations for HT employees.
• Organizing flu vaccination for HT employees in all regions.
• Celebrating World Hypertension Day with seminars in all re-
gions, in cooperation with the Croatian Red Cross, and pro-
curement of automatic external defibrillators for the largest
facilities in Zagreb, Split, Rijeka, and Osijek, as well as upper
arm blood pressure monitors.
• Celebrating World First Aid Day and organizing first aid
seminars in all regions in cooperation with the Croatian Red
Cross.
• Organizing ergonomic training as part of a preventive pro-
gram that includes awareness and practical education on
the effective use of the workspace.
• Organizing wellbeing webinars: Resilience, change manage-
ment, business-personal balance.
• Organizing the seminar "Traffic safety and traffic preven-
tion", in cooperation with the Croatian Auto Club.
• Conducting practical evacuation and rescue exercises in co-
operation with the Public Fire Department and Emergency
Medical Services.
• Conducting online exercises in collaboration with graduated
kinesiologists four times a week.
• SOS hour internal counseling, during which psychologists,
NLP experts, and others support employees who need it.
Knowledge society
In 2022, we continued cooperation with higher education institu-
tions and students. We provided students with internships led by
experienced HT experts acting as mentors.
In addition to traditional cooperation with faculties through guest
lectures and joint projects, summer and fall student internships
were organized in 2022, and the 'ICT Academy' continued. Through
summer 'Magenta Jump' internships, students were offered more
than 20 different positions and mentoring by experienced HT ex-
perts. At the 'ICT Academy', through 15 hours of interactive work-
shops and lectures, students learn directly from our experts who
work on some of the biggest projects in the ICT industry in this
part of Europe. More than 1,100 students recognized these great
opportunities and signed up.
We are continuously building the knowledge society from the
inside: all employees have 24/7 access to more than 20,000 on-
line educations on the internal Telekom learning platform, and we
conduct a whole series of professional training for our employees
internally and with renowned domestic and foreign suppliers. In
2021, we made a significant breakthrough because not only are
we perfecting existing competencies, but from the beginning, we
are training employees for the skills of the future, specifically soft-
ware developers. In 2022, we enrolled the second generation of
students who will be retrained as software developers.
Generation NOW program
Hrvatski Telekom is one of the first companies to recognize the
importance of systematically and comprehensively promoting
STEM education in Croatian schools. With the Generation NOW
program, launched in 2004 by Hrvatski Telekom and the Institute
for Youth Development and Innovation, more than 450 mentors
from 360 educational institutions were trained. The goal of the
donation program is to integrate existing and emerging tech
knowledge in the design of creative IoT projects, develop creativi-
ty, foster innovation, and provide many opportunities for students
to develop their own projects. In 2022, 169 institutions across
Croatia participated in the Generation NOW program, of which
60 new ones joined the program.
Generations Together - national digital education
program for seniors
The program, which we implement in cooperation with the Vol-
unteer Center Zagreb, aims to enable senior citizens to acquire
valuable digital skills. The Generations Together program in 2022
included 12 new nursing homes: Nursing home Korčula, Nursing
home Konavle, Nursing home Novigrad, Nursing home Velika,
Nursing home Volosko Opatija, Nursing home Marko A. Stuparić
Nursing Home, Veli Lošinj, Petrinja Nursing Home, Makarska
Nursing Home, Knin Nursing Home, Tisno Nursing Home, Oklaj
Nursing Home, and Vinkovci Nursing Home. This brings the num-
ber of homes participating in the program to 54.
In the 2022 Generation Together program, volunteers from out-
side the HT Group system joined HT Volunteers through the
'Volonteka' platform of the Zagreb Volunteer Center. A two-day
workshop of the 'Maksimir' Nursing Home was held. In addition
to repeating the basic tools, residents also learned about various
apps that interest them, updating data, etc.
HT's 'Generations Together', the national digital education pro-
CORPORATE SOCIAL RESPONSIBILITY
Hrvatski Telekom is a company that promotes sustainable devel-
opment, adheres to, and sets the highest standards of profession-
al communication, encourages, and facilitates integration into the
information and knowledge society, and is dedicated to environ-
mental protection.
We believe that the Company's reputation does not depend sole-
ly on the quality, price, or specific characteristics of products and
services but also on the Company's relations with customers,
suppliers, investors, employees, the environment, and the broader
community in which the Company operates.
This is HT's social responsibility strategy framework and the foun-
dation of business success. Through teamwork and the entire
Company's commitment to socially responsible business, our goal
is to contribute to society and improve the quality of life.
Hrvatski Telekom is committed to participating in the develop-
ment of society. We focus on investments in critical infrastructure
and the application of modern technologies that represent a digi-
tal platform for economic development and societal progress.
Despite the devastating war in Ukraine accompanied by deterio-
rating economic prospects, a large increase in energy prices, and
inflation, as the largest private investor in Croatia's digitalization,
Hrvatski Telekom recognizes the fact that the ICT infrastructure
and digitalization it provides play a key role in economic growth
and societal development and has remained focused on imple-
menting its strategy and providing comprehensive support to
national interests.
Throughout 2022, Hrvatski Telekom thus continued its responsi-
ble strategic approach and activities that contributed to society
and resulted in recognition for societal development. Some of the
awards in 2022 are highlighted below.
Ethisphere, the global leader in defining and improving the stan-
dards of ethical business practices, awarded Hrvatski Telekom for
the highest standards of ethics and compliance, integrity and cul-
ture, responsible business, corporate responsibility, governance,
and leadership, making it the first Croatian Company ever to be
included among the 2022 World's Most Ethical Companies.
The Financial Times also recognized Hrvatski Telekom for quality
corporate governance, implementation of sustainable develop-
ment strategy, continuous investments, development of high-per-
formance infrastructure, and introduction of modern ICT services
and innovative network solutions based on which HT positively
contributes to environmental protection and more efficient use of
natural resources, highlighting it as one of the European climate
leaders.
HT's systematic implementation of the sustainable development
strategy throughout its ecosystem, aimed at achieving ambitious
ESG goals for the second year in a row, resulted in the 2022 Croa-
tian Sustainability Index Award for contributions to society.
As part of the Days of Regional Development and EU Funds and
the 2022 Best City Awards, HT received recognition for its Con-
tribution to the sustainable development of cities and local
communities. We received the award thanks to our investments,
the construction of critical infrastructure, and the development of
innovative smart city solutions through which we create the foun-
dations for local communities to be more sustainable and enable
a higher quality of life for our fellow citizens.
In 2022, we also earned the EcoVadis certificate, which confirms
to our customers that the Company undertakes all available mea-
sures to achieve business sustainability. We hold the ISO 14001
certificate based on 20 years of systematic environmental care.
Caring about and developing employees
In 2022, according to an extensive survey the DT Group conducts
every year, Hrvatski Telekom achieved the highest employee satis-
faction in the history of HT and the highest employee engagement
in all segments.
These results are also a direct consequence of introducing a ca-
reer path across the Company, providing all our employees with a
clear, transparent, and structured career path, as well as the larg-
est investments in employees. A new Collective Agreement was
signed in 2022, confirming HT's status as the most desirable em-
ployer in the telecommunications industry. It provides employ-
ees with the highest level of social and material rights, and thus
HT responded to the challenges of inflation that all employees
face today.
An integral part of the development of HT as a digital company
is raising the level of knowledge in the Company through devel-
opment and programs for acquiring new skills and continuous
investment in employees. Digital learning is available to our em-
ployees through a platform that offers more than 23,000 online
courses. We are proud that over the last four years, we continu-
ously increased the number of completed online courses by an
average of 80 percent per year, providing modern learning tools and
enabling employees to take the initiative and seek continuous train-
ing adapted to the specific needs of target groups of employees.
We have identified talents from all areas of the Company, and
we develop their career individually to maximize competencies,
engagement, and motivation. The Talent program was further
developed in 2022 with the new generation of participants of the
12-month comprehensive program. The content includes active
work with Management Board members on actual business top-
ics. It goes beyond relying solely on classic educational methods
and has proven to be the most effective training method because
learning takes place in the work process. In addition to HT's talent
programs, the Company's talents can participate in DT's talent
program called Future skilling, which focuses on five topics: Soft-
ware Development, Data Analytics, Digital Marketing, Artificial
Intelligence, and User Experience.
Traditionally, we take care of the balance between personal and
business life and the health of our employees. We continue to oper-
ate in line with the SmartWork operating model adapted to current
business trends and employee needs, which has resulted in the
highest level of employee satisfaction in the Company's history.
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL
RESPONSIBILITY
42 43
CORPORATE SOCIAL RESPONSIBILITYCORPORATE SOCIAL RESPONSIBILITY
gram for the elderly resident of nursing homes, was recognized
at the international "The SABRE Awards 2022" as one of the best
projects in the entire EMEA region.
Digital innovation incubator
Hrvatski Telekom is also the general partner of the Digital Innova-
tion Incubator, an online project in which students of all faculties
learn about creativity and innovation, connect with leading com-
panies in the region and develop applicable innovative solutions
in selected industries. More than 2,500 registered elementary and
high school students and students from all over Croatia participat-
ed in the Digital Incubator organized by the Institute for Innovation
in 2022.
Volunteers Club
HT Group volunteer club has 296 members, and the club's activ-
ities continued in 2022. Several volunteer actions of the different
scopes of engagement were organized, including organizing a
hospital stay for the Krijesnica Association, one reforestation cam-
paign, and two humanitarian campaigns - collecting Christmas
packages for the Mali zmaj Association in Zagreb and collecting
supplies for the Maestral Children's Home in Split. Hrvatski Tele-
kom volunteers also participated in the Good Deeds Day cam-
paign, which was held throughout Croatia, and the Resolution Z
nature conservation and cleaning program.
Voluntary blood donation drives are regularly organized at HT
premises in Zagreb and Rijeka, with a great turnout from HT Group
colleagues. At the end of the year, a donation contest was orga-
nized based on which the employees themselves selected five
associations and/or initiatives to receive HT's Christmas donation.
How Are You?
At the end of 2022, Hrvatski Telekom conducted a national sur-
vey on communication habits and the importance of communi-
cation on mental state. A panel discussion was organized on the
topic "HOW ARE YOU? it's not just an ordinary question" with the
participation of renowned experts: Prof. Nataša Jokić-Begić, Ph.D.
from the Faculty of Philosophy, University of Zagreb, Tanja Sever
from Sever Psychology Center, and Prof. Neven Ricijaš, Ph.D. from
the Faculty of Education and Rehabilitation of the University of
Zagreb. They spoke from an expert point of view about the impor-
tance of honest and open communication and providing support
to loved ones as one of the key prerequisites for happiness, about
how to deal with problems, stress, and loneliness, and what we
can do to make ourselves and others feel better.
Together with the kako si? Association, a non-profit organization
whose goal is to empower the public to face various everyday
difficulties, Hrvatski Telekom did a series of 15 videos covering
specific topics to draw attention to these important but often ne-
glected topics.
#WhatWeValue
Hrvatski Telekom presented a free digital #WhatWeValue plat-
form to support young volunteers financially and connect them
with experienced leaders of humanitarian and socially responsible
actions who can help them achieve their goals.
Smart cities
In 2022, Hrvatski Telekom continued to develop solutions that
improve the quality of life in Croatian cities, reduce greenhouse
gas emissions, and increase the level of public services and the
efficiency of public spending. Some of the projects related to the
development of smart cities are described below.
Public bicycle system in Split-Dalmatia County
HT, with the System of Public Bicycles and the City of Split, pre-
sented in May of 2022 the system of public bicycles in Klis. The bi-
cycles were installed in that municipality as part of the "Choose a
bicycle!" EU project, a total value of HRK 13.6 million. The "Choose
a bicycle!" project is carried out in eight cities and municipalities
in the Urban Agglomeration of Split (UAS), which is also a record
holder in the number of users of public bicycle systems in Croa-
tia. The public bicycle system was previously set up in Podstrana,
followed by the expansion to the areas of Trogir, Kaštela, Solin, Du-
gopolje, and Dicma, and the upgrade of the system in Split. A total
of 41 new terminals and 242 bicycles were installed.
Smart remote water consumption metering pilot
project
HT and Đakovački vodovod successfully piloted the project of
smart remote water consumption metering pilot project. The proj-
ect tested the equipment consisting of a water meter and a com-
munication device that collects water consumption and flow data,
communication NB-IoT technology that sends the collected data
to a central system for processing and a central system or plat-
form for data collection, analysis, and visualization - ComWater.
IoT metering devices to collect meteorological data on
Biokovo
With the help of HGSS station Split and Biokovo Nature Park and in
cooperation with our renowned alpinist Stipe Božić, Hrvatski Tele-
kom installed IoT metering devices for collecting meteorological
data at the location of the Pakline mountain shelter on Biokovo.
The metering devices collect temperature and air humidity data,
which are then displayed in real-time on a mobile app enabling
future users to monitor and analyze data for various needs. For
example, HGSS can access precise meteorological data at a par-
ticular location and accordingly plan the necessary interventions.
Next-generation broadband access construction proj-
ects in ten counties
Hrvatski Telekom started with projects for constructing next-gen-
eration access - in ten counties in Croatia. By the end of 2023, this
will enable fast (+40 Mbit/s) and ultra-fast (+100 Mbit/s symmet-
rical) broadband access for almost 150 thousand new users in cit-
ies, municipalities, suburbs, and rural areas across Croatia.
The 13 Partnership Agreements are an integral part of the Pub-
lic Call of the Ministry of Regional Development and EU funds for
constructing next-generation access networks.
Digital transformation of factories
In early 2022, HT signed a partnership with Culmena on the
project of 100 smart factories to enable easier digitalization and
application of Industry 4.0 in Croatian factories. As part of the
digitalization and the application of the Industry 4.0 project, Hr-
vatski Telekom as a technology partner, provides factories with an
assortment of infrastructure services and the possibility of using
the modern HT IoT platform. As part of the complete Industry
4.0 offering, customers also have access to an app that monitors
real-time production to raise quality control and digitalize the
process further. Industry 4.0 aims to establish communication
between machines, people, products, and business apps. This re-
quires digitalization with the ultimate goal for factories to operate
more efficiently and for products with the highest quality stan-
dards to be more competitively priced.
E-mobility
Activities continued related to the EV charging infrastructure de-
velopment (installation of charging stations) and the provision
of the best possible digital charging service. Infrastructure de-
velopment aims to encourage the use of electric vehicles as the
most environmentally friendly solution in traffic, reduce CO2, and
increase air quality. As a continuation of the started activities, Hr-
vatski Telekom expanded in 2022 its cooperation with the Tom-
my retail chain and added another location equipped with an EV
charging station in the vicinity of the city of Split. In addition to
increasing the number of users of our Fleet Management Portal
service in cooperation with ALD, we have expanded the service by
four more users, bringing the total number of vehicles for which
we enable monitoring and session cost planning to 39.
As part of the consortium of Ericsson Nikola Tesla and REGEA,
Hrvatski Telekom actively participates in the Smart EPC project,
the goal of which is to develop standard tender documentation for
public procurement procedures in Smart Lighting, based on the
maximum inclusion of non-energy components.
In 2022, Hrvatski Telekom was also a part of the EU EIT Urban
Mobility project, as one of the consortium members, along with
REGEA, the Faculty of Electrical Engineering and Computing, and
Invento Capital Partners. HT focused on achieving five strategic
goals: Create livable urban spaces, bridge the knowledge gap,
implement green, safe, and inclusive mobility solutions for people
and goods, accelerate market opportunities, promote effective
policies, and behavior change.
As the leader of the CEKOM Surinmo sub-project, Hrvatski Tele-
kom successfully developed a car-sharing solution (shared mobili-
ty) and connected it to a charging stations management platform,
resulting in a unique solution that, in addition to providing a shared
mobility service, enables the user to view charging points and their
availability in real-time, and facilitates the use of electric vehicles.
WiFi4EU
As part of the WiFi4EU program, the European Union co-finances
public WiFi network projects, and cities and municipalities that
meet the conditions receive EUR 15,000 vouchers to provide free
internet in public locations. This program seeks to promote the
introduction of free WiFi for citizens and visitors in public spaces
across the European Union, such as parks, squares, public build-
ings, libraries, healthcare institutions, and museums, funding
local government units to procure cutting-edge equipment for
free WiFi in public areas. The fact that municipalities, towns, and
cities in these projects select Hrvatski Telekom proves that the
Company has been recognized as a reliable technological partner
that can provide quality internet access that increases economic
activity and quality of life for citizens in urban and suburban com-
munities. Hrvatski Telekom has so far implemented WiFi in more
than 50 cities and municipalities through the WiFi4EU program.
Responsibility towards environment
Sustainable development and climate protection are one of the
strategic determinants of HT and the entire DT Group. The use of
renewable energy sources is a step forward in the ongoing efforts
of HT to create a society with reduced greenhouse gas emissions.
In 2022, HT continued to use CO2-neutral electricity for 100 per-
cent of its consumption. The first corporate agreement on the
main conditions for the Virtual Power Purchase Agreement (vPPA)
in Croatia marks a major structural energy transition and is an im-
portant step towards securing the necessary energy for HT's op-
erations from RES, which will at the same time directly contribute
to HT's ambitious ESG goals.
As the only telecommunications company in Croatia certified ac-
cording to the ISO 14001 environmental management standard,
HT focuses on implementing green technologies and energy-sav-
ing solutions that are favorable to creating a society with reduced
greenhouse gas emissions. We systematically implement numer-
ous measures to reduce energy consumption and increase energy
efficiency by investing in the latest technologies. By introducing
the latest ICT technologies and services, we are reducing our car-
bon footprint and that of our customers.
We also use renewable sources to power base stations in our
mobile networks. We regularly renew and modernize our vehicle
fleet, which allows us to improve quality and efficiency and reduce
harmful environmental effects.
In addition to the unprecedented rise in electricity prices, in ac-
cordance with our sustainability and energy efficiency strategy,
numerous initiatives were implemented to reduce energy con-
sumption, such as the relocation of some employees in Zagreb
and Rijeka, the installation of modern and energy-efficient heating
systems in Rijeka and Split, the switching off of unnecessary light-
ing in our T-Centers and energy saving measures in our networks,
while maintaining the status of the leading network.
We continually encourage our employees to think and act eco-
logically. Numerous initiatives enable us to reduce energy con-
44 45
sumption and adverse climate impact and to properly manage
resources and waste. Points of sale accept customers' obsolete
mobile phones, other electronic devices, and waste batteries. We
are committed to working harder on the development of the cir-
cular economy process, which helped us in 2022 to improve the
collection of old devices that users no longer use and their proper
disposal and recycling of valuable raw materials. We achieved the
set goal for the return of old mobile and other electronic devices
(three percent of returned devices from users, compared to sold
devices).
Taxonomy regulation
For the first two environmental goals, the Company will publish
information on the share of EU Taxonomy eligible and aligned
economic activities and key performance indicators in the man-
ner and within the deadlines, as regulated by non-financial re-
porting in Articles 21.a and 24.a of the Accounting Act (Official
Gazette no. 78/15, 134/15, 120/16, 116/18, 42/20, 47/20, 114/22),
at the latest by the deadline from Article 30, paragraph 5. of the
Accounting Act, on Hrvatski Telekom's website, i.e., under the ap-
plicable regulations.
CORPORATE SOCIAL RESPONSIBILITY CORPORATE SOCIAL RESPONSIBILITY
Income statement
Balance sheet
Cash flow statement
FINAN-
CIAL
STATE -
MENTS
FOR
HT d.d.
48 49
FINANCIAL STATEMENTS FOR HT d.d. BALANCE SHEET
INCOME STATEMENT BALANCE SHEET
FINANCIAL STATEMENTS FOR HT d.d. INCOME STATEMENT
in HRK million At 31 Dec
2021
At 31 Dec
2022
% of change
A22/A21
Intangible assets 1.052 1.246 18,5%
Property, plant and equipment 5.666 5.710 0,8%
Non-current financial assets 2.053 1.606 -21,8%
Receivables 220 200 -9,3%
Prepayments and accrued income 186 -
Lessee use rights to leased assets (IFRS 16) 562 495 -11,9%
Contract assets (IFRS 15) 49 52 5,0%
Contract costs (IFRS 15) 102 128 26,2%
Deferred tax asset 105 127 20,9%
Total non-current assets 9.809 9.749 -0,6%
Inventories 140 175 25,6%
Assets held for sale 0 239 -
Receivables 1.382 1.364 -1,3%
Current financial assets 262 3 -98,7%
Contract assets (IFRS 15) 222 213 -4,0%
Contract costs (IFRS 15) 44 49 11,3%
Cash and cash equivalents 2.513 2.560 1,9%
Prepayments and accrued income 77 103 32,8%
Total current assets 4.640 4.707 1,4%
TOTAL ASSETS 14.449 14.456 0,0%
in HRK million 2021 2022 % of change
A22/A21
Mobile revenue 3.301 3.500 6,0%
Fixed revenue 2.394 2.497 4,3%
System solutions 194 143 -26,1%
Revenue 5.888 6.141 4,3%
Other operating income 98 86 -12,2%
Total operating revenue 5.987 6.227 4,0%
Operating expenses 3.291 3.501 6,4%
Material expenses 1.569 1.762 12,3%
Employee benefits expenses 893 886 -0,8%
Other expenses 808 832 2,9%
Work performed by the Group and capitalised -33 -28 16,7%
Net impairment losses on trade receivables and contract assets 53 49 -7,7%
Depreciation and amortization 1.932 1.788 -7,5%
EBIT 763 937 22,8%
Financial income 27 24 -11,2%
Income/loss from investment in joint ventures 80 0 -100,0%
Financial expenses 74 77 3,7%
Profit before taxes 796 884 11,1%
Taxation 130 189 46,0%
Net profit 666 695 4,3%
Adjusted EBITDA AL
1
2.477 2.508 1,3%
Exceptional items
2
107 96 -10,2%
EBITDA AL 2.370 2.412 1,8%
1
Mainly adjusted for restructuring redundancy costs and legal cases
2
Mainly related to restructuring redundancy costs and legal cases
HT d.d. changed presentation of revenue subcategories for 2021 and 2022, to align it with management reporting. The above-mentioned
amendment had no effect on total revenue.
50 51
CASH FLOW
FINANCIAL STATEMENTS FOR HT d.d. CASH FLOW
in HRK million 2021 2022 % of change
A22/A21
Profit before tax 796 884 11,1%
Depreciation and amortization 1.932 1.788 -7,5%
Increase / decrease of current liabilities -116 17 114,6%
Increase / decrease of current receivables 26 -153 -683,8%
Increase / decrease of inventories -35 -33 7,3%
Other cash flow increases / decreases -202 -136 32,9%
Net cash inflow/outflow from operating activities 2.401 2.367 -1,4%
Proceeds from sale of non-current assets 10 122 1085,7%
Proceeds from sale of non-current financial assets 0 1 -
Interest received 6 6 -0,4%
Dividend received 9 0 -100,0%
Other cash inflows from investing activities 10 399 -
Total increase of cash flow from investing activities 35 527 1410,6%
Purchase of non-current assets -1.366 -1.323 3,2%
Other cash outflows from investing activities -30 -150 -400,0%
Total decrease of cash flow from investing activities -1.396 -1.473 -5,5%
Net cash inflow/outflow from investing activities -1.362 -946 30,5%
Total increase of cash flow from financing activities
Repayment of loans and bonds -198 -274 -38,4%
Dividends paid -640 -630 1,6%
Repayment of lease -288 -290 -0,9%
Other cash outflows from financing activities -100 -180 -81,0%
Total decrease in cash flow from financing activities -1.226 -1.375 -12,2%
Net cash inflow/outflow from financing activities -1.226 -1.375 -12,2%
Exchange gains/losses on cash and cash equivalents -6 0 104,5%
Cash and cash equivalents at the beginning of period 2.706 2.513 -7,1%
Net cash (outflow) / inflow -192 47 124,2%
Cash and cash equivalents at the end of period 2.513 2.560 1,9%
in HRK million At 31 Dec
2021
At 31 Dec
2022
% of change
A22/A21
Subscribed share capital 10.245 10.245 0,0%
Reserves 575 517 -10,0%
Revaluation reserves 0 0 54,9%
Treasury shares -61 -4 94,2%
Retained earnings 1.179 1.002 -15,0%
Net profit for the period 666 695 4,3%
Total issued capital and reserves 12.603 12.455 -1,2%
Provisions 118 135 14,6%
Non-current liabilities 105 87 -16,7%
Lessee lease liabilities to third partie due > 1 year (IFRS 16) 397 346 -12,8%
Contract liabilities (IFRS 15) 0 0 -
Deferred tax liability 3 3 2,0%
Total non-current liabilities 622 571 -8,2%
Current liabilities 1.006 1.232 22,5%
Contract liabilities (IFRS 15) 56 36 -34,6%
Lessee lease liabilities due <= 1 year (IFRS 16) 129 126 -2,4%
Accrued expenses and deferred income 9 9 2,2%
Provisions for redundancy 24 26 9,2%
Total current liabilities 1.224 1.430 16,8%
Total liabilities 1.847 2.002 8,4%
TOTAL EQUITY AND LIABILITIES 14.449 14.456 0,0%
FINANCIAL STATEMENTS FOR HT d.d. BALANCE SHEET
BALANCE SHEET CONTINUED
Independent Auditor’s Report
Responsibility for the financial
statements
Statement of comprehensive income
Statement of financial position
Statement of cash flows
Statement of changes in equity
Notes to the financial statements
FINAN
CIAL
STATE
MENTS
DRAFT
STRICTLY CONFIDENTIAL
Croatian Telecom Inc.
Financial statements
31 December 2022
DRAFT
STRICTLY CONFIDENTIAL
Croatian Telecom Inc.
1
Contents
Page
Independent Auditor’s Report 3
Responsibility for the financial statements 10
Statement of comprehensive income 11
Statement of financial position 13
Statement of cash flows 15
Statement of changes in equity 16
Notes to the financial statements 17
DRAFT
STRICTLY CONFIDENTIAL
2 Croatian Telecom Inc.
Supervisory Board
The members of the Supervisory Board who served during 2022 and until the issuing of these statements are as follows:
Jonathan Richard Talbot
Chairman
From 25 April 2017
Ivica Mišetić, Ph. D.
Deputy Chairman
Member from 21 April 2008 until 24
April 2020
(Deputy Chairman from 8 May 2008)
From 20 July 2020
Vesna Mamić
Member, workers’ representative
From 1 January 2016
Dolly Predovic
Member
From 29 April 2014
Marc Stehle
Member
From 16 December 2015
Eirini Nikolaidi
Member
From 25 April 2016 until 24 April
2020
From 20 July 2020
Eva Somorjai-Tamassy
Member
Until 1 October 2022
Tino Puch
Member
Until 24 April 2022
Professor Gordan Gledec, Ph.D.
Member
From 20 July 2020
Jonathan Abrahamson
Member
From 25 April 2022
Management Board
The members of the Management Board who served during 2022 and until the issuing of these statements are as
follows:
Konstantinos Nempis
President
From 1 April 2019
Daniel Darius Denis Daub
Member
Until 1 August 2022
Nataša Rapaić
Member
From 1 February 2013
Boris Drilo
Member
From 1 January 2017
Ivan Bartulović
Member
From 1 March 2019
Matija Kovačević
Member
From 1 August 2022
Marijana Bačić
Member
From 1 September 2022
Siniša Đuranović
Member
From 8 December 2022
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
3
Ernst & Young d.o.o.
Radnička cesta 50, 10 000 Zagreb
Hrvatska / Croatia
MBS: 080435407
OIB: 58960122779
PDV br. / VAT no.: HR58960122779
Tel: +385 1 5800 800
Fax: +385 1 5800 888
www.ey.com/hr
Banka / Bank:
Erste & Steiermärkische Bank d.d.
Jadranski trg 3A, 51000 Rijeka
Hrvatska / Croatia
IBAN: HR3324020061100280716
SWIFT: ESBCHR22
INDEPENDENT AUDITOR’S REPORT
To the Shareholders of Hrvatski Telekom d.d.
Report on the audit of the financial statements
Opinion
We have audited the financial statements of Hrvatski Telekom d.d. (the Company), which comprise the
statement of financial position as at 31 December 2022, statement of comprehensive income, statement of
changes in equity and statement of cash flows for the year then ended, and notes to the financial statements,
including significant accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of
the Company as at 31 December 2022 and of its financial performance and its cash flows for the year then
ended in accordance with International Financial Reporting Standards as adopted by the European Union
(IFRS).
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (ISAs). Our responsibilities
under those standards are further described in the Auditor’s responsibilities for the audit of the financial
statements section of our report.
We are independent of the Company in accordance with the International Ethics Standards Board of
Accountants’ (IESBA) International Code of Ethics for Professional Accountants, including International
Independence Standards (IESBA Code), together with the ethical requirements that are relevant to our audit
of the financial statements in Republic of Croatia, and we have fulfilled our other ethical responsibilities in
accordance with these requirements and the IESBA Code.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our
opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in our audit
of the financial statements of the current period. These matters were addressed in the context of our audit
of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. For each matter below, our description of how our audit addressed the matters is
provided in that context.
We have fulfilled the responsibilities described in the Auditor’s responsibilities for the audit of the financial
statements section of our report, including in relation to these matters. Accordingly, our audit included the
performance of procedures designed to respond to our assessment of the risks of material misstatement of
the financial statements. The results of our audit procedures, including the procedures performed to address
the matters below, provide the basis for our audit opinion on the accompanying financial statements.
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
4
Key audit matter
How we addressed key audit matter
Revenue recognition
Refer to Note 2.3. Significant accounting
judgements, estimates and assumptions Revenue
recognition, Note 2.4. (o) Revenue recognition
and Note 3 Segment information of the separate
financial statements.
We consider revenue recognition as a significant
matter due to the complexity of the invoicing
systems and the large volume of data processed.
Additionally, various types of products and
services as well as pricing of these products and
services are the result of multi-element contracts.
Due to the complexity of transactions, which are
based on various inputs, there is a possibility that
the revenues will not be recognized in accordance
with IFRS as adopted by the EU.
As a result of the above factors as well as
significance of revenues to the financial
statements, the revenue recognition is considered
as a key audit matter.
Our audit procedures related to revenue recognition
included, among others, understanding of sales,
billing, roaming, interconnection and revenue
recognition processes. We understood and evaluated
the design and implementation of segregation of
duties, the adequacy of the policies and key controls,
including relevant Information technology systems
and controls around revenue recognition. On the
sample basis we tested the operating effectiveness of
key controls relevant to the revenue recognition.
We performed testing, on a sample basis, of revenue
accounts, including test of details by reviewing
contracts with customers and performing testing of
issued invoices around the balance sheet date. We
performed analytical procedures by comparison of
financial data with non-financial data (number of
users, industry trends) and investigation of
significant changes or lack of expected changes. We
assessed the adequacy of categorization of revenues
within portfolio approach.
We also assessed adequacy of the disclosures in the
separate financial statements and if these are in line
with the requirements of IFRS as adopted by the EU.
Recognition and valuation of content rights
Refer to Note 2.3. Significant accounting
judgements, estimates and assumptions
Capitalized content rights, Note 2.4. (e) Intangible
assets, (g) Impairment of non-financial assets and
Note 15 Intangible assets of the separate financial
statements.
We obtained the understanding of content rights
accounting process. We understood and evaluated
the design and implementation of segregation of
duties, the adequacy of the policies and key controls,
including controls that are in place around content
rights accounting.
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
5
The carrying amount of content rights of the
Company as at 31 December 2022 was HRK 73
million.
There is a risk that the Company has not applied
right criteria for the capitalization of content
rights cost and/ or the risk that the Company
estimation of future consideration payable from
content contracts is not reasonable.
Since the estimation process is based on the
assumptions like the estimated number of future
customers and discount rate, implying subjectivity
and complexity, this is an area considered to be a
key audit matter.
We obtained a detailed analysis of capitalized content
contracts in the current period and reconciled these
amounts to the general ledger. We have tested a
sample of costs capitalized in the period by inspection
of related contracts and invoices to assess whether
they have been appropriately capitalized.
We assessed the reasonableness of assumptions
(estimated number of future customers and discount
rate) used for measurement of future consideration.
We compared the future customers estimate to
historical data and considered the consistency of the
future growth rate assumptions with management’s
business plans. We tested the appropriateness of
discount rates used in the calculation with the
assistance of the valuation specialists.
We also assessed adequacy of the disclosures in the
separate financial statements and if these are in line
with the requirements of IFRS as adopted by the EU.
Other information
Management is responsible for the other information. Other information comprises the Management Report
and Corporate Governance Statement included in the Annual Report, but does not include financial
statements and our auditor’s report thereon.
Our opinion on the financial statements does not cover the other information.
In connection with our audit of the financial statements, our responsibility is to read the other information
and, in doing so, consider whether the other information is materially inconsistent with the financial
statements or our knowledge obtained in the audit or otherwise appears to be materially misstated.
With respect to the Management Report and Corporate Governance Statement, we also performed
procedures required by the Accounting Act. Those procedures include considering whether the Management
Report is prepared in accordance with the requirements of Article 21 of the Accounting Act and whether the
Corporate Governance Statement includes the information specified in Article 22 of the Accounting Act.
Based on the procedures undertaken, to the extent we are able to assess it, we report that:
1. the information given in the enclosed Management Report and Corporate Governance Statement is
consistent, in all material respects, with the enclosed financial statements;
2.the enclosed Management Report is prepared in accordance with requirements of Article 21 of the
Accounting Act; and
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
6
3. the enclosed Corporate Governance Statement includes the information specified in Article 22 of the
Accounting Act.
In the light of the knowledge and understanding of the Company and its environment obtained in the course
of the audit of financial statements, we are also required to report if we have identified material
misstatements in the Management Report and Corporate Governance Statement. We have nothing to report
in this respect.
Responsibilities of management and Audit Committee for the financial statements
Management is responsible for the preparation and fair presentation of the financial statements in
accordance with IFRS, and for such internal control as management determines is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company’s ability to
continue as a going concern, disclosing, as applicable, matters related to going concern and using the going
concern basis of accounting unless management either intends to liquidate the Company or to cease
operations, or has no realistic alternative but to do so.
Audit Committee is responsible for overseeing the Company’s financial reporting process.
Auditor’s responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are
free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes
our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted
in accordance with ISAs will always detect a material misstatement when it exists. Misstatements can arise
from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
As part of an audit in accordance with ISAs, we exercise professional judgment and maintain professional
skepticism throughout the audit. We also:
• Identify and assess the risks of material misstatement of the financial statements, whether due to
fraud or error, design and perform audit procedures responsive to those risks, and obtain audit
evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting
a material misstatement resulting from fraud is higher than for one resulting from error, as fraud
may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal
control.
• Obtain an understanding of internal control relevant to the audit in order to design audit procedures
that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the
effectiveness of the Company’s internal control.
• Evaluate the appropriateness of accounting policies used and the reasonableness of accounting
estimates and related disclosures made by management.
• Conclude on the appropriateness of management’s use of the going concern basis of accounting and,
based on the audit evidence obtained, whether a material uncertainty exists related to events or
conditions that may cast significant doubt on the Company’s ability to continue as a going concern.
If we conclude that a material uncertainty exists, we are required to draw attention in our auditor’s
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
7
report to the related disclosures in the financial statements or, if such disclosures are inadequate,
to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of
our auditor’s report. However, future events or conditions may cause the Company to cease to
continue as a going concern.
• Evaluate the overall presentation, structure and content of the financial statements, including the
disclosures, and whether the financial statements represent the underlying transactions and events
in a manner that achieves fair presentation.
We communicate with Audit Committee regarding, among other matters, the planned scope and timing of
the audit and significant audit findings, including any significant deficiencies in internal control that we
identify during our audit.
We also provide Audit Committee with a statement that we have complied with relevant ethical requirements
regarding independence, and communicate with them all relationships and other matters that may
reasonably be thought to bear on our independence, and where applicable, actions taken to eliminate threats
or safeguards applied.
From the matters communicated with Audit Committee, we determine those matters that were of most
significance in the audit of the financial statements of the current period and are therefore the key audit
matters. We describe these matters in our auditor’s report unless law or regulation precludes public
disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should
not be communicated in our report because the adverse consequences of doing so would reasonably be
expected to outweigh the public interest benefits of such communication.
Report on Other Legal and Regulatory Requirements
In compliance with Article 10(2) of Regulation (EU) No. 537/2014 of the European Parliament
and the Council, we provide the following information in our independent auditor’s report, which is required
in addition to the requirements of ISAs:
Appointment of Auditor and Period of Engagement
We were initially appointed as auditors of the Company on 23 April 2021. Our appointment has been renewed
annually by General Assembly of Shareholders, with the most recent reappointment on 25 April 2022,
representing a total period of uninterrupted engagement appointment of 2 years.
Consistence with Additional Report to Audit Committee
We confirm that our audit opinion on the financial statements expressed herein is consistent
with the additional report to the Audit Committee of the Company, which we issued on 20 February 2023
in accordance with Article 11 of Regulation (EU) No. 537/2014 of the European Parliament and the Council.
Provision of Non-audit Services
We declare that no prohibited non-audit services referred to in Article 5(1) of Regulation (EU) No. 537/2014
of the European Parliament and the Council were provided by us to the Company and its controlled
undertakings within the European Union. In addition, there are no other non-audit services which were
provided by us to the Company and its controlled undertakings and which have not been disclosed in the
financial statements.
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
8
Report on Regulatory requirements
Report based on Delegated Regulation (EU) 2018/815 on supplementing Directive 2004/109/EZ of
European parliament and Council related to regulatory technical standard for specification of single
electronic reporting format of reporting
Independent report on the compliance of financial statements prepared pursuant to Article 462 (5) of the
Capital Market Act (Official Gazette 65/18, 17/20,83/21 and 151/22) applying the requirements of the
Delegated Regulation (EU) 2018 / 815 on establishing of single electronic reporting format for issuers (the
ESEF Regulation).
We have conducted a reasonable assurance engagement on whether the financial statements, as contained
in the attached electronic file 097900BFHJ 0000029454-2022-12-31-en, are prepared, for the purposes of
public disclosure pursuant to Article 462, paragraph 5 of the Capital Market Act, in all material respects in
accordance with the requirements of the ESEF Regulation.
Responsibilities of the management and Audit Committee
Management is responsible for the preparation of the financial statements in accordance with ESEF
Regulation.
Furthermore, management is responsible for maintaining an internal control system that reasonably ensures
the preparation of financial statements without material non-compliances with ESEF Regulation
requirements, whether due to fraud or error.
Management is also responsible for:
• the public disclosure of financial statements included in the annual report, in XHTML format and
• selecting and using XBLR codes in accordance with ESEF regulation
Audit Committee is responsible for overseeing the preparation of the financial statements in ESEF format as
part of the financial reporting process.
Auditor's responsibilities
Our responsibility is to express a conclusion, based on the audit evidence gathered, as to whether the
financial statements are free from material non-compliances with the requirements of the ESEF Regulation.
We conducted our reasonable assurance engagement in accordance with International Standard for
Assurance Engagements ISAE 3000 (revised)- Assurance engagements other than audits or reviews of
historical financial information.
Work performed
The nature, timing and extent of the procedures selected depend on the auditor's judgment. Reasonable
assurance is a high degree of assurance, however it does not guarantee that the scope of procedures will
identify all significant (material) non-compliance with ESEF regulation.
A member firm of Ernst & Young Global Limited
Mjerodavan sud: Trgovački sud u Zagrebu; Temeljni kapital: 20.000,00 kuna, uplaćen u cijelosti;
Članovi Uprave: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
Applicable court: Commercial court in Zagreb; Registered share capital is 20.000,00 HRK, fully paid;
Members of the Board: Berislav Horvat, Ivana Krajinović, Zvonimir Madunić
9
In respect of the subject matter, we have performed the following procedures:
• we read the requirements of the ESEF Regulation,
• we have gained an understanding of the Company's internal controls relevant to the application of
the requirements of the ESEF Regulation,
• we have identified and assessed the risks of material non-compliance with the ESEF Regulation due
to fraud or error; and
• Based on this, devise and implement procedures to respond to the assessed risks and to obtain
reasonable assurance for the purpose of expressing our conclusion.
The aim of our procedures was to assess whether:
• the financial statements, which are included in the annual report, are prepared in the relevant XHTML
format,
• the information contained in the financial statements required by the ESEF Regulation is marked and
all markings meet the following requirements:
o the XBRL markup language was used,
o the basic taxonomy elements listed in the ESEF Regulation with the closest accounting
significance have been used, unless an additional taxonomy element has been created in
accordance with Annex IV. ESEF Regulation,
o the labeled elements comply with the common labeling rules under the ESEF Regulation.
We believe that the audit evidence obtained is sufficient and appropriate to provide a basis for our conclusion.
Conclusion
Based on the procedures performed and evidence gathered, the financial statements presented in ESEF
format for the year ended on 31 December 2022, contained in the aforementioned attached electronic file
and prepared pursuant to Article 462 paragraph 5 of the Capital Market Act prepared for public disclosure,
are prepared in all material respects in line with the requirements of Articles 3, 4 and 6 of the ESEF
Regulation.
Further to this conclusion, as well as the opinion contained in this independent auditor’s report related to
accompanying financial statements and annual report for the year ended 31 December 2022, we do not
express any opinion on the information contained in these presentations or on any other information
contained in the aforementioned file.
The partner in charge of the audit resulting in this independent auditor’s report is Ivana Krajinović.
Ivana Krajinović
Member of the Management Board and Certified auditor
Ernst & Young d.o.o.
Radnička cesta 50
10000 Zagreb, Republic of Croatia
14 March 2023
Statement of comprehensive income DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
11 Croatian Telecom Inc.
Notes
2022
2021
HRK million
HRK million
Revenue
4
6,141
5,888
Other operating income
5
86
98
Merchandise, material and energy expenses
6
(1,214)
(973)
Service expenses
7
(548)
(596)
Employee benefits expenses
9
(886)
(893)
Work performed by the Company and capitalized
28
33
Depreciation and amortization
8
(1,678)
(1,861)
Impairment of non-current assets
8
(110)
(71)
Net impairment losses on trade receivables and contract assets
25
(49)
(54)
Other expenses
10
(833)
(808)
__________
__________
Operating profit
4
937
763
__________
__________
Finance income
11
24
27
Finance costs
12
(77)
(74)
Income from dividends – subsidiaries
-
80
__________
__________
Finance income – net
(53)
33
__________
__________
Profit before income tax
884
796
Income tax expense
13
(189)
(130)
__________
__________
Profit for the year
695
666
__________
__________
Items that may be subsequently reclassified to comprehensive
income
Changes in the fair value of debt instruments at fair value
-
(1)
__________
__________
Other comprehensive income/ (loss) for the year, net of tax
-
(1)
__________
__________
Total comprehensive income for the year, net of tax
695
665
__________
__________
Statement of financial position DRAFT
As at 31 December 2022 STRICTLY CONFIDENTIAL
13 Croatian Telecom Inc.
Notes
31 December
31 December
2022
2021
HRK million
HRK million
ASSETS
Non-current assets
Intangible assets
15
1,246
1,052
Right-of-use assets
18
495
562
Property, plant and equipment
16
5,699
5,654
Investment property
17
11
12
Investments in subsidiaries
19
1,598
1,711
Investments accounted for using the cost method
20
-
334
Financial assets at fair value through other comprehensive income
21
8
8
Trade and other receivables
24
200
220
Contract assets
25
52
49
Capitalized contract costs
25
128
102
Prepayments
26
186
-
Deferred income tax asset
13
127
105
__________
__________
Total non-current assets
9,750
9,809
__________
__________
Current assets
Inventories
23
175
140
Assets classified as held for sale
22
239
-
Trade and other receivables
24
1,162
1,119
Contract assets
25
213
222
Capitalized contract costs
25
49
44
Receivables from subsidiaries
38
191
257
Prepayments
26
102
78
Financial assets at fair value through other comprehensive income
21
-
201
Income tax prepayments
-
6
Loans receivable from subsidiaries
38
15
60
Cash and cash equivalents
27
2,560
2,513
__________
__________
Total current assets
4,706
4,640
__________
__________
TOTAL ASSETS
14,456
14,449
__________
__________
Statement of cash flows
For the year ended 31 December 2022STRICTLY CONFIDENTIAL
15 Croatian Telecom Inc.
Notes
2022
2021
HRK million
HRK million
Operating activities
Profit before income tax
884
796
Depreciation and amortization
8
1,678
1,861
Impairment loss of PPE & Intangible assets
8
15
13
Impairment of investments accounted for using the cost method
8
95
-
Impairment of investment in subsidiary
8
-
58
Interest income
11
(6)
(7)
Interest expense
12
55
51
(Gain) on disposal of assets
5,10
(42)
(11)
Other net financial loss
11,12
4
3
Income from dividends - subsidiaries
-
(80)
(Increase) in inventories
(33)
(36)
Decrease/ (increase) in receivables and prepayments
(151)
75
(Increase) / decrease in contract assets/costs
25
(15)
(34)
Increase/ (decrease) in payables and accruals
40
(136)
Increase / (decrease) in contract liabilities
(20)
16
Increase / (decrease) in provisions
14
32
Increase in accruals
31
8
3
Increase in employee benefit obligations
5
8
Other non-cash items
-
8
__________
__________
Cash generated from operations
2,531
2,620
Interest paid
(34)
(62)
Income tax paid
(129)
(157)
__________
__________
Net cash flows from operating activities
2,368
2,401
__________
__________
Investing activities
Payments for property, plant and equipment and intangible assets
(1,323)
(1,366)
Proceeds from sale of non-current assets
122
10
Proceeds from sale of financial assets at fair value through other comprehensive income
201
-
Other investment received
4
10
Dividend received - subsidiaries
-
9
Given loan to subsidiary
(150)
(30)
Loan repayment from subsidiary
195
-
Interest received
5
5
__________
__________
Net cash flows used in investing activities
(946)
(1,362)
__________
__________
Financing activities
Dividends paid
35
(630)
(640)
Repayment of radio frequency spectrum and content
42
(274)
(198)
Repayment of lease liability
18
(291)
(288)
Acquisition of treasury shares
34
(180)
(100)
__________
__________
Net cash flows used in financing activities
(1,375)
(1,226)
__________
__________
Net increase/ (decrease) in cash and cash equivalents
47
(187)
Cash and cash equivalents as at 1 January
2,513
2,706
Exchange (losses) on cash and cash equivalents
-
(6)
__________
__________
Cash and cash equivalents as at 31 December
27
2,560
2,513
__________
__________
Statement of changes in equity
For the year ended 31 December 2022
16 Croatian Telecom Inc.
Issued
share capital
Legal
reserves
Other reserves
Reserve for
treasury
shares
Treasury
shares
Retained
earnings
Total
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
(Note 32)
(Note 33)
(Note 34)
(Note 34)
(Note 35)
Balance as at 31 December 2020
10,245
512
1
90
(90)
1,918
12,676
__________
__________
__________
__________
__________
__________
________
Balance as at 1 January 2021
10,245
512
1
90
(90)
1,918
12,676
__________
__________
__________
__________
__________
__________
______
Profit for the year
-
-
-
-
-
666
666
Other comprehensive income for the year
-
-
(1)
-
-
-
(1)
__________
__________
__________
__________
__________
__________
__________
Total comprehensive income for the year
-
-
(1)
-
-
666
665
Reserve for treasury shares
-
-
-
100
-
(100)
-
Acquisition of treasury shares
-
-
-
-
(100)
-
(100)
Shares cancelled
-
-
-
(126)
126
-
-
Share based payments
-
-
-
(3)
3
3
3
Effect of merger of subsidiary
-
-
-
-
-
(2)
(2)
Other changes
-
-
1
-
-
1
1
Dividends paid to equity holders of the Company
-
-
-
-
-
(640)
(640)
__________
__________
__________
__________
__________
__________
__________
Balance as at 31 December 2021
10,245
512
1
61
(61)
1,845
12,603
__________
__________
__________
__________
__________
__________
__________
Balance as at 1 January 2022
10,245
512
1
61
(61)
1,845
12,603
Profit for the year
-
-
-
-
-
695
695
Other comprehensive income for the year
-
-
-
-
-
-
__________
__________
__________
__________
__________
__________
__________
Total comprehensive income for the year
-
-
-
-
-
695
695
Reserve for treasury shares
-
-
-
180
-
(180)
-
Acquisition of treasury shares
-
-
-
-
(180)
-
(180)
Shares cancelled
-
-
-
(235)
235
-
-
Share based payments
-
-
-
(3)
3
3
3
Effect of merger of subsidiary (Note 3)
-
-
-
-
-
(36)
(36)
Other changes
-
-
-
-
-
-
-
Dividends paid to equity holders of the Company
-
-
-
-
-
(630)
(630)
__________
__________
__________
__________
__________
__________
__________
Balance as at 31 December 2022
10,245
512
1
3
(3)
1,697
12,455
__________
__________
__________
__________
__________
__________
__________
In 2021 and 2022, the Company has changed the presentation method of Share Award Plan as a part of treasury shares in the statement of financial position and the statement of changes in equity.
In 2021, Share Award Plan was shown separately, as a share based program in the statement of changes in equity, and as a share based program in the statement of financial position. This was done
in order to make the presentation of equity movements more transparent. The aforementioned adjustment had no impact on the total amount of equity.
The accompanying accounting policies and notes are an integral part of these financial statements.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
17 Croatian Telecom Inc.
1. Corporate information
Croatian Telecom Inc. (“HT” or the “Company”) is a joint stock company whose majority shareholder is Deutsche
Telekom Europe B.V. with a 53% holding. Deutsche Telekom Europe B.V. is 100% owned by Deutsche Telekom Europe
Holding B.V. Deutsche Telekom Europe Holding B.V is 100% owned by Deutsche Telekom Europe Holding GmbH which
is 100% owned by Deutsche Telekom AG. Thus, Deutsche Telekom AG is the ultimate controlling parent.
The registered office address of the Company is Radnička cesta 21, Zagreb, Croatia.
The total number of employees of the Company as at 31 December 2022 was 3,881 (31 December 2021: 4,036).
The principal activities of the Company are described in Note 4.
The financial statements for the financial year ended 31 December 2022 were authorized for issue in accordance with
a resolution of the Management Board on 14 March 2023. These financial statements are subject to approval of the
Supervisory Board as required by the Croatian Company Act. Annual consolidated financial statements of HT Group
are disclosed on the Company's web page in Investor Relations.
2.1. Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS)
as endorsed by the EU. The financial statements also comply with the Croatian Accounting Act on financial statements,
which refers to IFRS as endorsed by the EU.
The financial statements have been prepared under the historical cost convention, as modified by the revaluation of
financial assets at fair value through other comprehensive income (Note 21), as disclosed in the accounting policies
hereafter.
The Company’s financial statements are presented in Croatian Kuna (“HRK”) which is the Company’s functional
currency. All amounts disclosed in the financial statements are presented in millions of HRK if not otherwise stated.
The Company has also prepared consolidated financial statements in accordance with IFRS for the Company and its
subsidiaries (the “Group”), which were approved by the Management Board on 14 March 2023. In the consolidated
financial statements, subsidiary undertakings (Note 19) have been fully consolidated. Users of these separate financial
statements should read them together with the Group's consolidated financial statements as at and for the year ended
31 December 2022 in order to obtain full information on the financial position, results of operations and changes in the
financial position of the Group as a whole.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
18 Croatian Telecom Inc.
2.1. Changes in accounting policies and disclosures
Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or
after 1 January 2022 or later. The new standards did not have any material impact on the Company:
• IFRS 3 Business Combinations (Amendments) update a reference in IFRS 3 to the previous version of the
IASB’s Conceptual Framework for Financial Reporting to the current version issued in 2018 without significantly
changing the accounting requirements for business combinations
• IAS 16 Property, Plant and Equipment (Amendments) prohibit a company from deducting from the cost of
property, plant and equipment any proceeds from the sale of items produced while bringing the asset to the
location and condition necessary for it be capable of operating in the manner intended by management. Instead,
a company recognizes such sales proceeds and related cost in profit or loss
• IAS 37 Provisions, Contingent Liabilities and Contingent Assets (Amendments) specify which costs a company
includes in determining the cost of fulfilling a contract for the purpose of assessing whether a contract is
onerous. The amendments clarify, the costs that relate directly to a contract to provide goods or services include
both incremental costs and an allocation of costs directly related to the contract activities.
• Annual Improvements 2018-2020 make minor amendments to IFRS 1 First-time Adoption of International
Financial Reporting Standards, IFRS 9 Financial Instruments, IAS 41 Agriculture and the Illustrative Examples
accompanying IFRS 16 Leases
• IFRS 16 Leases-Cοvid 19 Related Rent Concessions beyond 30 June 2021 (Amendment); The Amendment
applies to annual reporting periods beginning on or after 1 April 2021, with earlier application permitted,
including in financial statements not yet authorized for issue at the date the amendment is issued. In March
2021, the Board amended the conditions of the practical expedient in IFRS 16 that provides relief to lessees
from applying the IFRS 16 guidance on lease modifications to rent concessions arising as a direct consequence
of the covid-19 pandemic. Following the amendment, the practical expedient now applies to rent concessions
for which any reduction in lease payments affects only payments originally due on or before 30 June 2022,
provided the other conditions for applying the practical expedient are met.
New standards and interpretations not yet adopted
Certain new standards and interpretations have been issued that are mandatory for the annual periods beginning on or
after 1 January 2023 or later. The new standards do not have any material impact on the Company:
• IAS 1 Presentation of Financial Statements and IFRS Practice Statement 2: Disclosure of Accounting policies
(Amendments); The Amendments are effective for annual periods beginning on or after January 1, 2023 with
earlier application permitted. The amendments provide guidance on the application of materiality judgements
to accounting policy disclosures. In particular, the amendments to IAS 1 replace the requirement to disclose
‘significant’ accounting policies with a requirement to disclose ‘material’ accounting policies. Also, guidance and
illustrative examples are added in the Practice Statement to assist in the application of the materiality concept
when making judgements about accounting policy disclosures.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
19 Croatian Telecom Inc.
2.2. Changes in accounting policies and disclosures (continued)
New standards and interpretations not yet adopted (continued)
• IAS 8 Accounting policies, Changes in Accounting Estimates and Errors: Definition of Accounting Estimates
(Amendments); The amendments become effective for annual reporting periods beginning on or after January
1, 2023, with earlier application permitted and apply to changes in accounting policies and changes in
accounting estimates that occur on or after the start of that period. The amendments introduce a new definition
of accounting estimates, defined as monetary amounts in financial statements that are subject to measurement
uncertainty, if they do not result from a correction of prior period error. Also, the amendments clarify what
changes in accounting estimates are and how these differ from changes in accounting policies and corrections
of errors
• IAS 12 Income taxes: Deferred Tax related to Assets and Liabilities arising from a Single Transaction
(Amendments); The amendments are effective for annual periods beginning on or after January 1, 2023 with
earlier application permitted. The amendments narrow the scope of and provide further clarity on the initial
recognition exception under IAS 12 and specify how companies should account for deferred tax related to
assets and liabilities arising from a single transaction, such as leases and decommissioning obligations. The
amendments clarify that where payments that settle a liability are deductible for tax purposes, it is a matter of
judgement, having considered the applicable tax law, whether such deductions are attributable for tax purposes
to the liability or to the related asset component. Under the amendments, the initial recognition exception does
not apply to transactions that, on initial recognition, give rise to equal taxable and deductible temporary
differences. It only applies if the recognition of a lease asset and lease liability (or decommissioning liability and
decommissioning asset component) give rise to taxable and deductible temporary differences that are not equal
• IAS 1 Presentation of Financial Statements: Classification of Liabilities as Current or Non-current
(Amendments); The amendments are effective for annual reporting periods beginning on or after January 1,
2024, with earlier application permitted, and will need to be applied retrospectively in accordance with IAS 8.
The objective of the amendments is to clarify the principles in IAS 1 for the classification of liabilities as either
current or non-current. The amendments clarify the meaning of a right to defer settlement, the requirement for
this right to exist at the end of the reporting period, that management intent does not affect current or non-
current classification, that options by the counterparty that could result in settlement by the transfer of the
entity’s own equity instruments do not affect current or non-current classification. Also, the amendments specify
that only covenants with which an entity must comply on or before the reporting date will affect a liability’s
classification. Additional disclosures are also required for non-current liabilities arising from loan arrangements
that are subject to covenants to be complied with within twelve months after the reporting period. The
amendments have not yet been endorsed by the EU
• IFRS 16 Leases: Lease Liability in a Sale and Leaseback (amendments); The amendments are effective for
annual reporting periods beginning on or after January 1, 2024, with earlier application permitted. The
amendments are intended to improve the requirements that a seller-lessee uses in measuring the lease liability
arising in a sale and leaseback transaction in IFRS 16, while it does not change the accounting for leases
unrelated to sale and leaseback transactions. In particular, the seller-lessee determines ‘lease payments’ or
‘revised lease payments’ in such a way that the seller-lessee would not recognise any amount of the gain or
loss that relates to the right of use it retains. Applying these requirements does not prevent the seller-lessee
from recognising, in profit or loss, any gain or loss relating to the partial or full termination of a lease.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
20 Croatian Telecom Inc.
2.2. Changes in accounting policies and disclosures (continued)
New standards and interpretations not yet adopted (continued)
A seller-lessee applies the amendment retrospectively in accordance with IAS 8 to sale and leaseback
transactions entered into after the date of initial application, being the beginning of the annual reporting period
in which an entity first applied IFRS 16. The amendments have not yet been endorsed by the EU.
• Amendment in IFRS 10 Consolidated Financial Statements and IAS 28 Investments in Associates and Joint
Ventures: Sale or Contribution of Assets between an Investor and its Associate or Joint Venture; The
amendments address an acknowledged inconsistency between the requirements in IFRS 10 and those in IAS
28, in dealing with the sale or contribution of assets between an investor and its associate or joint venture. The
main consequence of the amendments is that a full gain or loss is recognized when a transaction involves a
business (whether it is housed in a subsidiary or not). A partial gain or loss is recognized when a transaction
involves assets that do not constitute a business, even if these assets are housed in a subsidiary. In December
2015 the IASB postponed the effective date of this amendment indefinitely pending the outcome of its research
project on the equity method of accounting. The amendments have not yet been endorsed by the EU.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
21 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions
The preparation of the Company's financial statements requires management to make judgments, estimates and
assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of
contingent liabilities, during the reporting period or at the reporting date respectively. However, uncertainty about these
assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of the
asset or liability affected in future periods. The key assumptions concerning the future and other key sources of
estimation uncertainty at the statement of financial position date, that have a significant risk of causing a material
adjustment to the carrying amounts of assets and liabilities within the next financial year are discussed below:
Capitalized content rights
The rights to use electronic signals to broadcast sport events, TV programs, movies, music streams, etc. shall be
capitalized as intangible assets if all of the following conditions are met:
- there is no doubt whatsoever that the content will be delivered as agreed in the contract. That means that the
probability that the signal will eventually not be delivered is remote. If the probability of non-delivery is higher
than remote, such contract is accounted for as an executory contract where any prepayments are presented
as other assets and amortized through expenses for services purchased.
- the non-cancellable minimum term and the period over which revenues from customers are expected to be
generated exceed one year. If the term is shorter, the contract is accounted for as an executory contract.
- cost can be estimated reliably.
Contract values are calculated based on the price in the contract and the estimated number of users discounted for the
duration of the contract. Used discount rate depends on the duration of the contract.
Provisions and contingencies
The Company is exposed to a number of legal cases and regulatory proceedings and ownership dispute over distributive
telecommunication infrastructure that may result in significant outflow of economic resources or derecognition of related
assets. The Company uses internal and external legal experts to assess the outcome of each case and makes
judgments as to if and in what amount provisions need to be recorded in the financial statements as explained further
in Notes 30 and 37. Changes in these judgments could have a significant impact on the financial statements of the
Company.
Impairment of non-financial assets
The determination of impairment of assets involves the use of estimates that include, but are not limited to, the cause,
timing and amount of the impairment. Impairment is based on a large number of factors, such as changes in current
competitive conditions, expectations of growth in the industry, increased cost of capital, changes in the future availability
of financing, technological obsolescence, discontinuance of services, current replacement costs, prices paid in
comparable transactions and other changes in circumstances that indicate an impairment exists. The recoverable
amount and the fair values are typically determined using the discounted cash flow method which incorporates
reasonable market participant assumptions.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
22 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
Impairment of non-financial assets (continued)
The identification of impairment indicators, as well as the estimation of future cash flows and the determination of fair
values for assets (or groups of assets) require management to make significant judgments concerning the identification
and validation of impairment indicators, expected cash flows, applicable discount rates, useful lives and residual values.
Specifically, the estimation of cash flows underlying the fair values of the business considers the continued investment
in network infrastructure required to generate future revenue growth through the offering of new data products and
services, for which only limited historical information on customer demand is available. If the demand for those products
and services does not materialize as expected, this would result in less revenue, less cash flow and potential impairment
to write down these investments to their fair values, which could adversely affect future operating results.
The fair value less costs of disposal calculation is based on available data from binding sales transactions in an arm’s
length transaction of similar assets or observable market prices less incremental costs for disposing of the asset. The
value in use calculation is based on a discounted cash flow model. The cash flows are derived from the financial plan
covering a mid-term period. The cash flows beyond the planning period are extrapolated using appropriate growth rates.
The recoverable amount is most sensitive to the discount rate used for the discounted cash flow model as well as the
expected future cash inflows and the growth rate used for extrapolation purposes. Further details including carrying
values and effects on the result of the period are given in Notes 15, 16, 17 and 19.
Useful lives of assets
The determination of the useful lives of assets is based on historical experience with similar assets as well as any
anticipated technological development and changes in broad economic or industry factors. The appropriateness of the
estimated useful lives is reviewed annually, or whenever there is an indication of significant changes in the underlying
assumptions. We believe that this is a critical accounting estimate since it involves assumptions about technological
development in an innovative industry and is heavily dependent on the investment plans of the Company. Further, due
to the significant weight of depreciable assets in the Company’s total assets, the impact of significant changes in these
assumptions could be material to the financial position and results of operations of the Company.
The following table demonstrates the sensitivity to a reasonably possible change in useful life on amortization and
depreciation, with all other variables held constant, on the Company’s profit post tax:
Increase /
decrease in %
Effect on profit
post tax
HRK million
Year ended 31 December 2022
+10
100
-10
(120)
Year ended 31 December 2021
+10
118
-10
(144)
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
23 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
Impairment of investments in subsidiaries
The Company tests annually whether investments in subsidiaries have suffered any impairment. The recoverable
amounts of investment have been determined based on value in use calculation. These calculations require the use of
estimates. In estimates that are used for calculations is included the impact of COVID-19 for changes of revenue and
costs or ratios. In case of investment in HT Holding d.o.o. a reasonably possible change in certain key assumptions
when viewed separately (such as decrease of revenue growth by 2% or increase of costs by 2%) with all other variables
held constant, will not result in an impairment charge.
In June 2022, HT Production was merged to HT. In 2021, in case of investment in HT Production, a reasonably possible
change in certain key assumptions when viewed separately (such as decrease of revenue growth by 2%, increase of
costs by 2% or change in capex and revenue ratio) with all other variables held constant, could result in an impairment
charge of up to HRK 25 million.
Content contract liability
As explained in intangible asset accounting policy (Note 2.4) content costs are capitalised with related liability
recognized. The determination of liability for variable content contracts requires judgement as it is based on estimated
number of future customers and use of a discount rate.
Expected credit loss (ECL) measurement
With application of IFRS 9, Model of Expected Loss (ECL) is introduced. The measurement of expected loss is based
on reasonable and supporting information that is available without additional expenses and effort and which include
information on past events, current and foreseeable future conditions, and circumstances.
When estimating the expected credit loss, historical probabilities of non-collection are usually used, complemented with
future parameters relevant to the credit risk.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
24 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
Expected credit loss (ECL) measurement (continued)
Macroeconomic data are linked to historical customer behavior, which is corrected under the following conditions:
- Unemployment rate - If changes in unemployment rate are more than 2% compared to the average of the last
two years
- GDP - If GDP change rates are higher than 1% compared to the average of the last four years
- Average interest rates - If changes in average interest rates are greater than 2% compared to the average of
the last four years.
The general approach of expected credit losses applies to loans, debt instruments measured at amortized cost and
debt instruments measured at fair value through other comprehensive income. A simplified approach to expected credit
losses is applied to customer and contract assets, which results in earlier recognition of impairment charges.
Besides above stated assets to which a simplified approach applies, subsequent measurement of all other financial
assets applies a general approach of expected credit loss consisting of three stages: Bucket 1, Bucket 2 and Bucket 3.
The degree of application depends on the increase in credit risk by financial instrument after initial recognition, i.e. on
the credit quality of the financial instrument:
Buckets for measurement of credit
risk
Period of measurement of ECL
Increase of credit risk
Bucket 1
Performing
12-month expected credit losses
None or not significant
Bucket 2
Underperforming
Lifetime expected credit losses
Significant
Bucket 3
Non-performing
Lifetime expected credit losses
Significant
+
There is an evidence that financial
asset is impaired at the reporting
date
A credit risk is the risk that a counterparty of a financial instrument creates financial losses for the other counterparty by
not fulfilling the contractual obligation. Since the standard does not prescribe a definition of “significant increase in credit
risk” an entity decides how to define it in the context of its specific types of instruments taking into account the availability
of information and own historic data. Basis for assessing an increase in credit risk is either the probability of default or
an analysis of overdue receivables. Revision of applied simplified approach credit risk percentages is done twice a year
to measure credit risk and historical data in order to quantify expected credit loss. Additionally, financial analyst analyses
macroeconomic and external data – inflation rates, consumer credit interest rates, GDP per capita, unemployment and
employment rates and consumer price index change. These data are put in correlation with historical Company’s
customer payment behaviour in order to see possible change of credit risk percentages applied.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
25 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
Expected credit loss (ECL) measurement (continued)
The standard contains the rebuttable assumption that a “default event” has occurred when the financial asset is more
than 90 days overdue. The assumption may also be supported by the following indicators:
• Counterparty repeatedly fails to meet payment obligations and the service is blocked (contract not yet
terminated).
• Counterparty is over the credit limit with unpaid invoices and fails to pay despite repeated demands.
• Country embargo/countries are in recession or payment restrictions by the relevant state bank.
In making these assumptions, estimates based on historical data and existing market conditions are used.
Simplified approach of expected credit loss measurement i.e measurement on collective basis is applied for trade
receivables, due to large number of analytical data (customers) and homogeneous base of receivables. Trade
receivables are divided into portfolios based on type of customer and tracked according to aging structure. Portfolios
are created based on similarities of the customer behavior as to historical data and future expectations. Portfolios are
for example Mobile Residential Customers, Fixed Residential Customers, Mobile Business Customers, Fixed Business
Customers. Aging clusters for example are Undue, Overdue 0-29 days, Overdue 30-89 days and so further. Aging
clusters are created based on the similarities in collection process steps.
If not collected earlier, all telco receivables are claimed at Court within the statute of limitations.
Analysis of claimed and impaired receivables showed significant collection in first year from due date and subsequent
two years through claims. Historically these trends were stable and there are no known facts nor expected indication
that the trend will change in future periods.
Trade receivables credit risk was recognized through ECL provision matrix. Risk assumptions include historical
collection risk and dynamics adjusted for significant changes in macroeconomic indicators (GDP change, unemployment
rate, and credit default swap rate for long term receivables).
During the reporting period there were no significant changes in the gross carrying amount of financial instruments, so
there were no significant impacts on the loss allowance.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
26 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
Revenue recognition
Following IFRS15 judgments are applied in portfolio approach in order to reflect contracts behavior from contract
inception over the contract duration period. The most relevant judgements include:
- value adjustment of contract asset due to early contract termination in range of 3%-10% (2021:3%-10%) and
penalty fee collection in range of 52%-81% (2021: 52%-76%), depending on portfolio / customer group
- value adjustment of contract asset due to non-payment (relation with IFRS 9) in range of 0.1%-3% (2021: 0.1%-
3%), depending on portfolio / customer group
- handset budget is not used evenly during contract duration which is mostly 24 months, so linear usage within
12 months after contract inception is approximation of the uneven usage for large customer segment and
unlinear 3 months usage after contract inception is approximation for VSE customer segment
- costs which are directly attributable to acquisition of a new contract are amortized over average customer
retention period. Customer retention period is calculated per core services based on historical data.
Assets Classified as Held for Sale
Held for sale assets are non-current assets for which a Company has a concrete plan to dispose of the asset by sale.
They are carried on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them.
In estimating the fair value of asset classified as held for sale, Company is applying income approach based on
discounted cash flows which is supplemented with market approach. Based on current initiated process and actions
taken, assets classified as held for sale refers to assets for which it is in managements best belief that it will be sold
within the next twelve months.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
27 Croatian Telecom Inc.
2.4. Significant accounting policies
a) Operating profit
Operating profit is defined as the result before income taxes and finance items. Finance items comprise interest revenue
on cash balances in the bank, deposits, treasury bills, interest bearing financial assets at fair value through other
comprehensive income, dividend income from associate, subsidiaries and joint venture, interest expense on borrowings,
gains and losses on the sale of financial assets at fair value through other comprehensive income and foreign exchange
gains and losses on all monetary assets and liabilities denominated in foreign currency.
b) Investments in subsidiaries
Subsidiaries are all entities over which the Company has the power to govern the financial and operating policies
generally accompanying a shareholding of more than one half of the voting rights. The existence and effect of potential
voting rights that are currently exercisable or convertible are considered when assessing whether the Company controls
another entity. Investments in subsidiaries are measured at cost less any impairment in value.
Mergers of subsidiaries under common control
Mergers of subsidiaries from parties under common control are accounted for using the pooling of interests method.
Under this method the assets and liabilities of predecessor entity transferred under common control are transferred at
the predecessor entity’s carrying amounts.
Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded in these financial statements.
Any difference between the carrying amount of net assets, including the predecessor entity’s goodwill, and the liabilities
is accounted for in these financial statements as an adjustment to retained earnings.
c) Investment in associate
In the Company’s financial statements, investment in an associated company (generally a shareholding of between
20% and 50% of voting rights) where significant influence is exercised by the Company is measured at cost less any
impairment in value. An assessment of investment in associate is performed when there is an indication that the asset
has been impaired or that the impairment losses recognized in previous years no longer exist.
d) Investment in joint venture
The Company has an interest in a joint venture which is a jointly controlled entity, whereby the venturers have a
contractual arrangement that establishes joint control over the economic activities of the entity. This investment is
measured at cost less any impairment in value. An assessment of investment in joint venture is performed when there
is an indication that the asset has been impaired or that the impairment losses recognized in previous years no longer
exist.
e) Intangible assets
Intangible assets are measured initially at cost. Intangible assets are recognized in the event that the future economic
benefits that are attributable to the assets will flow to the Company, and that the cost of the asset can be measured
reliably. After initial recognition, intangible assets are measured at cost less accumulated amortization and any
accumulated impairment losses. Intangible assets are amortised on a straight-line basis over the best estimate of their
useful life. The amortization method is reviewed annually at each financial year-end.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
28 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
e) Intangible assets (continued)
Amortization of the telecommunication licence commences when the licence is acquired and ready for use, with the
amortization period being the term of the licence.
The Company recognizes costs of content as an intangible asset at the inception of the related contract. The Company
determined that the following conditions have to be met for capitalization of content provider contracts: contract duration
must be longer than one year, cost must be determined or determinable, contracted rights must be continuous and
costs under the contract are unavoidable. Assets recognized under these contracts will be amortized over the contract
period. Content contracts which do not meet the criteria for capitalization are expensed and presented in ‘other
expenses’ in the statement of comprehensive income.
Useful lives of intangible assets are as follows:
Licences and rights
Radio frequency spectrum in 2100 MHz frequency band
15 years
Radio frequency spectrum in 700 MHz/3600 MHz/ 26 GHz frequency bands
15 years
Radio frequency spectrum in 800 MHz frequency band
11-12 years
Radio frequency spectrum in 900/1800 MHz frequency band
10-13 years
Radio frequency spectrum in 2600 MHz frequency band
6 years
Radio frequency spectrum for digital television multiplexes
10 years
5G spectrum licence
15 years
HAKOM licence
Indefinite
Software, content and other assets
2-8 years or as
per contract
duration
In 2021, with the introduction of the new business (ERP) system, the structure of intangible assets within the DT Group
was harmonized in the area of fixed assets register classification, which resulted in a change of estimated useful life of
certain categories of intangible assets. The Group has changed the estimate of useful lives in order to reflect the
technical characteristics and technological functionalities of the future benefits from existing and newly acquired
intangible assets. The effect of the change in accounting estimate is not significant for financial statements.
Assets under construction are not amortised but are being reviewed for impairment annually.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
29 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
f) Property, plant and equipment
An item of property, plant and equipment that qualifies for recognition as an asset is measured at its cost. The cost of
an item of property, plant and equipment comprises its purchase price, including import duties and non-refundable
purchase taxes, after deducting trade discounts and rebates, and any directly attributable costs of bringing the asset to
its working condition and location for its intended use.
In addition to directly attributable costs, the costs of internally constructed assets include proportionate indirect material
and labour costs, as well as administrative expenses relating to production or the provision of services.
Subsequent expenditure on an asset that meets the recognition criteria to be recognized as an asset or an addition to
an asset is capitalized, while maintenance and repairs are charged to expense when incurred.
After recognition as an asset, an item of property, plant and equipment is measured at cost less accumulated
depreciation and any accumulated impairment losses.
Each part of an item of property, plant and equipment with a cost that is significant in relation to the total cost of the item
is depreciated separately.
Depreciation is computed on a straight-line basis.
Useful lives of newly acquired assets are as follows:
Buildings
10-50 years
Telecom plant and machinery
Cables
8-20 years
Cable ducts and tubes
20-35 years
Other
2-15 years
Customer premises equipment (CPE)
7 years
Tools, vehicles, IT, office and other equipment
2-15 years
Land, works of art and assets under construction are not depreciated but are being reviewed for impairment annually.
Useful lives, depreciation method and residual values are reviewed at each financial year-end, and if expectations differ
from previous estimates, the change(s) are accounted for as a change in an accounting estimate.
With the introduction of the new business (ERP) system in 2021, the structure of tangible assets within the DT Group
was harmonized in the area of fixed assets register classification, which resulted in a change of estimated useful life of
certain categories of tangible assets. The Group has changed the estimate of useful lives in order to reflect the technical
characteristics and technological functionalities of the future benefits from existing and newly acquired tangible assets.
The effect of the change in accounting estimate is not significant for financial statements.
Assets under construction represent plant and properties under construction and are stated at cost.
Depreciation of an asset begins when it is available for use.
Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognized
within ‘Other expenses’ in the statement of comprehensive income.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
30 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
g) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortization and are tested annually for impairment. Assets
that are subject to amortisation are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable. An impairment loss is recognized for the amount by which the asset’s
carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair value less
costs of disposal and value in use amount. For the purpose of assessing impairment, assets are grouped at the lowest
levels for which there are separately identifiable cash flows (cash-generating units). Non-financial assets other than
goodwill that suffered impairment are reviewed for possible reversal of the impairment at each reporting date.
h) Inventories
Inventories are measured at the lower of cost and net realisable value, after provision for obsolete items. Net realisable
value is the selling price in the ordinary course of business, less the costs necessary to make the sale. Cost is
determined on the basis of weighted average cost.
i) Investment property
Investment property, principally comprising business premises and land, is held for long-term rental yields or
appreciation and is not occupied by the Company. Investment property is treated as a long-term investment unless it is
intended to be sold in the next year and a buyer has been identified in which case it is classified within current assets.
Investment property is carried at historical cost less accumulated depreciation and provision for impairment.
Depreciation of buildings is calculated using the straight-line method to allocate their cost over their estimated useful
lives of 10 to 50 years (2021: 10 to 50 years). Subsequent expenditure is capitalised only when it is probable that future
economic benefits associated with it will flow to the Company and the cost can be measured reliably. All other repairs
and maintenance costs are charged to the statement of comprehensive income when incurred. If an investment property
becomes owner-occupied, it is reclassified to property, plant and equipment, and its carrying amount at the date of
reclassification becomes its deemed cost to be subsequently depreciated.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
31 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
j) Assets Classified as Held for Sale
Held for sale assets are non-current assets for which a Company has a concrete plan to dispose of the asset by sale.
They are carried on balance sheet at the lower of carrying value or fair value and no depreciation is charged on them.
Assets are classified as held for sale: when the following conditions are met: management is committed to a plan to
sell, the asset is available for immediate sale, an active program to locate a buyer is initiated, the sale is highly probable,
within 12 months of classification as held for sale (subject to limited exceptions), the asset is being actively marketed
for sale at a sales price reasonable in relation to its fair value, actions required to complete the plan indicate that it is
unlikely that plan will be significantly changed or withdrawn.
k) Financial assets
All assets are classified and measured as described below:
Classification and measurement
Classification / measurement
Assets
Current assets
Cash and cash equivalents (deposits, commercial
papers, ...)
Amortized cost
Trade and other receivables
Amortized cost
Other financial assets
Amortized cost
Given loans and other receivables
Amortized cost
Equity instruments
Fair value through Other Comprehensive Income without recycling
to Profit and Loss (FVOCI)
Debt instruments
Fair value through Other Comprehensive Income with subsequent
reclassification to the income statement
Non-current assets
Trade and other receivables
Amortized cost
Other financial assets
Amortized cost
Given loans and other receivables
Amortized cost
Equity instruments
Hold to collect and sell
Fair value through Other Comprehensive Income without recycling
to Profit and Loss (FVOCI)
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
32 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
k) Financial assets (continued)
The business model reflects how the Company manages the debt financial assets in order to generate cash flows –
whether the Company’s objective is: (i) solely to collect the contractual cash flows from the assets (“hold to collect
contractual cash flows”,) or (ii) to collect both the contractual cash flows and the cash flows arising from the sale of
assets (“hold to collect contractual cash flows and sell”) or, if neither of (i) and (ii) is applicable, the financial assets are
classified as part of “other” business model and measured at FVTPL.
Debt instruments
For the measurement of debt instruments, it is important which business model applies to each of them, and whether
they have the characteristics of an ordinary loan, i.e. whether their cash flows consist solely of interest and principal. If
they have these characteristics, and if they are not sold according to the business model but are held to maturity, they
must be measured at amortized cost. If the business model aims to sell and partially hold such instruments, they are to
be measured at fair value through other comprehensive income with subsequent reclassification to the income
statement. In all other cases, financial assets are to be measured at fair value through profit or loss.
Receivables which are sold to Collecting Agency as way of collection are initially considered to be in the ‘held to collect’
business model and are therefore measured at amortized cost since the Company initially has the credit risk and the
SPPI test is satisfied.
Equity instruments
Held equity instruments include strategic investments. The Company has exercised the option of valuing these in the
Other comprehensive income without subsequent reclassification. The reason for this is that strategic investments do
not focus on short-term profit maximization. Acquisition and sale of strategic investments are based on business policy
considerations. Dividends are recognized directly in profit or loss, in case that they do not constitute a capital repayment.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
33 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
l) Foreign currencies
Transactions denominated in foreign currencies are translated into local currency at the middle exchange rates of the
Croatian National Bank prevailing at the date of the transaction. Monetary assets and liabilities denominated in foreign
currencies are translated into local currency at the middle exchange rates of the Croatian National Bank prevailing at
the statement of financial position date. Any gain or loss arising from a change in exchange rates subsequent to the
date of the transaction is included in the statement of comprehensive income within financial income or financial
expense, respectively.
m) Taxation
The income tax charge is based on profit for the year and includes deferred taxes. Deferred taxes are calculated using
the balance sheet liability method.
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes at the reporting date.
Deferred tax is determined using income tax rates that have been enacted or substantially enacted by the financial
statement date and are expected to apply when the related deferred tax asset is realised or the deferred tax liability is
settled.
The measurement of deferred tax liabilities and deferred tax assets reflects the tax consequences that would arise from
the manner in which the Company expects, at the reporting date, to recover or settle the carrying amount of its assets
and liabilities.
Deferred income tax liabilities are provided on taxable temporary differences arising from investments in subsidiaries,
associates and joint arrangements, except for deferred income tax liability where the timing of the reversal of the
temporary difference is controlled by the Company and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred income taxes assets and liabilities relate to income taxes levied by
the same taxation authority on either the same taxable entity or different taxable entities where there is an intention to
settle the balances on a net basis.
Deferred tax assets are recognized to the extent that it is probable that future taxable profit (or reversing deferred tax
liabilities) will be available against which the temporary differences can be utilized.
Deferred tax assets and liabilities are not discounted and are classified as non-current assets and liabilities in the
statement of financial position. Deferred tax assets are recognized when it is probable that sufficient taxable profits will
be available against which the deferred tax assets can be utilised.
Current and deferred taxes are charged or credited in other comprehensive income if the tax relates to items that are
credited or charged, in the same or a different period in other comprehensive income.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
34 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
n) Employee benefit obligations
The Company provides other long-term employee benefits (Note 29). These benefits include pension payments. The
defined benefit obligation is calculated annually by independent actuary using a projected unit credit method. The
projected unit credit method considers each period of service as giving rise to an additional unit of benefit entitlement
and measures each unit separately to build up the final obligation.
Past service costs are recognized in profit or loss immediately in the period in which they occur. Gains or losses on the
curtailment or settlement of benefit plans are recognized when the curtailment or settlement occurs. The benefit
obligation is measured at the present value of estimated future cash flows using a discount rate that is similar to the
interest rate on government bonds where the currency and terms of the government bonds are consistent with the
currency and estimated terms of the benefit obligation. Gains and losses resulting from changes in actuarial
assumptions are recognized in other comprehensive income in the period in which they occur.
The net interest cost is calculated by applying the discount rate to the net balance of the defined benefit obligation and
the fair value of plan assets. This cost is included in employee benefit expense in the statement of comprehensive
income.
The Company provides death in service short term benefits which are recognized as an expense of the period in which
it is incurred.
o) Revenue recognition
Revenue is income arising in the course of the Company’s ordinary activities.
Revenue is recognized for each distinct performance obligation in the contract in the amount of transaction price.
Transaction price is the amount of consideration in a contract to which the Company expects to be entitled in exchange
for transferring promised goods or services to a customer. For contracts that contain more than one performance
obligation (multiple element arrangements), Company allocates the transaction price to those performance obligations
on a relative stand-alone selling price basis. The stand-alone selling price (SSP) is the price at which Company would
sell a promised good or service separately to a customer.
Revenue is recognized when performance obligations are satisfied by transferring control of a promised good or service
to a customer. Control of good (e.g. sale of equipment) is transferred when goods are delivered to customer, the
customer has full discretion over goods and there is no unfulfilled obligation that could affect the customer’s acceptance
of the goods. Delivery occurs when goods have been shipped to the specific location, and the risks of obsolescence
and loss have been transferred to customer. Control of good is usually transferred at point in time.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
35 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
o) Revenue recognition (continued)
Control of services (e.g. sales of telecommunication services, maintenance services, sale of licences, etc) transfers
over time or at a point in time, which affects when revenue is recorded. Revenue from providing services is recognized
in the accounting period in which the services are rendered. If service realization extends to more than one accounting
period both, input method (based on cost incurred) and output method (based on units/work delivered) are used to
measure progress towards completion.
Output method is used in mass market services (e.g. voice and data services provided on a monthly basis to customers)
as well as in system solutions (e.g. installation of equipment, when time period between start of work and delivery of
service is not too long and / or where work completed is regularly confirmed by both parties). Input method is mainly
used in complex systems solution (e.g. in case of development of customer tailored maid solution which lasts longer
period of time), where revenue is recognized monthly based on cost incurred in order to reflect progress towards
completion in periods where mutual confirmations are still not due.
In determining the transaction price, the Company adjusts the promised amount of consideration for the effects of the
time value of money if the timing of payments agreed to by the parties to the contract (either explicitly or implicitly)
provides the customer or the Company with a significant benefit of financing the transfer of goods or services to the
customer.
The Company makes use of the option not to consider a significant financing component if the maximum period between
delivery of a good or provision of a service and payment by the customer is one year or less. As well under the
Company’s policy, it is assumed that if the amount of the financing component exceeds 5% of a total contract’s
transaction price, this will indicate that such financing component will be deemed significant. By contrast, if the amount
is 5% or lower, an entity may conclude that the financing component is not considered significant. Based on these
criteria the Company did not identify significant financing component in contracts with customers.
The IFRS 15 Standard specifies the accounting for an individual contract with a customer. However, as a practical
expedient, the Standard may be applied to a portfolio of contracts, if:
- the contracts aggregated to a portfolio possess similar characteristics, and
- applying the Standard to the portfolio does not result in a materially different result compared to accounting of
single contracts.
In the Company IFRS 15 revenue is applied to portfolios of contracts as well as to single contracts. The Standard is
applied to portfolios of contracts for mass market products, while for special solutions it is applied on individual contracts
level. Portfolios are defined within each relevant business area and are set up based on common adjustment
requirements for the individual contracts.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
36 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
o) Revenue recognition (continued)
IFRS 15 Standard, in particular, has impact, on following business events:
Multiple element arrangements - in case of multiple-element arrangements (e.g. mobile contract plus handset) with
subsidized products delivered in advance, the transaction price is allocated to the performance obligations in the
contract by reference to their relative standalone selling prices. Standalone selling prices of hardware are determined
using price list prices. As a result, a larger portion of the total consideration is attributable to the component delivered in
advance (mobile handset), requiring earlier recognition of revenue which results in higher revenue from the sale of
goods and merchandise and lower revenue from provision of service (mobile communication service). This leads to the
recognition of what is known as a contract asset – a receivable arising from the customer contract that has not yet
legally come into existence – in the statement of financial position. The contract asset is amortized over the remaining
term of the contract. Contract liabilities are netted off against the contract assets on portfolio level.
Material rights which are granted to customers at contract inception with the option to be exercised at later point of time
mainly relate to granted Handset Budgets - the total transaction price of the combined contract is allocated to the
individual, separate performance obligations on a relative stand-alone selling price basis. A larger portion of the total
remuneration is attributable to the material right (e.g. right to a future subsidy on a mobile phone). In the balance sheet,
this leads to the recognition of a contract asset, which is amortized over the remaining term of the contract and,
compared with the amounts invoiced, reduces the revenue from service obligations.
Capitalized contract cost which consists of Cost to obtain a contract and Cost to fulfil a contract - Cost to obtain a
contract mainly relate to expenses for sales commissions paid to indirect partners or own employees which are
capitalized as Contract costs and amortised over the estimated customer retention period (depending on service) in
case of contact acquisitions or over contract duration period (usually 24 months) in case of contract prolongations. Cost
to fulfil a contract mainly relate to cost of vouchers / benefits for third party products granted to customers at contract
inception. These costs are capitalized as Contract costs and amortised over contract duration period (usually 24
months).
One-time payments made in advance by the customer that not fulfil definition of a separate performance obligation but
represent a prepayment on future services are deferred and recognized in revenue over the (remaining) term of the
contract and presented within contract liability.
Discounts or uneven transaction prices - When discounts on service fees are granted unevenly for specific months of a
contract or monthly service fees are charged unevenly for specific months of a contract while monthly service is provided
evenly to the customer, service revenue is recognized on a straight-lined basis.
IFRS 15 adjustments had major impact on revenues from mobile services. On fixed revenues impacts mainly relate to
multiple element arrangements and even service revenue recognition over contract duration period. System solution
area was not significantly impacted due to continuity in timing of revenue recognition.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
37 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
p) Cash and cash equivalents
Cash and cash equivalents include cash on hand, demand deposits, corporate commercial papers and short-term,
highly liquid investments that are readily convertible to known amounts of cash with original maturities of three months
or less and which are subject to an insignificant risk of change in value. Cash and cash equivalents are carried at
amortized costs because: (i) they are held for collection of contractual cash flows and those cash flows represent SPPI,
and (ii) they are not designated at FVTPL.
q) Borrowings
Borrowings are recognized initially at fair value, net of transaction costs incurred and are subsequently carried at
amortized cost using the effective interest method.
r) Provisions
A provision is recognized when, and only when, the Company has a present obligation (legal or constructive) as a result
of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle
the obligation, and a reliable estimate can be made of the amount of the obligation. Provisions are reviewed at each
statement of financial position date and adjusted to reflect the current best estimate.
Where the effect of the time value of money is material, the amount of a provision is the present value of the expenditures
expected to be required to settle the obligation. When discounting is used, the increase in provision reflecting the
passage of time is recognized as financial expense.
Provisions for termination benefits are recognized when the Company is demonstrably committed to a termination of
employment contracts, that is when the Company has a detailed formal plan for the termination which is without realistic
possibility of withdrawal. Provisions for termination benefits are computed based on amounts paid or expected to be
paid in redundancy programs.
Levies and charges, such as taxes other than income tax or regulatory fees based on information related to a period
before the obligation to pay arises, are recognized as liabilities when the obligating event that gives rise to pay a levy
occurs, as identified by the legislation that triggers the obligation to pay the levy. If a levy is paid before the obligating
event, it is recognized as prepayment.
A number of sites and other assets are utilized which are expected to have costs associated with de-commissioning.
Provision is recognized for associated cash outflows which are substantially expected to occur at the dates of exit of
the assets to which they relate, which are long-term in nature, primarily in periods up to 20 years from when the asset
is brought into use.
s) Contingencies
Contingent assets are not recognized in the financial statements. They are disclosed when an inflow of economic
benefits is probable.
Contingent liabilities are not recognized in the financial statements. They are disclosed unless the possibility of an
outflow of resources embodying economic benefits is remote.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
38 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
t) Share-based payments
The cost of cash-settled and equity-settled transactions is measured initially at fair value at the grant date using a
binomial model, further details of which are given in Note 43. This fair value is expensed over the period until the vesting
date with recognition of a corresponding liability for cash-settled and equity-settled transactions are recognized in equity.
The liability is remeasured to fair value at each statement of financial position date up to and including the settlement
date with changes in fair value recognized in the statement of comprehensive income.
u) Events after reporting period
Post-year-end events that provide additional information about the Company’s position at the statement of financial
position date (adjusting events) are reflected in the financial statements. Post-year-end events that are not adjusting
events are disclosed in the notes to the financial statements when material.
v) Trade payables
Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business
from suppliers. Accounts payable are classified as current liabilities if payment is due within one year or less. If not, they
are presented as non-current liabilities.
w) Dividend distribution
Dividend distributions to the Company’s shareholders are recognized as a liability in the Company’s financial statements
in the period in which the dividends are approved by the Company’s shareholders.
x) Earnings per share
Earnings per share are calculated by dividing the profit attributable to equity holders of the Company by the weighted
average number of ordinary shares in issue during the year excluding ordinary shares purchased by the Company and
held as treasury shares.
y) Contributed equity
Ordinary shares are classified as equity. Shares held by the Company are disclosed as treasury shares and deducted
from contributed equity.
z) Right-of-use assets
Leases are recognized as right-of-use assets and corresponding liabilities at the date at which the leased assets are
available for use by the Company.
The right-of-use assets is presented separately in the statement of financial position, except for right-of-use assets that
meet the definition of investment property which is presented in statement of financial position in separate line item –
“investment property”.
Right-of-use assets are measured initially at cost comprising the following:
• the amount of the initial measurement of the lease liability;
• any lease payments made at or before the commencement date less any lease incentives received;
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
39 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
z) Right-of-use assets (continued)
• any initial direct costs;
• restoration costs.
Subsequently, the right-of-use assets, are measured at cost less accumulated depreciation and any accumulated
impairment losses and adjusted for remeasurement of the lease liability due to reassessment or lease modifications.
The right-of-use assets are depreciated over the shorter of the asset’s useful life and the lease term on a straight-line
basis. If the Company is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over
the underlying assets’ useful lives.
The amortization periods for the right-of-use assets are as follows:
Buildings
1 - 69 years
Equipment
2 - 6 years
Land
0.5 - 25 years
Lease lines
1 - 26 years
Vehicles
0.5 - 7 years
Payments associated with all short-term leases are recognized on a straight-line basis as an expense in profit or loss.
Short-term leases are leases with a lease term of 1 month or less.
Full recognition requirements of IFRS 16 will also apply to leases based on low-value assets.
aa) Lease liabilities
At the commencement date, lease liabilities are measured at an amount equal to the present value of the following
lease payments for the underlying right-of-use assets during the lease term:
• fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• amounts expected to be payable by the Company under residual value guarantees;
• the exercise price of a purchase option if the Company is reasonably certain to exercise that option;
• payments of penalties for terminating the lease, if the lease term reflects the Company exercising that option.
The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily determined,
or the Company’s incremental borrowing rate.
Each lease payment is allocated between the liability and finance cost. Lease liabilities are subsequently measured
using the effective interest method. The carrying amount of liability is remeasured to reflect any reassessment, lease
modification or revised in-substance fixed payments.
The lease term is a non-cancellable period of a lease; periods covered by options to extend and terminate the lease are
only included in the lease term if it is reasonably certain that the lease will be extended or not terminated.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
40 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
bb) Finance lease
In classifying a sublease, the Company, as the intermediate lessor, classifies the sublease as a finance lease or an
operating lease in the same manner as any other lease using the criteria as per IFRS 16.61 with reference to the right-
of-use asset (not the underlying asset itself) arising from the head lease.
Where the Company is a lessor in a lease which transfers substantially all the risks and rewards incidental to ownership
to the lessee, the assets leased out are presented as a finance lease receivable at amount equal to the net investment
in the lease. At the commencement date measurement of the net investment in the lease comprises the following lease
payments:
• fixed payments, less any lease incentives payable,
• variable lease payment that are based on an index or a rate, initially measured using the index or rate as at the
commencement date,
• the exercise price of a purchase option if the lessee is reasonably certain to exercise that option, and
• payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option.
Finance lease receivables are initially recognized at commencement, using a discount rate implicit in the lease to
measure net investment in the lease.
The difference between the gross receivable and the present value represents unearned finance income. This income
is recognized over the term of the lease using the net investment method (before tax), which reflects a constant periodic
rate of return. Incremental costs directly attributable to negotiating and arranging the lease are included in the initial
measurement of the finance lease receivable and reduce the amount of income recognized over the lease term. Finance
income from leases is recorded within other operating income in profit or loss for the year.
The Company applies the IFRS 9 simplified approach, whereas to measure the expected credit losses clusters have
been grouped based on customer credit risk characteristics and collection efficiency. The expected loss rates are based
on the past data collected over a period of 36 months.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
41 Croatian Telecom Inc.
3 Business combinations
Merger of HT Production d.o.o.
As at 1 March 2019 the Group acquired 100% of the voting shares of HT Production d.o.o., following the approval of
the National Regulatory Agency (HAKOM), from Hrvatska Pošta. HT Production was an unlisted company located in
Zagreb, pay TV provider – EVOtv.
As at 1 June 2022, HTP d.o.o. was merged into Croatian Telecom Inc. By entering the merger in the court register, the
merged company HTP d.o.o. has ceased to exist. The acquirer, HT d.d., became the general legal successor of the
merged company and thereby entered all legal relations of the merged company. Due to the merger, there were no
changes of existing EVOtv services.
The carrying value of transferred assets and liabilities of HT Production as at the date of merger were:
in HRK million
Assets
210
Liabilities
122
___________
Total net assets
88
___________
Investment in HT Production
(113)
___________
(25)
Effect of catch-up tax
(11)
___________
Total effect of merger on retained earnings
(36)
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
42 Croatian Telecom Inc.
4 Segment information
The business reporting format of the Company for the purposes of segment reporting is determined to be Residential,
Business and Network and Support Function segments as the Company’s risks and rates of return are affected
predominantly by differences in the market and customers. The segments are organised and managed separately
according to the nature of the customers and markets that the services are rendered to, with each segment representing
a strategic business unit that offers different products and services.
The Residential Segment includes marketing, sales and customer services, focused on providing mobile, fixed line
telecommunications, TV distribution services to residential customers.
The Business Segment includes marketing, sales and customer services, focused on providing mobile and fixed line
telecommunications, systems integration services to corporate customers, small- and medium-sized businesses and
the public sector. The Business Segment is also responsible for the wholesale business in both fixed and mobile
services.
The Network and Support Functions segment performs cross-segment management and support functions, and
includes the Technology, Procurement, Accounting, Treasury, Legal and other central functions. The Network and
Support Functions is included in segment information as a voluntary disclosure since it does meet the criteria for an
operating segment.
The Management Board, as the chief operating decision maker, monitors the operating results of business units
separately for the purpose of making decisions about resource allocation and performance assessment. Segment
performance is evaluated based on contribution margin II or segment result (as calculated in the table below).
The Company’s geographical disclosures are based on the geographical location of its customers.
Management of the Company does not monitor assets and liabilities by segments and therefore this information has
not been disclosed.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
43 Croatian Telecom Inc.
4 Segment information (continued)
The following tables present revenue and direct cost information regarding the Company’s segments:
Year ended 31 December 2022
Residential
Business
Network and
Support
functions
Total
HRK million
HRK million
HRK million
HRK million
Net revenue
3,764
2,355
22
6,141
Mobile revenue
2,351
1,150
-
3,501
Fixed revenue
1,413
1,062
22
2,497
System solutions revenue
-
143
-
143
Usage related direct costs
(207)
(132)
-
(339)
Income and losses on accounts receivable
(30)
(6)
-
(36)
___________
___________
___________
___________
Contribution margin I
3,527
2,217
22
5,766
Non-usage related direct costs
(631)
(361)
-
(992)
___________
___________
___________
___________
Segment result (contribution margin II)
2,896
1,856
22
4,774
___________
___________
___________
___________
Other operating income
-
-
86
86
Other operating expenses
(465)
(243)
(1,427)
(2,135)
Depreciation and amortization of non-current assets
-
-
(1,678)
(1,678)
Impairment of non-current assets
-
-
(110)
(110)
___________
___________
___________
___________
Operating profit
2,431
1,613
(3,107)
937
___________
___________
___________
___________
Year ended 31 December 2021
Net revenue
3,559
2,329
-
5,888
Mobile revenue
2,195
1,105
-
3,300
Fixed revenue
1,364
1,030
-
2,394
System solutions revenue
-
194
-
194
Usage related direct costs
(211)
(134)
-
(345)
Income and losses on accounts receivable
(26)
(22)
-
(48)
___________
___________
___________
___________
Contribution margin I
3,322
2,173
-
5,495
Non-usage related direct costs
(662)
(430)
-
(1,092)
___________
___________
___________
___________
Segment result (contribution margin II)
2,660
1,743
-
4,403
___________
___________
___________
___________
Other operating income
-
-
98
98
Other operating expenses
(466)
(235)
(1,105)
(1,806)
Depreciation and amortization of non-current assets
-
-
(1,861)
(1,861)
Impairment of non-current assets
-
-
(71)
(71)
___________
___________
___________
___________
Operating profit
2,194
1,508
(2,939)
763
___________
___________
___________
___________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
44 Croatian Telecom Inc.
4 Segment information (continued)
Reconciliation of profit
2022
2021
HRK million
HRK million
Segment profit
937
763
Finance income
24
27
Finance cost
(77)
(74)
Income from dividends – subsidiaries
-
80
__________
__________
Profit before income tax
884
796
__________
__________
Revenue by geographical area
2022
2021
HRK million
HRK million
Republic of Croatia
5,629
5,479
Rest of the world
512
409
__________
__________
6,141
5,888
__________
__________
All the Company's assets are located in Croatia.
None of the Company’s external customers represent a significant source of revenue.
Revenue by category
2022
2021
HRK million
HRK million
Revenue from rendering of services
5,137
4,986
Revenue from sale of goods and merchandise
1,004
902
__________
__________
6,141
5,888
__________
__________
2022
2021
HRK million
HRK million
Revenue realized over time
4,901
4,758
Revenue realized at point in time
1,240
1,130
__________
__________
6,141
5,888
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
45 Croatian Telecom Inc.
5 Other operating income
2022
2021
HRK million
HRK million
Gain from sale of property, plant and equipment
44
13
Income from penalties and damage compensations
19
21
Liabilities write off
7
1
Sale of waste
1
1
Rental income
-
41
Other
15
21
__________
__________
86
98
__________
__________
6 Merchandise, material and energy expenses
2022
2021
HRK million
HRK million
Purchase cost of goods sold
933
837
Energy costs
257
110
Cost of raw material and supplies
13
12
Cost of services sold
11
14
__________
__________
1,214
973
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
46 Croatian Telecom Inc.
7 Service expenses
2022
2021
HRK million
HRK million
Domestic interconnection
174
177
International interconnection
165
169
Copyright fees
74
84
Online services
30
54
Cleaning services
14
12
Bank and money transfer services
12
12
Security services
11
10
Other services
68
78
__________
__________
548
596
__________
__________
8 Depreciation, amortization and impairment of non-current assets
2022
2021
HRK million
HRK million
Depreciation
807
890
Amortization
583
674
Amortization of Right-of-use assets
288
297
__________
__________
Total depreciation and amortization
1,678
1,861
Impairment loss of PPE & Intangible assets
15
13
Impairment loss of investment in subsidiary
-
58
Impairment loss of investment accounted for using the cost method
95
-
__________
__________
Total impairment of non-current assets
110
71
__________
__________
Notes 15, 16, 17, 18, 19 and 20 disclose further details on amortization and depreciation expense and impairment loss.
9 Employee benefits expenses
2022
2021
HRK million
HRK million
Net salaries
499
497
Contributions and taxes from salaries
204
203
Contributions on salaries
98
98
Redundancy expenses
54
68
Amortization of capitalized cost to obtain contract – own employees
5
5
Long term employee benefits
1
1
Other employee related expenses
25
21
__________
__________
886
893
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
47 Croatian Telecom Inc.
10 Other expenses
2022
2021
HRK million
HRK million
Maintenance services
202
218
Licence cost
120
118
Advertising
85
76
Contract workers
73
81
Selling commissions
53
54
Provisions for legal cases
51
51
Amortization of capitalized cost to obtain contract - external parties
45
48
Non-income taxes and contribution
30
30
Postal expenses
29
29
Education and consulting
19
11
Expenses from penalties and damage compensations
18
9
Insurance
14
11
Rental
14
8
Daily allowances and other costs of business trips
13
7
Expenses related to customers acquisition
7
11
Write down of inventories
2
3
Loss on disposal of property, plant and equipment and intangible assets
2
2
Other operating charges
56
41
__________
__________
833
808
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
48 Croatian Telecom Inc.
11 Finance income
2022
2021
HRK million
HRK million
Interest income
6
7
Foreign exchange gains
18
20
__________
__________
24
27
__________
__________
12 Finance costs
2022
2021
HRK million
HRK million
Interest expense from other financial liabilities
30
23
Interest expense from leases
25
28
Foreign exchange loss
20
22
Other finance costs
2
1
__________
__________
77
74
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 TRICTLY CONFIDENTIAL
49 Croatian Telecom Inc.
13 Income tax expense
a) Tax on profit
2022
2021
HRK million
HRK million
Current tax expense
201
129
Deferred tax expense
(22)
1
Additional tax related to merger of subsidiary
10
-
__________
__________
189
130
__________
__________
b) Reconciliation of the taxation charge to the income tax rate
2022
2021
HRK million
HRK million
Profit before taxes
884
796
__________
__________
Income tax at 18% domestic rate
159
143
Tax effect of:
Tax adjustment related to previous years
10
-
Expenses not deductible for tax purposes
9
2
Dividend income not subject to tax
-
(15)
Other
11
-
__________
__________
189
130
__________
__________
Effective tax rate
21.38%
16.33%
__________
__________
The Company utilized a tax incentive in previous periods in respect of reinvesting profit and increasing the share capital
in the same amount. If subsequently the capital that was increased by reinvested profit is decreased, this may result in
a future tax liability for the Company. The Company believes a future tax liability will not arise in this regard.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
50 Croatian Telecom Inc.
13 Income tax expense (continued)
Components and movements of deferred tax assets and liabilities are as follows:
Deferred tax assets recognized in:
31 December
2022
(charged) /
credited
in 2022
Acquisition
2022
Write off
2022
31 December
2021
(charged) /
credited
in 2021
31 December
2020
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
Statement of comprehensive income
Losses
-
(8)
8
-
-
-
-
Non-tax-deductible provisions
39
18
-
(11)
32
(1)
33
Property, plant and equipment write down
35
(7)
-
-
42
(2)
44
Accrued interest on legal cases
5
4
-
-
1
-
1
Other
48
18
-
-
30
2
28
__________
__________
__________
__________
__________
__________
__________
127
25
8
(11)
105
(1)
106
__________
__________
__________
__________
__________
__________
__________
Other comprehensive income
Actuarial gains and losses
-
-
-
-
-
-
-
__________
__________
__________
__________
__________
__________
__________
Deferred income tax asset
127
25
8
(11)
105
(1)
106
__________
__________
__________
__________
__________
__________
__________
Deferred tax liabilities recognized in:
31 December
2022
charged /
(credited)
in 2022
Acquisition
2022
Write off
2022
31 December
2021
charged /
(credited)
in 2021
31 December
2020
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
Other comprehensive income
Actuarial gains and losses
3
-
-
-
3
-
3
__________
__________
__________
__________
__________
__________
__________
Deferred income tax liability
3
-
-
-
3
-
3
__________
__________
__________
__________
__________
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
51 Croatian Telecom Inc.
13 Income tax expense (continued)
Deferred tax assets have been recognised for all deductible temporary differences to the extent that it is probable that
taxable profit will be available against which the deductible temporary differences can be utilised. Deferred tax assets
have not been discounted.
Deferred tax assets arise on the impairment of property, plant and equipment, on provision for impairment of receivables
and inventories (materials, merchandise), and accruals and provisions and other temporary differences. Out of the total
deferred tax asset, current portion amounts to HRK 80 million.
There are no formal procedures in the Republic of Croatia to agree the final level of tax charge upon submission of the
declaration for corporate tax. However, such tax settlements may be subject to review by the relevant tax authorities
during the limitation period of six years. The limitation period of six years starts with the year that follows the year of
submission of tax declarations, i.e. 2024 for the 2022 tax liability
In 2015, the tax authorities started conducting a supervision review of HT’s corporate tax and VAT returns for the year
ended 2014. A lawsuit was filed in the Administrative Court in Zagreb against the second instance and first instance
resolutions of the tax authorities related to tax supervision from 2014. The Decision of the Administrative Court for the
lawsuit in question was adopted as of 23 September 2022. On 21 October 2022 an appeal was filed to the Administrative
Court in Zagreb against the adopted decision.
14 Earnings per share
Basic earnings per share amounts are calculated by dividing net profit for the year attributable to ordinary equity holders
of the Company by the weighted average number of ordinary shares outstanding during the year.
Diluted earnings per share amounts are equal to basic earnings per share since there are no dilutive potential ordinary
shares or share options.
The following reflects the income and share data used in the basic and diluted earnings per share computations:
2022
2021
Profit for the year attributable to ordinary equity holders of the Company
in HRK million
695
666
Weighted average number of ordinary shares for basic earnings per share
79,191,974
80,238,967
__________
__________
HRK 8.77
HRK 8.30
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
52 Croatian Telecom Inc.
15 Intangible assets
Licences
Software
Goodwill
Other
assets
Assets under
construction
Total
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
As at 1 January 2021
Cost
481
3,356
-
361
11
4,209
Accumulated amortization
and impairment losses
(341)
(2,606)
-
(190)
-
(3,137)
__________
__________
__________
__________
__________
__________
Net book value
140
750
-
171
11
1,072
__________
__________
__________
__________
__________
__________
Year ended 31 December
2021
Opening net book value
140
750
-
171
11
1,072
Additions
248
27
-
154
210
639
Transfers
112
9
-
(136)
15
-
Other
-
-
-
15
-
15
Impairment loss
-
-
-
-
-
-
Amortization charge
(142)
(405)
-
(127)
-
(674)
__________
__________
__________
__________
__________
__________
Net book value
358
381
-
77
236
1,052
__________
__________
__________
__________
__________
__________
As at 31 December 2021
Cost
717
3,296
-
557
236
4,806
Accumulated amortization
and impairment losses
(359)
(2,915)
-
(480)
-
(3,754)
__________
__________
__________
__________
__________
__________
Net book value
358
381
-
77
236
1,052
__________
__________
__________
__________
__________
__________
Year ended 31 December
2022
Opening net book value
358
381
-
77
236
1,052
Additions
8
87
-
194
340
629
Merger of subsidiary (Note
3)
40
3
50
40
-
133
Transfers
5
296
-
-
(301)
-
Other
15
-
-
-
-
15
Impairment loss
-
-
-
-
-
-
Amortization charge
(77)
(287)
-
(219)
-
(583)
__________
__________
__________
__________
__________
__________
Net book value
349
480
50
92
275
1,246
__________
__________
__________
__________
__________
__________
As at 31 December 2022
Cost
785
3,682
50
791
275
5,583
Accumulated amortization
and impairment losses
(436)
(3,202)
-
(699)
-
(4,337)
__________
__________
__________
__________
__________
__________
Net book value
349
480
50
92
275
1,246
__________
__________
__________
__________
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
53 Croatian Telecom Inc.
15 Intangible assets (continued)
The intangible assets of the Company as at 31 December 2022 include six licences for use of the radio frequency
spectrum and licence for 5G spectrum (Notes 2.4. e) and 42 b)).
Other assets consist of capitalized content contracts in amount of HRK 73 million (31 December 2021: HRK 77 million).
Assets under construction primarily relate to software and the various licences for the use of software.
Additions of intangible assets
Major additions in 2022 relate to capitalized content contracts in the amount of HRK 194 million and software and the
various licences for the use of software in the amount of HRK 418 million.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
54 Croatian Telecom Inc.
16 Property, plant and equipment
Land and
buildings
Telecom
plant and
machinery
Tools,
vehicles, IT
and office
equipment
Assets under
construction
Total
HRK million
HRK million
HRK million
HRK million
HRK million
As at 1 January 2021
Cost
2,352
12,743
826
161
16,082
Accumulated depreciation and impairment
losses
(1,599)
(8,321)
(654)
-
(10,574)
__________
__________
__________
__________
__________
Net book value
753
4,422
172
161
5,508
__________
__________
__________
__________
__________
Year ended 31 December 2021
Opening net book value
753
4,422
172
161
5,508
Additions
1
120
27
913
1,061
Transfers
10
19
43
(72)
-
Disposals
(13)
-
-
-
(13)
Depreciation charge
(90)
(725)
(74)
-
(889)
Impairment loss
-
(13)
-
-
(13)
__________
__________
__________
__________
__________
Net book value
661
3,823
168
1,002
5,654
__________
__________
__________
__________
__________
As at 31 December 2021
Cost
2,358
12,586
869
1,002
16,815
Accumulated depreciation and impairment
losses
(1,697)
(8,763)
(701)
-
(11,161)
__________
__________
__________
__________
__________
Net book value
661
3,823
168
1,002
5,654
__________
__________
__________
__________
__________
Year ended 31 December 2022
Opening net book value
661
3,823
168
1,002
5,654
Additions
9
333
81
513
936
Merger of subsidiary (Note 3)
-
10
1
-
11
Transfers
25
509
22
(556)
-
Disposals
(79)
-
(2)
-
(81)
Depreciation charge
(70)
(677)
(59)
-
(806)
Impairment loss
-
-
(15)
-
(15)
__________
__________
__________
__________
__________
Net book value
546
3,998
196
959
5,699
__________
__________
__________
__________
__________
As at 31 December 2022
Cost
2,392
13,438
973
959
17,762
Accumulated depreciation and impairment
losses
(1,846)
(9,440)
(777)
-
(12,063)
__________
__________
__________
__________
__________
Net book value
546
3,998
196
959
5,699
__________
__________
__________
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
55 Croatian Telecom Inc.
16 Property, plant and equipment (continued)
Beginning in 2001, the Company has performed additional procedures which have provided support for the existence
of legal title to land and buildings transferred from HPT s.p.o. under the Separation Act of 10 July 1998. The Company
is still in the process of formally registering this legal title. The Company does not have any material property, plant and
equipment held for disposal.
Assets under construction
Assets under construction mainly relates to construction of mobile network devices and equipment of HRK 200 million
(2021: HRK 198 million), and construction of core, transmission and IP network of HRK 581 million (2021: HRK 622
million).
Impairment loss
In 2022, the Company recognized an impairment loss on property, plant and equipment of HRK 15 million (2021: HRK
13 million) mostly relating to change of equipment due to transfer to the newer technology. The recoverable amount of
that equipment is its estimated fair value less costs of disposal, which is based on the best information available to
reflect the amount that the Company could obtain, at the statement of financial position date, from the disposal of the
asset in an arm’s length transaction between knowledgeable, willing parties, after deducting the costs of disposal.
Disposal of property, plant and equipment
The disposal of the property, plant and equipment primarily relates to the disposal of land and building, telecom switches
and old devices, old tools, IT, office equipment and vehicles in the gross amount of HRK 342 million (2021: HRK 231
million). The gain from the sale is HRK 44 million (2021: HRK 13 million), the loss on the disposal is HRK 2 million
(2021: HRK 2 million).
Ownership over ducts
Although assets (including the ducts as a part of the infrastructure) were transferred from the legal predecessor of the
Company, HPT Public Company, by virtue of the Law on Separation of Croatian Post and Telecommunication and
contributed by the Republic of Croatia to the share capital at the foundation of the Company on 1 January 1999,
according to other Croatian legislation, which is also known as Distributive Telecommunication Infrastructure (DTI, TI or
ducts), does not have all the necessary documents (building, use permits etc.) which may be relevant to the issue of
proving the ownership towards third parties. Some claims of ownership over these assets by the local authorities (the
City of Zagreb) may have a material effect on the financial statements in the case that the Company will not be able to
prove its ownership rights for such ducts. However, HT management believes the likelihood of occurrence of such
circumstances is remote. Therefore, no adjustments were made to these financial statements in respect of this matter.
The net book value of all the Company’s ducts as at 31 December 2022 is HRK 647 million (31 December 2021: HRK
618 million).
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
56 Croatian Telecom Inc.
17 Investment property
The Company has classified unoccupied buildings and undeveloped land as investment property.
HRK million
As at 1 January 2021
Cost
45
Accumulated depreciation
(29)
__________
Net book value
16
__________
Year ended 31 December 2021
Opening net book value
16
Disposal
(3)
Depreciation charge
(1)
__________
Net book value
12
__________
As at 31 December 2021
Cost
40
Accumulated depreciation
(28)
__________
Net book value
12
__________
Year ended 31 December 2022
Opening net book value
12
Transfers to property plant and equipment
1
Disposal
(1)
Depreciation charge
(1)
__________
Net book value
11
__________
As at 31 December 2022
Cost
37
Accumulated depreciation
(26)
__________
Net book value
11
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
57 Croatian Telecom Inc.
18 Right-of-use assets and lease liabilities
The Company leases various cell sites (land, space in cell towers or rooftop surface areas), network infrastructure, and
buildings used for administrative or technical purposes. Rental contracts are typically made for fixed periods of 3 months
to 69 years.
Until 31 December 2018 leases of property, plant and equipment were classified as either finance leases or operating
lease. From 1 January 2019, leases and ECI (electronic communications infrastructure and associated facilities) are
recognized as a right-of-use asset and a corresponding liability from the date when the leased asset becomes available
for use by the Company. In 2022 renewals of the lease agreements are treated as increase of the right-of-use assets
(additions) and changes in the duration or fees in the agreements are classified as terminations or modifications (an
early termination or change in initially defined fee in the agreement).
In million HRK
Note
Land
Buildings
Equipment
Other
Total
Carrying amount at 1 January 2021
188
257
36
38
519
Additions
243
19
5
29
296
Termination of sublease contracts
-
53
-
-
53
Terminations/modifications
(1)
(1)
(6)
(1)
(9)
Transfers
(1)
1
-
-
-
Depreciation charge
8
(219)
(45)
(7)
(26)
(297)
Carrying amount at 31 December 2021
210
284
28
40
562
Additions
200
19
4
20
244
Terminations/modifications
(16)
(5)
(1)
-
(22)
Depreciation charge
8
(219)
(37)
(7)
(25)
(288)
Carrying amount at 31 December 2022
175
261
24
35
495
The Company recognized lease liabilities as follows:
In million HRK
31 December 2022
31 December 2021
Short-term lease liabilities
126
129
Long-term lease liabilities
346
397
Total lease liabilities
472
526
The movement of lease liabilities is disclosed in Note 41.
Interest expense included in finance costs of 2022 was HRK 25 million (2021: HRK 28 million).
Total lease repayment in 2022 was HRK 291 million plus interest expense HRK 25 million (2021: HRK 288 million plus
interest expense HRK 28 million).
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
58 Croatian Telecom Inc.
19 Investments in subsidiaries
The net book value of investments in subsidiaries comprises:
During 2018, HT d.d. transferred its investments in Iskon Internet d.d., Combis d.o.o., E-Tours d.o.o., KDS d.o.o. and
Optima Telekom d.d. in HT holding d.o.o. These investments were transferred from HT d.d. to HT holding d.o.o. at its
net book value. At the end of 2019, HT holding sold E-Tours.
In July 2021, the Company and Zagrebačka banka d.d. signed an agreement with the company Telemach Hrvatska
d.o.o. on the sale and purchase of the shares of the Optima Telekom d.d. In 2022 closing of the sale of the shares of
the Optima Telekom d.d. is closed. In December 2021, KDS is merged to HT. As at 1 June 2022 HT Production is
merged to HT d.d.
Company HT holding d.o.o. acts as special purpose vehicle entity which holds following investments:
Company
Country of Business
Principal Activities
Ownership
interest
____________________
__________________
_______________________________________
__________
Iskon Internet d.d.
Republic of Croatia
Provision of internet and data services
100%
Combis d.o.o.
Republic of Croatia
Provision of IT services
100%
Crnogorski Telekom AD
Republic of
Montenegro
Provision of fixed and mobile telephony services,
internet and data services
76.53%
HRK million
As at 1 January 2021
HT holding d.o.o.
1,719
HT Production
113
Impairment of investment in HT holding d.o.o.
(121)
__________
Year ended 31 December 2021
1,711
__________
As at 1 January 2022
HT holding d.o.o.
1,598
HT Production
113
Merger of HT Production
(113)
__________
Year ended 31 December 2022
1,598
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
59 Croatian Telecom Inc.
19 Investments in subsidiaries (continued)
Acquisition of OT-Optima Telekom d.d.
In 2014, the Company acquired voting shares in Optima Telekom d.d. (Optima) through pre-bankruptcy settlement.
Shares with value of HRK 52 million were acquired directly through court decision of converting receivables into equity
share as of 18 June 2014. An additional ownership share was acquired through the Mandatory Convertible Loan (MCL)
instrument in the amount of HRK 69 million as of 9 July 2014 and increase in Optima equity pursuant to Management
Board decision as of 23 July 2014 and approval of the Supervisory board. These two transactions are treated as a
single transaction in these financial statements.
The Company’s total ownership share in Optima amounts to 17.41% as of 31 December 2018. Control over Optima
was obtained through transfer of managerial rights in accordance with the agreement with Zagrebačka banka d.d., the
single largest shareholder of Optima. The Croatian Competition Agency has conditionally allowed the concentration of
HT with Optima Telekom based on the proposed financial and operational restructuring plan of Optima within the pre-
bankruptcy settlement procedure. The Croatian Competition Agency has determined a set of measures defining the
rules of conduct for a participant in concentration with regard to management and control over Optima, among which is
the implementation of a so called ’’Chinese wall’’ between Optima’s and HT employees, in relation to all sensitive
business information with the exception of reporting of financial data necessary for consolidation.
The control of HT over Optima initially was limited to a period of four years starting from 18 June 2014.
On 14 June 2017 HT received the Decision of the Croatian Competition Agency by which the duration of temporary
management rights of the company OT-Optima Telekom d.d. for HT is prolonged for an additional three-year period,
that is, until 10 July 2021.
On the same date, the Croatian Competition Agency has also reached the decision on conditional approval of the
merger pursuant to the Merger Agreement of the company H1 TELEKOM d.d. and OT-Optima Telekom d.d.
The Company tests annually whether investments in subsidiaries have suffered any impairment. The recoverable
amounts of investment have been determined based on value in use calculations. In 2019 annual impairment test
resulted in impairment of investment in Optima Telekom in HT Holding thus impairment of HT Holding investment in the
Company in the total amount of HRK 63 million.
The Company and Zagrebačka banka d.d. signed on 9 July 2021 an agreement with the company Telemach Hrvatska
d.o.o. owned by United Group (United Group B.V., The Netherlands) on the sale and purchase of the shares of the
company Optima Telekom d.d. The subject of the transaction is sale of total of 54.31% shares of Optima Telekom out
of which 36.90% are owned by Zagrebačka banka, while 17.41% are owned by HT holding d.o.o., a company in 100%
ownership of the Company.
By signing an agreement on the sale and purchase of the shares of the company Optima Telekom d.d., it was determined
that the fair value is lower than the carrying amount, which resulted in impairment of investments in Optima Telekom in
the amount of HRK 58 million. Recoverable amount of investment in HT holding d.o.o. is HRK 1,711 million based on
fair value less cost method.
In 2022, the sale process of Optima shares is closed.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
60 Croatian Telecom Inc.
19 Investments in subsidiaries (continued)
Acquisition of Crnogorski Telekom AD Podgorica
In January 2017, the Company signed a Sale and Purchase agreement to acquire majority shareholding in Crnogorski
Telekom AD Podgorica from Magyar Telekom NYRT Hungary. The transaction was executed through purchase of
company M-Tele d.o.o. that acts as special purpose vehicle entity which holds 76.53% shares of Crnogorski Telekom
AD. Since the entities involved in this transaction are all part of the DT Group, the Company records all assets acquired,
liabilities assumed and any non-controlling interest in the acquire using the predecessor accounting method. The fair
value of consideration transferred in this transaction was HRK 924 million.
Acquisition of HT Production d.o.o.
As at 1 March 2019 the Company acquired 100% of the voting shares of HT Production d.o.o., following the approval
of the National Regulatory Agency (HAKOM), from Hrvatska pošta. HT Production is an unlisted company located in
Zagreb, pay TV provider – EVOtv. Total cost acquisition amounted to HRK 113 million (comprising of shares in HP
Mostar HRK 11 million, properties HRK 72 million and cash HRK 30 million). As at 1 June 2022 HT Production is merged
with HT d.d., by transfer of all its assets and obligations to HT d.d. (Note 3). Following the merger, there were no changes
of existing EVOtv services.
20 Investments accounted for using the cost method
The net book value of investments accounted for using the cost method comprises:
31 December
2022
31 December
2021
HRK million
HRK million
Joint venture:
HT d.d. Mostar
334
334
Impairment of investment
(95)
-
Reclassification to assets held for sale
(239)
-
__________
__________
-
334
__________
__________
Investment in joint venture:
The Company has an ownership interest of 39.1% in its joint venture HT d.d. Mostar which is incorporated in the
Federation of Bosnia and Herzegovina. The principal activity of this company is provision of telecommunication services.
All decisions made by the Management Board and all decisions made by the Supervisory Board must be approved by
both majority shareholders. Therefore, the investment is classified as a jointly controlled entity. The rest of the company
is mainly owned by Federation of Bosnia and Herzegovina (50.10%). In 2022 and 2021, the Company did not receive
any dividend from HT d.d. Mostar.
The Company started the sale process during 2022 with the preparation of a valuation. As a result of valuation,
investment in HT d.d. Mostar was impaired in the amount of HRK 95 million. As at 31 December 2022, the amount of
investment of HRK 239 million is classified as assets held for sale (Note 22). The management considers the sale
process to be finalized within the next twelve months.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
61 Croatian Telecom Inc.
21 Financial assets at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income, include the following:
Issuer
Credit
rating
Currency
Maturity
31 December
2022
31 December
2021
HRK million
HRK million
Fortenova Group TopCo B.V.,
Amsterdam
EUR
6
6
Other
2
2
__________
__________
Total non-current financial
assets
8
8
__________
__________
Issuer
Credit
rating
Currency
Maturity
31 December
2022
31 December
2021
HRK million
HRK million
Given loan to Optima Telecom
HRK
2022
-
201
__________
__________
Total current financial assets
-
201
__________
__________
Given loan was fully repaid in January 2022.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
62 Croatian Telecom Inc.
22 Asset classified as held for sale
31 December
2022
31 December
2021
HRK million
HRK million
Asset classified as held for sale
239
-
__________
__________
239
-
__________
__________
Assets classified as held for sale refers to the joint venture HT d.d. Mostar which is incorporated in the Federation of
Bosnia and Herzegovina. The Company has an ownership share of 39.1%. The principal activity of this company is
provision of telecommunication services.
The Company started the sale process during 2022 with the preparation of a valuation. As a result of valuation,
investment in HT d.d. Mostar was impaired in the amount of HRK 95 million. As at 31 December 2022, the amount of
investment of HRK 239 million is classified as assets held for sale (Note 22). The management considers the sale
process to be finalized within the next twelve months.
Estimated net book value of HT d.d. Mostar as at 31 December 2022 is HRK 1,283 million (financial information for
2022 represents estimations as HT d.d. Mostar did not issue its financial statements up to the date of issuing
consolidated financial statements of HT Group).
Summarised statement of financial position:
31 December
2022
HRK million
Estimated
Current
Cash and cash equivalents
178
Other current assets
343
__________
Total current assets
521
Financial liabilities
21
Other current liabilities
213
__________
Total current liabilities
234
Non-current
Non-current assets
1,079
Financial liabilities
75
Other liabilities
8
__________
Total non-current liabilities
83
__________
Net assets
1,283
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
63 Croatian Telecom Inc.
23 Inventories
31 December
2022
31 December
2021
HRK million
HRK million
Inventories and spare parts (at lower of cost and net realizable value)
37
23
Merchandise (at lower of cost and net realizable value)
138
117
__________
__________
175
140
__________
__________
24 Trade and other receivables
31 December
2022
31 December
2021
HRK million
HRK million
Trade receivables
145
131
Loans to employees
15
15
Other receivables
2
2
__________
__________
Non-current financial instruments
162
148
__________
__________
Prepayment to regulator
38
72
Total non-current trade and other receivables
200
220
Trade receivables
1,100
1,076
Loans to employees
12
12
Other receivables
50
31
__________
__________
Current trade and other receivables
1,162
1,119
__________
__________
1,363
1,339
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
64 Croatian Telecom Inc.
24 Trade and other receivables (continued)
The aging analysis of current trade receivables and current and non-current contract assets is as of 31 December 2022
is as follows:
Total
Current
31-60 days
61-90 days
91-180 days
>180 days
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
31 December 2022
Expected loss rate
0.69-7.85%
6.13-16.98%
6.13-16.98%
14.64-86.88%
59.27-100%
Gross carrying amount -
trade receivables
1,691
1,119
11
6
6
549
Loss allowance
(591)
(33)
(2)
(1)
(6)
(549)
_________
_________
_________
_________
_________
_________
Net amount – trade
receivables
1,100
1,086
9
5
-
-
Gross carrying amount -
contract assets
280
280
-
-
-
-
Loss allowance
(15)
(15)
-
-
-
-
_________
_________
_________
_________
_________
_________
Net amount – contract
assets
265
265
-
-
-
-
The aging analysis of current trade receivables and current and non-current contract assets as of 31 December 2021
was as follows:
Total
Current
31-60 days
61-90 days
91-180 days
>180 days
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
31 December 2021
Expected loss rate
0.35-7.61%
4.46-15.18%
4.46-15.18%
14.40-71.68%
41.98-100%
Gross carrying amount -
trade receivables
1,693
1,038
22
23
29
581
Loss allowance
(617)
(21)
(2)
(2)
(13)
(579)
__________
_________
_________
_________
_________
_________
Net amount – trade
receivables
1,076
1,017
20
21
16
2
Gross carrying amount -
contract assets
284
284
-
-
-
-
Loss allowance
(13)
(13)
-
-
-
-
__________
_________
_________
_________
_________
_________
Net amount – contract
assets
271
271
-
-
-
-
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
65 Croatian Telecom Inc.
24 Trade and other receivables (continued)
The following table explains the changes in the credit loss allowance for trade receivables and contract assets under
simplified ECL model between the beginning and the end of the annual period:
Contract
assets
Trade
receivables
HRK million
HRK million
As at 1 January 2022
13
617
__________
__________
Changes in estimates and assumptions
7
57
Financial assets derecognized during the period
-
(15)
__________
__________
Total credit loss allowance charge in profit and loss for the period
7
42
Write-offs
(5)
(68)
__________
__________
As at 31 December 2022
15
591
__________
__________
Contract
assets
Trade
receivables
HRK million
HRK million
As at 1 January 2021
12
686
__________
__________
Changes in estimates and assumptions
6
70
Financial assets derecognized during the period
-
(22)
__________
__________
Total credit loss allowance charge in profit and loss for the period
6
48
Write-offs
(5)
(117)
__________
__________
As at 31 December 2021
13
617
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
66 Croatian Telecom Inc.
25 Assets and liabilities arising from contracts with customers
The Company has recognized following assets and liabilities related to contracts with customers:
31 December
2022
31 December
2021
HRK million
HRK million
Current contract asset resulting from
Equipment and service sales
223
231
Value adjustment
(10)
(9)
Total current contract asset
213
222
Non-current contract asset resulting from
Equipment and service sales
56
53
Value adjustment
(5)
(4)
Total non-current contract asset
51
49
Current capitalized contract cost resulting from
Cost to obtain a contract
43
39
Cost to fulfil a contract
6
5
Total current capitalized contract cost
49
44
Non-current capitalized contract cost resulting from
Cost to obtain a contract
127
100
Cost to fulfil a contract
2
2
Total non-current capitalized contract cost
129
102
Current contract liabilities
36
56
__________
__________
Total current contract liabilities
36
56
Decrease of contract asset compared to previous year is a result of lower sales of subsidized handsets and lower value
of granted handset budgets in current year compared to previous year, followed by higher release of contract asset from
previous year contracts.
Increase of contract cost compared to previous year is result of increased fees paid to indirect partners for contract
acquisition.
At 31 December 2022 the Company recognized 46 HRK million of revenue that was included in the contract liability
balance at the beginning of the period (2021: HRK 46 million).
Company applies the IFRS 9 simplified approach, whereas to measure the expected credit losses clusters have been
grouped based on customer credit risk characteristics and collection efficiency. The expected loss rates are based on
the past data collected over a period of 36 months.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
67 Croatian Telecom Inc.
25 Assets and liabilities arising from contracts with customers (continued)
Company has recognized following revenue adjustments from contracts with customers, which was not in line with billed
revenue, per following categories:
31 December
2022
31 December
2021
HRK million
HRK million
Sale of goods
164
166
Sale of services
(170)
(157)
__________
__________
Total Residential Customers
(6)
9
__________
__________
Sale of goods
155
170
Sale of services
(163)
(167)
__________
__________
Total Business Customers
(8)
3
__________
__________
The following table presents information on unsatisfied performance obligations resulting from long-term contracts with
customers.
31 December
2022
31 December
2021
HRK million
HRK million
Aggregate amount of the transaction price allocated to
long term contracts with customers that are unsatisfied
1,038
956
Management expects that 77% (HRK 802 million) of the transaction price allocated to unsatisfied contracts as at 31
December 2022 will be recognized as revenue during the next reporting period. The remaining 23% (HRK 236 million)
will be recognized in the next 1.5 years.
Company uses practical expedient not to disclose the outstanding transaction price allocated to performance obligations
that are unsatisfied (or partially unsatisfied) when the revenue is recognized overtime in line with billed revenue.
26 Prepayments
Prepayments mainly consist of prepaid liabilities for concession fees towards regulator in amount of HRK 76 million (31
December 2021: HRK 53 million), advances towards third parties in amount of HRK 206 million most of which are
advances for sports content rights secured by bank guarantees in amount of HRK 186 million (31 December 2021: HRK
18 million). Non-current prepayments are consisted completely of aforementioned HRK 186 million for sports content
rights. Additionally, within prepayments are prepaid expenses in amount of HRK 6 million (31 December 2021: HRK 7
million).
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
68 Croatian Telecom Inc.
27 Cash and cash equivalents and bank deposits
a) Cash and cash equivalents
Cash and cash equivalents comprise the following amounts:
31 December
2022
31 December
2021
HRK million
HRK million
Cash on hand and balances with banks
1,570
1,421
Commercial papers
750
1,079
Reverse repurchase agreement
226
-
Time deposits with maturity less than 3 months
14
13
__________
__________
2,560
2,513
__________
__________
Company has deposited an amount of HRK 226 million secured with a reverse repurchase agreement of Croatian
government bonds CROATIA 1,75% 03/04/41 (ISIN: XS2309433899).
b) Currency breakdown of cash and cash equivalents and time deposits:
31 December
2022
31 December
2021
HRK million
HRK million
HRK
2,253
1,971
EUR
288
523
GBP
1
-
USD
18
19
__________
__________
2,560
2,513
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
69 Croatian Telecom Inc.
28 Trade payables and other liabilities
31 December
2022
31 December
2021
HRK million
HRK million
Content contracts
23
5
Licence for radio frequency spectrum
61
96
Other
3
4
__________
__________
Non-current
87
105
__________
__________
Trade payables
825
714
Content contracts
94
102
VAT and other taxes payable
5
10
Payroll and payroll taxes
54
54
Other
22
9
__________
__________
Current
1,001
889
__________
__________
1,088
994
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
70 Croatian Telecom Inc.
29 Employee benefit obligations
Employee benefits include retirement payments in accordance with the collective agreement. Jubilee awards were
discontinued during 2014. Long-term employee benefits are determined using the projected unit credit method. Gains
and losses resulting from changes in actuarial assumptions are recognized as other comprehensive income in the
period in which they occur.
Employee benefits include a compensation for the employees, described in Note 43.
The movement in the liability recognized in the statement of financial position was as follows:
2022
2021
HRK million
HRK million
As at 1 January
19
11
LTI changes
14
10
LTI paid
(5)
(2)
LTI transfer to other liabilities
(2)
-
Service costs
1
1
Benefit paid
(1)
(1)
__________
__________
As at 31 December
26
19
__________
__________
Retirement
2
2
LTI
24
17
__________
__________
26
19
__________
__________
Retirement
2
2
LTI – non-current
13
10
__________
__________
Non-current
15
12
__________
__________
LTI – current
11
7
__________
__________
Current
26
19
__________
__________
The principal actuarial assumptions used to determine retirement benefit obligations as at 31 December were as follows:
2022
in %
2021
in %
Discount rate (annually)
3.00
3.00
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
71 Croatian Telecom Inc.
30 Provisions
Legal
claims
Asset
retirement
obligation
Total
HRK million
HRK million
HRK million
As at 1 January 2021
42
30
72
Additions
52
-
52
Utilisation
(19)
-
(19)
Reversals
(1)
-
(1)
Interest costs
-
1
1
As at 1 January 2022
74
31
105
Additions
52
1
53
Utilisation
(37)
-
(37)
Reversals
(2)
(1)
(3)
Interest costs
-
2
2
__________
__________
__________
As at 31 December 2022
87
33
120
Legal claims
As at 31 December 2022, the Company has provided estimated amounts for several legal actions and claims that
management has assessed as probable to result in outflow of resources of the Company.
Asset retirement obligation
Asset retirement obligation primarily exists in the case of telecommunications structures constructed on third parties’
properties. The Company carries out a revision of the necessary provisions every year.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
72 Croatian Telecom Inc.
31 Accruals
Variable
salary
Redundancy
Unused
vacation
Total
HRK million
HRK million
HRK million
HRK million
As at 1 January 2021
48
26
4
78
Additions
101
68
1
170
Utilisation
(97)
(70)
-
(167)
As at 1 January 2022
52
24
5
81
Additions
101
54
-
155
Utilisation
(91)
(52)
-
(143)
Reversal
(5)
-
1
(4)
__________
__________
__________
__________
As at 31 December 2022
57
26
6
89
__________
__________
__________
__________
Redundancy
Redundancy expenses and accruals include the amount of gross severance payments and other related costs for
employees whose employment contracts are terminated during 2022.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
73 Croatian Telecom Inc.
32 Issued share capital
Authorized, issued, fully paid and registered share capital:
31 December
2022
HRK million
78,775,842 ordinary shares without par value
10,245
__________
31 December
2021
HRK million
80,047,509 ordinary shares without par value
10,245
___________
In 2022, 1,271,667 shares were cancelled (2021: 718,720 shares).
33 Legal reserves
Legal reserves represent reserves prescribed by the Company Act in the amount of 5% of the net profit for the year,
until these reserves amount to 5% of the issued share capital. Legal reserves that do not exceed the above amount can
only be used to cover current year or prior year losses. If the legal reserves exceed 5% of the issued capital, they can
also be used to increase the issued share capital of the Company. These reserves are not distributable.
34 Treasury shares
In 2017, the Company started with acquisition of own shares due to introduction of share buy-back program which
lasted until 20 April 2021. 528,245 shares that were bought through this program in 2020 were cancelled in 2021.
Additional 205,443 shares which were bought from 1 January 2021 to 20 April 2021 were cancelled in 2021. Within this
program total of 1,853,528 shares are bought from the introduction of share buy-back program.
On 28 April 2021, Management Board launched a new Treasury Share Buyback Program with commencement as of 29
April 2021 and lasting until 22 April 2026. Under this Program the Company continuously performs acquisition of shares
in order to act in line with the purpose of the Program which is to withdraw shares without a nominal value without
reducing the share capital. In 2022, a total of 1,271,667 shares were canceled, out of which 326,838 shares were bought
in 2021.
Reserve for purchased own shares amounts to HRK 3 million as of 31 December 2022 (31 December 2021: HRK 61
million) and is not distributable.
The Company holds 19,952 own shares as at 31 December 2022 (31 December 2021: 326,838).
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
74 Croatian Telecom Inc.
35 Retained earnings
In 2022, General Assembly of the Company has brought the decision regarding the dividend pay-out. Under that
decision, HRK 630 million (2021: HRK 640 million) or HRK 8 per share were paid out to shareholders (2021: HRK 8).
Dividend was distributed from net profit in 2021.
36 Commitments
Capital commitments
The Company was committed under contractual agreements to capital expenditure as follows:
31 December
2022
31 December
2021
HRK million
HRK million
Intangible assets
692
333
Property, plant and equipment
932
1,072
__________
__________
1,624
1,405
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
75 Croatian Telecom Inc.
37 Contingencies
At the time of preparation of these financial statements, there are outstanding claims against the Company. In the
opinion of the management, the settlement of these cases will not have a material adverse effect on the financial position
of the Company, except for certain claims for which a provision was established (Note 30).
The Company vigorously defends all of its legal claims and potential claims, including regulatory matters, third party
claims and employee lawsuits.
Ownership claim of Distributive Telecommunication Infrastructure (DTI) by the City of Zagreb
In September 2008, the Company received a lawsuit filed by the Zagreb Holding Ltd. branch Zagreb Digital City
(“ZHZDG”) against the Company. ZHZDG is claiming the ownership of the City of Zagreb over DTI on the area of the
City of Zagreb and demanding a payment of fee for usage of DTI system in the range of up to HRK 390 million plus
interest.
This lawsuit is based on a claim that the Company is using DTI owned by the City of Zagreb without any remuneration.
In December 2012, the Company received the partial interlocutory judgement and partial judgement by which it was
determined that the Company is obliged to pay to ZHZDG the fee for usage of the DTI system, and that until the legal
validity of this partial interlocutory judgment, litigation will be stopped regarding the amount of the claim. Furthermore,
the claim was rejected in the part concerning the establishment of the ownership of the City of Zagreb over DTI and
other communal infrastructure for laying telecommunication installations on the area of the City of Zagreb for the
purpose of communication-information systems and services. The Company appealed against this judgment.
In August 2015 the second instance County Court of Varaždin accepted the Company’s remedy and returned the case
back to the first instance court proceeding.
As to avoid statute of limitation, the plaintiff has raised its claim in June 2016, 2017 and 2018, for the additional amount
of HRK 90 million each year respectively. Therefore, the claim now amounts altogether HRK 660 million, plus interest.
Based on the merit and development of the above legal proceedings, the Company concluded that the likelihood of an
obligation arising from these legal cases is remote, and that there was no need to present a provision related to these
cases in these financial statements.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
76 Croatian Telecom Inc.
37 Contingencies (continued)
Subscriber lawsuits
7 residential subscribers initiated in 2003 against Republic of Croatia as first defendant and HT as second defendant a
dispute, in which the Municipal Civil Court in Zagreb passed in a retrial in 2021 first-instance decision by which: (i) the
contractual provisions of the Concession Agreement for the Provision of Public Voice Services in the Fixed Network
concluded between Republic of Croatia and HT in 1999, as amended in 2001 (Concession Agreement), has been
determined as void in the part concerning monthly access charge and 1 minute billing interval; and (ii) ordered a payment
in the amount of HRK 925 per claimant plus interest.
In 2022 the County Court of Zagreb confirmed the first instance judgement by which HT was finally obliged to such
payment. HT filed against final court decision a proposal to submit revision before the Supreme Court of the Republic
of Croatia, as well as the constitutional claim before the Constitutional Court of the Republic of Croatia, with the
arguments that it was charging its residential subscribers in accordance with the Concession Agreement, as well as
other applicable laws and regulations.
Apart from the 7 mentioned plaintiffs in the above described procedure, there are 5 more plaintiffs who initiated litigation
against Republic of Croatia as first defendant and HT as second defendant with the same claim. These procedures are
pending.
There is a possibility of additional claims that could be initiated against HT on the same factual and legal ground.
Pending regulatory misdemeanor proceedings
The Croatian Regulatory Authority for Network Industries (HAKOM) initiated two misdemeanor proceedings against HT
in connection with possible breach of imposed regulatory obligations in 2018. Electronic Communications Act prescribes
for such misdemeanors fine in the amount of 1% up to a maximum of 10% of the total annual gross revenue of the
Company from performing electronic communications networks and services, achieved in the last year for which exist
concluded annual financial reports.
In one of this misdemeanor proceedings, initiated against HT regarding breach of price control and cost accounting
regulatory obligation, High Misdemeanour Court confirmed in 2022 fine imposed to HT by the first-instance judgement
of the Misdemeanour Court in the amount of HRK 36 million, with the possibility for HT of the payment of 2/3 of the
imposed fine within one month, in which case it will be considered as the fine has been paid in its entirety.
HT paid 2/3 of the imposed fine, i.e. HRK 24 million and filed against this judgment constitutional claim to the
Constitutional Court of the Republic of Croatia and a proposal to the State Attorney’s Office in order to initiate
proceedings for the protection of legality before the Supreme Court of the Republic of Croatia.
In another misdemeanor proceeding initiated against HT for abusing access, non-discrimination and transparency
regulatory obligation, misdemeanor procedure is still on-going.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
77 Croatian Telecom Inc.
37 Balances and transactions with related parties
The transactions disclosed below primarily relate to transactions with the companies owned by DTAG. The Company
enters into transactions in the normal course of business on an arm’s length basis. These transactions included the
sending and receiving of international traffic to/from these companies during 2022 and 2021.
The main transactions with related parties during 2022 and 2021 were as follows:
Revenue
Expenses
2022
2021
2022
2021
Related party:
HRK million
HRK million
HRK million
HRK million
Ultimate parent
Deutsche Telekom AG, Germany
13
100
47
34
Joint venture
HT d.d. Mostar, Bosnia and Herzegovina
5
6
3
4
Subsidiaries of ultimate parent
Telekom Deutschland GmbH, Germany
85
-
88
96
Deutsche Telekom UK Limited
7
8
1
38
T-Mobile Austria GmbH, Austria
16
16
11
11
Slovak Telecom a.s., Slovakia
14
16
3
3
Deutsche Telekom Services Europe SE
-
-
6
5
T-Systems International GmbH, Germany
2
2
7
6
Magyar Telekom Nyrt., Hungary
11
11
4
4
T-Mobile Czech
14
15
1
1
T-Mobile Polska
6
6
3
3
T-Mobile Netherlands
-
8
-
2
Deutsche Telekom IT GmbH
-
-
10
11
DT Europe Holding
-
-
2
1
Deutsche Telekom Cloud Services d.o.o
1
4
-
-
Hellenic Telecommunications Organization
-
-
6
2
Others
2
3
2
3
__________
__________
__________
__________
176
195
194
224
__________
__________
__________
__________
The transactions with DTAG disclosed above primarily relate to Licence Agreement and Frame agreement which covers
all mutual needs for services provided by the companies in DT group in telecom industry. The transactions with HT
Mostar relate to International settlement of telecommunications services.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
78 Croatian Telecom Inc.
38 Balances and transactions with related parties (continued)
The statement of financial position includes the following balances resulting from transactions with related parties:
Receivables
Payables
31 December
2022
31 December
2021
31 December
2022
31 December
2021
Related party:
HRK million
HRK million
HRK million
HRK million
Ultimate parent
Deutsche Telekom AG, Germany
-
-
61
78
Subsidiaries of ultimate parent
Telekom Deutschland GmbH, Germany
-
-
78
14
Makedonski Telekom
-
2
-
-
Deutsche Telekom Cloud Services d.o.o
3
1
-
-
Magyar Telekom Nyrt., Hungary
-
1
-
-
Deutche Telekom UK Limited
-
-
4
6
Deutsche Telekom IT GmbH
-
-
10
-
Slovak Telecom a.s., Slovakia
1
1
-
-
T-Systems International GmbH, Germany
-
-
2
32
Others
1
-
7
9
__________
__________
__________
__________
5
5
162
139
__________
__________
__________
__________
At the year end the Company holds investment in commercial paper of ultimate parent in the amount of HRK 750 million
(31 December 2021: HRK 1,079 million) (Note 27).
In 2022, the Company granted short term loans to Iskon Internet d.d. in amount of HRK 40 million and Combis d.o.o. in
amount of HRK 90 million (31 December 2021: HRK 30 million to HT Production).
Interest rate for given loans amounts 2.1%.
The Company had the following transactions and balances with its subsidiaries excluding loans in the amount of HRK
15 million (31 December 2021: HRK 60 million):
Revenues
Capital
expenditures
Expenses
Receivables
Payables
Subsidiaries:
HRK million
HRK million
HRK million
HRK million
HRK million
2022 / 31 December 2022
159
160
48
191
71
2021 / 31 December 2021
318
96
54
186
54
__________
__________
__________
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
79 Croatian Telecom Inc.
38 Balances and transactions with related parties (continued)
The Company was committed under contractual agreements to capital expenditure with its subsidiaries as follows:
31 December
2022
31 December
2021
HRK million
HRK million
Intangible assets
30
26
Property, plant and equipment
123
98
__________
__________
153
124
__________
__________
The Federal Republic of Germany is both a direct and an indirect shareholder and holds 30.4% of the share capital of
DTAG. Due to the average attendance at the shareholders’ meetings, the Federal Republic of Germany represents a
solid majority at the shareholders’ meetings of DTAG, although it only has a minority shareholding, making DTAG a
dependant company of the Federal Republic of Germany. Therefore, the Federal Republic of Germany and the
companies controlled by the Federal Republic of Germany or companies over which the Federal Republic of Germany
can exercise a significant influence are classified as related parties of DTAG, and consequently of the Company as well.
The Company did not execute as part of its normal business activities any transactions that were individually material
in the 2022 or 2021 financial year with companies controlled by the Federal Republic of Germany or companies over
which the Federal Republic of Germany can exercise a significant influence.
Compensation to the members of the Supervisory Board
The Chairman of the Supervisory Board receives remuneration in the amount of 1.5 times of the average net salary of
the employees of the Company paid in the preceding month. To the Deputy Chairman, remuneration is the amount of
1.25 times of the average net salary of the employees of the Company paid in the preceding month is paid, while any
other member receives the amount of one average net salary of the employees of the Company paid in the preceding
month. To a member of the Supervisory Board, who is at the same time the Chairman of the Audit Committee of the
Supervisory Board, remuneration is the amount of 1.5 times of the average monthly net salary of the employees of the
Company paid in the preceding month. To a member of the Supervisory Board, who is at the same time a member of
the one board or committee of the Supervisory Board, remuneration is the amount of 1.25 times of the average monthly
net salary of the employees of the Company paid in the previous month. To a member of the Supervisory Board, who
is at the same time a member of two or more committees of the Supervisory Board, remuneration is the amount of 1. 5
times of the average monthly net salary of the employees of the Company paid in the previous month.
DTAG representatives do not receive any remuneration for the membership in the Supervisory Board due to a respective
policy of DTAG.
In 2022, the Company paid a total amount of HRK 0.8 million (2021: HRK 0.8 million) to the members of its Supervisory
Board. No loans were granted to the members of the Supervisory Board.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
80 Croatian Telecom Inc.
38 Balances and transactions with related parties (continued)
Compensation to key management personnel
In 2022, the total compensation paid to key management personnel of the Company amounted to HRK 39 million (2021:
HRK 34 million). Key management personnel include members of the Management Boards and the operating directors
of the Company, who are employed by the Company.
Compensation paid to key management personnel includes:
2022
2021
HRK million
HRK million
Short-term benefits
39
34
__________
__________
39
34
__________
__________
In 2022, the total cost of pension contribution is HRK 4 million (2021: HRK 3 million).
39 Financial risk management objectives and policies
The Company is exposed to international service-based markets. As a result, the Company can be affected by changes
in foreign exchange rates. The Company also extends credit terms to its customers and is exposed to a risk of default.
The significant risks, together with the methods used to manage these risks, are described below. The Company does
not use derivative instruments either to manage risk or for speculative purposes.
a) Credit risk
The Company has no significant concentration of credit risk with any single counter party or group of counterparties
with similar characteristics. The Company procedures are in force to ensure on a permanent basis that sales are made
to customers with an appropriate credit history and do not exceed an acceptable credit exposure limit.
The Company does not guarantee obligations of third parties. The Company has issued guarantees for obligations of
its subsidiaries in total amount of HRK 65 million.
The Company considers that its maximum exposure is reflected by the value of debtors (Note 25) net of provisions for
impairment recognized at the statement of financial position date.
Additionally, the Company is exposed to risk through cash deposits in the banks. As at 31 December 2022, the Company
had business transactions with eight banks (2021: eight banks). The Company held major portion of cash and deposits
in three banks. For one domestic bank with foreign ownership, the Company received guarantee for deposits placed
from parent bank which have a minimum rating of BBB+ and acceptable CDS level. The management of this risk is
focused on dealing with the most reputable banks in foreign and domestic ownership in the domestic and foreign
markets and on contacts with the banks on a daily basis.
The Company applies the IFRS 9 simplified approach to measuring expected credit losses which uses a lifetime
expected loss allowance for all trade receivables and contract assets. To measure the expected credit losses, trade
receivables and contract assets have been grouped based on shared credit risk characteristics and the days past due.
The contract assets relate the same risk characteristics as the trade receivables for the same types of contracts. The
Company has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation of
the loss rates for the contract assets.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
81 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
a) Credit risk (continued)
The expected loss rates are based on the payment profiles of sales over a period of 36 months.
The historical loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors
affecting the ability of the customers to settle the receivables.
The Company has identified the GDP and the unemployment rate in the country in which it sells its goods and services
to be the most relevant factors, and accordingly adjusts the historical loss rates based on expected changes in these
factors.
Deposited amounts in Banks are money on current account and deposits under 3 months which are collected at maturity.
That is why it is classified as hold to collect according to IFRS 9 and according to that measurement is to amortized
cost. Credit risk is measured using the general approach. Impairment losses are recognized on the basis of individual
impairment. The Company uses the daily CDS-level which covers insurance for a period of five years. A CDS with an
insurance of five years has the highest market liquidity and was therefore chosen as a reference. The CDS-level reacts
immediately if a default risk increases - independently if an insurance with a period of three years or five years has been
chosen.
For the risk measure of banks and partners which don’t provide adequate bank guarantee with acceptable CDS level
or don’t have their own adequate rating, Company took the CDS indicator of Croatia, which was on 31 December 2022
amounted to 1.03%. Credit risk amount is calculated using the formula: deposit amount * number of days * 0.70% / 365.
For a vista deposits the Company uses 2 days.
The credit quality of non-current financial assets can be assessed by historical information about counterparty default
rates:
31 December
2022
31 December
2021
HRK million
HRK million
Trade receivables for merchandise sold
145
131
Prepayments to regulator
38
72
Loans to employees
15
15
Other receivables
2
2
__________
__________
200
220
__________
__________
Trade receivables from subsidiaries and other current receivables are neither past due nor impaired.
The credit quality of all other financial assets (Note 40) implies the total carrying amount as at the balance sheet date
is considered.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
82 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
b) Liquidity risk
The Company policy is to maintain sufficient cash and cash equivalents or to have available funding through an
adequate amount of committed credit facilities to meet its commitments for the foreseeable future.
Any excess cash is invested mostly in financial assets that are valued at fair value through other comprehensive income.
Trade and other payables
Other non-current liabilities
all amounts in HRK million
Less than 3
3 to 12
Total
1 to 5
> 5
Total
months
months
years
years
Year ended 31 December 2022
948
86
1,034
54
46
100
Year ended 31 December 2021
828
88
916
75
56
131
Lease liabilities
Lease liabilities
all amounts in HRK million
Less than 3
3 to 12
Total
1 to 5
> 5
Total
months
Months
years
years
Year ended 31 December 2022
48
98
146
219
229
448
Year ended 31 December 2021
52
99
151
251
248
499
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
83 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
c) Interest rate risk
The Company’s exposure to the risk of changes in market interest rates relates primarily to the Company’s financial
assets at fair value through other comprehensive income, cash, cash equivalents, time deposits and bank borrowings.
The Company is not exposed to variable interest rates.
d) Foreign currency risk
As at 31 December 2022 the Company’s functional currency is the Croatian Kuna. Certain assets and liabilities are
denominated in foreign currencies which are translated at the valid middle exchange rate of the Croatian National Bank
at each statement of financial position date. The resulting differences are charged or credited to the statement of
comprehensive income but do not affect short-term cash flows.
A significant amount of deposits in the banks, financial assets at fair value through other comprehensive income, cash
equivalents, receivables and payables are made in foreign currency, primarily in Euro.
Considering that Croatia joined the euro area and adopted Euro as an official currency as at 1 January 2023, there is
no foreign exchange currency risk to a change in the Euro exchange rate. The fixed official exchange rate is set at
7,53450 HRK per 1 EUR.
e) Fair value estimation
The fair value of securities included in financial assets at fair value through other comprehensive income is estimated
by reference to their quoted market price at the statement of financial position date. The Company’s principal financial
instruments not carried at fair value are trade receivables, other receivables, non-current receivables, trade and other
payables. The historical cost carrying amounts of receivables and payables, including provisions, which are all subject
to normal trade credit terms, approximate their fair values.
f) Capital management
The primary objective of the Company’s capital management is to ensure that business support and maximise
shareholder value. The capital structure of the Company comprises issued share capital, reserves and retained earnings
and totals HRK 12,455 million as at 31 December 2022 (31 December 2021: HRK 12,603 million).
The Company manages its capital structure and makes adjustments to it, in light of changes in economic conditions. To
maintain or adjust the capital structure, the Company may adjust the dividend payment to shareholders, return capital
to shareholders or issue new shares. No changes were made in the objectives, policies or processes during the years
ended 31 December 2022 and 31 December 2021 (Notes 33 and 36).
In accordance with the Law on electronic money (Official Gazette No. 64/18, Article 41), the Company as electronic
money institution and payment institution is obliged to report regulatory capital in its annual audited financial statements.
These disclosures are not required by IFRS and the Law does not require the disclosure of comparative information
from previous year.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
84 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
f) Capital management (continued)
Regulatory capital for electronic money institutions
REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-RK
Electronic money institution: HRVATSKI TELEKOM d.d.
Personal identification number (OIB): 81793146560
Date: 31 December 2022
IEN-RK: Section A - Calculation of Regulatory Capital
HRK
No.
Item
1.
REGULATORY CAPITAL
10,386,789,929.59
2.
EQUITY TIER 1 CAPITAL
10,386,789,929.59
3.
COMMON EQUITY TIER 1 CAPITAL
10,386,789,929.59
4.
Capital instruments
10,244,977,390.00
5.
Share premium
0.00
6.
(-) Direct, indirect and synthetic holdings by the institution of Common Equity Tier 1
Capital
-9,215,740.88
7.
Retained earnings or (-) carry back losses
995,938,285.90
8.
Losses for the current fiscal year
0.00
9.
Accumulated other comprehensive income
49,625.29
10.
Other reserves
528,173,032.42
11.
(+)/(–) Adjustments to the Common Equity Tier 1 from prudential filters
0.00
12.
Intangible assets
-
1,246,612,014.19
13.
(-) Deferred tax assets that rely on future profitability and not arise from temporary
differences
0.00
14.
(-) Pension fund assets under management
0.00
15.
(-) Reciprocal cross holdings in Common Equity Tier 1
0.00
16.
(-) Deduction from Common Equity Tier 1 items that exceed Additional Tier 1
0.00
17.
(-) Holdings of Common Equity Tier 1 instruments where an institution does not
have a significant investment in a financial sector entity
0.00
18.
(-) Deferred tax assets that rely on future profitability and arise from temporary
differences
-126,520,648.95
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
85 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
f) Capital management (continued)
Regulatory capital for electronic money institutions (continued)
No.
Item
19.
(-) Holdings of Common Equity Tier 1 instruments where an institution has a
significant investment in a financial sector entity
0.00
20.
(-) Deduction over treshold (17.65%)
0.00
21.
(-) Deduction from Common Equity Tier 1 items - other
0.000
22.
ADDITIONAL TIER 1 CAPITAL
0.000
23.
Capital instruments
0.00
24.
Share premium
0.00
25.
(-) Direct, indirect and synthetic holdings by the institution of Additional Tier 1 Capital
0.00
26.
(-) Reciprocal cross holdings in Additional Tier 1
0.00
27.
(-) Holdings of Additional Tier 1 instruments where an institution does not have a
significant investment in a financial sector entity
0.00
28.
(-) Holdings of Additional Tier 1 instruments where an institution has a significant
investment in a financial sector entity
0.00
29.
(-) Deduction from Additional Tier 1 items that exceed Tier 2 Capital
0.00
30.
Deduction from Additional Tier 1 items that exceed Additional Tier 1 (deducted from
Common Equity Tier 1)
0.00
31.
(-) Deduction from Additional Tier 1 items - other
0.00
32.
TIER 2 CAPITAL
0.00
33.
Capital instruments
0.00
34.
Share premium
0.00
35.
(-) Direct, indirect and synthetic holdings by the institution of Tier 2 Capital
0.00
36.
(-) Reciprocal cross holdings in Tier 2
0.00
37.
(-) Holdings of Tier 2 instruments where an institution does not have a significant
investment in a financial sector entity
0.00
38.
(-) Holdings of Tier 2 instruments where an institution has a significant investment in
a financial sector entity
0.00
39.
Deduction from Tier 2 Capital items that exceed Tier 2 Capital (deducted from
Additional Tier 1)
0.00
40.
(-) Deduction from Tier 2 items - other
0.00
41.
Notes
0.000
42.
Profit for the year
694,820,004.41
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
86 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
f) Capital management (continued)
Regulatory capital for electronic money institutions (continued)
REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-RK
Electronic money institution: HRVATSKI TELEKOM d.d.
Personal identification number (OIB): 81793146560
Date: 31 December 2022
IEN- RK: Section B – Capital available to calculate the amount of regulatory capital
HRK HRK
Number
Item
Total amount
Capital available to
calculate the amount
of regulatory capital
Excess
1
2
3
1.
Common Equity Tier 1
Capital
10,386,789,929.59
10,386,789,929.59
2.
Additonal Tier 1 Capital
0.00
0.00
0.00
3.
Equity Tier 1 Capital
10,386,789,929.59
10,386,789,929.59
4.
Tier 1 Capital
0.00
0.00
0.00
5.
Regulatory Capital
10,386,789,929.59
Minimum required regulatory capital and requirements coverage
MINIMUM REQUIRED REGULATORY CAPITAL FOR ELECTRONIC MONEY INSTITUTIONS - FORM IEN-MRK
Electronic money institution: HRVATSKI TELEKOM d.d.
Personal identification number (OIB): 81793146560
Date: 31 December 2022
IEN-MRK: Section A - Minimum required regulatory capital for electronic money institutions
HRK
Number
Calculation
Amount
1.
Average unused electronic money
3.324,87
2.
Minimum required regulatory capital for
electronic money institutions
66,50
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
87 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
f) Capital management (continued)
Regulatory capital for payment institutions
REGULATORY CAPITAL FOR PAYMENT INSTITUTIONS - FORM IPP-MRK
Electronic money institution: HRVATSKI TELEKOM d.d.
Personal identification number (OIB): 81793146560
Date: 31 December 2022
IPP-MRK: Section A - Minimum required regulatory capital for payment institutions
Number
Calculation
Amount
1.
Total amount of payment transactions in the previous year
241.863.642,48
2.
Payment volume
20.155.303,54
3.
Total amount (4., 5. ,6., 7., 8.)
806.212,14
4.
4% of payment volume up to the amount of HRK 38 million
806.212,14
5.
2.5% of payment volume over the amount of HRK 38 million and up
to the amount of HRK 76 million
0,00
6.
1% of payment volume over the amount of HRK 76 million and up to
the amount of HRK 750 million
0,00
7.
0.5% of payment volume over the amount of HRK 750 million and
up to the amount of HRK 1,875 million
0,00
8.
0.25% of payment volume over the amount of HRK 1,875 million
0,00
9.
Factor k
1,00
10.
Minimum required regulatory capital for payment institutions
806.212,14
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
88 Croatian Telecom Inc.
39 Financial risk management objectives and policies (continued)
g) Offsetting
The following financial assets and financial liabilities are subject to offsetting:
Trade receivables
Trade payables
31 December
2022
31 December
2021
31 December
2022
31 December
2021
HRK million
HRK million
HRK million
HRK million
Gross recognized amounts
72
56
210
157
Offsetting amount
(54)
(37)
(54)
(37)
__________
__________
__________
__________
18
19
156
120
__________
__________
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
89 Croatian Telecom Inc.
40 Financial instruments
Recurring fair value measurement
The level in fair value hierarchy into which the recurring fair value measurements are categorized are as follows:
31 December 2022
31 December 2021
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
Level 1
Level 2
Level 3
Level 1
Level 2
Level 3
Financial assets:
Assets classified as held for sale
-
-
239
-
-
-
Financial assets at fair value through
other comprehensive income, non-current
8
-
-
8
-
-
Financial assets at fair value through
other comprehensive income, current
-
-
-
201
-
-
Financial liabilities:
Non-current liability
Interest-bearing loans
3
-
-
4
-
-
Fair value of Level 2 financial instruments is calculated using discounted cash flows method. Carrying amounts and fair
values of all of the Company’s financial instruments are the same in 2022 and 2021.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
90 Croatian Telecom Inc.
41 Net debt reconciliation
Cash/bank
overdraft
Liquid
investments
Other fin. liabilities
(spectrum and
content) within 1
year
Other fin. liabilities
(spectrum and
content) after 1 year
Lease liabilities
Total
HRK million
HRK million
HRK million
HRK million
HRK million
HRK million
Net debt as at 31 December 2020
2,706
1
(131)
(21)
(528)
2,027
_________
_________
__________
__________
__________
__________
Cash flow
(187)
(1)
198
-
288
298
_________
_________
__________
__________
__________
__________
Reclassification of current portion
-
-
(166)
166
-
-
Additions
-
-
-
(246)
(296)
(542)
Termination/modification of lease
contracts
-
-
-
-
9
9
Other non financial movements
-
-
(3)
-
-
(3)
Foreign exchange movements
(6)
-
-
1
(5)
_________
_________
__________
__________
__________
__________
Net debt as at 31 December 2021
2,513
-
(102)
(101)
(526)
1,784
_________
_________
__________
__________
__________
__________
Cash flow
47
-
274
-
291
612
_________
_________
_________
_________
_________
_________
Reclassification of current portion
-
-
(249)
249
-
-
Additions
-
-
-
(232)
(243)
(475)
Termination/modification of lease
contracts
-
-
-
-
6
6
Merger of subsidiary (Note 3)
-
-
(20)
-
-
(20)
Other non financial movements
-
-
3
-
-
3
Foreign exchange movements
-
-
-
-
-
-
_________
_________
_________
_________
_________
_________
Net debt as at 31 December 2022
2,560
-
(94)
(84)
(472)
1,910
_________
_________
__________
__________
__________
__________
Liquid investments consist of bank deposits and financial assets at fair value through other comprehensive income.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
91 Croatian Telecom Inc.
42 Authorization for Services and Applicable Fees
The Company is party to the following Authorization for Services, none of which are within the scope of IFRIC 12:
a) Service authorization for the performance of electronic communications services
Pursuant to Article 24 of the Law on Electronic Communications (Official Gazette No. 76/2022) and in accordance with
the Article 12 of the European Electronic Communications Code (Directive (EU) 2018/1972) and BEREC Guidelines
(BoR (19) 259), the Company is entitled to provide the following electronic communication services based on the general
authorisation which was last updated in May 2022 (in compliance with the Law on electronic Communications that was
in force at that time, Official Gazette No. 90/11, 133/12, 80/13, 71/14, 72/17):
- Internet access service in the fixed electronic communications network,
- Internet access service in the mobile electronic communications network,
- Number based interpersonal communications service in the fixed electronic communications network (including
nomadic services),
- Number based interpersonal communications service in the mobile electronic communications network,
- Data transmission service,
- Lease lines service,
- Terrestrial TV broadcasting,
- Transport of telephone traffic among operators service (transit),
- M2M services,
- Other - premium rate and free phone services,
- Other - voice over internet protocol service (VoIP),
- Other - granting access and shared use of electronic communications infrastructure and associated facilities, and
- Other services.
On 26 February 2013 the Croatian Regulatory Authority for Network Industries (HAKOM) issued to the Company special
authorization to perform account reconciliation of accounts for the provision of electronic communications services in
maritime for a period of 10 years i.e. till 26 February 2023.
In accordance with HAKOM’s decision of 22 September 2022, the Company was designated as the Universal services
provider in the Republic of Croatia for a period of three (3) years starting from 1 December 2022 with the obligation to
provide following universal services during the mentioned period:
- access to the public communications network and publicly available telephone services at a fixed location, enabling
for the voice communications, facsimile communications and data communications, at data rates that are sufficient
to permit functional internet access, taking into account prevailing technologies used by the majority of subscribers
as well as the technological feasibility,
- setting up of public pay telephones or other publicly available access points for the public voice service on public
places accessible at any time, in accordance with the reasonable needs of end-users in terms of the geographical
coverage, the quality of services, the number of public pay telephones or other publicly available access points for
the public voice service and their accessibility for disabled persons,
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
92 Croatian Telecom Inc.
42 Authorization for Services and Applicable Fees (continued)
a) Service authorization for the performance of electronic communications services in a fixed and mobile network
(continued)
- special measures for persons with disabilities to access services, including access to emergency services, in the
same way as other end-users
- special pricing systems adapted to the needs of socially vulnerable groups of end-users of services, which include
the service referred to in the first point above
By the decision of HAKOM of 21 October 2022, the Company was issued the approval for the prices of universal
services.
b) Authorization for usage of radio frequency spectrum
HAKOM issued to the Company the following licences for use of the radio frequency spectrum for public mobile
electronic communications networks:
- licence for the use of radio frequency spectrum in 900 MHz and 1800 MHz frequency bands with the validity from 1
December 2011 until 18 October 2024,
- licence for the use of radio frequency spectrum in 2100 MHz frequency band with the validity from 1 January 2010
until 18 October 2024,
- licence for the use of radio frequency spectrum in 800 MHz frequency band with the validity from 29 October 2012
until 18 October 2024,
- licence for the use of radio frequency spectrum in 800 MHz frequency band with the validity from 6 November 2013
until 18 October 2024,
- licence for the use of radio frequency spectrum in 1800 MHz frequency band with the validity from 22 December
2014 until 18 October 2024,
- licence for the use of radio frequency spectrum in 2600 MHz frequency band with the validity from 1 May 2019 until
18 October 2024, and
- licences for the use of radio frequency spectrum in 700 MHz, 3600 MHz and 26 GHz frequency bands with the
validity from 12 August 2021 until 11 August 2036.
HAKOM also issued to the Company licences for the use of radio frequency spectrum for satellite services (DTH
services) with the validity from 12 August 2020 until 11 August 2025.
In March 2020 HAKOM approved the transfer of a licence for the use of radio frequency spectrum for the provision of
the service of management of electronic communications networks for digital television multiplexes MUX C and MUX E
from the companies HT Produkcija d.o.o., Odašiljači i veze d.o.o. and HP-Hrvatska pošta d.d. to the companies HT
Produkcija d.o.o., Odašiljači i veze d.o.o. and Hrvatski Telekom d.d. By the decision of HAKOM from August 2020 the
duration of the said licence was extended until 31 December 2030.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
93 Croatian Telecom Inc.
42 Authorization for Services and Applicable Fees (continued)
c) Fees for providing electronic communications services
Pursuant to the Law on Electronic Communications, the Company is obliged to pay the fees for the use of addresses
and numbers, radio frequency spectrum and for the performance of other tasks of HAKOM pursuant to the ordinances
of HAKOM and Ministry of the sea, transport and infrastructure. The said regulations prescribe the calculation and the
amount of fees. These fees are paid for the current year or one year in advance (in case of fees for usage of radio
frequency spectrum).
In 2022, the Company paid the following fees:
- the fees for the use of addresses, numbers and radio frequency spectrum pursuant to the ordinance passed by the
Ministry of the sea, transport and infrastructure (in favour of State budget, Official Gazette No. 154/08, 28/09, 97/10,
92/12, 62/14, 147/14, 138/15, 77/16, 126/17, 55/18, 99/18, 64/19 73/20, and 141/21),
- fees for the use of assigned radiofrequency spectrum pursuant to the decisions on the selection of the preferred
bidders in the public auctions procedures of 6 November 2013 (2x5 MHz in 800 MHz frequency band) and of 12
August 2021 (spectrum in 700 MHz, 3600 MHz and 26 GHz frequency bands), and
- the fees for use of addresses, numbers, radio frequency spectrum and for the performance of other tasks of HAKOM,
pursuant to the ordinance passed by HAKOM (in favour of HAKOM’s budget, Official Gazette No. 144/20 and
143/21).
d) Audiovisual and electronic media services
Pursuant to the Law on Audiovisual Activities (Official Gazette No. 61/18), the Company is obliged to pay the fee in the
amount of 2% of the total annual gross income generated from the performing of audiovisual activities on demand for
the purpose of the implementation of the National Programme.
Also, the Company (as the operator of public communication network) is obliged to pay a fee in the amount of 0.8% of
the total annual gross income generated in previous calendar year by performing transmission and/or retransmission of
audiovisual programmes and their parts through public communication network, including internet and cable distribution
for the purpose of the implementation of the National Programme.
Pursuant to the Law on Electronic Media (Official Gazette No. 111/21), the Company is obliged to pay the fee of 0.5%
of the annual gross revenues realized from the provisioning of audiovisual media services on demand and the electronic
publication services.
e) Electronic communications infrastructure and associated facilities (ECI)
The Company, as the infrastructure operator, is obligated to pay fees to the owners and managers of the property on
which the ECI of the Company is laid either under a right of way or under a right of servitude.
Pursuant to Electronic Communications Act, the right of way fee is paid to owners and managers of the property
(Republic of Croatia, local and regional municipalities, other legal and natural persons) on which ECI of the Company
is laid. The unit RoW fees are defined in the amount prescribed by the HAKOM’s Ordinance on Right of Way Certificate
and Payment of Fees for Right of Way (further: Ordinance on RoW) in the range of 3 - 10 HRK/m2/y depending on the
property type.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
94 Croatian Telecom Inc.
42 Authorization for Services and Applicable Fees (continued)
e) Electronic communications infrastructure and associated facilities (ECI) (continued)
In accordance with the Roads Act, the fee for servitude on a public road is paid to the managers of public roads. The
unit fees are defined by the Government’s Decision on the amount of fee for the establishment of servitude and
construction rights on a public road in the amount of 4,75 HRK/m2/y for ECI laid on highways and 2,40 HRK/m2/y for
ECI laid on all other public roads.
If the property rights are not resolved on the basis of the RoW, the Company pays the fee for the right of servitude to
other owners and managers in the agreed amount.
The Company also pays a concession fee for cables laid on maritime property under the Maritime Property and Seaports
Act, a fee for forest land to Hrvatske šume for the installation of antenna poles under the Forest Act, a fee for installing
street cabinets in accordance with individual decisions of local municipalities, utility fees to local municipalities for
business buildings pursuant to the Communal Economy Act, water fee to Hrvatske vode and local municipalities for
constructed ECI pursuant to the Water Management Financing Act and administrative fees for obtaining approvals and
permits for construction and legalization of ECI.
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
95 Croatian Telecom Inc.
43 Share-based and non share-based payment transactions
Long-term incentive plans (LTI) introduced in 2019, 2020, 2021 and 2022 exist at Group level.
LTI 2018 ended on 31 December 2021 and the Supervisory Board has determined final target achievement and awarded
amount of HRK 4,006,932 which was paid to plan participants in June 2022.
The LTI (Long term incentive) plan initiated in 2022, covers the period from 1 January 2022 to 31 December 2025.
Share Matching Plan (SMP), plan for the award of bonus shares to managers, is active in 2022. The term of the 2022
SMP covers the period from 1 July 2022 to 30 June 2026. Share Matching Plan is obligatory for the President of the
Management Board and voluntary for Management Board members.
Share Matching Plan (SMP) is a long-term remuneration instrument which is mandatory to the Company`s President of
the Management Board and voluntary for Management Board members. SMP 2018 covered the period from 1 July
2018 to 30 June 2022 and relates to the non-cash benefit arising from the inflow of the matching shares, with the
corresponding personal investment in Deutsche Telekom AG shares having been made in 2016. The proportion of the
number of additional shares thus granted depends on the individual’s management level: CEO: 1:1, other Management
Board members: 1:2.
Total number of Deutsche Telekom AG shares granted in 2022 as a part of the Share Matching Plan (SMP) 2018 is
shown in the following table:
Share
Matching
Plan (SMP)
Full entitlement for the entire SMP 2018
duration
The part of the
entitlement
relating to HT*
Matching
DT AG
shares
(pieces)
Non-cash
benefit per
share
Non-cash
benefit
Non-cash
benefit
(in EUR)
(in EUR)
(in EUR)
2018
2.918
38,30
55.888
49.215
EU Game Changer Incentive Program is introduced in 2022 for members of the Management Board and wildcards i.e.
executives below the MB. EU Game Changer covers the period from 1 January 2022 to 31 December 2025 with annual
payment instalments. Actual payments are determined by the participant group, the number of years of consecutive
overperformance and the average KPI target achievement for the respective plan year.
All gains and expenses resulting from changes of the related provisions for all LTIP plans recognized for employee
services received during the year are shown in the following table:
2022
2021
HRK million
HRK million
Expenses
15
10
__________
__________
15
10
__________
__________
Notes to the financial statements (continued) DRAFT
For the year ended 31 December 2022 STRICTLY CONFIDENTIAL
96 Croatian Telecom Inc.
44 Auditor’s fees
The auditors of the Company’s financial statements have rendered services of HRK 4 million in 2022 (2021: HRK 4
million). Services rendered in 2022 and 2021 mainly relate to audits of the financial statements and audit of financial
statements prepared for regulatory purposes.
45 Subsequent events
As at 1 January 2023 Croatia joined the euro area and adopted Euro as an official currency. The fixed official exchange
rate is set at 7,53450 HRK per 1 EUR.
Croatian Telecom Inc. | Radnička cesta 21, 10000 Zagreb | +385 1 491-1000 | www.t.ht.hr, www.hrvatskitelekom.hr
Bank account: Zagrebačka banka d.d. Zagreb | IBAN: HR24 2360 0001 1013 1087 5 | SWIFT-BIC: ZABAHR2X
Supervisory Board: J. R. Talbot (Chairman)
Board of Management: Konstantinos Nempis (President), Ivan Bartulović, Matija Kovačević, Boris Drilo, Nataša Rapaić, Marijana Bačić, Siniša Đuranović
Commercial register: Commercial Court in Zagreb, MBS: 080266256 | OIB: 81793146560 | VAT identification no. HR 81793146560
Share capital: HRK 10,244,977,390.25 | Total number of shares issued: 78,775,842 shares without nominal value
CONFIDENTIAL
No.: C3-03-760756-06-01/2023
Zagreb, 14 March 2023
Pursuant to Articles 11, 25, 31 and 32 of the Articles of Association of Croatian Telecom Inc. (HT d.d.
Herald, No. 5/2022) and Articles 220, 222 and 222a of the Companies Act (Official Gazette of the Republic
of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court of RoC, 118/03,
107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22 and 18/23),
the Management Board of Croatian Telecom Inc., on 14 March 2023, passed the following
D E C I S I O N
I) The Management Board of Croatian Telecom Inc. makes the following proposal of the Decision on
utilization of profit:
”P R O P O S A L
of Decision on utilization of profit for the year 2022
1. It is determined that Hrvatski Telekom d.d. in the business year ending with 31 December 2022 realized
net profit in the amount of EUR 92.218.462,33 (HRK 694.820.004,41)
Net profit amount stated herein shall be used accordingly:
• A part of net profit in the amount of EUR 86.631.479,00 EUR (HRK 652.724.878,53) shall be paid out
as dividend to shareholders, in the amount of EUR 1,10 (HRK 8.29) per share.
• A part of net profit in the amount of EUR 5.586.982,71 (HRK 42.095.121,23) shall be allocated to
retained earnings.
• A part of net profit in the amount of EUR 0,62 (HRK 4,67) shall be used to increase the share capital
from Company’s own capital, in order to express the share capital of the Company as a whole number.
2. Dividend referred to under Item 1 hereof shall be paid out to all shareholders that are registered as
shareholders at the Central Depository & Clearing Company (SKDD) on May 15th, 2023 (record date).
Date on which security of Hrvatski Telekom d.d. will be traded without dividend payment right is May
12th, 2023 (ex date). Dividend payment claim matures on May 22th, 2023 (payment date).
3. This Decision shall enter into effect as at the day of its passing”.
II) This Proposal shall be referred for approval to Supervisory Board of Croatian Telecom Inc., for further
referral to the General Assembly of the Company as a joint proposal of Management Board and
Supervisory Board.
III) This Decision comes into force as of the day of its passing.
President of the Management Board
Konstantinos Nempis
To be delivered to:
Members of the Management Board
P7 Legal Affairs Department
F1 Controlling, Transformation and Investor Relation Sector
F2 Treasury and Accounting Sector
MB and SB Secretary
Supervisory Board
This is to certify that this Decision is
identical as the signed original thereof
Croatian Telecom Inc. | Radnička cesta 21, 10000 Zagreb | +385 1 491-1000 | www.t.ht.hr, www.hrvatskitelekom.hr
Bank account: Zagrebačka banka d.d. Zagreb | IBAN: HR24 2360 0001 1013 1087 5 | SWIFT-BIC: ZABAHR2X
Supervisory Board: J. R. Talbot (Chairman)
Board of Management: Konstantinos Nempis (President), Ivan Bartulović, Matija Kovačević, Boris Drilo, Nataša Rapaić, Marijana Bačić, Siniša
Đuranović
Commercial register: Commercial Court in Zagreb, MBS: 080266256 | OIB: 81793146560 | VAT identification no. HR 81793146560
Share capital: HRK 10,244,977,390.25 | Total number of shares issued: 78,775,842 shares without nominal value
CONFIDENTIAL
No.: C3-03-760756-05/2023
Zagreb, 14 March 2023
Pursuant to Articles 11, 13 and 31 of the Articles of Association of Croatian Telecom Inc. (HT d.d. Herald,
No. 5/2022) and Articles 300.a, 300.b, 300.c and 300.d of the Companies Act (Official Gazette of the
Republic of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court of RoC,
118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19, 34/22, 114/22 and
18/23), the Management Board of Croatian Telecom Inc., on 14 March 2023, passed the following
D E C I S I O N
1. Separate and consolidated financial statements for the year ended 31 December 2022 are determined,
the Reports by the certified auditor Ernst&Young d.o.o. Zagreb for the year ended 31 December 2022
are accepted, in the text as attached hereto, making an integral part hereof.
2. The documents referred to in item 1 hereof shall be forwarded to the Supervisory Board of Croatian
Telecom Inc. for consent and, upon the obtaining of consent, they shall be deemed determined by the
Management Board and Supervisory Board of Croatian Telecom Inc. and shall be presented to the
General Assembly.
3. All Management Board members will sign the report.
4. This Decision comes into force as of the day of its passing.
President of the Management Board
Konstantinos Nempis
To be delivered to:
Members of the Management Board
C3 Legal Affairs Department
F1 Controlling, Transformation and Investor Relation Sector
F2 Treasury and Accounting Sector
MB and SB Secretary
Supervisory Board
This is to certify that this Decision is
identical as the signed original thereof
Croatian Telecom Inc.
Radnička cesta 21, 10 000 Zagreb
Croatian Telecom Inc.
SUPERVISORY BOARD
No: NO-01-654868-06-01/2023
Zagreb, 22 March 2023
Pursuant to Articles 300.b, 300.c and 300.d of the Companies Act (Official Gazette of the
Republic of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court
of RoC, 118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19,
34/22, 114/22 and 18/23), pursuant to Articles 11, 18 and 31 of the Articles of Association of
Croatian Telecom Inc. (HT d.d. Herald, No. 5/2022 – clean text) and pursuant to Articles 4 and 7
of the By-Laws on the Work of the Supervisory Board of Croatian Telecom Inc. (HT d.d. Herald,
No. 6/2019 – clean text), the Supervisory Board of Croatian Telecom Inc., at their 1
st
session in
2023, held on 22 March 2023, passed the following
D E C I S I O N
Consent is given to the annual financial statements of the Company and Consolidated
financial statements of HT Group for the business year 2022 with the auditor's report
attached thereto in the text as enclosed to the session material.
The Management Board of the Company is hereby informed on the consent of the
Supervisory Board to the annual financial statements of the Company and to the
consolidated financial statements of HT group for the year 2022.
Therefore, the annual financial statements of the Company and consolidated financial
statements of HT Group for the business year 2022 with the auditor's report attached
thereto are adopted both by the Management Board and the Supervisory Board in the text
as enclosed to the session material.
The annual financial statements of the Company and Consolidated financial statements of
HT Group are to be forwarded to the General Assembly of the Company.
Ivica Mišetić, Ph.D.
Deputy Chairman of the Supervisory Board
This is to certify that this Decision is
identical as the signed original thereof
Croatian Telecom Inc.
Radnička cesta 21, 10 000 Zagreb
Croatian Telecom Inc.
SUPERVISORY BOARD
No: NO-01-654868-06-02/2023
Zagreb, 22 March 2023
Pursuant to Articles 220, 222 and 222a of the Companies Act (Official Gazette of the Republic
of Croatia, Nos. 111/93, 34/99, 121/99, 52/00 – Decision of the Constitutional Court of RoC,
118/03, 107/07, 146/08, 137/09, 152/11 – clean text, 111/12, 68/13, 110/15, 40/19, 34/22,
114/22 and 18/23), pursuant to Articles 18, 25, 31 and 32 of the Articles of Association of
Croatian Telecom Inc. (HT d.d. Herald, No. 5/2022 – clean text) and pursuant to Articles 4 and 7
of the By-Laws on the Work of the Supervisory Board of Croatian Telecom Inc. (HT d.d. Herald,
No. 6/2019 – clean text), the Supervisory Board of Croatian Telecom Inc., at their 1
st
session in
2023, held on 22 March 2023, passed the following
D E C I S I O N
I) Consent is given to the Management Board’s proposal on utilization of profit for the year
2022, as follows:
“P R O P O S A L
of Decision on utilization of profit for the year 2022
1. It is determined that Hrvatski Telekom d.d. in the business year ending with 31 December
2022 realized net profit in the amount of EUR 92.218.462,33 (HRK 694.820.004,41)
Net profit amount stated herein shall be used accordingly:
• A part of net profit in the amount of EUR 86.631.479,00 EUR (HRK 652.724.878,53) shall
be paid out as dividend to shareholders, in the amount of EUR 1,10 (HRK 8.29) per share.
• A part of net profit in the amount of EUR 5.586.982,71 (HRK 42.095.121,23) shall be
allocated to retained earnings.
• A part of net profit in the amount of EUR 0,62 (HRK 4,67) shall be used to increase the
share capital from Company’s own capital, in order to express the share capital of the
Company as a whole number.
2. Dividend referred to under Item 1 hereof shall be paid out to all shareholders that are
registered as shareholders at the Central Depository & Clearing Company (SKDD) on May
15th, 2023 (record date). Date on which security of Hrvatski Telekom d.d. will be traded
without dividend payment right is May 12th, 2023 (ex date). Dividend payment claim
matures on May 22th, 2023 (payment date).
3. This Decision shall enter into effect as at the day of its passing”.
II) The Proposal referred to under item I) hereof shall be referred for adoption to the General
Assembly of the Company as a joint proposal of Management Board and Supervisory Board.
III) This Decision comes into force as of the day of its passing.
Ivica Mišetić, Ph.D.
Deputy Chairman of the Supervisory Board
This is to certify that this Decision is
identical as the signed original thereof