3
CONTENT
INTRODUCTION
CORPORATE PROFILE
INVESTOR INFORMATION
MANAGEMENT BOARD
SUPERVISORY BOARD
CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT
ECONOMIC ENVIRONMENT, MARKET AND REGULATORY OVERVIEW
ECONOMIC BACKGROUND
CROATIAN MARKET OVERVIEW
REGULATORY OVERVIEW
CHANGES IN REPORTING
BUSINESS REVIEW
SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
HT GROUP HIGHLIGHTS
FINANCIALS DEVELOPMENT OF HT GROUP AND THE COMPANY
CORPORATE SOCIAL RESPONSIBILITY
CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
INDEPENDENT AUDITOR’S REPORT
RESPONSIBILITY FOR THE CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
CONSOLIDATED AND SEPARATE STATEMENT OF COMPREHENSIVE INCOME
CONSOLIDATED AND SEPARATE STATEMENT OF FINANCIAL POSITION
CONSOLIDATED AND SEPARATE STATEMENT OF CASH FLOWS
CONSOLIDATED AND SEPARATE STATEMENT OF CHANGES IN EQUITY
NOTES TO CONSOLIDATED AND SEPARATE FINANCIAL STATEMENTS
Corporate profile
Investor information
Management board
Supervisory board
Corporate Governance Code
Compliance Statement
INTRODUCTION
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
telecommunications services in Croatia, offering fixed and mo-
bile telephony services, as well as wholesale, Internet and data
services. The Company has no branches.
Hrvatski Telekom d.d. (HT d.d. or the Company), including its
subsidiary companies, is the leading provider of comprehen-
sive information and communication solutions and services at
the whole territory of the Republic of Croatia. A wide spectrum
of fixed broadband network products and services is provided,
mobile communications, internet, IPTV, IoT services and data
transfer services between devices (M2M). HT Group also pro-
vides integrated Information and Communication Technology
solutions (ICT) for business and corporate customers and data
transfer services (leased lines, Metro-Ethernet, IP/MPLS).
R&D spending covers pre-production research and develop-
ment for new products, processes, and services. However, it
doesn't include the costs of developing system and user soft-
ware for productivity improvements in our business operations.
HT Group possesses various technological competencies and
provides a wide range of ICT solutions, including infrastructure
and data centres, a broad spectrum of network security ser-
vices, as well as solutions for IoT and smart cities. The newest
partnership between HT Group (HT) and Ericsson Nikola Tesla
(ENT) on exclusive supply of HT’s mobile network's radio access
part (RAN) aims to improve Internet access and mobile applica-
tions' quality for users by implementing Ericsson's cutting-edge
5G technology, paving the way for advanced digital solutions like
augmented reality and robotics. Also, HT Group and the Faculty
of Mechanical Engineering and Naval Architecture (FSB) collab-
orate on implementing a private 5G Campus network and Smart
Factories in the FSB laboratory. The project is inspired by Deut-
sche Telekom's initiatives across Europe for the development
and testing of new communication technologies.
History and Incorporation
Hrvatski Telekom d.d. is a joint stock company, majorly 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 Telecommu-
nications 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 trans-
ferred into two new joint stock companies, HT – Hrvatske teleko-
munikacije d.d. (HT d.d.) and HP – Hrvatska pošta d.d. (HP d.d.).
The Company 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), and on 25 Oc-
tober 2001, DTAG purchased further 16% of shares in HT d.d. and
thus became the majority shareholder with a 51% stake.
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 pro-
vides wholesale, Internet and data services; and the mobile op-
erations 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 Inter-
net 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 in-
cluded in the IPO, 25% were sold to Croatian retail investors,
while 7.5% were acquired by Croatian and international institu-
tional 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 Resi-
dential 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. The Combis Group
consists of Combis and its subsidiaries, Combis d.o.o., Sarajevo
and Combis – IT usluge d.o.o., Belgrade.
CORPORATE PROFILE
INTRODUCTION CORPORATE PROFILE
In December 2010, according to the records stored in the Cen-
tral Depository & Clearing Company, the Republic of Croatia
transferred 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 Restruc-
turing and Sale Center (Centar za restrukturiranje i prodaju –
CERP). The Republic of Croatia established CERP in July 2013
as legal successor to the Government Asset Management Agen-
cy. As a result, the Republic of Croatia again holds a stake in HT
d.d. In December 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 zaštitu tržišnog natjecanja - AZTN), has determined a set
of measures defining the rules of conduct for HT in regards to
management and control over Optima. The duration of the con-
centration of HT and Optima shall be limited to a period of four
years, starting 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 increas-
ing the share capital by a total amount of EUR 386,237.97. After
the registration of this change in the Court Registry in 2015, the
ownership 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 re-
quest 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 concentration 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 exchange 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
EUR 7,812,669.72, 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,
controlling 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
Purchase Agreement with Magyar Telekom, Nyrt, based in Buda-
pest, Hungary. Under the agreement, Hrvatski Telekom acquires
Magyar Telekom’s 76.53% stake in Crnogorski Telekom A.D.,
based in Podgorica, Montenegro, at a purchase price of EUR
123.5 million. Crnogorski Telekom is the largest telecommunica-
tions company in Montenegro and provides a full range of fixed
and mobile telecommunications services.
On 1 March 2018 HT d.d. concluded respective Agreements on
transfer of HT’s interest and shares in its subsidiaries and relat-
ed companies seated in Croatia, Iskon Internet d.d., OT-Optima
Telekom d.d., Combis, usluge integracija informatičkih teh-
nologija, 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 regu-
latory 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 customers 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 pres-
ent 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
8 9
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 United
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 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 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 relationships of the merged company.
In June 2023, Agreement on transfer of shares held by HT hold-
ing d.o.o. in Iskon Internet d.d. (Iskon) was concluded, between
HT holding d.o.o. as the transferor company and HT as the trans-
feree company.
HT and Iskon concluded on 8 November 2023 the Agreement
on merger of Iskon into HT. On 2 January 2024 the merger has
been entered into the Court Register of the Commercial Court in
Zagreb, by which the merged company Iskon seized to exist and
the acquiring company, HT, became the universal legal succes-
sor of the merged company, thus entering into all legal relation-
ships of the merged company. Iskon products and services shall
continue to be provided as a separate brand within HT.
On 1 January 2024, the technological unit Ericsson Nikola Tes-
la Servisi d.o.o. (ENTS) for construction and maintenance of the
Croatian Telecom network, which was initially outsourced to
ENTS in September 2014, became part of the HT Group. The now
former technological unit of ENTS has been transferred togeth-
er with the employees to HT Servisi d.o.o. (daughter company
fully owned by Croatian Telecom which was established on 15
November 2023), based on the Agreement on the transfer of a
part of the economic activity concluded with ENTS.
INVESTOR INFORMATION
Fueled by a strong economy, improved corporate earnings, and
anticipated pause in the Federal Reserve's interest rate hikes, the
primary stock indices exhibited robust growth throughout 2023.
In the same period, the CROBEX experienced a notable upswing,
recording a substantial increase of 28.0%. However, the European
telecom sector continued to face challenges. It grappled with in-
creased capital expenditures for essential fiber investments and
the implementation of 5G technology, alongside regulatory un-
certainties, and broader concerns regarding growth prospects.
Despite the headwinds, HT shares demonstrated a solid perfor-
mance throughout 2023. While HT growth lagged behind the
CROBEX, it notably exceeded the telecommunications index
STOXX® Europe 600. By the year’s end, the share price reached
EUR 27.30, demonstrating resilience and underlying potential.
With turnover of EUR 30.4 million, HT was one of the most trad-
ed shares on the Zagreb Stock Exchange in terms of value (2022:
EUR 53.2 million).
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 prospec-
tus 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 (in-
cluding but not limited to the Company’s business prospects,
cash requirements, financial performance, and other factors
including tax and regulatory considerations, payment practices
of other European telecommunications operators and general
economic climate).
INTRODUCTION INVESTOR INFORMATIONINTRODUCTION CORPORATE PROFILE
HT Share as compared to CROBEX and STOXX® Europe 600
Telecommunications Index, 31 December 2022 - 31 December 2023
Share price performance
135
125
115
105
95
85
75
Dec 22 Jan 23 Feb 23 Mar 23 Apr 23 May 23 Jun 23 Jul 23 Aug 23 Sep 23 Oct 23 Nov 23 Dec 23
Crobex STOXX® Europe 600 Telecommunications
HT Share
%
10 11
INTRODUCTION INVESTOR INFORMATIONINTRODUCTION INVESTOR INFORMATION
Dividend for the 2022 financial year
On 10 May 2023, the General Assembly of the Company ap-
proved a dividend payment to shareholders of EUR 1.10 per
share. EUR 1.10 per share was paid out of the year-end profit of
2022, in the amount of EUR 86,631,479.00.
In total, EUR 1.10 represents a dividend payout ratio of 93.9% from
the Company’s net profit. The dividend was paid in May 2023.
At the end of 2023, this represented a dividend yield of 4.0% on
HT’s closing price of EUR 27.30.
Dividend proposal for financial year 2023
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 Compa-
ny’s distributable profits depending on its overall financial posi-
tion and working capital needs.
To comply with that commitment, in March 2023, HT announced
that it expected to pay out a minimum dividend of EUR 0.8 per
share out of 2023 net profit.
The Management Board and Supervisory Board of Hrvatski Tele-
kom d.d. propose to this year’s General Assembly the distribu-
tion of the net profit from 2023 in a way that a part of net profit in
the amount of EUR 119,340,000.00 shall be paid out as dividend
to shareholders, in the amount of EUR 1.53 per share, and the
remainder of net profit in the amount of EUR 5,821,197.98 shall
be allocated to retained earnings.
The General Assembly is planned to be convoked for 8 May 2024.
In line with the proposal, aforementioned dividend is planned to
be paid out on 20 May 2024 to all shareholders who are entered
in the depository of the Central Depositary & Clearing Compa-
ny (SKDD) on 13 May 2024 (record date). The date on which the
securities of Croatian Telecom Inc. would be traded without the
dividend payment right is 10 May 2024 (ex-date).
Dividend proposal for financial year 2024
Management Board currently expects a minimum dividend of EUR
0.80 per share for the year 2024.
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 ac-
quired within this Programme is 3,000,000, while the maximum
amount allocated to the Programme is EUR 79,633,685.05.
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.
During 2023 the Company acquired at Zagreb Stock Exchange
in total 808,252 Company shares, representing 1.03% of the
Company’s issued share capital. For this acquisition in 2023, the
Company paid out an equivalent value of EUR 21,190,432.43.
The total number of Company shares held on 31 December
2023, amounted to 811,054, in book value of EUR 21,226,327.66,
representing 1.03% of the Company’s issued share capital.
In December 2023 the Management Board withdrew 775,842
Company shares, thereby the total number of shares has de-
creased to 78,000,000 shares.
Shareholder Structure as at 31 December 2023
Deutsche Telekom Europe B.V. 53.0%
War Veterans’ Fund 6.9%
Restructuring and Sale Center (CERP)/
Republic of Croatia
2.7%
Private and other institutional investors 37.4%
Total number of shares issued: 78,775,842
Shareholder Structure as at 2 January 2024
Deutsche Telekom Europe B.V. 53.5%
War Veterans’ Fund 7.0%
Restructuring and Sale Center (CERP)/
Republic of Croatia
2.7%
Private and other institutional investors 36.8%
Total number of shares issued: 78,000,000
Deutsche Telekom Europe B.V., majority shareholder in HT is ulti-
mately owned by Deutsche Telekom AG.
Raiffeisen Pension Funds are investors with the largest share-
holding among private and institutional investors, holding 11.2%
of shares of the Company.
Financial Calendar
Date
Release of fourth quarter and full year
2023 un-audited results
February 23, 2024
Release of full year 2023 audited
results Proposal on Utilization of Profit
March 20, 2024
Release of first quarter 2024 results April 29, 2024
The General Assembly of the Company May 08, 2024
Release of six months 2024 results July 26, 2024
Release of nine months 2024 results October 31, 2024
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
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.
Konstantinos Nempis submitted his resignation at the Supervi-
sory Board session held on 14 December 2023, and effectively
1 July 2024 will conclude his mandate as the President of the
Management Board of Hrvatski Telekom, as he is taking over
the role of Chairman and CEO of the Management Board of OTE
Group in Greece.
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 Hrvatski
Telekom and Deutsche Telecom Group, gaining extensive interna-
tional experience. He was responsible for financial and business
steering in Deutsche Telekom's subsidiaries in South-East Europe
and lead a range of transformation and operating model change
projects, as well as controlling of European Head Office unit at
Deutsche Telekom. He is also a Member of the Board of Directors
of Crnogorski Telekom.
INTRODUCTION MANAGEMENT BOARDINTRODUCTION 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 working with key business customers of the Com-
pany, as well as in developing Hrvatski Telekom’s innovative prod-
ucts 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.
By Supervisory Board Decision as of 14 December 2023 Nataša
Rapaić was appointed President of the Management Board (CEO)
of Croatian Telecom effective 1 July 2024.
14 15
INTRODUCTION MANAGEMENT BOARDINTRODUCTION 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 employ-
er satisfaction and engagement reaching all-time highs.
Before joining Hrvatski Telekom he held senior management posi-
tions with Intesa Sanpaolo Bank, CEMEX Group and A1 Group, and
in case of the latter two was responsible for strategic HR opera-
tions on a multi-country level.
He is a Management Council member of Croatian Business Coun-
cil for Sustainable Development.
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, implementation and operation of
technological platforms of Hrvatski Telekom, including mobile and
fixed networks and IT and business systems.
He previously held the position of HT’s Sector Director for manag-
ing architecture, strategy and investments within technical func-
tions of Hrvatski Telekom, 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.
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, mergers and
acquisitions (M&A) and sustainability governance (ESG), legal
and regulatory affairs, wholesale, electronic communications in-
frastructure, business transformation and T-Portal and media and
digital services.
During his career with Croatian Telecom, which started in 2000, he
has led regulatory and legal functions as well as strategic Croatian
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.
He graduated from the Faculty of Law in Zagreb and completed
the MBA program at IEDC Bled Business School of Management.
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) 2023 for the
managers, HT shares were transferred to Management Board
Members, as follows:
• President of the Management Board (CEO), Mr. Konstantinos
Nempis, acquired 1,716 shares
• Member of the Management Board and Chief Operating
Officer Residential (COO Residential), Mrs. Nataša Rapaić,
acquired 779 shares
• Member of the Management Board and Chief Technical
and Information Officer (CTIO), Mr. Boris Drilo, acquired 312
shares
• Member of the Management Board and Chief Human
Resources Officer (CHRO), Mr. Ivan Bartulović, acquired 522
shares
• Member of the Management Board and Chief Financial
Officer (CFO), Mr. Matija Kovačević, acquired 352 shares
• Member of the Management Board and Chief Operating
Officer Business (COO Business), Mrs. Marijana Bačić,
acquired 195 shares
• Member of the Management Board and Chief Corporate
Affairs Officer (CCO), Mr. Siniša Đuranović, acquired 504
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 2023
Konstantinos Nempis, President of the Management Board and
CEO, was paid in 2023 a fixed and variable salary and Long-
term Incentive Plan (LTIP 2019) and EU Game Changer in gross
amount of EUR 893,036. Fringe benefits amounted gross to EUR
164,238.
Nataša Rapaić, Member of the Management Board and COO
Residential, was paid in 2023 a fixed and variable salary and
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
10 May 2023. As of 2020, the Company once a year submits to
the General Assembly the Report on remuneration 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 together with the
Invitation to the General Assembly) are available at the Compa-
ny web pages at the following link https://www.t.ht.hr/en/inves-
tor-relations/report-of-remuneration for a period of ten years as
of their adoption. Therefore, a brief overview of Remuneration
Policies and payments made to Management Board and Super-
visory Board Members in 2023 is given within the Annual 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 compen-
sation elements, Long-Term Incentive (LTI), EU Game Changer
Incentive Program, and Share Matching Plan (SMP) that can
be awarded on top of the target salary as a voluntary long term
compensation instrument allowing participation only if targets
from the Short-Term incentive Plan are achieved at the level of
minimum 100%. The mandatory prerequisite for participation 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 bene-
fits: company car, accommodation cost, pension fund, scholar-
ship for children, other non-cash benefits and services, depend-
ing on individual circumstances of the person in question.
Long Term Incentive Plans for management
Long-term incentive plans (LTI) introduced in 2020, 2021, 2022
and 2023 exist at Group level.
LTI 2019 ended on 31 December 2022 and the Supervisory Board
has determined final target achievement and awarded amount of
EUR 796,437 which was paid to plan participants in June 2023.
The LTI (Long term incentive) plan initiated in 2023, covers the
period from 1 January 2023 to 31 December 2026.
Share Matching Plan (SMP), plan for the award of bonus shares
to managers, is active in 2023. The term of the 2023 SMP covers
the period from 1 July 2023 to 30 June 2027. Share Matching
Plan is obligatory for the President of the Management Board
and voluntary for Management Board members.
INTRODUCTION MANAGEMENT BOARD
Long-term Incentive Plan (LTIP 2019) and EU Game Changer in
gross amount of EUR 521,901. Fringe benefits amounted gross
to EUR 5,267.
Ivan Bartulović, Member of the Management Board and CHRO,
was paid in 2023 a fixed and variable salary and Long-term In-
centive Plan (LTIP 2019) and EU Game Changer in gross amount
of EUR 367,570. Fringe benefits amounted gross to EUR 7,082.
Boris Drilo, Member of the Management Board and CTIO was
paid in 2023 a fixed and variable salary and Long-term Incentive
Plan (LTIP 2019) and EU Game Changer in gross amount of EUR
436,393. Fringe benefits amounted gross to EUR 7,289.
Matija Kovačević, Member of the Management Board and CFO
as of 1 August 2022, was paid in 2023 a fixed and variable salary
in gross amount of EUR 192,475. Fringe benefits amounted gross
to EUR 8,391.
Marijana Bačić, Member of the Management Board and COO
Business as of 1 September 2022, was paid in 2023 a fixed and
variable salary in gross amount of EUR 171,986. Fringe benefits
amounted gross to EUR 8,739.
Siniša Đuranović, Management Board Member and Chief Corpo-
rate Affairs Officer (CCO) as of 8 December 2022, was paid in
2023 a fixed and variable salary in gross amount of EUR 152,497.
Fringe benefits amounted gross to EUR 8,461.
Daniel Darius Denis Daub, Member of the Management Board
and CFO until 31 July 2022, was paid in 2023 variable salary and
Long-term Incentive Plan (LTIP 2019) and EU Game Changer in
gross amount of EUR 165,296. Fringe benefits amounted gross
to EUR 72,908.
Saša Kramar, Member of the Management Board and COO Busi-
ness until 1 January 2020, was paid in 2023 Long-term Incentive
Plan (LTIP 2019) award in gross amount of EUR 22,249. With this
payment, all obligations towards Saša Kramar based on mem-
bership in the Management Board of the Company, have been
fulfilled.
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 at 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 em-
ployees of the Company paid in the preceding month. A member
of the Supervisory Board, who is also a member of one board or
committee of the Supervisory Board, receives a remuneration
in the amount of 1.25 of the average monthly net salary of the
Company's employees paid in the previous month. A member of
the Supervisory Board who is simultaneously a member of two or
more committees of the Supervisory Board receives a remuner-
ation in the amount of 1.5 of the average net salary of the Com-
pany's employees paid in the previous month. DT AG representa-
tives do not receive any remuneration for the membership in the
Supervisory Board due to a respective policy of DT AG.
Jonathan Richard Talbot Chairman
Until 30 October 2023 (chairman of the Related Parties
Transactions Committee and chairman of the Compensation and
Nomination Committee)
Elvira Gonzalez Sevilla Chairwoman
Member from 10 May 2023
Chairwoman from 31 October 2023 (chairwoman 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)
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 2023 is as follows:
The period of 2023 in which the
remuneration was paid
From To Gross 1 (in EUR)
Vesna Mamić Member 1 January 31 December 21,941
Dolly Predovic Member 1 January 31 December 31,431
Ivica Mišetić Deputy Chairman 1 January 31 December 32,912
Gordan Gledec Member 1 January 31 December 21,941
Total 108,225
20 21
CORPORATE GOVERNANCE CODE
COMPLIANCE STATEMENT
Croatian Telekom Inc. (hereinafter referred to as “HT” or “the
Company”), 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, 114/22, 18/23 and 130/23),
issues the Corporate Governance Code Compliance Statement.
In the year 2023, 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 le-
gal framework. These exceptions are as follows:
• The Management Board adopted the following acts and duly
informed the Supervisory Board thereon but has not request-
ed 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
foreseen. Within its activities of supervising the managing
of business affairs of the Company, the Supervisory Board
takes notice of the general matters falling to the managing
of business affairs and issues its “Declaration of review”. The
Company monitors the changes to the legal framework and
plans to consider the determination of future decision mak-
ing in accordance with the changes to the applicable legal
framework.
• 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 2023. 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. For other memberships the approval by the
Supervisory Board is necessary.
• 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 150 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 Su-
pervisory Board and the supervision of the implementation of
such decisions in relation to the controlling, reporting and audit
activities within HT d.d. and the HT Group. The Audit Commit-
tee oversees 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 Committee 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 in-
dependent audit and control function on behalf of the Manage-
ment 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 de-
fines the framework and the main principles necessary for the
work of the internal audit function in HT d.d. 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 In-
ternal Audit Charter are evaluating whether:
• Risks relating to the achievement of HT d.d. and HT Group’s
strategic objectives are appropriately identified and managed,
• The actions of HT d.d. and HT Group’s officers, directors,
employees and contractors are in compliance with HT d.d.
and HT Group’s policies, procedures, and applicable laws,
regulations and governance standards,
• The results of operations or programs are consistent with
established 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 d.d. and HT Group,
• The information and the means used to identify, measure,
analyse, classify and report such information are reliable
and have integrity,
• The resources and assets are acquired economically, used
efficiently and protected adequately.
Financial risk management objectives and
policies
The Group is exposed to international service-based markets.
As a result, the Group can be affected by changes in foreign
exchange rates. The Group also extends credit terms to its cus-
tomers and is exposed to a risk of default. The significant risks,
together with the methods used to manage these risks, are
described in detail in the Notes to the consolidated financial
statements (Note 41 Financial risk management objectives and
policies).
SIGNIFICANT COMPANY SHAREHOLDERS
On the day of issuing of this Statement, significant Company
shareholders are as follows:
• Deutsche Telekom Europe B.V. is the majority shareholder
with a 53.5 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 Hold-
ing 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 7.0 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
2.7 per cent of shares of the Company.
• The remaining 36.8 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, holding
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 6,409 shares in total; Mrs. Nataša
Rapaić, Management Board Member of Croatian Telecom Inc.,
owns 2,337 shares in total; Mr. Boris Drilo, Management Board
Member of Croatian Telecom Inc., owns 1,242 shares in total;
Mr. Ivan Bartulović, Management Board Member of Croatian
Telecom Inc., owns 1,257 shares in total; Mr. Matija Kovačević,
Management Board Member of Croatian Telecom Inc., owns 637
shares in total; Mrs. Marijana Bačić, Management Board Mem-
ber of Croatian Telecom Inc., owns 615 shares in total; Mr. Siniša
Đuranović, Management Board Member of Croatian Telecom
Inc., owns 1,234 shares in total and Professor Gordan Gledec,
Ph.D., Supervisory Board Member of Croatian Telecom Inc., owns
63 shares in total.
INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT
22 23
APPOINTMENT OF THE MANAGEMENT
BOARD, THEIR FUNCTIONS AND
AMENDMENTS TO THE ARTICLES OF
ASSOCIATION
Members and President of the Management Board are appoint-
ed and removed by the Supervisory Board. Their term of office is
up to five years, with the possibility of re-appointment. The Man-
agement 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 Member and Chief Financial Officer (CFO); MB Member
and Chief Operating 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
business units, Business and Residential.
The Management Board needs a prior approval from the Super-
visory 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 mat-
ters 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 EUR 79,633,685.05.
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 2023 the Company transferred 12,770 Company`s shares
to managers below Management Board level, within the Compa-
ny`s Share Award Plan (PDD) for the managers. Within the said
Plan, 4,380 Company`s shares were transferred to Members of
the Management Board of the Company in May 2023.
During 2023 the Company acquired at Zagreb Stock Exchange
in total 808,252 Company shares, representing 1.03% of the
Company’s issued share capital. For this acquisition of Compa-
ny shares in 2023, the Company paid out an equivalent value of
EUR 21,190,432.43. The total number of Company shares held
on 31 December 2023, amounted to 811,054, in book value of
EUR 21,226,327.66, representing 1.03% of the Company’s issued
share capital.
In December 2023 the Management Board withdrew 775,842
Company shares without nominal value, without the share capi-
tal of the Company being decreased, and the information on the
new number of shares has been aligned in the Articles of Asso-
ciation of the Company. Thereby the total number of shares has
decreased from 78,775,842 shares to 78,000,000 shares with-
out nominal value, while the remaining shares’ participation in
the share capital is being increased. The change of total number
of shares of the Company has been entered into the register of
the Commercial Court in Zagreb on 2 January 2024.
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 Compa-
ny's employees. The Supervisory Board is responsible for the
appointment and removal of Management Board members as
well as for supervising the management of the Company's busi-
ness affairs. Certain major transactions and the assumption of
long-term indebtedness 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
Assembly Decisions, together with voting results, are published
at the Company web pages.
INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT INTRODUCTION CORPORATE GOVERNANCE CODE COMPLIANCE STATEMENT
ECONOMIC
ENVIRONMENT,
MARKET AND
REGULATORY
OVERVIEW
Economic background
Croatian market overview
Regulatory overview
Changes in reporting
26 27
In 2023 competitive landscape was highly intense, with promo-
tional campaigns in mobile, fixed and convergent tariffs. Despite
this, Hrvatski Telekom maintained its market leadership position.
In Q1 2023, the Croatian Regulatory Authority for Network In-
dustries (HAKOM) conducted national and regional multi-band
spectrum auctions. The national licenses offering spectrum
in the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600
MHz bands were won by Hrvatski Telekom (HT), A1 Croatia and
Telemach Croatia. HT ensured the largest spectrum share and
invested EUR 135.5 million in further mobile network develop-
ment.
January 2023 saw introduction of an Indexation clause with-
in General Terms and Conditions by operators, allowing price
adjustment in line with the average yearly inflation rate. In Q3
2023, competitors activated the Indexation clause with increase
of the prices of tariffs, bundles and options. HT Group activated
the Indexation clause from 1 October 2023.
At the end of July 2023, HAKOM approved deregulation of fiber
broadband services in 72 markets across Croatia. This decision is
based on the assessment that there is significant competition in
these markets, particularly in relation to Hrvatski Telekom and its
subsidiary Iskon, who will no longer be subject to price regula-
tions. Deregulation of fiber broadband services came into force
at the end of November 2023.
CROATIAN MARKET OVERVIEW
ECONOMIC ENVIRONMENT CROATIAN MARKET OVERVIEW
Throughout the year, all operators continued to invest in 5G net-
work and fiber rollout, alongside migration of customers to fiber
technology. According to HAKOM, there were 1.098 thousand
fixed broadband connections at the end of September 2023, a
2.6% more than at the end of September 2022. The migration
of customers to fiber technology continued, primarily those who
had previously used copper-pair internet access. The number of
fixed broadband connections on fiber network increased by 33%
on yearly basis at the end of September 2023. Broadband traffic
increased by 27.5% YoY in the first nine months of 2023.
Wholesale
The number of broadband wholesale customers on copper and
fiber (BSA/Naked BSA/FTTH) increased by 0.9% compared to
December 2022. Share of fiber broadband wholesale access
is growing and currently is 11% (compared to 4% at the end of
2022). Wholesale broadband services development is driven by
churn of copper-based services and demand for the fiber-based
services.
Based on HAKOM’s decision from 22 November 2022, new (low-
er) WACC value was defined, which led to average decrease of
HT infrastructure wholesale prices from 1 January 2023. Also,
regulated mobile termination rate (MTR) further decreased from
1 January 2023 because of EU Commission Delegated Act.
In 2023, Croatia’s GDP increased by 2.8% YoY, supported by
strong growth of private consumption amid rising salaries and
public investments boosted by the EU funds. Croatian economic
growth in 2023 is the second highest in the eurozone (that has
average growth of 0.5% YoY). GDP is expected to rise to 3% YoY
in 2024, fuelled by stronger growth of personal consumption
(due to increased salaries) and higher public investments lever-
aging EU funds. There are negative risks due to worsening global
geopolitical situation.
The average annual inflation in Croatia decelerated to 8.0% in
2023, down from 10.8% in 2022. Key drivers were higher pric-
es for food, beverages, and tobacco (11.6%), services (7.7%) and
non-food industrial products (7.6%). In 2023, growth of energy
prices experienced a notable slowdown (2.3%) compared with
the average increase in 2022 (17.4%). The Government intro-
duced in Autumn 2023 latest package of measures to combat
rising prices, worth EUR 0.5bn, effective till April 2024. The
package consists of fixed electricity prices for citizens, SME and
institutions, capped prices for 30 products in retail stores and
financial aid for the most vulnerable citizens. Deceleration of in-
flationary pressures is expected to continue in 2024.
Following Croatia’s entry into the Schengen area and the adop-
tion of the euro, the country's tourist season set new records in
2023. Tourist activity outperformed the in 2022 figures: 20.6
million travellers generated 108 million overnight stays in Cro-
atia, which was 9% and 3% respectively more than in 2022 and
nearly reaching pre-pandemic levels of 2019. According to the
Croatian National Bank, revenue from foreign travellers in the
first nine months of 2023 reached EUR 13 billion, a 11.4% in-
crease from the same period last year. However, considering
worsening global geopolitical and macroeconomic situation, the
tourist 2024 season will be challenging.
On the labour market, unemployment rate continued to decline
with increasing employment and salaries. Total number of em-
ployed individuals increased in 2023 by 1.2% on yearly basis,
especially among foreign workers (with app. 9% share in total
employed workers in Croatia). Average unemployment rate in
2023 was 6.2%, a 0.5 p.p. decrease from 2022. Slower decrease
of unemployment rate is expected in 2024, partly influenced by
growing employment of foreign workers.
In September 2023, Standard & Poor’s credit rating agency con-
firmed Croatia’s credit rating of BBB+ and upgraded the outlook
from stable to positive. In October 2023, the Fitch agency also
revised Croatia's outlook to positive and affirmed the credit rat-
ing at BBB+. In November 2023, the agency Moody's improved
the outlook on Croatia from stable to positive, affirming its long-
term issuer and senior unsecured ratings at Baa2.
ECONOMIC ENVIRONMENT ECONOMIC BACKGROUND
ECONOMIC BACKGROUND
28 29
Final decisions on market analysis of
wholesale market for central access provided
at a fixed location for mass market products
(Bitstream) and wholesale market for
local access provided at a fixed location
(Unbundled local loop) adopted by HAKOM
On 27 July 2023 HAKOM adopted final decisions on market
analysis of the wholesale market for central access provided at
a fixed location for mass market products and wholesale market
for local access provided at a fixed location thereby deregulating
HT’s fiber in 72 geographic units (local municipalities and Zagreb
city quarters) which are deemed by HAKOM as competitive.
Final decisions introduce geographic and service segmentation
of the wholesale market for central access provided at a fixed lo-
cation for mass market products and wholesale market for local
access provided at a fixed location:
• Both markets are segmented to Low-Capacity market (in-
cludes services offered via copper, hybrid, mobile at the
fixed location, and wi-fi networks) and High-Capacity mar-
ket (includes services offered via fiber and cable networks).
• Low-capacity market was not geographically segmented
but defined as a national market (HT would remain regulat-
ed as the operator with significant market power, with the
same set of regulatory remedies as today). High-capacity
market is further geographically segmented into two sub-
markets based on the level of competitiveness, i.e.:
• Competitive areas (full deregulation of HT, above men-
tioned 72 geo-units)
• Non-competitive areas (HT remains regulated)
New round of analysis of wholesale call
termination markets
On 29 June 2023 HAKOM passed decisions in the process of the
analysis of the following relevant electronic communications
markets:
• Wholesale call termination on individual public telephone
networks provided at a fixed location,
• Wholesale voice call termination on individual mobile net-
works.
Based on the conducted three-criteria tests, HAKOM deter-
mined that the mentioned markets are no longer susceptible to
ex ante regulation, and consequently the regulatory obligations
previously prescribed to HT in these markets were abolished.
Regardless of the relevant wholesale call termination markets
analysis, the maximum wholesale mobile and fixed call termina-
tion rates remain prescribed by the European Commission Dele-
gated Regulation (EU) 2021/654.
Maximum mobile termination rate in EU is 0.2 eurocents per
minute and will be achieved gradually by 2024, facilitated by a
glide path. In 2024, all EU operators should apply the same sin-
gle maximum rate (0.2 eurocents per minute).
Applicable mobile termination rates in Croatia:
• 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 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 rates 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 stan-
dards as in the EU.
Ordinance on conditions for access to, collo-
cation and joint use of electronic communi-
cations infrastructure and other associated
equipment.
On 15 June 2023 HAKOM adopted new Ordinance on conditions
for access to, collocation and joint use of electronic commu-
nications infrastructure and other associated equipment. The
new Ordinance abolishes the obligation of the owner of ducts
to refund other operators for the costs of deployment of their
sub-pipes.
Spectrum assignment
Upon completion of the bidding procedure, which began on 16
January 2023, the public auction procedure for assignment of
licenses for using radiofrequency spectrum in 800 MHz, 900
MHz, 1800 MHz, 2100 MHz and 2600 MHz frequency bands was
completed on 8 March 2023 by the decision of HAKOM on the
selection of most favorable bidders.
HT participated in the bidding procedure for 800 MHz, 900
MHz, 1800 MHz, 2100 MHz and 2600 MHz frequency bands at
the national level, and after the public auction, HT was awarded
2x10 MHz in 800 MHz frequency band, 2x15 MHz in 900 MHz
frequency band, 2x30 MHz in 1800 MHz frequency band, 2x25
MHz in 2100 MHz frequency band and 2x25 MHz in 2600 MHz
frequency band. Consequently, from the total offered amount of
radio frequency spectrum of 2x270 MHz, HT was awarded 2x105
MHz with which HT maintained its market leading position in
terms of spectrum shares for mobile networks.
Total amount achieved in the bidding procedure for the said
frequency blocks amounts to EUR 135,314,598.50. In addition
REGULATORY OVERVIEW
ECONOMIC ENVIRONMENT REGULATORY OVERVIEW ECONOMIC ENVIRONMENT REGULATORY OVERVIEW
to the fee achieved in the public auction, for using the assigned
radio frequency spectrum, a fee determined by the By-law on
the payment of fees for carrying out of tasks of the Croatian Reg-
ulatory Authority for Network Industries is also applied.
Licenses for the use of the radio frequency spectrum are being
assigned for the period of 15 years (renewable for another 5
years), validity starting from 19 October 2024.
HT continues to use the previously assigned 2x95 MHz in the
above mentioned frequency bands until the new licenses for the
use of the radio frequency spectrum begin to be valid.
Annual fees
In December 2022 HAKOM and the Ministry of the Sea, Trans-
port and Infrastructure (MMPI) passed new ordinances prescrib-
ing the amounts of annual fees:
• Ordinance on the payment of fees for carrying out of tasks
of the Croatian Regulatory Authority for Network Industries
(Official Gazette, No. 154/22; HAKOM),
• Ordinance on the payment of fees for right to use of ad-
dresses, numbers and radio frequency spectrum (Official
Gazette, No. 151/22; MMPI).
As a result of the new HAKOM ordinance from 1 January 2023
the annual fee for the use of radiofrequency spectrum for the
public electronic communications network was increased (58%
fee increase for frequencies below 3800 MHz, and 20% fee in-
crease for frequencies above 3800 MHz) as well as the fee for
performing other tasks of HAKOM (125%).
In March 2023 MMPI passed amendments of the Ordinance on
payment of fees for right to use of addresses, numbers and ra-
dio frequency spectrum (Official Gazette, No. 37/23), based on
which the following annual fees are reduced:
• annual fee for the use of radiofrequency spectrum for
public electronic communications networks has been de-
creased by 50%,
• annual fee for the use of addresses and numbers has been
decreased by 30%.
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 512 kbit/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, start-
ing 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, was updated as from 1 January 2023, to
include new USO speed of 7 Mbit/s download and 1 Mbit/s up-
load.
In June 2023 HAKOM adopted amendments to the Ordinance on
universal services in electronic communications, however, with-
out significant impact on HT. These latest amendments were pri-
marily adopted with aim to ensure consistence of the Ordinance
with the new Telecom Act adopted in July 2022.
New Ordinance on the Manner and Conditions
of Performing Electronic Communications
Networks and Services (Official Gazette of
the RoC no. 86/23)
In July 2023, HAKOM adopted a new Ordinance on the Manner
and Conditions of Performing Electronic Communications Net-
works and Services. This Ordinance prescribes detailed rules
related to the conclusion of subscriber contracts for the use of
electronic communication services. The new Ordinance entered
into force on 1 January 2024.
Decision on new value of WACC for HT’ regu-
lated wholesale products
On 2 December 2023, HAKOM defined new level of weighted
average cost of capital (WACC) in the amount of 4.82% as well
30 31
CHANGES IN REPORTING
ECONOMIC ENVIRONMENT REGULATORY OVERVIEW ECONOMIC ENVIRONMENT CHANGES IN REPORTING
Based on the Merger Agreement concluded on 15 March 2022
between the company Hrvatski Telekom d.d. and the company
HT Produkcija LLC (hereinafter: HTP LLC or the merged compa-
ny), and pursuant to the Assembly decision of the merged com-
pany 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 compa-
ny, HT d.d., became the universal legal successor of the merged
company, thus entering into all legal relationships of the merged
company.
The Group and the Company have an ownership interest of 39.1%
in the joint venture HT d.d. Mostar which is incorporated in the
Federation of Bosnia and Herzegovina. In 2022, 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 investments in the amount of EUR 18,801
thousand (the effect of the impairment in the Company is EUR
12,649 thousand and total effect in the Group is EUR 18,801
thousand). As of 31 December 2023, the investment is still clas-
sified as assets held for sale.
On 2 January 2024, Company merged its subsidiary Iskon Inter-
net d.d. With the date of incorporation into the court register,
Iskon Internet d.d. ceased to operate as a separate business
entity and is no longer active in the court register, while the en-
tire assets and all rights and obligations were transferred to the
Company. After the merger, the products and services provided
by Iskon will continue to be provided within the portfolio of the
Company under Iskon's brand.
On 1 January 2024, a new subsidiary has started operating with-
in the HT Group – the company HT Servisi d.o.o. which main ac-
tivities are planning and construction of fixed and mobile net-
works, maintenance of electronic communication infrastructure,
supervision of the telecommunications network and field main-
tenance of active and passive network.
as the new level of additional risk premium (RP) for HT’s fiber
network in the amount of 1.59%.
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 slightly higher than the previ-
ous one and would be incorporated in new wholesale prices that
will be applicable from 1 April 2024 as a result of cost model up-
date done by HAKOM.
BUSINESS
REVIEW
Summary of key financial indicators
of HT Group and the Company
HT Group highlights
Financials development of HT Group
and the Company
34 35
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS – HT GROUP IN CROATIABUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
SUMMARY OF KEY FINANCIAL INDICATORS
OF HT GROUP AND THE COMPANY
HT Group changed presentation of revenue subcategories in 2022 to align it with management reporting.
The above-mentioned amendment had no effect on total revenue.
Key financial data (EUR thousands) 2022 2023
% of change
A23/A22
Revenue 983,504 1,039,335 5.7%
Adjusted EBITDA AL 377,613 397,522 5.3%
Adjusted EBITDA AL margin 38.4% 38.2% -0.2 p.p.
EBITDA AL 363,920 384,459 5.6%
EBITDA AL margin 37.0% 37.0% 0.0 p.p.
EBIT 125,606 161,390 28.5%
EBIT margin 12.8% 15.5% 2.7 p.p.
Net profit after non controlling interest 86,987 132,029 51.8%
Net profit margin 8.8% 12.7% 3.9 p.p.
CAPEX AL 230,550 220,980 -4.2%
CAPEX AL / Revenue ratio 23.4% 21.3% -2.1 p.p.
Key financial data (EUR thousands) 2022 2023
% of change
A23/A22
Revenue 905,359 956,293 5.6%
Mobile service revenues 324,612 341,366 5.2%
Mobile non-service revenues 138,349 167,249 20.9%
Fixed service revenues 294,837 300,102 1.8%
Fixed non-service revenues 73,637 73,359 -0.4%
System solutions 73,924 74,217 0.4%
Adjusted EBITDA AL 349,344 367,360 5.2%
Adjusted EBITDA AL margin 38.6% 38.4% -0.2 p.p.
EBITDA AL 336,511 354.,965 5.5%
EBITDA AL margin 37.2% 37.1% -0.1 p.p.
EBIT 119,736 152,451 27.3%
EBIT margin 13.2% 15.9% 2.7 p.p.
Net profit after non controlling interest 87,153 128,553 47.5%
Net profit margin 9.6% 13.4% 3.8 p.p.
Exceptional items
1)
12,833 12,395 -3.4%
1)
Mainly related to restructuring redundancy costs and legal cases
HT GROUP IN CROATIA
HT GROUP
36 37
Key financial data (EUR thousands) 2022 2023
% of change
A23/A22
Revenue 814,987 868,393 6.6%
Mobile service revenues 326,009 342,562 5.1%
Mobile non-service revenues 138,562 167,274 20.7%
Fixed service revenues 257,847 268,140 4.0%
Fixed non-service revenues 73,567 73,347 -0.3%
System solutions 19,003 17,070 -10.2%
Adjusted EBITDA AL 332,910 354,245 6.4%
Adjusted EBITDA AL margin 40.8% 40.8% 0.0 p.p.
EBITDA AL 320,177 342,638 7.0%
EBITDA AL margin 39.3% 39.5% 0.2 p.p.
EBIT 124,419 153,040 23.0%
EBIT margin 15.3% 17.6% 2.3 p.p.
Net profit 92,218 125,161 35.7%
Net profit margin 11.3% 14.4% 3.1 p.p.
Exceptional items
1)
12,732 11,607 -8.8%
Key financial data (EUR thousands) 2022 2023
% of change
A23/A22
Revenue 79,152 84,027 6.2%
Mobile service revenues 35,161 37,781 7.5%
Mobile non-service revenues 9,970 10,660 6.9%
Fixed service revenues 24,549 25,869 5.4%
Fixed non-service revenues 6,091 6,154 1.0%
System solutions 3,381 3,564 5.4%
Adjusted EBITDA AL 28,269 30,162 6.7%
Adjusted EBITDA AL margin 35.7% 35.9% 0.2 p.p.
EBITDA AL 27,409 29,494 7.6%
EBITDA AL margin 34.6% 35.1% 0.5 p.p.
EBIT 5,593 8,661 54.9%
EBIT margin 7.1% 10.3% 3.2 p.p.
Net profit after non controlling interest 2,346 6,636 182.8%
Net profit margin 3.0% 7.9% 4.9 p.p.
Exceptional items
1)
859 668 -22.3%
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS – HT d.d.
HT d.d. CRNOGORSKI TELEKOM
1)
Mainly related to restructuring redundancy costs and legal cases
1)
Mainly related to restructuring redundancy costs and legal cases
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS – CRNOGORSKI TELEKOM
38 39
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS – HT GROUP IN CROATIA
HT GROUP IN CROATIA
Key operational data ¹ 2022 2023
% of change
A23/A22
Mobile
Number of customers 2,305 2,336 1.3%
- Prepaid 917 868 -5.3%
- Postpaid 1,389 1,468 5.7%
Blended ARPU 10 11 5.0%
- Prepaid 5 5 -0.2%
- Postpaid 14 14 4.0%
Fixed
Fixed voice mainlines - retail² 714 705 -1.2%
- ARPU voice per user 8 8 0.3%
Broadband access lines - retail³ 648 661 2.0%
- Broadband retail ARPU 14 15 1.3%
TV customers 538 539 0.1%
- TV ARPU 12 12 4.2%
Wholesale customers 209 183 -12.3%
Number of customers in thousands, ARPU in EUR
Includes PSTN, FGSM,old PSTN Voice customers migrated to IP platform and Smart packages for business; payphones excluded
Includes ADSL,VDSL, FTTH i Naked DSL
Includes Naked Bitstream + Bitstream + ULL + FA + WLR wholesale rental
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS – CRNOGORSKI TELEKOM
CRNOGORSKI TELEKOM
Key operational data 2022 2023
% of change
A23/A22
Mobile
Number of customers 449 478 6.5%
- Prepaid 163 170 4.1%
- Postpaid 286 308 7.8%
Fixed
Fixed mainlines - retail 102 101 -1.3%
Broadband access lines - retail 83 83 0.4%
TV customers 79 81 1.7%
40 41
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
HT Group highlights
Financial performance:
• Revenue in 2023 grew by EUR 55,831 thousand (5.7%) YoY.
Growth is mainly a result of strong performance across con-
sumer and business segments.
• Adjusted EBITDA before exceptional items after leases in
2023 grew by EUR 19,909 thousand (5.3%) YoY. Growth in
Croatia is driven by strong commercial momentum and top
line growth which has counterbalanced inflationary pres-
sures on operating expenses.
• Net profit after Non Controlling Interest in 2023 grew by EUR
45,042 thousand (51.8%) YoY. Increase is driven by improved
EBITDA and more significantly, by positive net financial re-
sult due to rising interest rates and non-recurring items.
• The largest investments in HT history, with Capex after lease
including Spectrum reaching EUR 361.4m (+50.7% YoY). HT
won the largest mobile spectrum share and expanded the
largest FTTH network in Croatia by more than 20%.
• Excluding the Spectrum investment, Capex after leases in
2023 declined by EUR 9,570 thousand or 4.2% YoY, down in
HT Group in Croatia (EUR 13,663 thousand or 6.4%) and up
in CT (EUR 4,093 thousand or 25.4%). Decrease in HT Group
in Croatia is driven by phasing of projects, while increase in
CT is due to dynamic of TV Content capitalization and in-
creased operational investments.
Residential segment:
• Key marketing initiatives
• In January 2023, updated General Terms and Condi-
tions to include indexation clause, followed by opening
of customer base for 60 days (till 15 March 2023)
• Indexation clause applied from 1 October 2023, adjust-
ing service prices with inflation with 5% price increase,
below both the competition and average annual infla-
tion rate for 2022.
• Launched “Magenta Moments” – a new customer en-
gagement program in Moj Telekom app, offering ex-
ceptional experiences and discounts
• Leading mobile and fixed network - Umlaut “Best
in Test”; the Fastest and largest 5G network - Ookla
„Speedtest”
• Launched “Swap and Save” initiative aimed to collect
and dispose old devices, positively contributing to the
environment; Supporting increase of T phone share in
handset sales
• Successful Xmas promotion “We are connected by
more than just a holiday” – Advent calendar in Magenta
Moments and Special Xmas hard sell offer – bring old
technical equipment and get 50% discount on great
phones
• Mobile
• Postpaid
• Launched new Family offer for M1 customers with
discounts for additional SIMs
• Prepaid and Bonbon: Refreshed M4M offer, and
launched new Internet SIM offers
• New option Travel and surf Region covering West Bal-
kans for postpaid and prepaid customers
• Fixed
• Introduced new fixed service packages providing the
best and the safest home experience - highest avail-
able Internet speed, simultaneous connection of twice
as many devices in one home and the state-of-the-art
WiFi6 technology.
• Launched new unique MAXtv television experience as
part of upgrade and modernization – developed plat-
forms for AndroidTV and AppleTV devices
• Growth of BB supported by deregulation starting from
end of November and Home Internet on 5G network -
MAX 2 5G product
• The best sport content offer - All Croatian football on
MAX sport– all football matches of the national football
league available only for HT customers on MAX sport
channel
• Continued EVO TV promo offers
Business segment:
• Focus on migration to the new Magenta 1 offer, aiming to
cross-sell existing customers base
• Digitalization – increasing customer base using digital tools
and transactions
• Special offers for customers using “Moj Telekom” App
• Launched “Magenta Moments” – a new customer engage-
ment program in Moj Telekom app
• Customer experience initiatives - Surprise & Delight Christ-
mas 2023, – Flat for 7 days on mobile tariffs
• Mobile
• Migration to the New mobile portfolio for VSE custom-
ers with M4M approach & continued migration on VPN
offers in SME and Corporate segments
• Announced 3G shutdown activities during 2024
• Fixed
• Migration to the New portfolio for fixed VSE customers
with M4M & migration to SD WAN for SME customers
• Continuous migrations of customers from Copper to
FTTH infrastructure
• System solutions
• Maintaining a focus on profitable managed services
business and integrated solutions across Business ap-
plications, Security, Infrastructure and IOT/Smart-city.
• Within the Smart City and Internet of Things HT and
Combis continued with the delivery of the One City
App project for smart city management in Otočac. HT
won another One City App project in Rovinj and signed
the contract for two smart parking projects in Zabok.
HT participated as a partner in the GALP conference,
the largest regional conference for Industry 4.0, where
HT presented its’ Smart Factory solution.
• Combis introduced innovative AI technology-based
voice assistant to help companies with taking their
contact centers to the next level. The solution was in-
troduced at a Fintech conference in November.
• Combis continued to further improve its solutions and
services such as setting 30SEC security in multiple
models, Recurring Pentest, new RPA/CRM, Managed
Wi-Fi, Cloud No.9, Microsoft Advisory models as well as
international portfolio upgrade
• Combis’ employer branding and social responsibility
initiative #GetInvolved was again recognized by the
profession, and this year we won the Best Employer
Brand Adria award due to the success of our #GetIn-
volved Culture Across Generations campaign for a bet-
ter Combis and a better society, which responds to the
numerous needs of multiple generations of employees
characterized primarily by diversity.
Other highlights:
• After the public auction procedure for the radio frequency
spectrum in March 2023, Hrvatski Telekom was allocated
2x10 MHz in the 800 MHz frequency band, 2x15 MHz in the
900 MHz frequency band, 2x30 MHz in the 1800 MHz fre-
quency band, 2x25 MHz in the 2100 MHz frequency band
and 2x25 MHz in the 2600 MHz frequency band at the
national level. As a result, Hrvatski Telekom was allocated
2x105 MHz from the total of 2x270 MHz of radio frequen-
cy spectrum offered, which kept Hrvatski Telekom in the
leading position in terms of spectrum shares for mobile net-
works. The total amount achieved is EUR 135.5 million.
• In mobile, for the fifth year in a row, Hrvatski Telekom won
the Ookla® Speedtest Awards™ for 'Best Mobile Network',
'Fastest Mobile Network' and 'Best Mobile Coverage' in Cro-
atia.
• By building fiber infrastructure not only in cities but also in
sub-urban and rural areas across Croatia, HT has expand-
ed already it’s by far the largest fiber-to-the-home (FTTH)
network in Croatia by more than 20% YoY, a significant step
towards fulfilling the goal of covering more than 1 million
households with gigabit fiber speeds.
• In July 2023 HAKOM adopted the final decisions on market
analysis of wholesale fixed network access, deregulating
HT’s fiber in 72 administrative units in urban areas of Croa-
tia, which are by HAKOM deemed as competitive. Deregula-
tion of high-speed networks in competitive areas will enable
equal market conditions for all market participants.
• In January 2024 HT has completed integration of Iskon
Internet into HT d.d. and has transferred construction and
maintenance unit of HT network from Ericsson Nikola Tes-
la Servisi by acquisition to newly founded subsidiary - HT
Servisi d.o.o.
• In December, a new Collective Agreement was signed, set
to take effect in January 2024, and is valid for three years.
Hereby HT once again affirmed itself as the most desirable
employer in the telecom industry, and one of the best in Cro-
atia altogether.
Financials development of HT Group and the
Company
Revenue
Revenue of the HT Group in 2023 grew by EUR 55,831 thousand
or 5.7% YoY, up in HT Group in Croatia (EUR 50,934 thousand
/5.6%) and CT (EUR 4,897 thousand /6.3%). Growth is supported
by higher mobile non-service (EUR 29,589 thousand or 19.9%),
mobile service (EUR 19,383 thousand or 5.4%), fixed service rev-
enue (EUR 6,577 thousand or 2.1%) and System solutions reve-
nue (571 thousand or 0.7%), while fixed non-service is lower by
EUR 289 thousand or 0.4%.
Revenue of the Company grew by EUR 53,406 thousand or 6.6%.
The growth is driven by higher mobile non-service (EUR 28,713
thousand or 20.7%), mobile service (EUR 16.553 thousand or
5.1%) and fixed service revenue (EUR 10,293 thousand or 4.0%),
offset by lower System solutions revenue (EUR 1,934 thousand
or 10.2%) and fixed non-service (EUR 220 thousand or 0.3%).
Mobile service revenue
Mobile service revenue of HT Group grew by EUR 19,383 thou-
sand or 5.4%, up in HT Group in Croatia (EUR 16,754 thou-
sand/5.2%) and CT (EUR 2,629 thousand /7.5%), predominantly
driven by the postpaid segment, a result of migration from pre-
paid to postpaid subscriptions as well as upselling customers to
higher value tariff plans.
Mobile service revenue of the Company grew by EUR 16,553
thousand or 5.1%.
HT Group in Croatia
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 2022, in 2023 HT continued promo activities and best
hardware offers focusing on MNP and retention efforts. Addi-
tionally, in Q2 new Family offer for M1 customers is launched
with additional discounts for each additional SIM. New roaming
option Travel and surf Region covering West Balkans for both
Postpaid and prepaid customers is introduced in Q3. In Q4 new
engagement program Magenta Moments is launched in Moj
Telekom app, offering best experiences and discounts from
partners. FMS offer Gigabox continues to grow, providing our
customers flat internet with mobility functionality without MCD
on service and with MCD on router.
In business segment, HT is encouraging medium and large cus-
tomers to migrate to VPN offer with More-4-More approach.
In addition, HT is working on digitization of business customer
base with special offers and Magenta Moments engagement
program for customers using Moj Telekom App.
42 43
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
competition. On-going MNP and retention efforts in prepaid
segment, as well as focusing on additional value for HT prepaid
customers, are being undertaken to mitigate the on-going de-
cline. In 2023 both prepaid brands focused pushing latest offers:
More-4-more in Simpa and Bonbon, refreshed Visitor offer as
well as Internet SIM (bonbon and new under T brand) for cus-
tomers interested in data only service (without the possibility of
classic calls and SMS).
Visitor data roaming traffic in 2023 is higher than last year, due
to higher number of foreign users on HT network and higher us-
age per customer.
From 1 January 2023, regulated mobile termination rate (MTR)
was further decreased due to the EU Commission Delegated Act.
Crnogorski Telekom
CT kept leadership position in total postpaid and in business
segment. Leading position in number of mobile internet users
was kept as well. Significant activities in mobile network mod-
ernisation, coverage and capacity increase is continued through
the year, with the aim to provide the best customer experience
in Montenegro.
Mobile non-service revenue
Mobile non-service revenue in HT Group grew by EUR 29,589
thousand or 19.9%, up in HT Group in Croatia (EUR 28,900
thousand/20,9%) and CT (EUR 689 thousand /6,9 %), driven by
strong handset sales with promotional activities throughout the
year and as well as changing handset mix in favour of higher-end
models. As a part of the Christmas promotion, record number of
customers also returned their used devices while acquiring new
ones, also contributing to our ambitious ESG goals.
HT continued with “Swap and Save” initiative, aiming to collect
and dispose old devices. Reducing the amount of electronic
waste and its disposal are environmental priorities. HT has de-
cided to motivate customers by providing benefits for each re-
turned mobile phone when buying a new device. In addition, HT
increased share of own-brand phone within the overall handset
sales, emphasizing affordable device with competitive features,
premium design and excellent quality.
Mobile non-service revenue for the Company grew by EUR
28,713 thousand or 20.7%.
Fixed service revenue
Fixed service revenue in HT Group grew by EUR 6,577 thousand
or 2.1%, up in HT Group in Croatia (EUR 5,256 thousand/1.8%)
and CT (EUR 1,312 thousand /5.4%), a result of growth in broad-
band and TV revenue, offsetting voice revenue contraction,
consistent with market trends.
Fixed service revenue of the Company grew by EUR 10,293 thou-
sand or 4.0%.
HT Group in Croatia
Voice decline is driven by the market trend of fixed to mobile and
IP substitution, regulation and competitive dynamics. However,
HT continues with further proactive and reactive churn preven-
tion offers and activities. To mitigate the ongoing contraction,
continuous promo offer for fixed line is in place offering phone
connection for EUR 0.13 with 24 MCD accompanied by attrac-
tive fixed line tariffs.
In its effort to promote gigabit fiber connectivity, HT continued
pushing FTTH offer, 200 Mbit/s speed for all existing custom-
ers with possibility to upgrade to 500 Mbit/s or 1 Gbit/s. HT will
continue to invest in the development of the fiber network and
plans to expand the fiber optical internet zones. Broadband cus-
tomers can upgrade their connection with Premium Smart WiFi
offer, Premium CPE modem and repeater assuring same inter-
net speed in all parts of home and on multiple devices. This offer
ensures fast and reliable internet connection at any time. Push
of broadband acquisition continued and is supported with FTTH
targeted campaigns and MAX 2 5G product – home Internet on
fastest 5G network. In Q3 2023 HT introduced new fixed service
packages providing the best and the safest home experience
with features such as internet speed increased to the highest
available, simultaneous connection of twice as many devices in
one home and the state-of-the-art WiFi6 technology. Deregu-
lation of BB FTTH offers started from the end of November al-
lowing equal market conditions for all market participants and
supporting further broadband growth.
In Small and Medium business segment, HT is promoting migra-
tion to SD WAN with More-4-More approach. In addition, in large
and medium segment fixed ARPU is boosted by continued up-
sell/migration of broadband customers to Fiber and professional
data services (Metro Ethernet, IP VPN).
MAXtv continues to be standard for the premium television ser-
vice. At the end of Q3 2023 HT launched a new unique MAXtv
television experience as part of its upgrade and modernization.
Additionally, platforms for AndroidTV and AppleTV devices have
been developed. The richest content, premium picture quality,
interactivity, interface, and full integration with mobile devices
provide customers a unique TV viewing experience fully adapt-
ed to their habits. HT also continued sales activities on DVBT-2
devices. TV acquisitions are supported by best sport content
including rights for HNL (Croatian Football League) and all com-
petitions under jurisdiction of HNS (Croatian Football Federa-
tion) on two exclusive channels, MAX Sport1 included in basic
package and MAX Sport2 included in sport package.
Crnogorski Telekom
Fixed service revenue grew supported by better broadband and
TV revenue. Continuous development of optical infrastructure
in 2023. resulted in the availability of optical network services
reaching a total coverage of 133k households, while the number
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
of connections increased by 11%.
The migration of customers to the new TV platform during 2023
confirms CT’s position as a competitive player in the market, set-
ting positive trends, quality, and innovation as the basis of the
competitive game in the market targets. Also, customer experi-
ence measurements show excellent trends, with customers giv-
ing a 4 times better rating for the Magenta TV service compared
to the old platform.
Fixed non-service revenue
Fixed non-service revenue in HT Group decreased by EUR 289
thousand or 0.4%, down in HT Group in Croatia (EUR 278 thou-
sand/0.4%) and CT (EUR 11 thousand /0.2%), due to lower reg-
ulated prices and contracting customer base, as operators con-
tinued to migrate customers to their own infrastructure.
Fixed non-service revenue of the Company decreased by EUR
220 thousand or 0.3%.
System Solutions
System Solutions in HT Group increased by EUR 571 thousand or
0.7%, up in HT Group in Croatia (EUR 293 thousand/0.4%) and
CT (EUR 279 thousand /8.8 %), while on the Company level it de-
creased by 1,934 thousand or 10.2%. HT Group growth is driven
by Cybersecurity and Cloud projects, with margin generated by
the System Solutions business further improving in both abso-
lute and relative terms compared to the previous year.
HT Group in Croatia
Within the Smart City and Internet of Things topics, in the fourth
quarter, HT and Combis have continued with the delivery of the
One City App project for smart city management in Otočac, with
implementation planned to be fully completed within Q1 2024.
This application will enable access to municipal services through
a web browser and mobile application and facilitate quick and
straightforward bill payments. The system supports the dissem-
ination of news and notifications from the city to its residents,
along with a centralized city service desk.
HT also won another One City App project in Rovinj, and the im-
plementation phase is already ongoing.
Additionally, HT has signed the contract for two smart parking
projects in Zabok. One of the projects is directly contracted with
the city, and the other one is with its parking company. Go Live
for both projects is expected in Q1 2024. HT also participated
as a partner in the GALP conference, the largest regional con-
ference for Industry 4.0, where we presented our Smart Factory
solution.
During October and November, we conducted a successful digi-
tal campaign promoting HT and Combis ICT services eligible for
EU business digitization vouchers under the EU National Plan
for Recovery and Resilience 2021−2026. Small and medium en-
terprises could apply for Digital Business, Omni, Pantheon ERP,
Smart Factory, Digital Advisory, CRM, and Cybersecurity ser-
vices. Given the positive outcome, we plan to repeat the cam-
paign this quarter, aligning with the upcoming public call for EU
voucher applications in March.
In October HT launched an offer for existing customers of Moj
digitalni ured service, aimed at enhancing our efforts to foster
customers loyalty and retaining them. We also launched special
promotions for Premium Fiscal register targeting seasonal busi-
nesses and for Fleet management service.
Special promotion offer for newly founded companies was intro-
duced in July for Digital Business service.
Combis introduced innovative AI technology-based voice assis-
tant to help companies with taking their contact centers to the
next level. The solution was introduced at a fintech conference
in November.
In the field of cyber security, Combis was engaged in presenting
the new EU regulative NIS 2 to its customers and to a broader
audience at the Carnet CUC conference dedicated to the aca-
demic community.
Combis continues to further improve its solutions and services
such as setting 30SEC security in multiple models, Recurring
Pentest, new RPA/CRM, Managed Wi-Fi, Cloud No.9, Microsoft
Advisory models as well as international portfolio upgrade. Fur-
thermore, in cooperation with its partner, Combis has organized
a specialized ESG reporting workshop to present expertise for
the IBM ESG solution and to help its customers to prepare them-
selves for this EU obligation.
Crnogorski Telekom
System Solutions revenue grew by EUR 279 thousand or 8.8%
following growth in managed services.
Operating expenses
Operating expenses include material expenses, employee bene-
fit expenses, capitalised work performed by the Group, net im-
pairment losses and other expenses.
Operating expenses in 2023 grew by EUR 27,960 thousand or
4.8% YoY, driven by HT Group in Croatia (EUR 25,547 thousand or
4.7%) and in CT (EUR 2,413 thousand or 5.1%). Increase is mostly
coming from higher material expenses, employee benefits ex-
penses, write down of assets and lower work performed by the
Group partly offset by lower other cost. Inflationary pressure on
cost was partially contained by continued transformation of op-
erating model and cost efficiency initiatives.
On Company level, operating expenses in 2023 grew by EUR
26,109 thousand or 5.6% YoY. The increase is mostly coming
from higher material expenses, employee benefits expenses and
write down of assets partly offset by lower other cost and higher
work performed by the Group.
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
44 45
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
Material expenses
Material expenses include merchandise and service expenses,
costs of raw material and supplies, as well as energy costs and
costs of sold services.
HT Group increase is a result of higher merchandise, service
expenses, and cost of raw materials and supplies (EUR 25,871
thousand or 9.5%), partly offset by lower energy cost, and costs
of service sold (EUR 3,218 thousand or 8.6%).
On the Company level the increase is driven by higher merchan-
dise, service expenses and cost of raw materials and supplies
(EUR 26,858 thousand or 13.5%), partly offset by lower energy
cost and costs of service sold (EUR 2,959 thousand or 8.3%).
Employee benefits expenses
The increase of total employee benefits expenses in HT Group
(EUR 11.442 thousand or 7,6%) is mainly driven by HT Group in
Croatia (EUR 10.615 thousand or 7,7%) by higher salaries, bonus-
es and higher rights from collective agreement. CT employee
benefits expenses increased by EUR 826 thousand or 6.6% com-
paring to 2022. Total number of FTEs amounts to 4,686 FTEs,
which is decrease of 88 FTEs compared to 2022.
Depreciation and amortization
Depreciation and amortization decreased (EUR 13,438 thousand
or 4.7%), down in both, HT Group in Croatia (EUR 12,853 thou-
sand or 5.0%) and CT (EUR 585 thousand or 2.3%).
HT Group’s and the Company’s Profitability
EBITDA before exceptional items after leases
EBITDA before exceptional items after leases in HT Group in
2023 grew by EUR 19,909 thousand (5.3%) YoY, up in HT Group
in Croatia (EUR 18,016 thousand/5.2%) and CT (EUR 1,893 thou-
sand /6.7%). Growth in Croatia is supported by strong commer-
cial momentum and top line growth which has counterbalanced
inflationary pressures on operating expenses.
EBITDA before exceptional items after leases for the Company
in 2023 grew by EUR 21,335 thousand or 6.4% YoY. Growth is
driven by strong commercial performance and increasing net
margin, offsetting inflationary pressure on operating expenses.
EBITDA before exceptional items after leases equals to operat-
ing profit in the financial statements increased for depreciation,
amortization and impairment of non-current assets, excluding
amortization of Right-of-use assets (Note 8 in the attached au-
dited financial statements), decreased for Interest expense from
leases (Note 12 in the attached audited financial statements)
and excluding exceptional items.
Earnings before interest and tax (EBIT)
EBIT equals to operating profit in the financial statements.
Net profit after non-controlling interests
Net profit after NCI in HT Group in 2023 grew by EUR 45,042
thousand (51.8%) YoY up in HT Group in Croatia (EUR 41,400
thousand/47.5%) and CT (EUR 3,643 thousand). Increase is driv-
en by improved EBITDA and, more significantly, by positive net
financial result due to rising interest rates and several non-recur-
ring items from previous year: the impairment of the net book
value of investment in HT Mostar and tax one-timers which had
adversely impacted last year’s result.
Net profit
Net profit in 2023 for the Company grew by EUR 32,943 thou-
sand (35.7%) YoY. Increase is driven by EBITDA growth, positive
net financial result, and lower depreciation, partly offset by
higher taxes.
Financial position of the Group and the Company
Balance sheet
On the HT Group level in comparison to 2022 year-end, total
asset value increased by 3.6% or EUR 70,845 thousand mainly
driven by higher fixed assets and receivables partially offset by
lower cash and cash equivalents.
Total issued capital and reserves increased EUR 24,487 thou-
sand (1.5%) compared to 31 December 2022 mainly driven by
realized net profit in 2023 partially offset by dividend payout
and treasury share buyback.
Total non-current liabilities decreased by EUR 8,838 thousand
(9.8%) primarily due to lower content liabilities.
Total current liabilities increased by EUR 55,196 thousand to EUR
288,638 thousand at 31 December 2023 primarily due to higher
trade payables.
On the Company level in comparison to 2022 year-end, total
asset value increased by 3.1% or EUR 59,429 thousand mainly
driven by higher fixed assets and receivables partially offset by
lower cash and cash equivalents.
Total issued capital and reserves increased by EUR 17,855 thou-
sand (1.1%) compared to 31 December 2022 mainly driven by re-
alized net profit in 2023 partially offset by dividend payout and
treasury shares buyback.
Total non-current liabilities decreased by EUR 7,882 thousand
(10.4%) primarily due to lower content liabilities.
Total current liabilities increased by EUR 49,456 thousand to
EUR 239,312 thousand at 31 December 2022 primarily due to
higher trade payables to third parties.
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
Cash flow
Cash flow from operating activities is T-HT Group’s principal
source of funds enabling the Company to finance capital invest-
ments and dividend distributions.
CF from operating activities on the HT Group level increased by
EUR 15,615 thousand (4.5%) mainly by favourable working capital
and inventory decrease partially offset by other cash flow items.
CF from investing activities increased by EUR 152,648 thousand
mainly affected by higher cash capex, higher net investment out-
flow and lower proceeds from sale of tangible assets.
CF from financing activities decreased by EUR 4,417 thousand
(2.3%) mainly affected by lower content repayments and lower
treasury shares buyback.
Cash flow from operating activities is the Company’s principal
source of funds enabling the Company to finance capital invest-
ments and dividend distributions.
CF from operating activities on the Company level increased by
EUR 1,740 thousand (0.6%) mainly affected by stronger business
performance offset by lower working capital and higher income
taxes paid.
CF from investing activities increased by EUR 164,451 thousand
mainly affected by spectrum payment.
CF from financing activities decreased by EUR 7,623 thousand
(4.2%) mainly affected by lower treasury buyback and content
repayment.
Capital expenditure after leases (excluding
Spectrum) of HT Group and the Company
Capex after leases excluding Spectrum in HT Group in 2023 de-
creased by EUR 9,570 thousand or 4.2% YoY, down in HT Group
in Croatia (EUR 13,663 thousand or 6.4%) and up in CT (EUR
4,093 thousand or 25.4%). Decrease in HT Group in Croatia is
driven by phasing of projects, whereas increase in CT is due to
dynamic of TV Content capitalization and increased operational
investments.
CAPEX after leases in EUR thousands 2022 2023
% of change
A23/A22
CAPEX after leases* 230,550 220,980 -4.2%
CAPEX after leases/ Revenue ratio 23.4% 21.3% -2.1 p.p.
HT Group
CAPEX after leases in EUR thousands 2022 2023
% of change
A23/A22
CAPEX after leases* 214,450 200,787 -6.4%
CAPEX after leases/ Revenue ratio 23.7% 21.0% -2.7 p.p.
HT Group in Croatia
CAPEX after leases in EUR thousands 2022 2023
% of change
A23/A22
CAPEX after leases 16,099 20,192 25.4%
CAPEX after leases/ Revenue ratio 20.3% 24.0% 3.7 p.p.
Crnogorski Telekom
IFRS 16 CAPEX in EUR thousands 2022 2023
% of change
A23/A22
IFRS 16 CAPEX - HT Group 33,870 45,409 34.1%
IFRS 16 CAPEX - HT Group in Croatia 32,843 40,432 23.1%
IFRS 16 CAPEX - Crnogorski Telekom 1,027 4,978 384.9%
HT Group
*CAPEX after leases excluding Spectrum
46 47
BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY BUSINESS REVIEW SUMMARY OF KEY FINANCIAL INDICATORS OF HT GROUP AND THE COMPANY
Hrvatski Telekom continued fiber optic network deployment in
the Fiber To The Home topology (FTTH), achieving an over 20%
increase in coverage by the end of 2023 thus confirmed the
leading market position in the availability of fiber optical net-
works. The development of the FTTH included networks co-fi-
nanced by EU funds, highlighting the importance of this project
for regional infrastructure development.
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
915 thousand households.
The strong growth of the mobile network traffic continued
throughout 2023, however, the quality of the user experience
remained at a high level, due to targeted capacity expansion
through 5G network.
Hrvatski Telekom concluded the year 2023, recognized as the
leading fixed and mobile network according to high standards
of network performance confirmed by different independent
benchmark measurements. HT's fixed network is the best rated
fixed broadband in Croatia according to results of extensive um-
laut analysis. In the mobile segment, Ookla measurements con-
firmed HT as the best and fastest mobile network in Croatia, and
one with the best coverage. On top, the analysis by Croatian reg-
ulator HAKOM (in cooperation with Net Check) also confirmed
that HT has the best mobile network.
In 2023, 83% network function cloudification was achieved, ac-
celerating the journey to a more agile and efficient cloud-based
network.
The overall stability of the HT network is maintained at a high
level. During 2023, 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.
Capex after leases excluding Spectrum on the Company level in 2023 declined by EUR 9,695 thousand or 4.9% YoY.
HT Group
Total CAPEX (Booked + IFRS 16 Capex) in EUR thousands 2022 2023
% of change
A23/A22
Total CAPEX 264,419 266,389 0.7%
Total CAPEX/ Revenue ratio 26.9% 25.6% -1.3 p.p.
Total CAPEX (Booked + IFRS 16 Capex) in EUR thousands 2022 2023
% of change
A23/A22
Total CAPEX 230,960 228,790 -0.9%
Total CAPEX/ Revenue ratio 28.3% 26.3% -2.0 p.p.
CAPEX after leases in EUR thousands 2022 2023
% of change
A23/A22
CAPEX after leases* 198,722 189,027 -4.9%
CAPEX after leases/ Revenue ratio 24.4% 21.8% -2.6 p.p.
HT d.d.
IFRS 16 CAPEX in EUR thousands 2022 2023
% of change
A23/A22
IFRS 16 CAPEX 32,238 39,763 23.3%
*CAPEX after leases excluding Spectrum
CORPORATE
SOCIAL
RESPONSIBILITY
50 51
paign in all of Europe at the "European Excellence Awards 2023",
and the Deutsche Telekom Group recognized the campaign as
one of five best projects.
World of Equal Opportunities
Inclusion is an integral part of our activity and business. With
digital inclusion, we want to contribute to society so that every-
one has equal opportunities and all the opportunities to realize
their potential. Through the World of Equal Opportunities plat-
form, we focus on raising public awareness of how digital tech-
nologies can contribute to a fairer society of equals.
Smart cities
In 2023, Hrvatski Telekom continued to develop various smart
city offerings based on recognizable advanced solutions for
e-mobility, smart parking, smart monitoring of energy con-
sumption, and smart lighting. At the Mobile World Congress, the
world's largest mobile industry fair, Hrvatski Telekom presented
smart city solutions implemented in Dubrovnik, recognized as
one of Deutsche Telekom's best practices.
In cooperation with the city of Split, Hrvatski Telekom realized
the project of creating a Split Smart City platform that will rep-
resent the digital transformation of city services and enable citi-
zens to have quick and straightforward two-way communication
with city services.
Next-generation broadband access construction
projects in ten counties
We continued to build next-generation broadband access in ten
counties in Croatia in 2023. It will enable fast (+40 Mbit/s) and
ultra-fast (+100 Mbit/s symmetrical) broadband access for al-
most 150 thousand new users in cities, municipalities, and sub-
urban and rural areas across Croatia. The 13 Partnership Agree-
ments are integral to the Public Call of the Ministry of Regional
Development and EU funds for constructing next-generation
access networks.
Digital transformation of factories
We also continued to partner with Culmen on the 100 smart fac-
tories project to enable simpler digitalization and application of
Industry 4.0 in Croatian factories, whereby Hrvatski Telekom, as
a technology partner, provides factories with a portfolio of infra-
structure services and the possibility of using the contemporary
HT IoT platform and HT MES platform. As part of the complete
Industry 4.0 offering, customers can access an app that moni-
tors real-time production to raise quality control and further dig-
italize the process. Last year, HT also successfully implemented
its new ICT product, MES - Smart Factory, in several domestic
companies.
Private 5G campus network
Hrvatski Telekom and the Zagreb Faculty of Mechanical Engi-
neering and Naval Architecture (FSB) have signed a business
cooperation agreement for a private 5G Campus network and
the practical application of solutions for smart factories in the
FSB R&D lab. The private 5G Campus network at the FSB will be
used for laboratory and auditory exercises and final, graduate,
specialist, and doctoral theses.
WiFi4EU
Through the WiFi4EU program co-financed by the European
Union, Hrvatski Telekom has implemented WiFi in more than
50 cities and municipalities in Croatia. The fact that municipali-
ties, towns, and cities in these projects select Hrvatski Telekom
proves that the company has been recognized as a reliable tech-
nological partner that can provide quality internet access that
increases economic activity and quality of life for citizens in ur-
ban and suburban communities.
Responsibility towards environment
Sustainable development and climate protection are strategic
determinants of HT and the DT Group. In 2023, HT continued to
use CO2-neutral electricity for 100 percent of its consumption.
The first corporate agreement on the main conditions for the Vir-
tual Power Purchase Agreement (vPPA) in Croatia marks a major
structural energy transition. It is an essential step towards secur-
ing the necessary energy for HT's operations from RES, which will
at the same time directly contribute to HT's ambitious ESG goals.
Call you have to take
We kicked off the Call you have to take, Hrvatski Telekom's plat-
form focused on environmental protection, more efficient use
of natural resources, circular economy, conscientious manage-
ment of electronic equipment and waste, and other sustainabil-
ity topics. Through it, HT intends to contribute even more and
highlight the importance and the necessity of responsible action
in environmental protection. A part of it is also a campaign to
collect small ICT equipment in all T-Centers throughout Croa-
tia. We have thus improved the process of collecting obsolete
devices that users no longer use and their proper disposal and
recycling of valuable raw materials.
Certificates
HT focuses on implementing green technologies and solutions
that save energy and have a favourable effect on creating a soci-
ety with reduced greenhouse gas emissions. The entire DT Group
is committed to important climate and environmental goals. To
achieve them, we systematically increase energy efficiency by
investing in the latest technologies and implementing numerous
measures and solutions to reduce energy consumption while
maintaining the status of a leading network. In addition, by intro-
ducing cutting-edge ICT technologies and services, we reduce
our and our users' carbon footprint.
In 2023, we are still the proud holder of the ISO 9001, ISO 14001,
ISO 45001, ISO 27001 and EcoVadis certificates, and we also ob-
tained a certificate for business continuity management accord-
ing to the ISO 22301 norm.
CORPORATE SOCIAL RESPONSIBILITY
HT d.d. sustainability strategy reflects the ambition of the entire
HT Group to be a digital and sustainable telecommunications
company focused on creating value for all stakeholders - cus-
tomers, employees, shareholders, partners, and the whole so-
ciety. The long-term vision of sustainability is an integral part
of our business strategy to achieve sustainable and profitable
growth and connect everyone in Croatia with the opportunities
of digitalization.
As a socially responsible company, we integrate and systemati-
cally implement all three ESG dimensions in our operations and
strategic decision-making.
We consider this to be our crucial contribution, and we remain
committed to it. Our approach to sustainability is based on three
key activity areas: climate change, resource efficiency, and dig-
ital inclusion. We are focused on efficiently using resources, re-
ducing greenhouse gas emissions, and creating a better future
for everyone.
Our largest-ever investments, the construction of critical ICT
infrastructure, the implementation of our sustainable develop-
ment strategy, exemplary corporate governance, and the imple-
mentation of socially responsible programs aimed at reducing
the digital divide, resulted not only in the achievement of our
ambitious ESG goals, international and domestic awards, and
recognition for the best network, setting industry standards,
the greatest satisfaction of customers and employees, winning
the Croatian sustainability index award for the third consecutive
year, but also made the entire ecosystem more sustainable in
business and life. We consider this to be our crucial contribution,
and we remain committed to it.
Digital society
The social component of our sustainability strategy focuses
on relationships among employees, with customers, suppliers,
and the community. We strive to positively influence society by
connecting everyone in Croatia with the opportunities of digita-
lization, promoting equality, inclusion, and diversity in building
a better future. Digital inclusion primarily reflects our belief in
digital technology's power to improve everyone's quality of life
and drive positive changes. We strive to create a more equal
and connected world for everyone by promoting inclusion and
breaking down digital barriers. Three key factors support the
goal of enabling equal access to digitalization for all members of
society - the availability of high-speed networks, the accessibili-
ty of services and devices, and the development and promotion
of digital competencies. We ensure the availability of affordable
devices and services for everyone, regardless of financial status
or level of digital literacy. We implement and design various pro-
grams and initiatives that provide people of all ages, from chil-
dren to older people, with the newest education, allowing them
to acquire and develop the necessary digital skills, with the ulti-
mate goal of creating a society where there is no digital inequal-
ity. Our mission is to ensure equal opportunities for everyone to
be included in the digital society so that no one misses out on
the digital world.
"Tools for Modern Times" program
In 2023, in cooperation with the Faculty of Education and Re-
habilitation (ERF) of the University of Zagreb, we launched the
"Tools for Modern Times" program, the first structured and sci-
ence-based program whose goal is to prevent risky behaviour
among elementary school students and adolescents in a virtual
environment. The program's first phase includes the participa-
tion of more than 100 schools from 17 counties. In the coming
years, we plan to cover the entire Croatia.
Generation NOW program
Over the past year, the Generation NOW program, with which
we promote STEM education and which we implement with the
Institute for Youth Development and Innovation, included more
than 140 schools and other educational institutions. More than
1,400 students had the opportunity to use cutting-edge tech-
nologies to improve their competencies.
National digital education program for seniors Genera-
tions Together
The Generations Together program, in which 57 nursing homes
across Croatia have participated so far, continued in 2023.
Through the engagement of HT volunteers and cooperation with
the Association for the Education of Citizens Split, we conducted
multi-day workshops on using the internet, useful apps, and oth-
er digital tools for seniors.
Digital innovation incubator
Hrvatski Telekom is also the general partner of the Digital Inno-
vation Incubator, an online project in which students of all fac-
ulties learn about creativity and innovation, connect with lead-
ing companies in the region, and develop applicable innovative
solutions in selected industries. In 2023, more than 2,000 prima-
ry and secondary school students and university students from
all over Croatia participated in the project.
Volunteers Club
The HT Group volunteers club, which has 230 enthusiastic col-
leagues ready to help, continued its activities in 2023. Our volun-
teers happily participated in the Generations Together program,
in the reforestation of Sljeme, we helped the Mali Zmaj Associ-
ation in their regular campaigns, we collected supplies for the
Maestral children's home in Split and the Autonomous Women's
House in Zagreb, and we also organized a donation contest in
which employees selected five initiatives as recipients of HT's
Christmas donation. The Zagreb Volunteer Center awarded us an
important recognition for our volunteering engagement in 2023
in the business sector.
How Are You?
How Are You? campaign aimed to raise awareness of the im-
portance of communicating with loved ones and taking care of
mental health, was declared the best socially responsible cam-
CORPORATE SOCIAL RESPONSIBILITY
CORPORATE SOCIAL
RESPONSIBILITY
52 53
CORPORATE SOCIAL RESPONSIBILITYCORPORATE SOCIAL RESPONSIBILITY
Employee development
In line with our commitment to high standards of employee
satisfaction and engagement, Hrvatski Telekom regularly con-
ducts related research. After a series of exceptional results over
the past few years, extremely high employee satisfaction was
achieved again in 2023.
Hrvatski Telekom employees' satisfaction and engagement re-
sults, among the highest within DT Group, stem from structured
career management, which was achieved by introducing a ca-
reer path process that enables clear rules for advancement, job
changes, and development. A new Collective Agreement was
signed in 2023, confirming HT's status as the most desirable
employer in the telecommunications industry. It provides em-
ployees with the highest level of social and material rights, and
thus, HT responded to the challenges of inflation that all employ-
ees face today.
An integral part of the development of HT as a digital company
is raising the level of knowledge internally through development
programs and programs for acquiring new skills and continuous
investment in employees. Our employees can learn through a
digital platform offering more than 23 thousand online courses.
We are proud that over the last four years, we have continuous-
ly increased the number of completed online educations by an
average of 80 percent per year, providing modern learning tools
and enabling employees to show initiative and seek continuous
training adapted to the specific needs of target groups of em-
ployees.
We have identified talents from all company areas, and we devel-
op their careers individually to maximize competencies, engage-
ment, and motivation. The talent program continued in 2023.
Thanks to numerous initiatives dealing with key topics for em-
ployees, HT Group was the most awarded employer in 2023
and won eight 'Employer Brand' awards for practices, projects,
and activities carried out by employers, resulting in exceptional
satisfaction, experience, and employee engagement, and con-
sequently a better user experience.
For our excellence in human resource management, continuous
improvement of work processes, and following global trends, we
have again received the status of Employer Partner. As one of
the best employers in Croatia, we also received the "Above and
Beyond" recognition of excellence.
Caring for employees' physical and mental health and safety
remains the highest priority at Hrvatski Telekom. Along with
the continuous adjustment of instructions and guidelines for
occupational safety in line with the requirements of workplaces
and the general health situation, in 2023, we continued active-
ly promoting and implementing vaccinations and carried out
many campaigns to encourage a healthy lifestyle. Here are just
a few highlights – organizing flu vaccinations for HT employees
in all regions in cooperation with the Institutes of Public Health;
marking the World Hypertension Day by organizing seminars in
all regions, in collaboration with the Croatian Red Cross; pro-
curement of automatic external defibrillators for the largest fa-
cilities in Zagreb, Split, Rijeka, and Osijek, as well as upper arm
sphygmomanometers; "Health Polygon" initiative carried out in
cooperation with the Croatian Institute of Public Health at HT
locations in Zagreb, Split, Rijeka, and Osijek, where employees
could measure blood pressure, blood sugar levels, and educate
themselves on several topics on how to preserve health; the or-
ganization of ergonomic training as part of a preventive program
that includes awareness and practical education on the effective
use of the work space; "Health Month" in May, which included
more than 20 different health, sports, recreational, and educa-
tional activities; organization of well-being training aimed at pro-
tecting mental health on the topics of stress resistance, change
management, balance of work and personal life, diversity, fair-
ness and inclusion; organization of the "Traffic safety and traffic
prevention" seminar, in cooperation with the Croatian Auto Club;
practical evacuation and rescue drills, in collaboration with the
Public Fire Department and Emergency Medical Services.
All investments and efforts in preserving the health of employ-
ees were rewarded with the external certificate "Health Friendly
Company", which the Croatian Institute of Public Health awards
to companies that enable their employees to adopt healthy life-
style habits, promote health in the workplace, and show positive
concern for the health of employees, consumers, and clients,
and environmental protection.
Responsible business in HT Group members
COMBIS
Community
We donated funds to one of the best secondary schools in the
country, the Zagreb V. gimnazija, by purchasing a picture signed
by artificial intelligence. For the occasion of the feast of St. Nich-
olas, we bought 130 picture books from the Center for Missing
and Abused Children and donated them to the hearing and
speech rehabilitation clinic "Suvag".
Combis cooperated with the Center for Missing and Abused
Children in designing picture books from the "Fairy Tales in the
Digital World" collection, which have an important purpose - to
educate children about safety online. All proceeds from sales
go to the Center for Missing and Abused Children. 'Fairytales
in the digital world' are part of an extensive educational cam-
paign about online security and growing Combis' recognition
as a company with the highest security expertise. It may not be
easy to talk about technology in a simple way, but with effort and
good communication, one can talk about everything and create
an atmosphere of trust, which is an integral part of the formula
by which the Combis team tries to answer the question of what
is needed to be safe in the digital world.
Knowledge society
The online discussion format DiscussIT "Innovations for a better
society" was raised to a new level with a one-day conference fea-
turing interesting case studies with users, followed by a panel,
this time on the positive impact of IT on trade and distribution.
Combis also supported VMware vForum, CarnetCUC, F2 Future
of Fintech conference, and in 2023, again participated in the
Good Game Global humanitarian tournament.
ISKON
Environmental Protection
A big step forward was made in educating customers on ecolog-
ically conscientious actions with a particular focus on e-invoices,
resulting in the largest annual increase in e-invoice users.
The first main phase of the SUPEER research project, co-fi-
nanced by the European Union for optimizing electricity con-
sumption in Croatian households, has also been completed. Af-
ter the successful completion of technical and administrative EU
audits, the project on which Iskon partners with FER, Sedam IT
d.o.o., HEP ODS, and the Hrvoje Požar Institute enters the com-
mercialization phase.
Volunteer and sponsorship activities
Last year, Iskon celebrated the fifth anniversary of its coopera-
tion with the Unison Association on the Rock&Off project. The
goal is to draw the public's attention to quality and continuous
creativity in the local music scene. With a substantial involve-
ment of volunteers, Iskon and partners also organized a musical
Rock&Off six-day camp in Šibenik for 19 children aged between
12 and 15 without adequate parental care from the Lipik commu-
nity service centre. The year ended with the Rock&Off School of
Music Journalism, open for all interested persons aged 16 to 25
free of charge.
CRNOGORSKI TELEKOM
Digital society
In line with its strategic commitment to encouraging young peo-
ple to engage in STEM and directing them to develop innova-
tions and digital solutions in various fields, Crnogorski Telekom
supported many activities in education. Crnogorski Telekom
thus endorsed one of the world's largest math competitions for
children, Kangourou sans Frontières. They also supported the
competition for young programmers as part of the partner Cor-
tex Academy (the largest online and hybrid platform for educa-
tion in Montenegro). They spent several months developing web
and mobile apps while Telekom's representatives mentored one
team that worked on that project.
Crnogorski Telekom continued to implement the Free Internet
in Schools project in 2023, thanks to which almost all Montene-
grin schools receive free internet necessary for their daily needs.
To give everyone equal access to new technologies in rural and
suburban parts of the country, where there is no possibility of
bringing fiber optics or other landline technologies, Crnogorski
Telekom provides free mobile internet to schools. This continued
a decade and a half long and over half a million-euro worth of co-
operation with the Ministry of Education since Crnogorski Tele-
kom has been providing free broadband internet to all Montene-
grin primary and secondary schools and pre-schools since 2007.
Environmental Protection
In April 2023, Crnogorski Telekom launched an extensive green
campaign that raised users' awareness of the importance of
recycling and responsible electronic waste management.
Crnogorski Telekom also announced that for the first 100 recy-
cled old devices, it will organize the planting of 100 trees in the
Montenegrin cities.
They also launched a large donor initiative for a campaign to
plant trees in the park forest of Gorica (Podgorica), destroyed
by a big fire last year. All Telekom postpaid and prepaid users
could thus donate 1 euro through the Telekom ME application,
and Telekom matched each donation.
The Telekom Volunteer Club participated, through volunteering
and donation, in the largest volunteer effort that takes place
once a year around the world and was organized in Montenegro
for the occasion of International Coastal Cleanup Day. At the
same time, Telekom promoted the importance of recycling old
devices by rewarding users with free gigabytes and discounts on
devices for those who bring old devices to T-Centre for recycling.
Crnogorski Telekom’s Volunteer Club
Crnogorski Telekom's Volunteer Club and the Montenegrin Blood
Transfusion Institute organized a voluntary blood drive among
employees, and volunteers traditionally participated in the hu-
manitarian Christmas Diplomatic Bazaar. This year, Telekom
again supported the humanitarian initiative, thanks to which
hundreds of children from all over Montenegro received human-
itarian packages with food and school supplies.
Ratio of women in executive positions
The Supervisory Board set a goal in 2023 to keep female ratio in
executive positions at minimum of 40 percent. Women currently
make up for 50 percent of Supervisory Board membership and
29 percent of Management Board membership. Woman is the
Chairwoman of the Supervisory Board as of 31 October 2023 and
as of 1 July 2024 a woman shall be the President of the Manage-
ment Board. Women hold 39 percent of managerial positions,
while 39 percent of all employees are women.
In relation to the year 2022, in 2023 progress has been achieved
with respect to ratio of women in the Supervisory Board (50 per-
cent compared to 44.4 percent), while the achieved percentage
in managerial positions is very close to the minimal level, with
the goal to achieve over the minimal level in the upcoming pe-
riods, in line with the realistic conditions for individual improve-
ment, given that female work force is not predominant in the
telecom industry (39 percent of all employees are women).
54 55
Taxonomy Regulation
Based on the obligation from Article 8 of the Regulation on the
establishment of a framework for facilitating sustainable invest-
ments 2020/852 and the Delegated Regulation 2021/2178 on
the publication of the content and presentation of information
on environmentally sustainable economic activities, information
on the share of taxonomically acceptable and taxonomically
unacceptable economic activities in revenues, capital expen-
ditures, and operating expenditures for all six objectives of the
EU taxonomy prescribed by Delegated Regulation 2023/2486
and Delegated Regulation 2023/2485 and the share of taxo-
nomically acceptable economic activities that significantly con-
tribute to climate change mitigation and adaptation to climate
change aligned with the technical verification criteria defined by
Delegated Regulation 2021/2139 in revenues, capital expendi-
tures, and operating expenses, the Company will publish, in the
manner and within the deadlines as regulated for non-financial
reporting by articles 21.a and 24.a of the Accounting Act (Of-
ficial Gazette no. 78/15, 134/15, 120/16, 116/18, 42/20, 47/20),
at the latest by the deadline from Article 30, paragraph 5 of the
Accounting Act, on Hrvatski Telekom's website, i.e., under the
applicable regulations.
CORPORATE SOCIAL RESPONSIBILITY
CONSOLIDATED
AND SEPARATE
FINANCIAL
STATEMENTS
Independent auditor’s report
Responsibility for the consolidated and separate financial statements
Consolidated and separate statement of comprehensive income
Consolidated and separate statement of financial position
Consolidated and separate statement of cash flows
Consolidated and separate statement of changes in equity
Notes to the consolidated and separate financial statements
DRAFT
STRICTLY CONFIDENTIAL
Croatian Telecom Inc.
Consolidated and separate financial statements
31 December 2023
DRAFT
STRICTLY CONFIDENTIAL
Croatian Telecom Inc.
1
Contents
Page
Independent Auditor’s Report 2
Responsibility for consolidated and separate financial statements 10
Consolidated and separate statement of comprehensive income 11
Consolidated and separate statement of financial position 13
Consolidated and separate statement of cash flows 15
Consolidated and separate statement of changes in equity 16
Notes to consolidated and separate financial statements 18
The company was registered at Zagreb Commercial Court: MBS 030022053; paid-in initial capital: EUR 5,930.00; Company Directors: Katarina Kadunc, Goran Končar
and
Helena Schmidt, Bank: Privredna banka Zagreb d.d., Radnička cesta 50, 10 000 Zagreb, bank account no. 2340009–
1110098294; SWIFT Code: PBZGHR2X IBAN:
HR3823400091110098294.
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INDEPENDENT AUDITOR’S REPORT
T
o the Shareholders of Hrvatski Telekom d.d.
Report on the Audit of the Financial Statements
Opinion
We have audited the separate financial statements of Hrvatski Telekom d.d. (the Company) and consolidated
financial statements of the Hrvatski Telekom d.d. and its subsidiaries (the Group) which comprise the separate and
the consolidated statement of financial position as at 31 December 2023, the separate and the consolidated
statement of comprehensive income, the separate and the consolidated statement of changes in equity and the
separate and the consolidated statement of cash flows for the year then ended, and notes to the separate and the
consolidated financial statements, including material accounting policy information.
In our opinion, the accompanying separate and consolidated financial statements present fairly, in all material
respects, the financial position of the Company and the Group as at 31 December 2023, and 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 the International Standards on Auditing (ISAs) and Regulation (EU)
537/2014 of the European Parliament and of the Council, dated 16 April 2014, on specific requirements regarding
statutory audit of public-interest entities. Our responsibilities under those standards are further described in the
Auditor’s Responsibilities for the Audit of the Separate and the Consolidated Financial Statements section of our
report. We are independent of the Company and the Group in accordance with the International Ethics Standards
Board for Accountants’ International Code of Ethics for Professional Accountants, including International
Independence Standards (IESBA Code) and we have fulfilled our ethical responsibilities in accordance with 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
separate and the consolidated financial statements of the current period. This matter was addressed in the context
of our audit of the separate and the consolidated financial statements as a whole, and in forming our opinion thereon,
and we do not provide a separate opinion on this matter.
This version of the auditor`s report is translation from the original, which was prepared in the Croatian language. All possible care has been taken to ensure that the
translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the
report takes precedence over this translation.
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of the Financial Statements
Key Audit Matters (continued)
Revenue recognition
How we addressed key audit matter
Refer to Note 2.3.1 Significant accounting estimates - Revenue recognition, Note 2.4. (p) Revenue recognition and
Note 4 Segment information of the financial statements.
We consider revenue recognition as a key audit matter
due to following:
a) the accounting complexity;
Revenue recognition is based on various significant
assumptions (i.e. statistical data, manual adjustments,
determination of standalone selling price, financing
component assessment etc.).
b) the complex structure of the IT systems;
Due to the business model and its wide range of
services, the accurate recognition of revenue in the
separate and consolidated statement of comprehensive
income, in compliance with the International Financial
Reporting Standard “Revenue from contracts with
customers” (IFRS 15), requires the coordinated
interaction of a variety of complex IT systems, in which
a high number of transactions are initiated, processed
and invoiced in an automated manner.
In view of the dynamic development of these complex
services, the recognition of revenue,
with the
correlated IT systems, was of particular significance in
the scope of our audit.
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.
In order to assess risks of material misstatement, we
first obtained an understanding of the process and the
internal controls related to the recognition of revenue
by taking into account the corporate environment and
the applicable accounting standards.
To the extent that identified controls were relevant to
our audit of revenue account, we tested the controls for
design and implementation. This testing of design and
implementation covered both manual controls and
automated controls in the IT systems used for the
purposes of revenue recognition.
In the IT systems that are important to the
implementation of controls, we tested the general IT
controls – particularly those that ensure authorized
access, system operation and changes in relation to
these systems. In this part we involved IT specialists.
On the basis of the risks of material misstatement
identified in the scope of audit procedures, we selected
manual and automated controls as well as related
general IT controls from the controls relevant to the
audit,
with respect to revenue recognition.
Subsequently, these controls were tested for operating
effectiveness to assess their effectiveness in the
reporting year. In this process
, too, we involved IT
specialists.
Apart from testing the operating effectiveness of
controls, we performed the following procedures in
response to identified risks of material misstatement;
By involving IFRS 15 specialists, we assessed for
selected business models as to whether the accounting
policies defined for these models, result in revenue
recognition according to the requirements of IFRS 15.
We tested the reconciliation of transaction data
recorded in the IT systems to the revenue reported in
the general ledger for accuracy and completeness. This
also included the examination of manual adjustment
postings.
Furthermore, we used data analysis tools to generate
evaluations of different revenue flows over time and
analyzed deviations from expected trends. We
examined the customer and contract data used in the
analyses by comparing the related contracts with the
corresponding data in the master data systems on a
sample basis.
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of the Financial Statements (continued)
Other Matter
The financial statements of the Company and the Group for the year ended 31 December 2022 were audited by
another auditor who expressed an unmodified opinion on the financial statements on 14 March 2023.
Other Information
Management is responsible for the other information. The other information comprises the Management Report and
Corporate Governance Statement (but does not include the separate and consolidated financial statements and our
auditor’s opinion thereon), which we obtained prior to the date of this auditor’s report, and the Non-financial report,
which is expected to be made available to us after that date. When we read the Non-financial report, if we conclude
that there is a material misstatement therein, we are required to communicate the matter to those charged with
governance.
Our opinion on the separate and the consolidated financial statements does not cover the other information.
In connection with our audit of the separate and the consolidated financial statements, our responsibility is to read
the other information and, in doing so, consider whether the other information is materially inconsistent with the
separate and the consolidated financial statements or our knowledge obtained in the audit or otherwise appears to
be materially misstated. With respect to the Management Report and the Corporate Governance Statement, which
are included in the Annual Report, we have also performed the procedures prescribed by the Accounting Act. These
procedures include examination of whether the Management Report include required disclosures as set out in the
Articles 21 and 24 of the Accounting Act and whether the Corporate Governance Statement includes the information
specified in the Articles 22 and 24 of the Accounting Act.
Based on the procedures performed during our audit, to the extent we are able to assess it, we report that:
1) Information included in the other information is, in all material respects, consistent with the attached
separate and consolidated financial statements.
2) Management Report has been prepared, in all material respects, in accordance with the Articles 21 and 24
of the Accounting Act.
3) Corporate Governance Statement has been prepared, in all material aspects, in accordance with the Articles
22 and 24 of the Accounting Act,
Based on the knowledge and understanding of the Company and the Group and its environment, which we gained
during our audit of the separate and the consolidated financial statements, we have not identified material
misstatements in the other information.
Responsibilities of Management and Those Charged with Governance for the Separate and the Consolidated
Financial Statements
Management is responsible for the preparation and fair presentation of the separate and the consolidated financial
statements in accordance with IFRSs and for such internal control as Management determines is necessary to enable
the preparation of separate and consolidated financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the separate and the consolidated financial statements, Management is responsible for assessing the
Company’s and the Group’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 the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting
process.
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of the Financial Statements (continued)
Auditor’s Responsibilities for the Audit of the Separate and the Consolidated Financial Statements
Our objectives are to obtain reasonable assurance about whether the separate and the consolidated 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 separate and consolidated
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 separate and the consolidated 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 and the Group's internal controls.
• 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 and the Group’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 report to the
related disclosures in the separate and the consolidated 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 and the Group to
cease to continue as a going concern.
• Evaluate the overall presentation, structure and content of the separate and the consolidated financial
statements, including the disclosures, and whether the separate and the consolidated financial statements
represent the underlying transactions and events in a manner that achieves fair presentation.
• Obtain sufficient appropriate audit evidence regarding the financial information of the entities or business
activities within the Group to express an opinion on the consolidated financial statements. We are
responsible for the direction, supervision and performance of the group audit. We remain solely responsible
for our audit opinion.
INDEPENDENT AUDITOR’S REPORT (continued)
Report on the Audit of the Financial Statements
Auditor’s Responsibilities for the Audit of the separate and the Consolidated Financial Statements (continued)
We communicate with those charged with governance 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 those charged with governance 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 those charged with governance, we determine those matters that were of
most significance in the audit of the separate and the consolidated 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.
INDEPENDENT AUDITOR'S REPORT (continued)
Report on Other Legal and Regulatory Requirements
Report based on the requirements of Delegated Regulation (EU) No. 2018/815 amending Directive No.
2004/109/EC of the European Parliament and of the Council as regards regulatory technical standards for the
specification of the uniform electronic format for reporting (ESEF)
Auditor’s reasonable assurance report on the compliance of separate and consolidated financial statements (financial
statements), prepared based on the provision of Article 462 (5) of the Capital Market Act by applying the
requirements of the Delegated Regulation (EU) 2018/815 specifying for the issuers a single electronic reporting
format (“ESEF Regulation”). We conducted a reasonable assurance engagement on whether the financial statements
of the Company the Group for the financial year ended 31 December 2023 prepared to be made public pursuant to
Article 462 (5) of the Capital Market Act, contained in the electronic file [Croatian Telekom_2023-12-31_eng.zip],
have been prepared in all material aspects in accordance with the requirements of the ESEF Regulation.
Responsibilities of the Management and Those Charged with Governance
Management is responsible for the preparation and content of the financial statements in line with the ESEF
Regulation.
In addition, Management is responsible for maintaining the internal controls system that reasonably ensures the
preparation of financial statements without material differences with the reporting requirements from the ESEF
Regulation, whether due to fraud or error.
Furthermore, Company Management is responsible for the following:
• public reporting of financial statements presented in the annual report in valid XHTML format
• selection and use of XBRL markups in line with the requirements of the ESEF Regulation.
Those charged with governance are responsible for supervising the preparation of financial statements in ESEF format
as part of the financial reporting process.
Auditor’s Responsibilities
It is our responsibility to carry out a reasonable assurance engagement and, based on the audit evidence obtained,
give our conclusion on whether the financial statements have been prepared without material differences with the
requirements from the ESEF Regulation. We conducted our reasonable assurance engagement in accordance with
the International Standard on Assurance Engagements 3000 (Revised) – Assurance Engagements Other than Audits
or Reviews of Historical Financial Information (ISAE 3000). This standard requires that we plan and perform the
engagement to obtain reasonable assurance for providing a conclusion.
Quality management
We have conducted the engagement in compliance with independence and ethical requirements as provided by the
Code of Ethics for Professional Accountants (including International Independence Standards) issued by the
International Ethics Standards Board for Accountants. The code is based on the principles of integrity, objectivity,
professional competence and due diligence, confidentiality, and professional conduct. We comply with the
International Standard on Quality Management 1, Quality Management for Firms that Perform Audits and Reviews
of Financial Statements, and Other Assurance and Related Services Engagements (ISQM 1) and accordingly maintain
an overall management control system, including documented policies and procedures regarding compliance with
ethical requirements, professional standards, and applicable legal and statutory requirements.
INDEPENDENT AUDITOR'S REPORT (continued)
Report on Other Legal and Regulatory Requirements (continued)
Report based on the requirements of Delegated Regulation (EU) No. 2018/815 amending Directive No.
2004/109/EC of the European Parliament and of the Council as regards regulatory technical standards for the
specification of the uniform electronic format for reporting (ESEF) (continued)
Procedures performed
As part of the selected procedures, we have conducted the following activities:
• We have read the requirements of the ESEF Regulation;
• We have gained an understanding of internal controls of the Company and the Group, relevant for the
application of the ESEF Regulation requirements;
• We have identified and assessed the risks of material differences with the ESEF Regulation due to fraud or
error;
• We have devised and designed procedures for responding to estimated risks and obtaining reasonable
assurance in order to give our conclusion.
Our procedures focused on assessing whether:
• Financial statements included in the separate and the consolidated report have been prepared in valid
XHTML format;
• Data included in the separate and the consolidated financial statements required by the ESEF Regulation
have been marked up and meet all of the following requirements:
o XBRL has been used for markups.
o Core taxonomy elements stipulated in the ESEF Regulation with the closest accounting meaning
were used unless an extension taxonomy element was created in line with the Annex IV of the ESEF
Regulation;
o Markups comply with the common rules on markups in line with the ESEF Regulation.
We believe the evidence we obtained to be sufficient and appropriate to provide a basis for our conclusion.
Conclusion
We believe that, based on the procedures performed and evidence obtained, the financial statements of the
Company and the Group presented in the ESEF format, contained in the aforementioned electronic file, and based
on the provision of Article 462 (5) of the Capital Market Act, have been prepared to be published for public, in all
material aspects in accordance with the requirements of articles 3, 4 and 6 of the ESEF Regulation for the year ended
31 December 2023.
In addition to this conclusion, as well as the audit opinion contained in this Independent Auditor's Report for the
accompanying financial statements and annual report for the year ended 31 December 2023, we do not express any
opinion on the information contained in these documents or other information contained in the above mentioned
file.
INDEPENDENT AUDITOR’S REPORT (continued)
Report on Other Legal and Regulatory Requirements (continued)
Other reporting obligations as required by Regulation (EU) No. 537/2014 of the European Parliament and the
Council and the Audit Act
tĞ ǁĞƌĞ ĂƉƉŽŝŶƚĞĚ ĂƐ the statutory auditor of the Company and the Group by the shareholders on General
^ŚĂƌĞŚŽůĚĞƌƐMeeting held on ϭϬ May 2023 to perform audit of accompanying separate and consolidated financial
statements. Our total uninterrupted engagement has lasted ϭ year and covers period ϭ January 2023 to ϯϭ December
2023.
tĞĐŽŶĨŝƌŵƚŚĂƚ:
x our audit opinion on the accompanying separate and consolidated financial statements is consistent with
the additional report issued ƚŽ ƚŚĞƵĚŝƚ ŽŵŵŝƚƚĞĞŽĨƚŚĞCompany on ϭϱ March 20Ϯϰ in accordance with
ƚŚĞƌƚŝĐůĞϭϭŽĨZĞŐƵůĂƚŝŽŶ ;hͿ EŽ ϱϯϳϮϬϭϰŽĨ ƚŚĞƵƌŽpean Parliament and the Council;
x no prohibited non-ĂƵĚŝƚ ƐĞƌǀŝĐĞƐ ƌĞĨĞƌƌĞĚ ƚŽ ŝŶ ƚŚĞ ƌƚŝĐůĞ ϱ;ϭͿ ŽĨ ZĞŐƵůĂƚŝŽŶ ;hͿ EŽ ϱϯϳϮϬϭϰ ŽĨ ƚŚĞ
European Parliament and the Council were provided.
There are no services, in addition to the statutory audit, which we provided to the Company and its controlled
ƵŶĚĞƌƚĂŬŝŶŐƐĂŶĚǁŚŝĐŚŚĂǀĞŶŽƚďĞĞŶĚŝƐĐůŽƐĞĚŝŶƚŚĞŶŶƵĂůZĞƉŽƌƚ.
dŚĞĞŶŐĂŐĞŵĞŶƚƉĂƌƚŶĞƌŽŶƚŚĞĂƵĚŝƚƌĞƐƵůƚŝŶŐŝŶƚŚŝƐŝŶĚĞƉĞŶĚĞŶƚĂƵĚŝƚŽƌƐƌĞƉŽƌƚŝƐKatarina Kadunc.
Katarina Kadunc
Director and Certified auditor
Deloitte d.o.o.
ϭϵ March 2023
ZĂĚŶŝēŬĂ ĐĞƐƚĂ ϴϬ
ϭϬϬϬϬĂŐƌĞď
Croatia
This version of the auditor`s report is translation from the original, which was prepared in the Croatian language. All possible care has been taken to ensure that the
translation is an accurate representation of the original. However, in all matters of interpretation of information, views or opinions, the original language version of the
report takes precedence over this translation.
Di
g
i
ta
ll
y s
i
gne
d
b
y:
KATARINA KADUNC
Date:
19-ožu-2024
08:31:40
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DN:
C=HR
O=DELOITTE D.O.O.
2.5.4.97=#130D485231313
6
L=ZAGREB
S=KADUNC
G=KATARINA
CN=KATARINA KADUNC
Consolidated and separate statement of comprehensive income
For the year ended 31 December 2023
11 Croatian Telecom Inc.
Group
Company
EUR thousand
Notes
2023
2022
2023
2022
Revenue
4
Other operating income
5
Merchandise, material and energy expenses
6
(229,548 )
(209,683 )
(180,225 )
(161,069 )
Service expenses
7
(102,324 )
(99,529 )
(77,499 )
(72,756 )
Employee benefits expenses
9
(162,311 )
(150,869 )
(125,954 )
(117,625 )
Capitalized work performed by the Group
and the Company
9
Depreciation and amortization
8
(270,229 )
(263,702 )
(231,948 )
(222,741 )
Impairment of non-current assets
8
(754 )
(20,719 )
(628 )
(14,566 )
Net impairment losses on trade receivables
and contract assets
25
(12,050 )
(8,470 )
(10,544 )
(6,548 )
Other expenses
10
(117,777 )
(128,336 )
(100,295 )
(110,388 )
__________
__________
__________
__________
Operating profit
4
__________
__________
__________
__________
Finance income
11
Finance costs
12
(9,527 )
(12,095 )
(6,385 )
(10,192 )
__________
__________
__________
__________
Finance costs – net
(941 )
(8,212 )
(7,051 )
__________
__________
__________
__________
Profit before income tax
Income tax expense
13
(26,834 )
(29,793 )
(28,323 )
(25,150 )
__________
__________
__________
__________
Profit for the year
__________
__________
__________
__________
Items that may be subsequently
reclassified to comprehensive income
Effects of foreign exchange
Result from effective cash flow hedging
(172 )
(172 )
Items that will not be subsequently
reclassified to comprehensive income
Changes in the fair value of equity
instruments at fair value
Actuarial gains
Other comprehensive income/ (loss) for
the year, net of tax
(123 )
(123 )
__________
__________
__________
__________
Total comprehensive income for the year,
net of tax
__________
__________
__________
__________
Consolidated and separate statement of comprehensive income (continued)
For the year ended 31 December 2023
12 Croatian Telecom Inc.
Group
Company
EUR thousand
Notes
2023
2022
2023
2022
Profit attributable to:
Equity holders of the Company
Non-controlling interest
__________
__________
__________
__________
__________
__________
__________
__________
Total comprehensive income arisen from
continuing operations attributable to:
Equity holders of the Company
Non-controlling interest
__________
__________
__________
__________
__________
__________
__________
__________
Earnings per share
Basic and diluted, from continuing
operations attributable to equity holders of
the Company during the year
14
EUR 1.69
EUR 1.10
EUR 1.60
EUR 1.16
__________
__________
__________
__________
The accompanying accounting policies and notes are an integral part of these consolidated and separate financial
statements.
Consolidated and separate statement of financial position
As at 31 December 2023 STRICTLY CONFIDENTIAL
13 Croatian Telecom Inc.
Group
Company
31 December
31 December
31 December
31 December
EUR thousand
Notes
2023
2022
2023
2022
ASSETS
Non-current assets
Intangible assets
15
Right-of-use assets
17
Property, plant and equipment
16
Investment property
Investments in subsidiaries
18
Financial assets at fair value through
other comprehensive income
21
Trade and other receivables
25
Contract assets
26
Capitalized contract costs
26
Prepayments
27
Deferred tax asset
13
__________
__________
__________
__________
Total non-current assets
__________
__________
__________
__________
Current assets
Inventories
23
Assets classified as held for sale
19, 20, 24
Trade and other receivables
25
Contract assets
26
Capitalized contract costs
26
Receivables from subsidiaries
40
Prepayments
27
Financial assets at amortized cost
22
Bank deposits
28
Loans receivable from subsidiaries
40
Cash and cash equivalents
28
__________
__________
__________
__________
Total current assets
__________
__________
__________
__________
TOTAL ASSETS
___________
__________
__________
__________
Consolidated and separate statement of financial position (continued)
As at 31 December 2023 STRICTLY CONFIDENTIAL
14 Croatian Telecom Inc.
Group
Company
31 December
31 December
31 December
31 December
EUR thousand
Notes
2023
2022
2023
2022
EQUITY AND LIABILITIES
Issued capital and reserves
Issued share capital
33
Legal reserves
34
Effects of foreign exchange
Other reserves
Cash flow hedge reserves
35
(172 )
(172 )
Reserve for treasury shares
36
Treasury shares
36
(22,170 )
(808 )
(21,226 )
(472 )
Retained earnings
37
__________
__________
__________
__________
Total equity attributable to equity
holders of the parent
Non-controlling interest
__________
__________
__________
__________
Total issued capital and reserves
__________
__________
__________
__________
Non-current liabilities
Provisions
31
Lease liabilities
17
Liabilities from other derivative financial
instruments for cash flow hedges
Employee benefit obligations
30
Trade payables and other liabilities
29
Deferred tax liability
13
__________
__________
__________
__________
Total non-current liabilities
__________
__________
__________
__________
Current liabilities
Trade payables and other liabilities
29
Contract liabilities
26
Employee benefit obligations
30
Accruals
32
Payables to subsidiaries
40
Lease liabilities
17
Income tax payable
Deferred income
__________
__________
__________
__________
Total current liabilities
__________
__________
__________
__________
Total liabilities
__________
__________
__________
__________
TOTAL EQUITY AND LIABILITIES
__________
__________
__________
__________
The accompanying accounting policies and notes are an integral part of these consolidated and separate financial
statements.
Consolidated and separate statement of cash flows
For the year ended 31 December 2023
Croatian Telecom Inc.
15
Group
Company
EUR thousand
Notes
2023
2022
2023
2022
Operating activities
Profit before income tax
Depreciation and amortization
8
Impairment loss of PPE & Intangible assets
8
Impairment of investment in joint venture
8
Interest income
11
(7,009 )
(951 )
(6,552 )
(718 )
Interest expense
12
(Gain) / loss on disposal of assets
5,10
(500 )
(5,921 )
(434 )
(5,539 )
Other net financial loss
11,12
(Increase) / decrease in inventories
(9,669 )
(1,702 )
(4,348 )
Net impairment losses on trade receivables and contract assets
25
(Increase) / decrease in receivables and prepayments
(60,973 )
(43,966 )
(59,608 )
(26,817 )
(Increase) / decrease in contract assets/costs
26
(10,470 )
(2,654 )
(11,877 )
(2,005 )
Increase / (decrease) in payables and accruals
Increase / (decrease) in contract liabilities
(1,725 )
(2,654 )
Increase / (decrease) in provisions
31
(3,036 )
(3,283 )
Increase / (decrease) in employee benefit obligations
30
Increase / (decrease) in accruals
32
Other non-cash items
(146 )
_________
_________
_________
_________
Cash generated from operations
Interest paid
(6,533 )
(5,368 )
(5,431 )
(4,525 )
Income tax paid
(34,417 )
(17,479 )
(32,012 )
(17,089 )
_________
_________
_________
_________
Net cash flows from operating activities
_________
_________
_________
_________
Investing activities
Purchase of non-current assets
(303,565 )
(194,768 )
(275,903 )
(175,563 )
Proceeds from sale of non-current assets
Proceeds from financial assets at fair value through other
comprehensive income
Receipts from investments in financial assets
Other investment (paid) / received
(282 )
(468 )
Given loan to subsidiary
(27,000 )
(19,908 )
Loan repayment from subsidiary
Proceeds from given guarantee deposit
Payments for secured deposits
(29,320 )
(8,625 )
(29,190 )
Interest received
_________
_________
_________
_________
Net cash flows used in investing activities
(311,255 )
(158,607 )
(290,016 )
(125,565 )
_________
_________
_________
_________
Financing activities
Dividends paid
37
(86,464 )
(83,649 )
(86,464 )
(83,649 )
Dividend paid to non-controlling interest in subsidiary
(541 )
(664 )
Repayment of radio frequency spectrum and content
43
(34,613 )
(43,299 )
(26,659 )
(36,368 )
Repayment of lease liability principal amounts
17
(45,568 )
(42,127 )
(40,556 )
(38,528 )
Acquisition of treasury shares
36
(22,417 )
(24,283 )
(21,190 )
(23,947 )
_________
_________
_________
_________
Net cash flows used in financing activities
(189,603 )
(194,020 )
(174,869 )
(182,492 )
_________
_________
_________
_________
Net (decrease) / increase/ in cash and cash equivalents
(140,344 )
(7,728 )
(148,933 )
Cash and cash equivalents as at 1 January
Exchange (losses) on cash and cash equivalents
_________
_________
_________
_________
Cash and cash equivalents as at 31 December
28
________
________
________
________
Consolidated statement of changes in equity
For the year ended 31 December 2023TIAL
16 Croatian Telecom Inc.
Group
Issued
share capital
Legal
reserves
Effects of
foreign
exchange
Other reserves
Cash flow
hedge
reserves
Reserve for
treasury share
Treasury
shares
Retained
earnings
Total equity
attributable
to equity
holders of
the parent
Non-
controlling
interest
Total equity
EUR thousand
(Note 33
)
(Note 34
)
(Note 35)
(Note 36
)
(Note 36
)
(Note 37)
Balance as at 1 January 2022
(8,149 )
Profit for the year
Other comprehensive income for the year
________
______
_______
________
________
________
_________
_________
_________
__________
________
Total comprehensive income for the year
Dividends (Note 37)
(83,649 )
(83,649 )
(664 )
(84,313 )
Reserve for treasury shares
(23,947 )
Acquisition of treasury shares
(24,283 )
(24,283 )
(24,283 )
Share based payments
(373 )
Effect of merger of subsidiary (Note 3)
(1,416 )
(1,416 )
(1,416 )
Shares cancelled
(31,251 )
Other changes
(8 )
_______
______
_______
__________
_______
_______
_________
_________
________
__________
_________
Balance as at 31 December 2022 1,359,742 67,987 361 200 - 472 (808 ) 206,490 1,634,444 32,561 1,667,005
_______
_______
_______
__________
_______
________
__________
__________
________
__________
_________
Balance as at 1 January 2023
Profit for the year
Other comprehensive income for the year
(172 )
(123 )
(123 )
________
______
_______
________
________
________
________
________
________
________
________
Total comprehensive income for the
year
Dividends (Note 37)
(86,464 )
(86,464 )
(541 )
(87,005 )
Reserve for treasury shares
(20,754 )
Acquisition of treasury shares
(22,134 )
(22,134 )
(283 )
(22,417 )
Share based granted
Shares cancelled
Other changes
(3 )
(383 )
(277 )
_______
______
_______
__________
_______
_______
_________
_________
________
__________
_______
Balance as at 31 December 2023
Separate statement of changes in equity
For the year ended 31 December 2023TIAL
17 Croatian Telecom Inc.
Company
Issued
share capital
Legal
reserves
Other reserves
Cash flow
hedge reserves
Reserve for
treasury shares
Treasury
shares
Retained
earnings
Total
EUR thousand
(Note 33)
(Note 34)
(Note 35)
(Note 36)
(Note 36)
(Note 37)
Balance as at 1 January 2022
(8,149 )
__________
__________
__________
__________
__________
__________
__________
______
Profit for the year
Other comprehensive income for the year
__________
__________
__________
__________
__________
__________
__________
__________
Total comprehensive income for the year
Reserve for treasury shares
(23,947 )
Acquisition of treasury shares
(23,947 )
(23,947 )
Shares cancelled
(31,251 )
Share based payments
(374 )
Effect of merger of subsidiary (Note 3)
(4,725 )
(4,725 )
Other changes
Dividends paid to equity holders of the Company
(83,649 )
(83,649 )
__________
__________
__________
__________
__________
__________
__________
__________
Balance as at 31 December 2022
(472 )
__________
__________
__________
__________
__________
__________
__________
__________
Balance as at 1 January 2023
(472 )
Profit for the year
Other comprehensive income for the year
(172 )
(123 )
__________
__________
__________
__________
__________
__________
_________
__________
Total comprehensive income for the year
(172 )
Reserve for treasury shares
(20,754 )
Acquisition of treasury shares
(21,190 )
(21,190 )
Share based granted
Other changes
Dividends paid to equity holders of the Company
(86,464 )
(86,464 )
__________
__________
__________
__________
__________
__________
__________
__________
Balance as at 31 December 2023
(172 )
(21,226 )
The accompanying accounting policies and notes are an integral part of these and separate financial statements.
Notes to the consolidated and separate financial statements DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
18 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 53.02% 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 (“DTAG”). Thus, Deutsche Telekom AG is the ultimate
controlling parent.
The registered office address of the Company is Radnička cesta 21, Zagreb, Croatia .
The consolidated financial statements include the financial statements of:
| Ownership interest | |||||
| 31 | 31 | ||||
| December | December | ||||
| Entity | Country of Business | Principal Activities | 2023 | 2022 | |
| Croatian Telecom Inc. | Republic of Croatia | Provision of fixed and | |||
| mobile telephony services, | |||||
| internet and data services | |||||
| Combis d.o.o. Zagreb | Subsidiary | Republic of Croatia | Provision of IT services | 100% | 100% |
| Combis d.o.o. Sarajevo | Subsidiary of | Federation of Bosnia | Provision of IT services | 100% | 100% |
| Combis d.o.o. | and Herzegovina | ||||
| Zagreb | |||||
| Combis – IT usluge d.o.o. | Subsidiary of | Republic of Serbia | Provision of IT services | 100% | 100% |
| Belgrade | Combis d.o.o. | ||||
| Zagreb | |||||
| Iskon Internet d.d. | Subsidiary | Republic of Croatia | Provision of internet and | 100% | 100% |
| data services | |||||
| Crnogorski Telekom AD | Subsidiary | Republic of Montenegro | Provision of fixed and | 76.93% | 76.53% |
| mobile telephony services, | |||||
| internet and data services | |||||
| HT holding d.o.o. | Subsidiary | Republic of Croatia | Founding and managing | 100% | 100% |
| other companies | |||||
| JP HT d.d. Mostar | Joint venture | Federation of Bosnia | Provision of fixed and | 39.10% | 39.10% |
| and Herzegovina | mobile telephony services, | ||||
| internet and data services | |||||
The total number of employees of the Group as at 31 December 2023 was 4,917 (31 December 2022: 4,984 and the
total number of employees of the Company as at 31 December 2023 was 3,804 (31 December 2022: 3,881).
The principal activities of the Group and the Company are described in Note 4.
The consolidated and separate financial statements for the financial year ended 31 December 2023 were authorized
for issue in accordance with a resolution of the Management Board on 15 March 2024. These consolidated and
separate financial statements are subject to approval of the Supervisory Board as required by the Croatian Company
Act. Annual consolidated financial statements of DT Group are disclosed on the web page of Deutsche Telekom in
Investor Relations.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
19 Croatian Telecom Inc.
2.1. Basis of preparation
The consolidated and separate financial statements have been prepared in accordance with International Financial
Reporting Standards (IFRS Accounting Standards) as endorsed by the EU. The consolidated and separate financial
statements also comply with the Croatian Accounting Act on consolidated and separate financial statements, which
the historical cost convention, as modified by the revaluation financial assets at fair value through other
comprehensive income (Note 21), as disclosed in the accounting policies hereafter.
Starting from this reporting period, Hrvatski Telekom d.d. ("Company") and HT Group ("Group") are issuing
consolidated and separate financial statements within the same report for the first time. This change aims to enhance
clarity, transparency, and simplicity for users of these financial statements. As part of our accounting policies, we have
included all relevant and significant policies for both levels, which were previously presented in separate reports. In
addition to the above, there have been no additional significant changes in the reporting or presentation of information
in the annual report.
As of 1 January 2023, Republic of Croatia entered the Euro zone and Croatian Kuna (HRK) was replaced by new
currency Euro (EUR). As a result, the Group and Company have changed its presentation and functional currency for
2023 financial statements to EUR as of that date. Comparative financial information is translated by using the official
conversion rate of 7,53450 HRK / EUR.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
20 Croatian Telecom Inc.
2.2. Changes in accounting policies and disclosures
New and amended IFRS Accounting Standards that are effective for the current year
In the current year, the Group and Company have applied a number of amendments to IFRS Accounting Standards
issued by the International Accounting Standards Board (IASB) and adopted by the EU that are mandatorily effective
for reporting period that begins on or after 1 January 2023. Their adoption has not had any material impact on the
disclosures or on the amounts reported in these financial statements.
| Standard | Title |
| IFRS 17 | New standard IFRS 17 “Insurance Contracts” including the June 2020 and December |
| 2021 Amendments to IFRS 17 | |
| Amendments to IAS 1 | Disclosure of Accounting Policies |
| Amendments to IAS 8 | Definition of Accounting Estimates |
| Amendments to IAS 12 | Deferred Tax related to Assets and Liabilities arising from a Single Transaction |
| Amendments to IAS 12 | International Tax Reform — Pillar Two Model Rules* |
New and revised IFRS Accounting Standards in issue and adopted by the EU but not yet effective
At the date of authorisation of these financial statements, the Group and Company have not applied the following revised
IFRS Accounting Standards that have been issued by IASB and adopted by EU but are not yet effective:
| Standard | Title | Effective date |
| Amendments to IFRS | Lease Liability in a Sale and Leaseback | 1 January 2024 |
| 16 | ||
| Amendments to IAS 1 | Classification of Liabilities as Current or Non- | 1 January 2024 |
| Current and Non-current Liabilities with Covenants |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
21 Croatian Telecom Inc.
2.2. Changes in accounting policies and disclosures (continued)
New and revised IFRS Accounting Standards in issue but not adopted by the EU
At present, IFRS as adopted by the EU do not significantly differ from IFRS adopted by the International Accounting
Standards Board (IASB) except for the following new standards and amendments to the existing standards, which were
not adopted by the EU at the date of authorisation of these financial statements:
| Standard | Title | EU adoption status |
| Amendments to IAS 7 | Supplier Finance Arrangements | Not yet adopted by EU |
| and IFRS 7 | (IASB effective date: 1 January 2024) | |
| Amendments to IAS 21 | Lack of Exchangeability | Not yet adopted by EU |
| (IASB effective date: 1 January 2025) | ||
| IFRS 14 | Regulatory Deferral Accounts | the European Commission has |
| (IASB effective date: 1 January 2016) | decided not to launch the | |
| endorsement process of this | ||
| interim standard and to wait for | ||
| the final standard | ||
| Amendments to IFRS | Sale or Contribution of Assets between an Investor | Endorsement process |
| 10 and IAS 28 | and its Associate or Joint Venture and further | postponed indefinitely until the |
| amendments (effective date deferred by IASB | research project on the equity | |
| indefinitely but earlier application permitted) | method has been concluded |
The Group and Company do not expect that the adoption of the Standards listed above will have a material impact on
the financial statements of the Group and Company in future periods.
Hedge accounting for a portfolio of financial assets and liabilities whose principles have not been adopted by the EU
remains unregulated. According to the Group’s and Company’s estimates, the application of hedge accounting to a
portfolio of financial assets or liabilities pursuant to IAS 39: “Financial Instruments: Recognition and Measurement”
would not significantly impact the financial statements, if applied as at the balance sheet date.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
22 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions
2.3.1. Significant accounting estimates
The preparation of the Group’s and the Company’s financial statements require 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 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 Group and the Company and are exposed to several 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 Group and the Company use 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 31 and 39. Changes in these judgments could have a significant impact on
the financial statements of the Group and 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 many 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 consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
23 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
2.3.1. Significant accounting estimates (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 and 16.
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 Group and the Company.
Further, due to the significant weight of depreciable assets in the Group’s and 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
Group and the Company.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
24 Croatian Telecom Inc.
2.3 Significant accounting judgments, estimates and assumptions (continued)
2.3.1. Significant accounting estimates (continued)
Impairment of goodwill
The Group tests annually whether goodwill has suffered any impairment. The recoverable amounts of cash-generating
units have been determined based on value in use calculations. These calculations require the use of estimates (Note
15). Management believes that no reasonably possible change in any of the key assumptions 2023 would cause the
carrying value of the business and residential cash-generating units, and cash-generating unit Crnogorski Telekom, to
materially exceed their recoverable amount.
Content contract liability
As explained in intangible asset accounting policy (Note 2.4.) content costs are capitalized with related liability
recognised. 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.
Intangible assets with an indefinite life
In arriving at the conclusion that the acquired brand EVOtv has an indefinite life, the Group and the Company considered
the fact that the brand represents a residential segment and relate to operators with proven and sustained demand for
their products and services in a well-established market. The brand EVOtv has historically been supported through
spending on consumer marketing and promotion. The Group considered other factors such as the ability to continue to
protect the legal rights that arise from the brands name indefinitely and the absence of any competitive factors that
could limit the life of the brand name. The Group and the Company expect continued economic benefits from the
acquired brand in the future. However, a strategic decision to withdraw marketing support from the brand or the
weakening in the brand’s appeal through changes in customer preferences might result in an impairment charge in the
future. Also, reasonable change in certain key assumptions (such as change of revenues by 2% and change in royalty
relief rate by 0.1%) does not lead to impairment.
Expected credit loss (ECL) measurement
Model of Expected Loss (ECL) is implemented in accordance with IFRS 9. 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
forward looking parameters relevant to the credit risk.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
25 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
2.3.1. Significant accounting estimates (continued)
Expected credit loss (ECL) measurement (continued)
Macroeconomic data are linked to historical customer behaviour, 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, resulting in the recognition of a loss allowance before the credit loss
is incurred.
Besides above stated assets to which a simplified approach applies, subsequent measurement of all other assets in
scope of ECL 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 | Period of measurement of ECL | Increase of credit risk |
| risk | ||
| Bucket 1 | 12-month expected credit losses | None or not significant |
| Performing | ||
| Bucket 2 | Lifetime expected credit losses | Significant |
| Underperforming | ||
| Significant | ||
| Bucket 3 | + | |
| Lifetime expected credit losses | There is evidence that | |
| Non-performing | 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 once a year
to measure credit risk and historical data in order to quantify expected credit loss.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
26 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
2.3.1. Significant accounting estimates (continued)
Expected credit loss (ECL) measurement (continued)
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 Group and Company customer payment behaviour in order to see possible change of credit
risk percentages applied.
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, receivables are claimed at Court within the statute of limitations.
Analysis receivables and respective value adjustment showed significant collection in first year from due date and
subsequent two years through claims.
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, inflation 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 consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
27 Croatian Telecom Inc.
2.3. Significant accounting judgments, estimates and assumptions (continued)
2.3.1. Significant accounting estimates (continued)
Revenue recognition
Following IFRS15 judgments are applied in portfolio approach in order to reflect contracts behaviour 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% (2022: 3%-10%) and
penalty fee collection in range of 52%-88% (2022: 52%-81%), depending on portfolio / customer group
- value adjustment of contract asset due to non-payment (relation with IFRS 9) in range of 0.1%-3% (2022: 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 and medium customer
segment and non-linear 3 months usage after contract inception is approximation for very small enterprises
(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 Group and Company have 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, an income approach is applied 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 consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
28 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, share of profit and loss from associate 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) Business Combinations and Goodwill
Subsidiaries are all entities over which the Group has control. The Group controls an entity when the Group is exposed
to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through
its power over the entity. Subsidiaries are fully consolidated from the date on which control is transferred to the Group
and are deconsolidated from the date that control ceases.
The Group applies the acquisition method to account for business combinations. The consideration transferred for the
acquisition of a subsidiary is the fair values of the assets transferred, the liabilities incurred to the former owners of the
acquire and the equity interests issued by the Group. The consideration transferred includes the fair value of any asset
or liability resulting from a contingent consideration arrangement. Identifiable assets acquired and liabilities and
contingent liabilities assumed in a business combination are measured initially at their fair values at the acquisition date.
The Group recognizes any non-controlling interest in the acquire on an acquisition-by-acquisition basis, either at fair
value or at the non-controlling interest’s proportionate share of the recognized amounts of acquiree’s identifiable net
assets. Acquisition-related costs are expensed as incurred.
If the business combination is achieved in stages, the acquisition date fair value of the acquirer’s previously held equity
interest in the acquire is remeasured to fair value as at the acquisition date through the statement of comprehensive
income.
Any contingent consideration to be transferred by the Group is recognized at fair value at the acquisition date.
Subsequent changes to the fair value of the contingent consideration that is deemed to be an asset or liability is
recognized in accordance with IFRS 9 in statement of comprehensive income. Contingent consideration that is classified
as equity is not remeasured, and its subsequent settlement is accounted for within equity.
Goodwill is initially measured as the excess of the aggregate of the consideration transferred and the amount of non-
controlling interest in the acquire over the fair value of identifiable net assets acquired. If this consideration is lower than
the fair value of the net assets acquired, the difference is recognized in profit or loss. Following initial recognition,
goodwill is measured at cost less any accumulated impairment losses.
Inter-company transactions, balances, income and expenses on transactions between group companies are eliminated.
Profits and losses resulting from inter-company transactions that are recognized in assets are also eliminated.
Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies
adopted by the Group.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
29 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
b) Business Combinations and Goodwill (continued)
Purchases of subsidiaries from parties under common control
Purchases of subsidiaries from parties under common control are accounted for using the predecessor values method.
Under this method the consolidated and separate financial statements of the combined entity are presented as if the
businesses had been combined from the beginning of the earliest period presented or, if later, the date when the
combining entities were first brought under common control. The assets and liabilities of the subsidiary transferred under
common control are at the predecessor entity’s carrying amounts.
The predecessor entity is considered to be the highest reporting entity in which the subsidiary’s IFRS financial
information was consolidated. Related goodwill inherent in the predecessor entity’s original acquisitions is also recorded
in these consolidated and separate financial statements. Any difference between the carrying amount of net assets,
including the predecessor entity’s goodwill, and the consideration for the acquisition is accounted for in these
consolidated and separate financial statements as an adjustment to retained earnings.
c) 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.
d) Investment in joint venture
The Group and Company have 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. The Group
recognizes its interest in the joint venture using equity method of accounting, while the Company recognizes it using
cost method. The financial statements of the joint venture are prepared for the same reporting period as the parent
company.
Adjustments are made where necessary to bring the accounting policies into line with those of the Group and
Company. Adjustments are made in the Group’s and Company’s financial statements to eliminate the Group’s and
Company’s share of unrealised gains and losses on transactions between the Group or Company and its jointly
controlled entity.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
30 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
d) Investment in joint venture (continued)
Losses on transactions are recognized immediately if the loss provides evidence of a reduction in the net realisable
value of current assets or an impairment loss. Interest in the joint venture is derecognized at the date on which the
Group or Company cease to have joint control over the joint venture.
When the Group’s and Company’s share of losses in a joint venture equals or exceeds its interest in the joint venture,
the Group and Company do not recognize further losses, unless it has incurred legal or constructive obligations or
made payments on behalf of the joint venture. Unrealized gains on transactions between the Group and Company
and its joint venture are eliminated to the extent of the Group’s and Company’s interest in the joint venture. Unrealised
losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred.
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 Group, 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.
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 and Group recognize costs of content as an intangible asset at the inception of the related contract. The
Company and Group 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.
Customer relationships and long-term customer contracts acquired in a business combination are recognised at fair
value at the acquisition date. They have a finite useful life and are subsequently carried at cost less accumulated
amortisation and impairment losses.
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 |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
31 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
e) Intangible assets (continued)
| Software, content and other assets | 2-8 years or as per |
| contract duration | |
| Customer relationship | 6.5–10.5 years |
| Brand | Indefinite |
| HAKOM licence | Indefinite |
| Long-term customer contracts | 1.5-7 years |
Assets under construction are not amortised but are being reviewed for impairment annually.
Goodwill arises on the acquisition of subsidiaries. For impairment testing, goodwill acquired in a business combination
is allocated to each of the Group’s cash generating units, or groups of cash generating units, that are expected to
benefit from the synergies of the combination. Each unit or group of units to which the goodwill is allocated represents
the lowest level within the Group at which the goodwill is monitored for internal management purposes and is not
larger than an operative segment before aggregation.
Goodwill, intangible assets with indefinite useful lives and intangible assets under construction are reviewed for
impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be
impaired. Impairment for goodwill is determined by assessing the recoverable amount, based on value in use
calculations, of the cash-generating unit (or group of cash-generating units), to which the goodwill relates. Where the
recoverable amount of the cash-generating unit (or group of cash-generating units) is less than the carrying amount of
the cash-generating unit (group of cash-generating units) to which goodwill has been allocated, an impairment loss is
recognized. Impairment losses relating to goodwill cannot be reversed in future periods. The Group performs its annual
impairment test of goodwill as at 31 December. Please see Note 15 for more details.
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 of an organizational unit relating to specific product 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.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
32 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
f) Property, plant and equipment (continued)
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 carrying amount and are recognised within ‘Other expenses’ in the statement of comprehensive income.
g) Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation 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 recognised 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 inflows (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 based on weighted average cost.
Material spare parts and stand-by equipment qualify as property, plant, and equipment if the requirements of IAS 16 -
Property, Plant, and Equipment are met and the entity expects to use these assets during more than one period.
Similarly, if the spare parts and stand-by equipment can only be used in association with property, plant, and equipment
and their use is expected to be irregular, they are reported as property, plant, and equipment.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
33 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
i) Government grants
Government grants are recognised when there is reasonable assurance that the grant will be received and all attached
conditions will be complied with. When the grant relates to an expense item, it is recognised as income on a systematic
basis over the periods that the related costs, for which it is intended to compensate, are expensed. When the grant
relates to an asset, it is recognised as income in equal amounts over the expected useful life of the related asset. When
the Group or Company receive grants of non-monetary assets, the asset and the grant are recorded at nominal amounts
and released to profit or loss over the expected useful life of the asset, based on the pattern of consumption of the
benefits of the underlying asset by equal annual instalments.
j) 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 or Group. 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 as asset
held for sale.
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 (2022: 10 to 50 years).
Subsequent expenditure is capitalized only when it is probable that future economic benefits associated with it will flow
to the Company and Group 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.
k) Assets Classified as Held for Sale
Held for sale assets are long-lived assets for which a Company and Group have 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.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
34 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
l) Financial assets
All assets are classified and measured as described below:
The business model reflects how the Company and the Group manage the debt financial assets in order to generate
cash flows – whether the Company’s and Group’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 debt instrument. If the
business model is only „held to collect“ contractual cashflows (principal + interest) without intention to sell, debt
instruments are measured at amortized cost.
Receivables which are sold to Collecting Agency (as way of collection) are considered to be in the ‘held to collect’
business model and are therefore measured at amortized cost (the SPPI test is satisfied).
| 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 | Amortized cost |
| Cash flow hedge derivative | 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 | Fair value through Other Comprehensive Income without recycling |
| to Profit and Loss (FVOCI) |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
35 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
l) Financial assets (continued)
Equity instruments
Held equity instruments include strategic investments. HT 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
m) Foreign currencies
Transactions denominated in foreign currencies are translated into local currency (functional currency of each entity of
the Group) 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.
n) 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 realized 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 and Group expect, 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 Group and it is probable that the temporary difference will not
reverse in the foreseeable future.
Generally, the Company and Group are unable to control the reversal of the temporary difference for associates.
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.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
36 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
n) Taxation (continued)
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.
o) Employee benefit obligations
The Group and Company provide post-employment benefits and incentive plan payments (Note 30). These benefits
include pension, jubilee benefit, LTI and Game Changer. 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.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
37 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
p) Revenue recognition
Revenue is income arising in the course of the Group’s and 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 Group and Company expect 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), Group and Company
allocate 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 Group and 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.
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. In ICT solutions business, if service realization extend 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 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 made 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. For mass market, if services extend to more than one accounting period (e.g. postpaid
flat tariffs), revenue is recognized in fixed amounts to which the Group and Company have the right to invoice.
In determining the transaction price, the Group and the Company adjust 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 Group or Company with a significant benefit of financing the transfer of goods
or services to the customer. The Group and Company make 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 Group’s and 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 Group did not identify significant financing component in contracts with
customers.
The Group and the Company apply 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 consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
38 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
p) Revenue recognition (continued)
The Group and the Company use practical expedient not to disclose the outstanding transaction price allocated to
performance obligations that are unsatisfied (or partially unsatisfied) when the revenue is recognised overtime in line
with billed revenue.
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 Group and 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.
IFRS 15 Standard has impact, on following business events:
Multiple element arrangements – in case of multiple-element arrangements (e.g. mobile contract plus handset) with
subsidised 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. Standalone selling price of service includes additional discount to customers for not buying
devices at discounted prices (if such discounts are part of marketing offer). 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 telecommunication costs occurred to fulfil contracts with customers as well as cost of
vouchers / benefits for third party products granted at contract inception. These costs are capitalized as Contract costs
and amortised over contract duration period (usually 24 months).
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
39 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
p) Revenue recognition (continued)
One-time payments made in advance by the customer that do 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.
q) 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
amortised 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.
r) Provisions
A provision is recognized when, and only when, the Company and the Group have 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 and the Group is demonstrably committed to a
termination of employment contracts, that is when the Company and the Group have 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 recognised 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 recognised as prepayment.
A number of sites and other assets are utilised 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.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
40 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
r) Provisions (continued)
Asset retirement obligation
Asset retirement obligation costs primarily arise in situations where the Group and the Company have a legal obligation
to dismantle and remove assets on third party's properties, where said assets meet the definition of assets (it is likely
that future economic benefits associated with the asset will flow into the Group and the Company and the costs of those
assets can be reliably measured), and when the Group or the Company installs assets such as buildings for the
accommodation of equipment, antenna poles, antenna supports and systems.
Depreciation period of ARO assets is determined based on an estimated time frame in which dismantling will take place.
In accordance with IAS 37, the period in which the ARO asset is discounted, the discount rate and the dismantling price
is reconsidered every year and depending on the possible change in the mentioned parameters, an increase or
decrease in the provision for the dismantling of the asset is booked.
The goal is that the amount at the end of the period of use of the asset, which constitutes the initial reservation increased
by the accrued interest, during the discounting period, will be sufficient for the total cost of dismantling the asset.
The Group and the Company reconsider these provisions every year.
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.
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 45. 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 recognised 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 and Group’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 consolidated and separate 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.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
41 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
w) Dividend distribution
Dividend distributions to the Company’s and Group’s shareholders are recognized as a liability in the Company’s and
Group’s financial statements in the period in which the dividends are approved by the Company’s and the Group’s
shareholders.
x) Earnings per share
Earnings per share are calculated by dividing the profit attributable to equity holders of the Company and the Group by
the weighted average number of ordinary shares in issue during the year excluding ordinary shares purchased by the
Company and the Group and held as treasury shares.
y) Contributed equity
Ordinary shares are classified as equity. Shares held by the Company and the Group are disclosed as treasury shares
z) Right-of-use assets
Leases are recognised as right-of-use assets and corresponding liabilities at the date at which the leased assets are
available for use by the Group and 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;
• 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 Group and Company is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying assets’ useful lives. The amortisation periods for the right-of-use assets are as follows:
| Buildings | 1 - 32 years |
| Equipment | 2 - 6 years |
| Land | 0.5 - 30 years |
| Lease lines | 1 - 25 years |
| Vehicles | 0.5 - 6 years |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
42 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
z) Right-of-use assets (continued)
Lease lines class refers to the lines on locations where the Group or the Company does not build its own network, but
rents already built lines.
Payments associated with all short-term leases are recognised 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 Group and the Company under residual value guarantees;
• the exercise price of a purchase option if the Group and the Company is reasonably certain to exercise that
option;
• payments of penalties for terminating the lease, if the lease term reflects the Group and 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 Group’s and 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.
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,
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
43 Croatian Telecom Inc.
2.4. Significant accounting policies (continued)
bb) Finance lease (continued)
• 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 consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
44 Croatian Telecom Inc.
3 Changes in Group structure
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 assets and liabilities of HT Production were transferred into Croatian Telecom Inc.
The carrying value of transferred assets and liabilities of HT Production in the Company as at the date of merger were:
| in EUR thousand | |
| Assets | 27,792 |
| Liabilities | ___________ 16,158 |
| Total net assets | ___________ 11,634 |
| Investment in HT Production | ___________ (14,943) |
| (3,390) | |
| Effect of catch-up tax | (1,416) |
| ___________ | |
| Total effect of merger on retained earnings of the Company | (4,725) |
Since this merger is considered as business combination under common control, there is no material effect in the aspect
of consolidated financial statements of the Group.
Control over OPTIMA
HT 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 goodwill and assets in Group in
the net amount of EUR 6,636 thousand.
In 2022, the sale process of Optima shares is closed.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
45 Croatian Telecom Inc.
4 Segment information
The business reporting format of the Group for purpose of segment reporting is determined to be Residential, Business,
Other and Crnogorski Telekom as the Group’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 rendered, 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 and TV distribution and services to residential customers.
The Business Segment includes marketing, sales and customer services, focused on providing mobile and fixed line
telecommunications and 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 Other segment performs cross-segment management and support functions, and includes the Technology,
Procurement, Accounting, Treasury, Legal and other central functions. The name of the segment was changed from
previous name Network & support functions.
The Crnogorski Telekom segment includes the contribution of all Crnogorski Telekom’s functions to Group financial
results following the same reporting structure as used for other operating segments.
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 Revenue per segment (as calculated in the table below).
The Group’s geographical disclosures are based on the geographical location of its customers.
Management of the Group does not monitor assets and liabilities by segments and therefore this information has not
been disclosed. Fully owned subsidiaries Iskon Internet, Combis (that is owned through HT holding d.o.o.) and HT
Production (until the merger with HT on 1 June 2022) are consolidated within the respective operating segments to
which they relate.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
46 Croatian Telecom Inc.
4 Segment information (continued)
The following tables present revenue and results information regarding the Group’s segments:
| Residential | Business | Other | Crnogorski | Total | |
| EUR thousand | Telekom | ||||
| consolidated | |||||
| Year ended 31 December 2023 | |||||
| Mobile service revenue | 230,297 | 111,049 | - | 37,776 | 379,122 |
| Mobile non service revenue | 97,057 | 56,458 | 13,734 | 10,660 | 177,909 |
| Fixed service revenue | 219,693 | 80,168 | - | 25,808 | 325,669 |
| Fixed non service revenue | 3,756 | 61,664 | 7,419 | 6,148 | 78,987 |
| System solutions revenue | - | 74,084 | - | 3,564 | 77,648 |
| Net revenue | _________ 550,803 | __________ 383,423 | __________ 21,153 | __________ 83,956 | ________ 1,039,335 |
| Other operating income | - | - | - | - | 8,639 |
| Operating expenses | - | - | - | - | (615,602) |
| Depreciation and amortization | - | - | - | - | (266,677) |
| Impairment of non current assets | - | - | - | - | (4,306) |
| Operating profit | - | - | - | - | 161,389 |
| Finance income (cost) net | - | - | - | - | (941) |
| Profit before income tax | - | - | - | - | ________ 160,448 |
| Residential | Business | Other | Crnogorski | Total | |
| EUR thousand | Telekom | ||||
| consolidated | |||||
| Year ended 31 December 2022 | |||||
| Mobile service revenue | 219,802 | 104,783 | - | 35,154 | 359,739 |
| Mobile non service revenue | 72,494 | 46,477 | 19,378 | 9,970 | 148,319 |
| Fixed service revenue | 213,999 | 80,606 | - | 24,488 | 319,093 |
| Fixed non service revenue | 3,168 | 62,712 | 7,316 | 6,080 | 79,276 |
| System solutions revenue | - | 73,696 | - | 3,381 | 77,077 |
| Net revenue | _________ 509,463 | __________ 368,274 | __________ 26,694 | __________ 79,073 | ________ 983,504 |
| Other operating income | - | - | - | - | 14,164 |
| Operating expenses | - | - | - | - | (587,641) |
| Depreciation and amortization | - | - | - | - | (263,702) |
| Impairment of non current assets | - | - | - | - | (20,719) |
| Operating profit | - | - | - | - | 125,606 |
| Finance income (cost) net | - | - | - | - | (8,212) |
| Profit before income tax | - | - | - | - | 117,394 |
________
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
47 Croatian Telecom Inc.
4 Segment information (continued)
Revenue by geographical area
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| 863,804 | 813,218 | 803,867 | 746,973 | |
| Rest of the world | _________ 175,531 | _________ 170,286 | _________ 64,526 | _________ 68,014 |
| 1,039,335 | 983,504 | 868,393 | 814,987 | |
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_________
_________
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The majority of thee Group’s and the Company’s assets are located in Croatia.
None of the Group’s and the Company’s external customers represent a significant source of revenue.
Revenue by category
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Revenue from rendering of services | 839,922 | 805,785 | 706,565 | 681,735 |
| Revenue from sale of goods and merchandise | __________ 199,413 | __________ 177,719 | __________ 161,828 | __________ 133,252 |
| 1,039,335 | 983,504 | 868,393 | 814,987 | |
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| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Revenue realized over time | 833,523 | 807,013 | 676,002 | 650,396 |
| Revenue realized at point in time | __________ 205,812 | __________ 176,491 | __________ 192,391 | __________ 164,591 |
| 1,039,335 | 983,504 | 868,393 | 814,987 | |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
48 Croatian Telecom Inc.
5 Other operating income
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Liabilities write off | 4,212 | 1,028 | 4,211 | 899 |
| Income from penalties and damage | 827 | 2,739 | 797 | 2,601 |
| compensations | ||||
| Gain from sale of property, plant and | 638 | 5,880 | 590 | 5,805 |
| equipment | ||||
| Sale of subsidiary | - | 1,678 | - | - |
| Sale of waste | 240 | 199 | 125 | 145 |
| Other income | __________ 2,722 | __________ 2,640 | __________ 2,324 | __________ 2,004 |
| __________ 8,639 | __________ 14,164 | __________ 8,047 | __________ 11,454 | |
Other income consists of various transactions such as sale of equipment to employees, different discounts and rebates
from suppliers and customers.
6 Merchandise, material and energy expenses
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Purchase cost of goods sold | 192,078 | 169,544 | 145,449 | 123,858 |
| Energy costs | 33,306 | 36,011 | 31,520 | 34,019 |
| Cost of raw material and supplies | 3,084 | 2,535 | 2,227 | 1,704 |
| Cost of services sold | __________ 1,080 | __________ 1,593 | __________ 1,029 | __________ 1,488 |
| __________ 229,548 | __________ 209,683 | __________ 180,225 | __________ 161,069 | |
7 Service expenses
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| International interconnection | 40,585 | 41,271 | 21,920 | 21,885 |
| Domestic interconnection | 23,911 | 27,680 | 20,558 | 23,089 |
| Copyright fees | 14,337 | 12,072 | 12,899 | 9,872 |
| Online services | 4,941 | 3,920 | 4,126 | 3,958 |
| Cleaning services | 2,503 | 2,096 | 2,348 | 1,938 |
| Bank and money transfer fees | 1,811 | 1,731 | 1,666 | 1,560 |
| Security services | 1,647 | 1,592 | 1,495 | 1,469 |
| Other services | __________ 12,589 | __________ 9,167 | __________ 12,487 | __________ 8,965 |
| 102,324 | 99,529 | 77,499 | 72,756 | |
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Other services consist of various services such as billing services, administration services, recruiting and human
resource services, water cost, transportation and real estate services.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
49 Croatian Telecom Inc.
8 Depreciation, amortization and impairment of non-current assets
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Depreciation | 119,834 | 122,141 | 106,448 | 107,136 |
| Amortization | 107,029 | 99,275 | 86,274 | 77,397 |
| Amortization of Right-of-use assets | 43,366 | 42,286 | 39,226 | 38,208 |
| _________ | _________ | _________ | _________ | |
| Total depreciation and amortization | 270,229 | 263,702 | 231,948 | 222,741 |
| Impairment loss of PPE & Intangible assets | 754 | 1,918 | 628 | 1,917 |
| Impairment loss of investment in joint venture | - | 18,801 | - | 12,649 |
| _________ | _________ | _________ | _________ | |
| Total impairment of non-current assets | 754 | 20,719 | 628 | 14,566 |
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Notes 15, 16 and 17 disclose further details on amortization and depreciation expense and impairment loss.
9 Employee benefits expenses
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Net salaries | 93,500 | 86,058 | 72,244 | 66,225 |
| Contributions and taxes from salaries | 36,848 | 34,785 | 28,406 | 27,024 |
| Contributions on salaries | 17,475 | 16,552 | 13,818 | 13,065 |
| Redundancy expenses | 8,672 | 8,037 | 7,616 | 7,152 |
| Amortisation of capitalized cost to obtain contract – | 630 | 672 | 630 | 672 |
| own employees | ||||
| Long-term employee benefits | 230 | 251 | 105 | 124 |
| Other employee related expenses | _________ 4,956 | _________ 4,544 | __________ 3,135 | __________ 3,363 |
| 162,311 | 150,869 | 125,954 | 117,625 | |
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Capitalized work performed by the Group and the Company is calculated on a basis of hourly rate per employee or on
market services prices, where applicable. Besides employee expenses, other expenses are included in calculation of
hourly rate per employee, such as depreciation, service expenses and other operating expenses. Costs that are
capitalized relate mainly to CPE installation and development, implementation and integration of hardware and software
solutions.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
50 Croatian Telecom Inc.
10 Other expenses
| Group | Company | ||||
| EUR thousand | 2023 | 2022 | 2023 | 2022 | |
| Maintenance services | 36,293 | 31,118 | 31,932 | 26,760 | |
| Advertising | 14,402 | 13,886 | 11,733 | 11,219 | |
| Licence cost | 10,216 | 17,496 | 9,403 | 15,926 | |
| Contract workers | 9,504 | 12,438 | 7,141 | 9,656 | |
| Amortisation of capitalized cost to obtain contract - | 9,177 | 8,045 | 6,949 | 5,965 | |
| external parties | |||||
| Selling commissions | 7,755 | 7,651 | 7,049 | 7,052 | |
| Non-income taxes and contribution | 5,841 | 5,561 | 4,307 | 3,945 | |
| Postal expenses | 4,698 | 4,351 | 4,298 | 3,817 | |
| Daily allowances and other costs of business trips | 2,753 | 2,320 | 2,037 | 1,699 | |
| Expenses from penalties and damage | 2,641 | 2,467 | 3,087 | 2,369 | |
| compensations | |||||
| Insurance | 2,120 | 1,954 | 1,992 | 1,807 | |
| Education and consulting | 1,945 | 2,791 | 1,506 | 2,471 | |
| Rental costs (Note 17) | 2,023 | 2,352 | 1,697 | 1,808 | |
| Expenses related to customers acquisition | 992 | 981 | 992 | 981 | |
| Loss on disposal of fixed assets | 329 | 334 | 256 | 298 | |
| Write down of inventories | 133 | 241 | 133 | 241 | |
| Provisions for legal cases | (2,902) | 6,563 | (2,918) | 6,637 | |
| Other operating charges | 9,857 | 7,787 | 8,701 | 7,737 | |
| 117,777 | 128,336 | 100,295 | 110,388 | ||
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
51 Croatian Telecom Inc.
11 Finance income
| Group | Company | ||||
| EUR thousand | 2023 | 2022 | 2023 | 2022 | |
| Foreign exchange gains | 1,573 | 2,897 | 273 | 2,413 | |
| Interest income | 7,009 | 951 | 6,552 | 718 | |
| Other financial income | 4 | 35 | 4 | 10 | |
| 8,586 | 3,883 | 6,829 | 3,141 | ||
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12 Finance cost
| Group | Company | ||||
| EUR thousand | 2023 | 2022 | 2023 | 2022 | |
| Interest expense from leases | 4,547 | 3,820 | 3,752 | 3,340 | |
| Interest expense from other financial liabilities | 3,076 | 4,531 | 2,282 | 3,921 | |
| Foreign exchange loss | 1,641 | 3,304 | 283 | 2,691 | |
| Other financial cost | 263 | 440 | 68 | 240 | |
| 9,527 | 12,095 | 6,385 | 10,192 | ||
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13 Income tax expense
a) Tax on profit
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Current tax expense | 32,086 | 29,161 | 29,992 | 26,684 |
| Deferred tax expense | (5,252) | 632 | (1,669) | (2,907) |
| Additional tax related to merger of subsidiary (Note 3) | - | - | - | 1,373 |
| 26,834 | 29,793 | 28,323 | 25,150 | |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
52 Croatian Telecom Inc.
13 Income tax expense (continued)
b) Reconciliation of the taxation charge to the income tax rate
| Group | Company | ||||
| EUR thousand | 2023 | 2022 | 2023 | 2022 | |
| Profit before tax | 160,448 | 117,394 | 153,484 | 117,368 | |
| Income tax at 18% (domestic rate) | 28,881 | 21,131 | 27,627 | 21,126 | |
| Tax effect of: | |||||
| Tax adjustment related to previous years | - | - | 11 | 1,396 | |
| Expenses not deductible for tax purposes | 969 | 2,951 | 685 | 1,135 | |
| Effect of different tax rates | (520) | 1,527 | - | - | |
| Tax effects of tax loss for which no deferred |
(2,397) | 3,155 | - | - | |
| income tax asset was recognised | |||||
| Tax paid abroad | 94 | 184 | - | - | |
| Other | (193) | 845 | - | 1,493 | |
| 26,834 | 29,793 | 28,323 | 25,150 | ||
| Effective tax rate | 16.72% | 25.38% | 18.45% | 21.43% |
The Group and 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 Group and the Company. The Group and the Company believe a future tax
liability will not arise in this regard.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
53 Croatian Telecom Inc.
13 Income tax expense (continued)
Group
Components and movements of deferred tax assets and liabilities are as follows:
| Deferred tax assets | 31 December | (charged) / | 31 December | (charged) / | Write off in | 31 December |
| recognized in: | 2023 | credited | 2022 | credited | 2022 | 2021 |
| in 2023 | in 2022 | |||||
| EUR thousand | ||||||
| Statement of | ||||||
| comprehensive income | ||||||
| Non-tax deductible | 6,380 | 573 | 5,807 | (248) | (1,493) | 7,548 |
| provisions | ||||||
| Property, plant and | 6,618 | 1,626 | 4,992 | (883) | - | 5,875 |
| equipment write down | ||||||
| Accrued interest on legal | 727 | 57 | 670 | 516 | - | 154 |
| cases | ||||||
| Losses | 3,507 | 3,507 | - | (1,081) | - | 1,081 |
| Accruals | 5,403 | (754) | 6,157 | 2,471 | - | 3,686 |
| Other | 290 | - | 290 | - | - | 290 |
| Deferred tax asset | 22,925 | 5,009 | 17,916 | 775 | (1,493) | 18,634 |
| Deferred tax liabilities | 31 December | charged / | 31 December | (charged) / | Write off in | 31 December |
| recognized in: | 2023 | (credited) | 2022 | credited | 2022 | 2021 |
| in 2023 | in 2022 | |||||
| EUR thousand | ||||||
| Statement of | ||||||
| comprehensive income | ||||||
| Property, plant, equipment | (3,783) | 243 | (4,026) | 86 | - | (4,112) |
| and intangible assets | ||||||
| (3,783) | 243 | (4,026) | 86 | - | (4,112) | |
| Other comprehensive | ||||||
| income | ||||||
| Actuarial gains and losses | (362) | (8) | (354) | (7) | - | (347) |
| Deferred tax liability | (4,145) | 235 | (4,380) | 79 | - | (4,459) |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
54 Croatian Telecom Inc.
13 Income tax expense (continued)
Components and movements of deferred tax assets and liabilities are as follows:
Company
| Deferred tax assets recognized | 31 | (charged) / | 31 | Acquisition | Write off | (charged) | 31 |
| in: | December | credited | December | 2022 | 2022 | / | December |
| 2023 | in 2023 | 2022 | credited | 2021 | |||
| in 2022 | |||||||
| EUR thousand | |||||||
| Statement of comprehensive | |||||||
| income | |||||||
| Losses | - | - | - | 1,074 | - | (1,074) | - |
| Non-tax-deductible provisions | 5,796 | 739 | 5,057 | - | (1,493) | 2,319 | 4,231 |
| Property, plant and equipment | 6,246 | 1,627 | 4,619 | - | - | (906) | 5,525 |
| write down | |||||||
| Accrued interest on legal cases | 727 | 57 | 670 | - | - | 516 | 154 |
| Other | 5,692 | (754) | 6,446 | - | - | 2,471 | 3,975 |
| 18,461 | 1,669 | 16,792 | 1,074 | (1,493) | 3,326 | 13,885 | |
| Other comprehensive income | |||||||
| Actuarial gains and losses | - | - | - | - | - | - | - |
| Deferred income tax asset | 18,461 | 1,669 | 16,792 | 1,074 | (1,493) | 3,326 | 13,885 |
| Deferred tax liabilities | 31 | (charged) / | 31 | Acquisition | Write off | (charged) | 31 |
| recognized in: | December | credited | December | 2022 | 2022 | / | December |
| 2023 | in 2023 | 2022 | credited | 2021 | |||
| in 2022 | |||||||
| EUR thousand | |||||||
| Other comprehensive income | |||||||
| Actuarial gains and losses | 362 | 7 | 355 | - | - | 7 | 348 |
| Deferred income tax liability | 362 | 7 | 355 | - | - | 7 | 348 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
55 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. Out of total deferred tax assets, current portion amounts to EUR 10,655 thousand for Group
and EUR 10,501 thousand for Company.
Deferred tax asset arises on the property, plant and equipment impairment, on provision of impairment of receivables
and inventories (materials, merchandise), and related to accruals and provisions and other temporary differences.
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. 2025 for the 2023 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. On 2 January 2024 the Higher Administrative Court in Zagreb issued a
final binding Decision, which stipulates that HT was illegally charged for certain tax obligations, and the Tax
Administration is ordered to return the illegally acquired funds from HT within 60 days, including default interest from
day of payment. With this Decision of the Higher Administrative Court in Zagreb, the lawsuit proceedings have finished.
On reporting date, the Group has available EUR 33,907 thousand of tax loss, of which EUR 14,425 thousand has not
been recognized as a deferred tax asset because it is not expected to be used in future periods. These losses relate to
subsidiaries of the Group.
| Losses expire in: | EUR thousand |
| 2024 | 4,873 |
| 2025 | 2,446 |
| 2026 | 3,787 |
| 2027 | 17,527 |
| 2028 | 5,274 |
| 33,907 |
Global Minimum Taxation
As at 31 December 2023 the Law on Minimum Global Profit Tax (Official Gazette 155/2023, 22.12.2023) entered into
force, which will ensure global minimum taxation according to OECD Pillar-II regulations and the corresponding EU
directive. Pursuant to Article 61 of the Law on Minimum Global Profit tax, this Law applies to fiscal years starting from
31 December 2023, therefore there is no minimum tax on the reporting date. Furthermore, HT Company and Group
apply the exemption from recording deferred taxes related to global minimum taxes according to IAS 12.4A.
Due to the complexity of the provisions and the fact that the legislative process is not completed yet, it is not possible
to give a reliable estimate of the future tax burden being related to this minimum tax legislation. Therefore, the potential
tax burden has been assessed based on information available at the reporting date (historical information, planning
data, et al).
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
56 Croatian Telecom Inc.
13 Income tax expense (continued)
Based on this assessment, the Group and the Company expect that it would not be subject to minimum taxation in any
of the jurisdictions in which it operates in 2024, either by proving to meet the temporary safe harbor criteria or by
providing evidence for a minimum taxation based on detailed calculations according to the GLoBE provisions.
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 Group 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:
| Group | Company | ||||
| 2023 | 2022 | 2023 | 2022 | ||
| Profit for the year attributable to ordinary equity holders of the | 132,029 | 86,986 | 125,161 | 92,218 | |
| Company (in EUR thousand) | |||||
| Weighted average number of ordinary shares for basic | 78,334,748 | 79,191,974 | 78,334,748 | 79,191,974 | |
| earnings per share | |||||
| Earnings per share (in EUR) |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
57 Croatian Telecom Inc.
15 Intangible assets
| Group | Licences | Software | Goodwill | Other assets | Assets under | Total |
| EUR thousand | construction | |||||
| As at 1 January 2022 | ||||||
| Cost | 155,727 | 505,246 | 60,894 | 164,960 | 37,600 | 924,427 |
| Accumulated amortization | (441,321) | (14,848) | (139,214) | - | (670,387) | |
| and impairment losses | (75,004) | |||||
| Net book value | 80,723 | 63,925 | 46,046 | 25,746 | 37,600 | 254,040 |
| Year ended 31 December 2022 | ||||||
| Opening net book value | 80,723 | 63,925 | 46,046 | 25,746 | 37,600 | 254,040 |
| Other | - | - | 41 | - | - | 41 |
| Additions | 1,378 | 16,832 | - | 33,353 | 50,737 | 102,300 |
| Transfers | 3,517 | 40,965 | - | (81) | (44,401) | - |
| Disposal | (8) | (3) | - | (129) | - | (140) |
| Amortization charge | (14,228) | (46,035) | - | (39,012) | - | (99,275) |
| Impairment loss | - | - | - | (28) | - | (28) |
| Net book value | 71,382 | 75,684 | 46,087 | 19,849 | 43,936 | 256,938 |
| As at 31 December 2022 | ||||||
| Cost | 160,621 | 563,043 | 60,935 | 198,232 | 43,936 | 1,026,767 |
| Accumulated amortization | (89,239) | (487,359) | (14,848) | (178,383) | - | (769,289) |
| and impairment losses | ||||||
| Net book value | 71,382 | 75,684 | 46,087 | 19,849 | 43,936 | 256,938 |
| Year ended 31 December 2023 | ||||||
| Opening net book value | 71,382 | 75,684 | 46,087 | 19,849 | 43,936 | 256,938 |
| Additions | 5,189 | 15,553 | - | 48,102 | 167,143 | 235,987 |
| Transfers | 3,500 | 43,246 | - | 1,639 | (48,385) | - |
| Amortization charge | (18,359) | (47,131) | - | (41,539) | - | (107,029) |
| Disposal | (115) | - | - | - | - | (115) |
| Net book value | 61,597 | 87,352 | 46,087 | 28,051 | 162,694 | 385,781 |
| As at 31 December 2023 | ||||||
| Cost | 189,400 | 519,802 | 60,935 | 116,847 | 162,694 | 1,049,678 |
| Accumulated amortization | (432,450) | (14,848) | (88,796) | - | (663,897) | |
| and impairment losses | (127,803) | |||||
| Net book value | 61,597 | 87,352 | 46,087 | 28,051 | 162,694 | 385,781 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
58 Croatian Telecom Inc.
15 Intangible assets (continued)
| Company | Licences | Software | Goodwill | Other | Assets under | Total |
| assets | construction | |||||
| EUR thousand | ||||||
| As at 1 January 2022 | ||||||
| Cost | 97,155 | 437,466 | - | 73,958 | 31,289 | 639,868 |
| Accumulated amortization and | (47,595) | (386,921) | - | (63,730) | - | (498,246) |
| impairment losses | ||||||
| Net book value | 49,560 | 50,545 | - | 10,228 | 31,289 | 141,622 |
| Year ended 31 December 2022 | ||||||
| Opening net book value | 49,560 | 50,545 | - | 10,228 | 31,289 | 141,622 |
| Additions | 932 | 11,652 | - | 25,705 | 45,414 | 83,703 |
| Merger of subsidiary (Note 3) | 5,332 | 436 | 6,567 | 5,252 | - | 17,587 |
| Transfers | 687 | 39,335 | - | - | (40,022) | - |
| Disposal | (8) | (3) | - | (129) | - | (140) |
| Impairment loss | - | - | - | (28) | - | (28) |
| Amortization charge | (10,517) | (37,906) | - | (28,974) | - | (77,397) |
| Net book value | 45,986 | 64,059 | 6,567 | 12,054 | 36,681 | 165,347 |
| As at 31 December 2022 | ||||||
| Cost | 104,105 | 488,889 | 6,567 | 104,915 | 36,681 | 741,157 |
| Accumulated amortization and | (58,119) | (424,830) | - | (92,861) | - | (575,810) |
| impairment losses | ||||||
| Net book value | 45,986 | 64,059 | 6,567 | 12,054 | 36,681 | 165,347 |
| Year ended 31 December 2023 | ||||||
| Opening net book value | 45,986 | 64,059 | 6,567 | 12,054 | 36,681 | 165,347 |
| Additions | 68 | 8,102 | - | 40,839 | 164,971 | 213,980 |
| Transfers | 1,111 | 35,321 | - | 2,381 | (38,813) | - |
| Amortization charge | (13,433) | (38,865) | - | (33,976) | - | (86,274) |
| Net book value | 33,732 | 68,617 | 6,567 | 21,298 | 162,839 | 293,053 |
| As at 31 December 2023 | ||||||
| Cost | 126,055 | 458,409 | 6,567 | 74,739 | 162,839 | 828,609 |
| Accumulated amortization and | (92,323) | (389,792) | - | (53,441) | - | (535,556) |
| impairment losses | ||||||
| Net book value | 33,732 | 68,617 | 6,567 | 21,298 | 162,839 | 293,053 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
59 Croatian Telecom Inc.
15 Intangible assets (continued)
The intangible assets of the Group as at 31 December 2023 include seven licences for Group and six licences for
Company for use of the radio frequency spectrum and licence for 5G spectrum (Notes 2.4. e) and 44 b).
Other assets mainly consist of brand name EUR 1,381 thousand (31 December 2022: EUR 1,381 thousand), customer
relationships EUR 749 thousand (31 December 2022: EUR 1,006 thousand) and capitalized content contracts EUR
17,838 thousand for Group and EUR 13,143 thousand for Company (31 December 2022: Group EUR 16,229 thousand,
Company EUR 9,693 thousand).
Assets under construction primarily relate to the license for the use of radio frequency spectrum.
Intangible assets with indefinite useful life consist of brand name related to EVOtv with carrying value as at 31 December
2023 EUR 1,381 thousand (31 December 2022: EUR 1,381 thousand) and HAKOM licence related to EVOtv services
with carrying value as at 31 December 2023 EUR 5,332 thousand (31 December 2022: EUR 5,332 thousand).
Additions of intangible assets
Major additions in 2023 relate to the license for the use of radio frequency spectrum in the amount of EUR 140,438
thousand for the Group and EUR 135,548 thousand for the Company and capitalized content costs in the amount of
EUR 38,060 thousand for the Group and EUR 30,798 thousand for the Company.
Impairment testing of goodwill
Goodwill is allocated to the Group’s cash-generating units (CGUs) identified according to operating segment. An
operating segment-level summary of the goodwill allocation is presented below:
| 31 December | 31 December | |
| 2023 | 2022 | |
| EUR thousand | EUR thousand | |
| Residential | 13,898 | 13,898 |
| Business | 14,152 | 14,152 |
| Crnogorski Telekom | 18,037 | 18,037 |
| 46,087 | 46,087 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
60 Croatian Telecom Inc.
15 Intangible assets (continued)
Impairment testing of goodwill (continued)
The key assumptions used for value in use calculations are as follows:
| Crnogorski Telekom | Residential | Business | ||||
| 31 December | 31 December | 31 December | 31 December | 31 December | 31 | |
| December | ||||||
| 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | |
| Growth rate | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% | 1.0% |
| Discount rate (pre-tax) | 10.53% | 10.42% | 8.04% | 10.75% | 8.04% | 10.75% |
| Sales growth rate | 0.8% | 0.7% | 2.5% | 1.6% | 0.8% | 0.6% |
| Budgeted EBITDA margin | 46.9% | 48.1% | 59.9% | 66.9% | 47.7% | 48.2% |
| Average annual capital | 20,827 | 19,073 | 125,558 | 134,539 | 71,913 | 69,836 |
| expenditure (EUR thousand) | ||||||
The recoverable amount of a CGU is determined based on value in use calculations. The key assumptions reflect
experience and expectations of market development, particularly the development of revenue, market share, customer
acquisition and retention cost, capital expenditures and growth rate. The growth rate does not exceed the long-term
average growth rate for the industry in which the CGU operates. The weighted average growth rate is used to extrapolate
cash flows beyond the budgeted period and pre-tax discount rate is applied to the cash flow projections. The costs of
central functions (Management and Administration) have been allocated between the segments for the purpose of
impairment testing based on internal secondary cost allocation, using defined planed internal products. The
measurements of CGU are founded on projections for a ten-year projection period that are based on financial plans that
have been approved by management and are used for internal purposes. The planning horizon selected reflects the
assumptions for short- to medium-term market developments and is selected to achieve a steady state in the business
outlook that is necessary for calculating the perpetual annuity. This steady state can only be established based on this
planning horizon, in particular due to the sometimes long investment cycles in the telecommunications industry and the
investments planned and expected in the long run to acquire.
Crnogorski Telekom CGU
The recoverable amount of the Crnogorski Telekom CGU as of 31 December 2023 has been determined based on a
value in use calculation using cash flow projections from financial budgets approved by the management covering a
five-year period. Parameters beyond the five-year period are extrapolated using a 0.8% sales growth rate (2022: 0.7%)
and 1% compound annual growth rate (2022: 1%). The pre-tax discount rate applied to cash flow projections is 10.53%
(2022: 10.42%). Forementioned growth rates are based on compound annual growth rates in telecommunications
industry and average rates derived from actual results in previous years. The management has also taken into
consideration the recent negative impact and uncertainties caused by war in Ukraine, strong inflationary pressures and
negative impact on available income of the consumers and economic activities as well as the overall economic situation
in Crna Gora. As a result of this analysis, management has not recognised an impairment charge in the current year.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
61 Croatian Telecom Inc.
15 Intangible assets (continued)
Impairment testing of goodwill (continued)
Residential CGU
The recoverable amount of the Residential CGU as of 31 December 2023 has been determined based on a value in
use calculation using cash flow projections from financial budgets approved by the management covering a five-year
period. Parameters beyond the five-year period are extrapolated using a 2.5% sales growth rate (2022: 1.6%) and 1%
compound annual growth rate (2022: 1%). The pre-tax discount rate applied to cash flow projections is 8.04% (2022:
10.75%). Forementioned growth rates are based on compound annual growth rates in telecommunications industry and
average rates derived from actual results in previous years. The management has also taken into consideration the
recent negative impact and uncertainties caused by war in Ukraine, strong inflationary pressures and negative impact
on available income of the consumers. As a result of this analysis, management has not recognised an impairment
charge in the current year.
Business CGU
The recoverable amount of the Business CGU as of 31 December 2023 has been determined based on a value in use
calculation using cash flow projections from financial budgets approved by the management covering a five-year period.
Parameters beyond the five-year period are extrapolated using a 0.8% sales growth rate (2022: 0.6%) and 1%
compound annual growth rate (2022: 1%). The pre-tax discount rate applied to cash flow projections is 8.04% (2022:
10.75%). Forementioned growth rates are based on compound annual growth rates in telecommunications industry and
average rates derived from actual results in previous years. The management has also taken into consideration the
recent negative impact and uncertainties caused by war in Ukraine, strong inflationary pressures and negative impact
on economic activities, as well as positive impacts of Croatia entering the euro zone and Schengen zone. As a result of
this analysis, management has not recognised an impairment charge in the current year.
Impairment testing of brand
HT Production has registered the trademark “EVOtv” as intellectual property rights. After the merger of HT Production
with HT d.d. in 2022, the trademark “EVOtv” became intellectual property rights of HT. EVOtv is included in Residential
CGU segment for the purpose of impairment testing.
Brand is an indefinite – lived asset, and it is tested for impairment annually using the Relief from Royalty method. The
brand value represents the net present value of the projected brand earnings, discounted using the pre-tax discount
rate on projected cash flows. The net present value calculation comprises both the explicit five and a half year
projections and the terminal period, as this reflects the brand’s ability to create revenues in perpetuity. The growth rate
of projected cash flows and the discount rate used is the same as the key assumptions utilised in the impairment testing
of goodwill (reflected above).
First licence is granted to HT Production on 26 October 2011. Licence is renewed every ten years and there is no risk
assigned to the renewal of HAKOM licence; accordingly, HAKOM licence is an indefinite-lived intangible asset.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
62 Croatian Telecom Inc.
16 Property, plant and equipment
| Land and | Telecom | Tools, | Assets under | Total | |
| buildings | plant and | vehicles, IT | construction | ||
| Group | machinery | and office | |||
| equipment | |||||
| EUR thousand | |||||
| As at 1 January 2022 | |||||
| Cost | 426,595 | 1,824,375 | 137,439 | 137,531 | 2,525,940 |
| Accumulated depreciation and impairment losses | (296,929) | (1,285,590) | (108,934) | - | (1,691,453) |
| Net book value | 129,666 | 538,785 | 28,505 | 137,531 | 834,487 |
| Year ended 31 December 2022 | |||||
| Opening net book value | 129,666 | 538,785 | 28,505 | 137,531 | 834,487 |
| Additions | 2,395 | 51,129 | 11,379 | 72,405 | 137,308 |
| Transfers | 3,294 | 67,758 | 3,809 | (74,861) | - |
| Disposals | (10,524) | - | (342) | - | (10,866) |
| Depreciation charge | (10,598) | (101,514) | (9,914) | - | (122,026) |
| Impairment loss | - | - | (1,889) | - | (1,889) |
| Foreign exchange difference | - | 197 | - | - | 197 |
| Net book value | 114,233 | 556,355 | 31,548 | 135,075 | 837,211 |
| As at 31 December 2022 | |||||
| Cost | 421,760 | 1,943,459 | 152,285 | 135,075 | 2,652,579 |
| Accumulated depreciation and impairment losses | (307,527) | (1,387,104) | (120,737) | - | (1,815,368) |
| Net book value | 114,233 | 556,355 | 31,548 | 135,075 | 837,211 |
| Year ended 31 December 2023 | |||||
| Opening net book value | 114,233 | 556,355 | 31,548 | 135,075 | 837,211 |
| Additions | 688 | 46,312 | 7,966 | 70,461 | 125,427 |
| Transfers | (22,764) | 70,750 | 6,662 | (54,648) | - |
| Transfers from investment property | 781 | - | - | - | 781 |
| Disposals | - | (14) | - | - | (14) |
| Depreciation charge | (9,863) | (98,278) | (11,649) | - | (119,790) |
| Impairment loss | - | (126) | (628) | - | (754) |
| Net book value | 83,075 | 574,999 | 33,899 | 150,888 | 842,861 |
| As at 31 December 2023 | |||||
| Cost | 337,410 | 2,001,509 | 140,949 | 150,888 | 2,630,756 |
| Accumulated depreciation and impairment losses | (254,335) | (1,426,511) | (107,049) | - | (1,787,895) |
| Net book value | 83,075 | 574,999 | 33,899 | 150,888 | 842,861 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
63 Croatian Telecom Inc.
16 Property, plant and equipment (continued)
| Company | Land and | Telecom | Tools, | Assets under | Total |
| buildings | plant and | vehicles, IT | construction | ||
| machinery | and office | ||||
| equipment | |||||
| EUR thousand | |||||
| As at 1 January 2022 | |||||
| Cost | 312,984 | 1,670,440 | 115,401 | 133,000 | 2,231,825 |
| Accumulated depreciation and impairment losses | (225,258) | (1,163,034) | (93,115) | - | (1,481,407) |
| Net book value | 87,726 | 507,406 | 22,286 | 133,000 | 750,418 |
| Year ended 31 December 2022 | |||||
| Opening net book value | 87,726 | 507,406 | 22,286 | 133,000 | 750,418 |
| Additions | 1,589 | 44,140 | 10,727 | 67,890 | 124,346 |
| Merger of subsidiary (Note 3) | - | 1,275 | 69 | - | 1,344 |
| Transfers | 3,264 | 67,335 | 2,904 | (73,503) | - |
| Disposals | (10,507) | - | (312) | - | (10,819) |
| Depreciation charge | (9,475) | (89,748) | (7,798) | - | (107,021) |
| Impairment loss | - | - | (1,889) | - | (1,889) |
| Net book value | 72,597 | 530,408 | 25,987 | 127,387 | 756,379 |
| As at 31 December 2022 | |||||
| Cost | 318,184 | 1,782,844 | 129,102 | 127,387 | 2,357,517 |
| Accumulated depreciation and impairment losses | (245,587) | (1,252,436) | (103,115) | - | (1,601,138) |
| Net book value | 72,597 | 530,408 | 25,987 | 127,387 | 756,379 |
| Year ended 31 December 2023 | |||||
| Opening net book value | 72,597 | 530,408 | 25,987 | 127,387 | 756,379 |
| Additions | 130 | 38,779 | 6,608 | 65,078 | 110,595 |
| Transfers | 1,932 | 47,226 | 1,720 | (50,840) | - |
| Transfers from investment property | 781 | - | - | - | 781 |
| Disposals | (202) | (11) | (289) | - | (502) |
| Depreciation charge | (8,648) | (88,235) | (9,521) | - | (106,404) |
| Impairment loss | - | - | (628) | - | (628) |
| Net book value | 66,590 | 528,167 | 23,877 | 141,625 | 760,259 |
| As at 31 December 2023 | |||||
| Cost | 304,385 | 1,796,195 | 122,139 | 141,625 | 2,364,344 |
| Accumulated depreciation and impairment losses | (237,795) | (1,268,028) | (98,262) | - | (1,604,085) |
| Net book value | 66,590 | 528,167 | 23,877 | 141,625 | 760,259 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
64 Croatian Telecom Inc.
16 Property, plant and equipment (continued)
Beginning in 2001, the Group 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 Group is still
in the process of formally registering this legal title.
The Group 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 EUR 30,485
thousand (2022: EUR 26,594 thousand), and construction of core, transmission and IP network of EUR 83,584 thousand
(2022: EUR 66,561 thousand).
Impairment loss
In 2023, the Group recognized an impairment loss on property, plant and equipment of EUR 753 thousand (2022: EUR
1,889 thousand), the Company EUR 628 thousand (2022: EUR 1,889 thousand) relating to change of equipment due
to transfer to 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 Group 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 devices, old tools, IT, office equipment and vehicles in the gross amount of EUR 93,851 thousand (2022: EUR
58,221 thousand) for the Group and the gross amount of EUR 54,237 thousand (2022: EUR 45,365 thousand) for the
Company.
The gain from the sale is EUR 638 thousand (2022: EUR 5,880 thousand) for the Group and EUR 590 thousand (2022:
EUR 5,805 thousand for the Company, the loss on the disposal is EUR 329 thousand (2022: EUR 334 thousand) for
the Group and EUR 256 thousand (2022: EUR 298 thousand) for the Company.
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 HT 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 Group’s and Company’s ducts as at 31 December 2023 is EUR 82,458 thousand (31
December 2022: EUR 85,917 thousand).
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
65 Croatian Telecom Inc.
17 Right-of-use assets and lease liabilities
The Group and 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 and vehicles. Rental contracts are typically
made for fixed periods of 6 months to 32 years.
In 2023 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).
Group
| Note | Land | Buildings | Equipment | Other | Total | |
| In thousand EUR | ||||||
| Carrying amount at 1 January 2022 | 31,075 | 41,001 | 6,534 | 6,775 | 85,385 | |
| Additions | 27,013 | 3,260 | 811 | 2,786 | 33,870 | |
| Terminations/modifications | (2,298) | (814) | (154) | (9) | (3,275) | |
| Depreciation charge | 8 | (31,226) | (6,012) | (1,452) | (3,596) | (42,286) |
| Carrying amount at 31 December 2022 | 24,564 | 37,435 | 5,739 | 5,956 | 73,694 | |
| Additions | 33,605 | 3,578 | 1,091 | 7,135 | 45,409 | |
| Terminations/modifications | 278 | (1,612) | (410) | (386) | (2,130) | |
| Transfers | 500 | (56) | 56 | (500) | - | |
| Write-offs | (728) | 46 | (579) | - | (1,261) | |
| Depreciation charge | 8 | (31,083) | (6,429) | (1,418) | (4,436) | (43,366) |
| Carrying amount at 31 December 2023 | 27,136 | 32,962 | 4,479 | 7,769 | 72,346 |
The Group recognised lease liabilities as follows:
| In thousand EUR | 31 December 2023 | 31 December 2022 |
| Short-term lease liabilities | 16,038 | 20,156 |
| Long-term lease liabilities | 50,930 | 50,217 |
| Total lease liabilities | 66,968 | 70,373 |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
66 Croatian Telecom Inc.
17 Right-of-use assets and lease liabilities (continued)
Company
| Note | Land | Buildings | Equipment | Other | Total | |
| In thousand EUR | ||||||
| Carrying amount at 1 January 2022 | 27,809 | 37,781 | 3,681 | 5,301 | 74,572 | |
| Additions | 26,526 | 2,432 | 493 | 2,787 | 32,238 | |
| Terminations/modifications | (2,078) | (667) | (127) | (9) | (2,881) | |
| Depreciation charge | 8 | (29,004) | (4,920) | (884) | (3,400) | (38,208) |
| Carrying amount at 31 December 2022 | 23,253 | 34,626 | 3,163 | 4,679 | 65,721 | |
| Additions | 29,318 | 2,642 | 626 | 7,177 | 39,763 | |
| Terminations/modifications | 275 | (1,200) | (272) | (185) | (1,382) | |
| Write-offs | (728) | 46 | (579) | - | (1,261) | |
| Depreciation charge | 8 | (28,801) | (5,268) | (818) | (4,339) | (39,226) |
| Carrying amount at 31 December 2023 | 23,317 | 30,846 | 2,120 | 7,332 | 63,615 |
The Company recognized lease liabilities as follows:
| In thousand EUR | 31 December 2023 | 31 December 2022 |
| Short-term lease liabilities | 13,918 | 16,723 |
| Long-term lease liabilities | 44,802 | 45,949 |
| Total lease liabilities | 58,720 | 62,672 |
The movement of lease liabilities is disclosed in Note 43.
Interest expense included in finance costs of 2023 was EUR 4,457 thousand (2022: EUR 4,254 thousand) for the Group
and EUR 3,752 thousand (2022: EUR 3,340 thousand) for the Company.
Total cash outflow for leases in 2023 for the Group was EUR 45,568 thousand plus interest expense EUR 4,457
thousand (2022: EUR 42,127 thousand plus interest expense EUR 4,254 thousand).
Total cash outflow for leases in 2023 for the Company was EUR 40,556 thousand plus interest expense EUR 3,752
thousand (2022: EUR 38,528 thousand plus interest expense EUR 3,340 thousand).
Expenses relating to short-term leases in 2023 was EUR 2,023 thousand (2022: EUR 2,352 thousand) for the Group
and EUR 1,697 thousand (2022:1,808 thousand) for the Company (Note 10).
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
67 Croatian Telecom Inc.
18 Investments in subsidiaries
| EUR thousand | |
| As at 1 January 2022 | |
| HT holding d.o.o. | 212,098 |
| HT Production d.o.o. | 14,943 |
| Merger of HT Production d.o.o. | (14,943) |
| Year ended 31 December 2022 | 212,098 |
| As at 1 January 2023 | |
| HT holding d.o.o. | 165,748 |
| Iskon Internet d.d. | 46,349 |
| HT Servisi d.o.o. | 3 |
| Year ended 31 December 2023 | 212,100 |
As at 1 June 2022 HT Production is merged to HT d.d. (Note 3). The initial investment in Iskon Internet was in HT
holding and due to merger of Iskon Internet on 2 January 2024, investment in Iskon Internet d.d. was transferred from
HT holding to HT in 2023 (Note 47).
Company HT holding d.o.o. acts as special purpose vehicle entity which holds following investments:
| Company | Country of Business | Principal Activities | Ownership |
| interest | |||
| Combis d.o.o. | Republic of Croatia | Provision of IT services | 100% |
| Crnogorski Telekom AD | Republic of | Provision of fixed and mobile telephony services, | 76.93% |
| Montenegro | internet and data services |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
68 Croatian Telecom Inc.
19 Investments accounted for using the equity method
Investments accounted for using the equity method in Group refer to investment in JP HT d.d. Mostar, while in Company
the same investment is classified as investment accounted for using the cost method (Note 20) in 2022. In 2023. for
both Group and Company investment in JP HT d.d. Mostar is classified as assets held for sale (Note 24).
The net book value of investments accounted for using the equity method comprises of:
| 2023 | 2022 | |
| EUR thousand | EUR thousand | |
| Joint venture JP HT d.d. Mostar: | ||
| As at 1 January | - | 50,337 |
| Share of profit | - | 24 |
| Dividends paid | - | - |
| Impairment of investment | - | (18,801) |
| Investment | - | 31,561 |
| Reclassification to assets held for sale | - | (31,561) |
| As at 31 December | - | - |
Investment in joint venture:
The Group has an ownership interest of 39.1% in its joint venture JP 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 the Federation of Bosnia and Herzegovina (50.10%).
In 2023 and 2022, HT did not receive any dividend from JP 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 JP HT d.d. Mostar was impaired in the amount of EUR 18,801 thousand. As at 31 December 2022, the
amount of investment of EUR 31,561 thousand is classified as assets held for sale (Note 24).
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
69 Croatian Telecom Inc.
19 Investments accounted for using the equity method (continued)
Summarised financial information for investments accounted for using the equity method is as follows:
Summarised statement of financial position:
| 31 December | 31 December | |
| 2023 | 2022 | |
| EUR | EUR | |
| thousand | thousand | |
| Estimated | Actual | |
| Joint venture JP HT d.d. Mostar: | ||
| Current | ||
| Cash and cash equivalents | 14,638 | 24,967 |
| Other current assets | 52,730 | 43,690 |
| Total current assets | 67,368 | 68,657 |
| Financial liabilities | 2,464 | 91 |
| Other current liabilities | 27,104 | 31,955 |
| Total current liabilities | 29,568 | 32,046 |
| Non-current assets | 143,872 | 143,429 |
| Financial liabilities | 10,769 | 791 |
| Other liabilities | 155 | 8,648 |
| Total non-current liabilities | 10,924 | 9,439 |
| Net assets | 170,748 | 170,601 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
70 Croatian Telecom Inc.
19 Investments accounted for using the equity method (continued)
Summarised statement of comprehensive income:
| 2023 | 2022 | |
| EUR thousand | EUR | |
| thousand | ||
| Estimated | Actual | |
| Joint venture JP HT d.d. Mostar: | ||
| Revenue | 107,628 | 103,562 |
| Depreciation and amortisation | (26,871) | (25,964) |
| Interest income | 669 | 87 |
| Interest expense | (678) | (1,113) |
| Pre-tax (loss)/profit | 275 | 378 |
| Income tax expense | (128) | (35) |
| Net income | 147 | 343 |
| Dividends received | - | - |
Reconciliation of summarised financial information
| 31 December | 31 December | |
| 2023 | 2022 | |
| EUR | EUR | |
| thousand | thousand | |
| Estimated | Actual | |
| Joint venture JP HT d.d. Mostar | ||
| Opening net assets 1 January | - | 170,153 |
| Profit for the period | - | 343 |
| Foreign currency translation | - | 105 |
| Closing net assets | - | 170,601 |
| Interest in joint venture 39.10% | - | 66,705 |
| Foreign currency translation | - | (416) |
| Impairment | - | (34,728) |
| Carrying value | - | 31,561 |
| Reclassification to asset classified as held for sale | - | (31,561) |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
71 Croatian Telecom Inc.
20 Investments accounted for using the cost method
Investments accounted for using the equity method in Group refer to investment in JP HT d.d. Mostar (Note 19), while
in Company the same investment is classified as investment accounted for using the cost method in 2022. In 2023. for
both Group and Company investment in JP HT d.d. Mostar is classified as assets held for sale (Note 24).
The net book value of investments accounted for using the cost method comprises of:
| 31 December | 31 December | |
| 2023 | 2022 | |
| EUR thousand | EUR thousand | |
| Joint venture: | ||
| JP HT d.d. Mostar | - | 44,349 |
| Impairment of investment | - | (12,649) |
| Reclassification to assets held for sale | - | (31,700) |
| - | - |
The Company started the sale process during 2022 with the preparation of a valuation. As a result of valuation,
investment in JP HT d.d. Mostar was impaired in the amount of EUR 12,649 thousand. As at 31 December 2022, the
amount of investment of EUR 31,700 thousand is classified as assets held for sale (Note 24).
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
72 Croatian Telecom Inc.
21 Financial asset at fair value through other comprehensive income
Financial assets at fair value through other comprehensive income, include the following:
| Group | Company | ||||
| Issuer | Currency | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | ||
| EUR thousand | |||||
| International bonds: | |||||
| Fortenova Group TopCo | EUR | 766 | 766 | 766 | 766 |
| B.V., Amsterdam | |||||
| Equity instruments | 144 | 419 | 69 | 342 | |
| Total non-current financial | 910 | 1,185 | 835 | 1,108 | |
| assets | |||||
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22 Financial asset at amortised cost
Financial assets at amortised cost include the following:
| Group | Company | ||||||
| Issuer | Credit | Currency | Maturity | 31 | 31 | 31 | 31 |
| rating | December | December | December | December | |||
| 2023 | 2022 | 2023 | 2022 | ||||
| EUR thousand | |||||||
| Government bonds: | |||||||
| Republic of Croatia | BBB+ | EUR | 27 November | 19,404 | - | 19,404 | - |
| 2024 | |||||||
| Total current financial | 19,404 | - | 19,404 | - | |||
| assets | |||||||
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
73 Croatian Telecom Inc.
23 Inventories
| Group | Company | |||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| Inventories and spare parts (at lower of cost and net | 7,399 | 5,047 | 7,374 | 4,997 |
| realisable value) | ||||
| Merchandise (at lower of cost and net realisable | 26,427 | 29,802 | 17,594 | 18,269 |
| value) | ||||
| 33,826 | 34,848 | 24,968 | 23,266 | |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
74 Croatian Telecom Inc.
24 Asset classified as held for sale
| Group | Company | |||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| Asset classified as held for sale | 31,561 | 31,561 | 31,700 | 31,700 |
| 31,561 | 31,561 | 31,700 | 31,700 | |
Assets classified as held for sale refers to the joint venture JP HT d.d. Mostar which is incorporated in the Federation
of Bosnia and Herzegovina. The Group 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 JP HT d.d. Mostar was impaired in the amount of EUR 18,801 thousand (the effect of impairment in the
Company is EUR 12,649 thousand and total effect in the Group is EUR 18,801 thousand). As at 31 December 2023,
the amount of investment of EUR 31,561 thousand in Group and 31,700 EUR thousand in Company is classified as
assets held for sale. The management considers the sale process to be finalized within the next twelve months.
Estimated net book value of JP HT d.d. Mostar as at 31 December 2023 is EUR 170,748 thousand (financial
information for 2023 represents estimations as JP HT d.d. Mostar did not issue its financial statements up to the date
of issuing these consolidated and separate financial statements – Note 19).
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
75 Croatian Telecom Inc.
25 Trade and other receivables
| Group | Company | |||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Trade receivables | 31,832 | 22,441 | 28,557 | 19,212 |
| Loans to employees | 6,167 | 7,095 | 1,992 | 1,940 |
| Other receivables | 1,103 | 456 | 314 | 374 |
| Non-current financial instruments | 39,101 | 30,082 | 30,863 | 21,527 |
| Prepayments to regulator | - | 5,007 | - | 5,007 |
| Total non-current trade and other | 39,101 | 35,089 | 30,863 | 26,534 |
| receivables | ||||
| Trade receivables | 219,870 | 189,022 | 167,817 | 145,964 |
| Loans to employees | 3,671 | 3,202 | 1,662 | 1,580 |
| Other receivables | 23,697 | 7,545 | 24,460 | 6,706 |
| Current trade and other receivables | 247,238 | 199,769 | 193,939 | 154,250 |
| 286,339 | 234,859 | 224,802 | 180,784 | |
Other receivables mainly refer to receivables from European structural and investment funds for EUBB project (EUR
19,442 thousand).
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
76 Croatian Telecom Inc.
25 Trade and other receivables (continued)
The aging analysis of current trade receivables and current and non-current contract assets as of 31 December 2023
is as follows:
| Group | Total | Current | 31-60 days | 61-90 days | 91-180 days | >180 days |
| EUR | EUR | EUR | EUR | EUR | EUR | |
| thousand | thousand | thousand | thousand | thousand | thousand | |
| 31 December 2023 | ||||||
| Expected credit loss rate | 1.69% | 8.92% | 11.67% | 30.38% | 76.66% | |
| Gross carrying amount - | 332,591 | 218,552 | 3,942 | 1,290 | 3,267 | 105,540 |
| trade receivables | ||||||
| Loss allowance | (112,721) | (6,376) | (507) | (252) | (2,269) | (103,317) |
| Net amount – trade | 219,870 | 212,176 | 3,435 | 1,038 | 998 | 2,222 |
| receivables | ||||||
| Gross carrying amount - | 44,262 | 44,262 | - | - | - | - |
| contract assets | ||||||
| Loss allowance | (2,945) | (2,945) | - | - | - | - |
| Net amount – contract | 41,317 | 41,317 | - | - | - | - |
| assets |
The aging analysis of current trade receivables and current and non-current contract assets as of 31 December 2022
was as follows:
| Total | Current | 31-60 days | 61-90 days | 91-180 days | >180 days | |
| EUR | EUR | EUR | EUR | EUR | EUR | |
| thousand | thousand | thousand | thousand | thousand | thousand | |
| 31 December 2022 | ||||||
| Expected credit loss rate | 2.26% | 9.24% | 11.61% | 31.48% | 75.68% | |
| Gross carrying amount - | 299,422 | 184,663 | 4,400 | 1,710 | 2,368 | 106,281 |
| trade receivables | ||||||
| Loss allowance | (110,399) | (4,774) | (414) | (201) | (956) | (104,055) |
| Net amount – trade | 189,022 | 179,889 | 3,986 | 1,510 | 1,412 | 2,226 |
| receivables | ||||||
| Gross carrying amount - | 38,289 | 38,289 | - | - | - | - |
| contract assets | ||||||
| Loss allowance | (2,060) | (2,060) | - | - | - | - |
| Net amount – contract | 36,229 | 36,229 | - | - | - | - |
| assets |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
77 Croatian Telecom Inc.
25 Trade and other receivables (continued)
The aging analysis of current trade receivables and current and non-current contract assets is as of 31 December 2023
is as follows:
| Company | Total | Current | 31-60 days | 61-90 days | 91-180 days | >180 days |
| EUR | EUR | EUR | EUR | EUR thousand | EUR | |
| thousand | thousand | thousand | thousand | thousand | ||
| 31 December 2023 | ||||||
| Expected loss rate | 0.24% | 8.45% | 8.45% | 34.80% | 87.59% | |
| Gross carrying amount - | 247,998 | 170,626 | 2,641 | 661 | 2,148 | 71,922 |
| trade receivables | ||||||
| Loss allowance | (80,181) | (5,598) | (435) | (170) | 2,062 | (71,556) |
| Net amount – trade | 167,817 | 164,668 | 2,206 | 491 | 86 | 367 |
| receivables | ||||||
| Gross carrying amount - | 42,882 | 42,882 | - | - | - | - |
| contract assets | ||||||
| Loss allowance | (2,893) | (2,893) | - | - | - | - |
| Net amount – contract | 39,988 | 39,988 | - | - | - | - |
| assets |
The aging analysis of current trade receivables and current and non-current contract assets as of 31 December 2022
was as follows:
| Total | Current | 31-60 days | 61-90 days | 91-180 days | >180 days | |
| EUR | EUR | EUR | EUR | EUR thousand | EUR | |
| thousand | thousand | thousand | thousand | thousand | ||
| 31 December 2022 | ||||||
| Expected loss rate | 2.56% | 10.55% | 10.55% | 45.96% | 90.16% | |
| Gross carrying amount - | 224,461 | 148,504 | 1,515 | 776 | 758 | 72,908 |
| trade receivables | ||||||
| Loss allowance | (78,497) | (4,377) | (329) | (125) | (758) | (72,908) |
| Net amount – trade | 145,964 | 144,127 | 1,186 | 651 | - | - |
| receivables | ||||||
| Gross carrying amount - | 37,109 | 37,109 | - | - | - | - |
| contract assets | ||||||
| Loss allowance | (2,013) | (2,013) | - | - | - | - |
| Net amount – contract | 35,096 | 35,096 | - | - | - | - |
| assets |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
78 Croatian Telecom Inc.
25 Trade and other receivables (continued)
The following table explains the changes in the credit loss allowance for trade receivables under simplified ECL model
between the beginning and the end of the annual period:
| Group | Company | |||
| Contract | Trade | Contract | Trade | |
| EUR thousand | assets | receivables | assets | receivables |
| As at 1 January 2023 | 2,060 | 110,399 | 2,013 | 78,497 |
| Credit loss allowance in current period | 1,730 | 11,853 | 1,726 | 10,181 |
| Financial assets derecognised during the period | - | (1,533) | - | (1,363) |
| Total credit loss allowance charge in profit and loss | 1,730 | 10,320 | 1,726 | 8,818 |
| for the period | ||||
| Write-offs | (845) | (7,998) | (846) | (7,134) |
| As at 31 December 2023 | 2,945 | 112,721 | 2,893 | 80,181 |
| Group | Company | |||
| Contract | Trade | Contract | Trade | |
| EUR thousand | assets | receivables | assets | receivables |
| As at 1 January 2022 | 1,724 | 112,649 | 1,682 | 81,947 |
| Credit loss allowance in current period | 966 | 9,552 | 961 | 7,547 |
| Financial assets derecognised during the period | - | (2,048) | - | (1,959) |
| Total credit loss allowance charge in profit and loss | 966 | 7,504 | 961 | 5,588 |
| for the period | ||||
| Write-offs | (629) | (9,756) | (629) | (9,038) |
| As at 31 December 2022 | 2,060 | 110,399 | 2,013 | 78,497 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
79 Croatian Telecom Inc.
26 Assets and liabilities arising from contracts with customers
The Group has recognized following assets and liabilities related to contracts with customers:
| Group | Company | |||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Current contract asset resulting from | ||||
| Equipment and service sales | 35,191 | 30,456 | 34,160 | 29,578 |
| Value adjustment | (2,205) | (1,384) | (2,155) | (1,338) |
| Total current contract asset | 32,986 | 29,072 | 32,006 | 28,340 |
| Non current contract asset resulting from | ||||
| Equipment and service sales | 9,070 | 7,832 | 8,721 | 7,531 |
| Value adjustment | (738) | (675) | (738) | (676) |
| Total non current contract asset | 8,332 | 7,157 | 7,983 | 6,855 |
| Current capitalized contract cost resulting from | ||||
| Cost to obtain a contract | 9,375 | 7,494 | 7,364 | 5,751 |
| Cost to fulfil a contract | 3,274 | 2,602 | 640 | 780 |
| Total current capitalized contract cost | 12,650 | 10,096 | 8,004 | 6,531 |
| Non-current capitalized contract cost resulting | ||||
| from | ||||
| Cost to obtain a contract | 28,569 | 21,875 | 23,321 | 16,824 |
| Cost to fulfil a contract | 232 | 329 | 152 | 215 |
| Total non-current capitalized contract cost | 28,891 | 22,204 | 23,473 | 17,039 |
| Current contract liabilities | 12,085 | 10,368 | 6,646 | 4,828 |
| Total current contract liabilities | 12,085 | 10,368 | 6,646 | 4,828 |
Increase of contract asset compared to previous year is primarily result of higher value of granted handset budgets in
current year compared to previous year.
Increase of contract cost compared to previous year is result of increased fees paid to indirect partners for contract
acquisitions.
At 31 December 2023 the Group recognised EUR 7,060 thousand (31 December 2022: EUR 8,408 thousand) of
revenue that was included in the contract liability balance at the beginning of the period.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
80 Croatian Telecom Inc.
26 Assets and liabilities arising from contracts with customers (continued)
At 31 December 2023 the Company recognized EUR 4,451 thousand of revenue that was included in the contract
liability balance at the beginning of the period (2022: EUR 6,085 thousand).
The Group and the Company have recognized following revenue adjustments from contracts with customers, which
was not in line with billed revenue, per following categories:
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Sale of goods | 24,726 | 21,797 | 24,633 | 21,720 |
| Sale of services | (21,458) | (22,684) | (21,346) | (22,506) |
| Total Residential Customers | 3,268 | (887) | 3,287 | (786) |
| Sale of goods | 25,949 | 21,616 | 24,631 | 20,560 |
| Sale of services | (23,455) | (22,398) | (22,355) | (21,658) |
| Total Business Customers | 2,493 | (782) | 2,276 | (1,098) |
Through our accounts and reporting we distinguish the following:
- Revenues invoiced to customers from our billing systems,
- IFRS 15 timing revenue adjustments on top of billed / invoiced revenue.
This table above relates to the second and adjustments here mainly relate to sold subsidized / discounted HW / granted
budgets for sale of goods in current year and reduction of service revenue from current and previous years.
The following table presents information on unsatisfied performance obligations resulting from long-term contracts with
customers.
| Group | Company | |||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| Aggregate amount of the transaction price | ||||
| allocated to long term contracts with | ||||
| customers that are unsatisfied | 176,437 | 150,779 | 157,896 | 131,829 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
81 Croatian Telecom Inc.
26 Assets and liabilities arising from contracts with customers (continued)
For the Group, Management expects that 76% (EUR 134,758 thousand) of the transaction price allocated to unsatisfied
contracts as at 31 December 2023 will be recognized as revenue during the next reporting period. The remaining 24%
(EUR 41,679 thousand) will be recognized in the next 1.5 years.
For the Company, Management expects that 77% (EUR 121,829 thousand) of the transaction price allocated to
unsatisfied contracts as at 31 December 2023 will be recognized as revenue during the next reporting period. The
remaining 23% (EUR 36,067 thousand) will be recognized in the next 1.5 years.
27 Prepayments
| Non current prepayments | Group | Company | ||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| Advances towards third parties | 28,155 | 24,629 | 24,629 | 24,629 |
| 28,155 | 24,629 | 24,629 | 24,629 | |
Non-current prepayments in the amount of EUR 28,155 thousand for the Group and EUR 24,629 thousand for the
Company are consisted of advances for sports content rights secured by bank guarantees.
| Current prepayments | Group | Company | ||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| Prepaid liabilities for concession fees towards regulator | 3,775 | 10,234 | 3,775 | 10,235 |
| Advances towards third parties | 7,076 | 10,667 | 4,387 | 3,414 |
| 10,851 | 20,901 | 8,162 | 13,649 | |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
82 Croatian Telecom Inc.
28 Cash and cash equivalents and bank deposits
a) Cash and cash equivalents
Cash and cash equivalents comprise the following amounts:
| Group | Company | |||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| Cash on hand and balances with banks | 51,248 | 241,976 | 31,912 | 208,328 |
| Commercial papers (i) | 109,572 | 99,572 | 109,572 | 99,572 |
| Reverse repurchase agreement (ii) | - | 30,000 | - | 30,000 |
| Time deposits with maturity less than 3 months (iii) | 72,258 | 1,875 | 49,358 | 1,875 |
| 233,078 | 373,422 | 190,842 | 339,775 | |
(i) Refers to two (2) commercial papers of the issuer Deutsche Telekom, with maturity under 3 months and with
average interest rate of 3.84%
(ii) At 31 December 2022 HT has deposited an amount of EUR 30,000 thousand via reverse repurchase agreement
of Croatian government bonds CROATIA 1,75% 03/04/41 (ISIN: XS2309433899) which matured in 2023.
(iii) Short-term deposits are made for varying periods of between one day and three months, depending on the
immediate cash requirements of the Group and the Company, and earn interest at the respective short-term
deposit rates.
Cash and cash equivalents were also assessed regarding ECL with immaterial effects.
b) Currency breakdown of cash and cash equivalents and time deposits:
| Group | Company | |||
| EUR thousand | 31 December | 31 December | 31 December | 31 December |
| 2023 | 2022 | 2023 | 2022 | |
| EUR | 230,845 | 367,478 | 190,145 | 337,180 |
| GBP | 149 | 176 | 79 | 175 |
| USD | 643 | 3,013 | 617 | 2,420 |
| BAM | 1,382 | 2,530 | - | - |
| RSD | 58 | 225 | - | - |
| 233,078 | 373,422 | 190,842 | 339,775 | |
Considering the introduction of the euro as the official currency in the Republic of Croatia from 1 January 2023, and the
different treatment of the euro as a currency in the previous year, the Group and the Company have reclassified the
amounts within the note lines as of 31 December 2022 to make the data comparable. This did not affect the total amount
of cash and cash equivalents in 2022.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
83 Croatian Telecom Inc.
28 Cash and cash equivalents and bank deposits (continued)
c) Bank deposits over 3 months
| Group | Current | Non-current | ||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Foreign bank (guarantee deposits) | - | 3,500 | - | - |
| Foreign bank (bank deposits) | 10,000 | 10,000 | - | - |
| 10,000 | 13,500 | - | - | |
On 31 December 2022 and 31 December 2023, Hrvatski Telekom did not have any bank deposits.
29 Trade payables and other liabilities
| Group | Company | |||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Content contracts | 1,694 | 4,973 | 993 | 69 |
| Licence for radio frequency spectrum | 7,197 | 11,048 | 5,919 | 11,048 |
| Other | 568 | 481 | 426 | 464 |
| Non-current | 9,459 | 16,502 | 7,338 | 11,581 |
| Trade payables | 180,451 | 140,955 | 145,025 | 109,401 |
| Content contracts | 20,566 | 14,399 | 15,506 | 12,481 |
| VAT and other taxes payable | 7,034 | 3,876 | 4,735 | 643 |
| Payroll and payroll taxes | 9,027 | 8,652 | 7,474 | 7,187 |
| Licence for radio frequency spectrum | 281 | - | - | - |
| Other | 8,483 | 5,345 | 6,398 | 3,101 |
| Current | 225,842 | 173,227 | 179,138 | 132,813 |
| 235,301 | 189,729 | 186,476 | 144,394 | |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
84 Croatian Telecom Inc.
30 Employee benefit obligations
In addition to retirement and jubilee benefits, employee benefits include a compensations for the employees regarding
Incentive plans such as LTI (Long Term Incentive) and Game Changer described in Note 45.
Other short term liabilities to employees are disclosed and described in Note 32.
The movement in the liability recognized in the statement of financial position was as follows:
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| As at 1 January | 3,863 | 2,819 | 3,433 | 2,486 |
| Incentive plan changes | 2,669 | 1,929 | 2,579 | 1,903 |
| Incentive plan paid | (1,414) | (747) | (1,414) | (728) |
| Incentive plan transfer to other liabilities | (22) | (261) | (9) | (266) |
| Service costs | 210 | 108 | 106 | 106 |
| Interest cost | 5 | 98 | 5 | 5 |
| Benefit paid | (66) | (58) | (59) | (39) |
| Transfer of benefits | - | 14 | - | - |
| Actuarial gains | (39) | (39) | (38) | (39) |
| As at 31 December | 5,207 | 3,863 | 4,603 | 3,408 |
| Retirement | 250 | 237 | 234 | 221 |
| Jubilee awards | 424 | 323 | - | - |
| Incentive plans | 4,533 | 3,303 | 4,369 | 3,187 |
| 5,207 | 3,863 | 4,603 | 3,408 | |
| Retirement | 250 | 237 | 234 | 221 |
| Jubilee awards – non-current | 394 | 309 | - | - |
| Incentive plans– non-current | 2,257 | 1,831 | 2,097 | 1,745 |
| Non-current | 2,901 | 2,377 | 2,331 | 1,966 |
| Jubilee awards – current | 30 | 14 | - | - |
| Incentive plans – current | 2,276 | 1,472 | 2,272 | 1,442 |
| Current | 2,306 | 1,486 | 2,272 | 1,442 |
| 5,207 | 3,863 | 4,577 | 3,408 | |
The principal actuarial assumptions used to determine retirement benefit obligations as at 31 December were as follows:
| Group | Company | |||
| 2023 | 2022 | 2023 | 2022 | |
| Discount rate (annually) in % | 3.0 | 3.0 | 3.0 | 3.0 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
85 Croatian Telecom Inc.
31 Provisions
| Group | Assets | ||
| Legal claims | retirement | Total | |
| EUR thousand | obligation | ||
| As at 1 January 2022 | 10,380 | 4,511 | 14,891 |
| Additions | 6,854 | 228 | 7,082 |
| Utilisation | (5,069) | - | (5,178) |
| Net changes | (234) | (108) | (234) |
| Interest costs | (57) | 223 | 166 |
| As at 1 January 2023 | 11,874 | 4,853 | 16,728 |
| Additions | 1,753 | - | 1,753 |
| Utilisation | (361) | - | (361) |
| Reversals | (4,655) | (4) | (4,659) |
| Interest costs | - | 299 | 299 |
| As at 31 December 2023 | 8,610 | 5,149 | 13,759 |
| Company | Assets | ||
| Legal claims | retirement | Total | |
| EUR thousand | obligation | ||
| As at 1 January 2022 | 9,823 | 4,152 | 13,975 |
| Additions | 6,838 | 173 | 7,011 |
| Utilisation | (4,953) | (108) | (5,061) |
| Reversals | (201) | - | (201) |
| Interest costs | - | 223 | 223 |
| As at 1 January 2023 | 11,507 | 4,439 | 15,946 |
| Additions | 1,733 | - | 1,733 |
| Utilisation | (361) | - | (361) |
| Reversals | (4,651) | (4) | (4,655) |
| Interest costs | - | 247 | 247 |
| As at 31 December 2023 | 8,227 | 4,682 | 12,910 |
Legal claims
As at 31 December 2023, the Group has provided estimated amounts for several legal actions and claims that
management has assessed as probable to result in outflow of resources of the Group.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
86 Croatian Telecom Inc.
32 Accruals
| Group | Variable | Redundancy | Unused | Total |
| salary | vacation | |||
| EUR thousand | ||||
| As at 1 January 2022 | 8,418 | 3,219 | 755 | 12,393 |
| Additions | 15,794 | 7,152 | 582 | 23,527 |
| Utilisation | (14,498) | (6,856) | 149 | (21,206) |
| Reversal | (618) | - | (10) | (627) |
| As at 1 January 2023 | 9,096 | 3,514 | 1,476 | 14,087 |
| Additions | 17,082 | 8,181 | 18 | 25,281 |
| Utilisation | (15,628) | (7,150) | - | (22,779) |
| Reversal | - | - | (140) | (140) |
| As at 31 December 2023 | 10,550 | 4,545 | 1,354 | 16,449 |
| Company | Variable | Redundancy | Unused | Total |
| salary | vacation | |||
| EUR thousand | ||||
| As at 1 January 2022 | 6,865 | 3,219 | 621 | 10,705 |
| Additions | 13,362 | 7,152 | - | 20,514 |
| Utilisation | (12,079) | (6,865) | - | (18,787) |
| Reversal | (618) | - | 149 | (618) |
| As at 1 January 2023 | 7,530 | 3,514 | 770 | 11,815 |
| Additions | 14,125 | 7,616 | - | 21,741 |
| Utilisation | (13,068) | (6,634) | - | 19,702 |
| Reversal | - | - | (97) | (97) |
| As at 31 December 2023 | 8,587 | 4,497 | 673 | 13,757 |
Redundancy
Redundancy expenses and accruals include the amount of gross severance payments and other related costs for
employees whose employment contracts are terminated during 2023.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
87 Croatian Telecom Inc.
33 Issued share capital
As of 31 December 2023, the share capital of the Company totalled EUR 1,359,742 thousand (31 December 2022:
EUR 1,359,742 thousand). The share capital is divided into 78,775,842 no par value registered shares (31 December
2022: 78,775,842).
34 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. These reserves are not distributable.
35 Cash flow hedge
The Company applies hedge accounting to hedged items in the statement of financial position and future cash flows,
thus reducing income statement volatility. The hedged item is represented by the forecasted energy consumption of HT
for the period beginning from 1 October 2024 until 30 September 2034.
Hedging relationships are exclusively accounted for in accordance with the requirements of IFRS (IFRS 9).
To hedge against variability in electricity prices, Croatian Telekom concluded on 25th May 2023 a cash flow hedge
transaction in the form of a virtual Power Purchase Agreement (vPPA).
vPPA is concluded for future energy consumption for the period beginning from 1st October 2024 until 30th September
2034 and is expected to cover part of Company’s energy consumption.
As of December 31, 2023, the fair value of the liability is EUR 172 thousand. Any future increase or decrease in fair
value will be reported in the position of capital and long-term financial assets or liabilities, depending on the amount of
the instrument's valuation.
Sensitivity analysis:
Overview of FV Sensitivities of the Hedging Instrument
| Price of electricity | |||
| Valuation date 31.12.2023 | Base Case | Price +10 % | Price -10% |
| Fair Value (thousand EUR) | (171.55) | 4,284.57 | (4,631.33) |
36 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. 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 2023, a total of 808,252 shares were bought and 775,842 shares were cancelled in
January 2024.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
88 Croatian Telecom Inc.
36 Treasury shares (continued)
The Company holds 811,054 own shares as at 31 December 2023 (31 December 2022: 19,952).
In 2023 Crnogorski Telekom has also carried out purchase of own shares. Total of 687,000 shares were bought in 2023
but none were cancelled.
Reserve for purchased own shares of Company amounts to EUR 21,226 thousand as of 31 December 2023 (31
December 2022: EUR 472 thousand) and is not distributable. Crnogorski Telekom does not create reserve for purchased
own shares.
37 Retained earnings
In 2023, General Assembly of the Company has brought the decision regarding the dividend pay-out. Under that
decision, EUR 86,464 thousand (2022: EUR 83,649 thousand) or EUR 1.10 per share were paid out to shareholders
(2022: EUR 1.06 ). Dividend was distributed from net profit in 2022.
38 Commitments
Capital commitments
The Group and the Company were committed under contractual agreements to capital expenditure as follows:
| Group | Company | |||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Intangible assets | 85,195 | 94,288 | 83,262 | 91,805 |
| Property, plant and equipment | 102,248 | 125,019 | 100,980 | 123,748 |
| 187,443 | 219,307 | 184,242 | 215,553 | |
Future payments regarding short-term leases are EUR 2,023 thousand (31 December 2022 EUR 2,352 thousand) for
the Group and EUR 1,697 thousand (31 December 2022 EUR 1,808 thousand) for the Company (Note 10).
Off-balance sheet bank guarantees amount to EUR 11,012 thousand (31 December 2022 EUR 4,833 thousand) for the
Company and EUR 17,095 thousand (31 December 2022 EUR 9,080 thousand) for the Group at 31 December 2023.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
89 Croatian Telecom Inc.
39 Contingencies
At the time of preparation of these consolidated and separate financial statements, there are outstanding claims against
the Group. In the opinion of the management, the settlement of these cases will not have a material adverse effect on
the financial position of the Group, except for certain claims for which a provision was established (Note 31).
The Group 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 Group received a lawsuit filed by the Zagreb Holding Ltd. branch Zagreb Digital City (“ZHZDG”)
against the Group. 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 EUR 51,762 thousand plus interest.
This lawsuit is based on a claim that the HT is using DTI owned by the City of Zagreb without any remuneration.
In December 2012, the Group received the partial interlocutory judgement and partial judgement by which it was
determined that the HT 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 Group appealed against this judgment.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
90 Croatian Telecom Inc.
39 Contingencies (continued)
Ownership claim of Distributive Telecommunication Infrastructure (DTI) by the City of Zagreb (continued)
In August 2015 the second instance County Court of Varaždin accepted the HT’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 EUR 11,945 thousand each year respectively. Therefore, the claim now amounts altogether EUR 87,597 thousand,
plus interest.
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 EUR 122 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 misdemeanour proceedings
In 2020 the Croatian Regulatory Authority for Network Industries (HAKOM) initiated misdemeanour proceeding against
HT in connection with possible breach of imposed regulatory obligations in 2018. In 2023, due to the statute of
limitations, the court issued a decision suspending this misdemeanour proceeding.
In 2023 the Croatian Regulatory Authority for Network Industries (HAKOM) initiated two new misdemeanour
proceedings against HT in connection with possible breach of imposed regulatory obligations during 2020 and 2021.
For such misdemeanour Electronic Communications Act prescribes a penalty in the amount of 1%-10% of a yearly
gross turnover achieved in the year in which the misdemeanour was committed and for which concluded financial
reports exist, respectively according to the latest available concluded financial reports. Both proceedings are ongoing.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
91 Croatian Telecom Inc.
40 Balances and transactions with related parties
The transactions disclosed below primarily relate to transactions with the companies owned by DTAG. The Group 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 2023 and 2022.
The main transactions with related parties during 2023 and 2022 were as follows:
| Group | Company | |||||||
| EUR thousand | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 | 2023 | 2022 |
| Related party: | Revenue | Expense | Revenue | Expense | ||||
| Ultimate parent | ||||||||
| Deutsche Telekom | 4,712 | 5,692 | 12,084 | 11,193 | 1,112 | 1,713 | 6,300 | 6,287 |
| Joint venture | ||||||||
| JP HT d.d. Mostar | 5,612 | 3,140 | 1,545 | 733 | 765 | 663 | 305 | 367 |
| Subsidiaries of ultimate parent | ||||||||
| Telekom Deutschland | 11,526 | 11,245 | 11,398 | 11,681 | 11,416 | 11,245 | 11,351 | 11,681 |
| T-Mobile Austria | 2,494 | 2,129 | 1,678 | 1,520 | 2,489 | 2,123 | 1,673 | 1,511 |
| Slovak Telecom | 1,434 | 1,867 | 134 | 407 | 1,304 | 1,854 | 134 | 406 |
| Magyar Telekom | 1,874 | 1,614 | 393 | 671 | 1,568 | 1,468 | 306 | 555 |
| Deutsche Telekom Cloud Services | 1,076 | 145 | - | - | 884 | 90 | - | - |
| T-Mobile Czech | 1,785 | 1,801 | 165 | 142 | 1,782 | 1,799 | 165 | 140 |
| Deutsche Telekom UK Limited | 1,274 | 957 | 156 | 121 | 1,272 | 956 | 156 | 121 |
| T-Mobile Polska | 812 | 751 | 410 | 367 | 806 | 751 | 403 | 367 |
| DT Europe Holding | - | - | 180 | 255 | - | - | 250 | |
| T-Systems International | 620 | 218 | 5,037 | 2,393 | 620 | 218 | 4,918 | 2,270 |
| Makedonski Telekom | 285 | 163 | 13 | - | 39 | 66 | 13 | 12 |
| Hellenic Telecommunications | - | - | 57 | 771 | - | - | 48 | 736 |
| Organization | ||||||||
| Deutsche Telekom Services Europe SE | - | - | 657 | 742 | - | - | 646 | 742 |
| Others | 446 | 395 | 405 | 317 | 377 | 318 | 535 | 267 |
| 33,950 | 30,117 | 34,312 | 31,313 | 24,434 | 23,264 | 26,953 | 25,712 | |
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 JP HT
d.d. Mostar relate to international settlement of telecommunications services.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
92 Croatian Telecom Inc.
40 Balances and transactions with related parties (continued)
The statement of financial position includes the following balances resulting from transactions with related parties:
| Group | Receivables | Payables | ||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Related party: | ||||
| Ultimate parent | ||||
| Deutsche Telekom | 37 | 147 | 5,404 | 9,048 |
| Joint venture | ||||
| JP HT d.d. Mostar | 1,674 | 405 | - | - |
| Subsidiaries of ultimate parent | ||||
| T-Systems International | - | - | 5,436 | 1,741 |
| Deutsche Telekom Cloud Services | 238 | 375 | - | - |
| Makedonski Telekom | 443 | 208 | - | - |
| Magyar Telekom. | 307 | 104 | 212 | 170 |
| Telekom Deutschland | 30 | 58 | 7,085 | 10,434 |
| Deutsche Telekom UK Limited | - | - | 634 | 492 |
| Slovak Telecom | 179 | 159 | - | - |
| Cosmote | 43 | 26 | 4 | 16 |
| Others | 17 | 8 | 741 | 1,091 |
| 2,968 | 1,490 | 19,646 | 22,992 | |
| Company | Receivables | Payables | ||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Related party: | ||||
| Ultimate parent | ||||
| Deutsche Telekom | - | - | 4,560 | 8,045 |
| Joint venture | ||||
| JP HT d.d. Mostar | 85 | 35 | - | - |
| Subsidiaries of ultimate parent | ||||
| Telekom Deutschland | 30 | 23 | 7,085 | 10,408 |
| Makedonski Telekom | 46 | 66 | - | - |
| Deutsche Telekom Cloud Services | 74 | 336 | - | - |
| T-Mobile Polska | - | - | 40 | 289 |
| Magyar Telekom | 93 | 54 | - | - |
| Deutsche Telekom UK Limited | - | - | 630 | 492 |
| Slovak Telecom | 179 | 159 | - | - |
| T-Systems International | - | - | 5,278 | 1,561 |
| Others | 9 | 8 | 589 | 732 |
| 516 | 681 | 18,182 | 21,528 | |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
93 Croatian Telecom Inc.
40 Balances and transactions with related parties (continued)
At the year end the Group and the Company hold investment in commercial paper of ultimate parent in the amount of
EUR 109,572 thousand (31 December 2022: EUR 99,718 thousand) (Note 28).
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 Group as well.
The Group did not execute as part of its normal business activities any transactions that were individually material in
the 2023 or 2022 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.
In 2023, the Company granted short term loans to Combis d.o.o. in amount of EUR 27,000 thousand (31 December
2022: EUR 5,309 thousand to Iskon Internet d.d. and EUR 11,945 thousand to Combis d.o.o.).
Interest rate for given loans amounts 5.4%.
The Company had the following transactions and balances with its subsidiaries excluding loans in the amount of EUR
3,010 thousand (31 December 2022: EUR 1,995 thousand):
| Revenues | Capital | Expenses | Receivables | Payables | |
| expenditures | |||||
| Subsidiaries: | EUR thousand | EUR thousand | EUR thousand | EUR thousand | EUR thousand |
| 2023 / 31 December 2023 | 20,893 | 15,807 | 6,424 | 30,191 | 8,680 |
| 2022 / 31 December 2022 | 21,145 | 21,281 | 6,345 | 25,301 | 9,405 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
94 Croatian Telecom Inc.
40 Balances and transactions with related parties (continued)
Compensation of the members 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, the amount of 1.25 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, 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 committee of the Supervisory Board, receives
a remuneration in the amount of 1.25 of the average monthly net salary of the Company's employees paid in the previous
month. A member of the Supervisory 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 employees
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 2023, the Group paid a total amount of EUR 129 thousand (2022: EUR 123 thousand) to the members of its
Supervisory Board and the Company paid a total amount of EUR 108 thousand (2022: EUR 105 thousand) to the
members of its Supervisory Board. No loans were granted to the members of the Supervisory Board.
Compensation to key management personnel
In 2023, the total compensation paid to key management personnel of the Group amounted to EUR 7,725 thousand
(2022: EUR 6,588 thousand) and to key management personnel of the Company amounted to EUR 6,019 thousand
(2022: EUR 5,160 thousand). Key management personnel include members of the Management Boards of the
Company and its subsidiaries and the Company’s directors of Sector, who are employed by the Group and Company.
Compensation paid to key management personnel includes:
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Short-term benefits | 7,725 | 6,588 | 6,019 | 5,160 |
| 7,725 | 6,588 | 6,019 | 5,160 | |
In 2023, the total cost of pension contribution of the Group is EUR 800 thousand (2022: EUR 731 thousand) and of the
Company is EUR 557 thousand (2022: EUR 472 thousand).
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
95 Croatian Telecom Inc.
41 Financial risk management objectives and policies
The Group and the Company are exposed to international service-based markets. As a result, the Group and Company
can be affected by changes in foreign exchange rates. The Group and Company also extend 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 Group or Company does not use derivative instruments either to manage risk or for
speculative purposes.
a) Credit risk
The Group or Company have no significant concentration of credit risk with any single counter party or group of
counterparties with similar characteristics. The Group and Company’s 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 Group or Company do not guarantee obligations of other parties.
The Group and Company consider 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. The maximum exposure to credit risk
at the reporting date is the carrying value of each class of financial assets disclosed (Note 25). Generally, trade
receivables are written-off if past due for more than one year and are not subject to enforcement activity. If receivables
are uncollectible, and all legal procedures have been completed and the final amount of loss is known, the receivables
are written off directly. If in the next period the amount of the credit loss is reduced, and the decrease can be directly
related to an event that occurred after the write-off, previously recognized loss is discharged through profit or loss.
To account for expected credit losses, macroeconomic and external data is analysed – 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 HT customer payment behaviour in order to see possible change of credit risk
percentages applied.
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.
Detailed Expected credit loss (ECL) measurement and approach is explained in Note 2.3.
Additionally, the Group and Company are exposed to risk through cash deposits in the banks, as well as bonds and
commercial papers. As at 31 December 2023, the Group had business transactions with thirty-two banks (2022: thirty-
four banks) while Company had business with eight banks (2022: eight banks). The Group held cash and deposits in
three banks almost exclusively. For one domestic bank with foreign ownership, the Group received guarantee for
deposits placed from parent bank which has a minimum rating of BBB+ and acceptable Credit Default Swap level
(“CDS”). 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 Group and Company apply 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
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
96 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
a) Credit risk (continued)
due. The contract assets relate the same risk characteristics as the trade receivables for the same types of contracts.
The group has therefore concluded that the expected loss rates for trade receivables are a reasonable approximation
of the loss rates for the contract assets.
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 Group and Company have 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 classified as
financial assets at amortized cost. Credit risk is measured using the general approach. Impairment losses are
recognized on the basis of individual impairment. Group and Company use 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, Group and the Company
took the CDS indicator of Croatia, which on 31 December 2023 amounted to 0.85%.
Credit risk amount calculated using the formula: deposit amount * number of days * 0.85% / 365. For a vista deposits
the Group uses 2 days.
The exposure of non-current financial assets can be assessed by historical information about counterparty default rates:
| Group | Company | |||
| 31 December | 31 December | 31 December | 31 December | |
| 2023 | 2022 | 2023 | 2022 | |
| EUR thousand | EUR thousand | EUR thousand | EUR thousand | |
| Trade receivables for merchandise sold | 31,832 | 22,441 | 28,557 | 19,212 |
| Prepayments to regulator | - | 5,007 | - | 5,007 |
| Loans to employees | 6,167 | 7,095 | 1,992 | 1,940 |
| Other receivables | 1,103 | 546 | 314 | 2,374 |
| 39,101 | 35,089 | 30,863 | 26,533 | |
Trade receivables from subsidiaries and other current receivables are neither past due nor impaired.
The credit quality of all other financial assets (Note 42) implies the total carrying amount as at the balance sheet date
is considered.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
97 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
b) Liquidity risk
The Group and Company’s 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 short-term financial assets that are valued at fair value through other comprehensive income.
The amounts of financial liabilities disclosed in the tables are the contractual undiscounted cash flows. The amounts of
financial assets disclosed in the tables are the discounted cash flows (book values).
Group – Financial liabilities
| 31 December 2023 | Less than 3 | 3-12 | 1-5 years | >5 years | Total | Book value |
| months | months | |||||
| EUR thousand | ||||||
| Trade and other payables | 184,529 | - | 426 | - | 184,685 | 184,685 |
| Licence for radio | 70 | 932 | 3,606 | 4,327 | 8,935 | 7,478 |
| frequency spectrum | ||||||
| Capitalized content rights | 9,805 | 12,669 | 2,828 | - | 25,302 | 22,260 |
| Other liabilities | 26,013 | - | - | - | 26,013 | 26,013 |
| Lease liabilities | 6,656 | 12,857 | 37,516 | 25,944 | 82,973 | 66,968 |
| 31 December 2022 | Less than 3 | 3-12 | 1-5 years | >5 years | Total | Book value |
| months | months | |||||
| EUR thousand | ||||||
| Trade and other payables | 145,552 | - | - | - | 145,552 | 145,552 |
| Licence for radio | - | 849 | 5,043 | 8,070 | 13,962 | 11,048 |
| frequency spectrum | ||||||
| Capitalized content rights | 9,703 | 9,736 | 1,617 | - | 21,056 | 19,372 |
| Other liabilities | 15,794 | - | - | - | 15,794 | 15,794 |
| Lease liabilities | 7,398 | 15,698 | 33,100 | 31,093 | 87,289 | 70,373 |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
98 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)
Group – Financial assets
| 31 December 2023 | Less than 3 | 3-12 months | 1-5 years | >5 years | Total |
| months | |||||
| EUR thousand | |||||
| Financial assets at fair value through | - | - | 910 | - | 910 |
| other comprehensive income (Note 21) | |||||
| Trade receivables (Note 25) | 216,649 | 3,220 | 31,832 | - | 251,701 |
| Financial asset at amortized cost | - | 19,404 | - | - | 19,404 |
| 31 December 2022 | Less than 3 | 3-12 months | 1-5 years | >5 years | Total |
| months | |||||
| EUR thousand | |||||
| Financial assets at fair value through | - | - | 1,185 | - | 1,185 |
| other comprehensive income (Note 21) | |||||
| Trade receivables (Note 25) | 185,385 | 3,637 | 22,441 | - | 211,463 |
Company – Financial liabilities
| Less | 3-12 | 1-5 | Total | Book value | ||
| 31 December 2023 | than 3 | months | years | >5 years | ||
| months | ||||||
| EUR thousand | ||||||
| Trade and other payables | 148,636 | - | - | - | 148,636 | 148,636 |
| Licence for radio frequency | - | 721 | 3,606 | 4,327 | 8,654 | 5,919 |
| spectrum | ||||||
| Capitalized content rights | 8,652 | 8,164 | 1,128 | - | 17,944 | 16,499 |
| Other liabilities | 17,525 | - | - | - | 17,525 | 17,525 |
| Lease liabilities | 5,958 | 10,884 | 31,074 | 25,196 | 73,112 | 58,720 |
| Less | 3-12 | 1-5 | Total | Book value | ||
| 31 December 2022 | than 3 | months | years | >5 years | ||
| months | ||||||
| EUR thousand | ||||||
| Trade and other payables | 113,796 | - | - | - | 113,796 | 113,796 |
| Licence for radio frequency | - | 849 | 5,043 | 8,070 | 13,962 | 11,048 |
| spectrum | ||||||
| Capitalized content rights | 6,767 | 6,135 | 76 | - | 12,978 | 12,550 |
| Other liabilities | 8,505 | - | - | - | 8,505 | 8,505 |
| Lease liabilities | 6,422 | 12,945 | 29,036 | 30,352 | 78,755 | 62,672 |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
99 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
b) Liquidity risk (continued)
Company – Financial assets
| 31 December 2023 | Less than 3 | 3-12 months | 1-5 years | >5 years | Total |
| months | |||||
| EUR thousand | |||||
| Financial assets at fair value through | - | - | 835 | - | 835 |
| other comprehensive income (Note 21) | |||||
| Trade receivables (Note 25) | 167,365 | 452 | 28,557 | - | 196,375 |
| Financial asset at amortized cost | - | 19,404 | - | - | 19,404 |
| Loans receivable from subsidiaries (Note | - | 3,010 | - | - | 3,010 |
| 40) |
| 31 December 2022 | Less than 3 | 3-12 months | 1-5 years | >5 years | Total |
| months | |||||
| EUR thousand | |||||
| Financial assets at fair value through | - | - | 1,108 | - | 1,108 |
| other comprehensive income (Note 21) | |||||
| Trade receivables (Note 25) | 145,964 | - | 19,212 | - | 165,176 |
| Loans receivable from subsidiaries (Note | - | 1,995 | - | - | 1,995 |
| 40) |
c) Other price risk
As part of the presentation of market risks, IFRS 7 also requires disclosures on how hypothetical changes in risk
variables affect the price of financial instruments. Important risk variables are stock exchange prices or indexes. We
use derivative to hedge electricity price (Note 35), not for speculative gains. In the process, we monitor the effectiveness
of the hedges on a regular basis.
d) Interest rate risk
The Group’s and Company’s exposure to the risk of changes in market interest rates relates primarily to the Group’s
and Company’s financial assets at fair value through other comprehensive income and amortized cost, cash, cash
equivalents, time deposits and bank borrowings.
The Group or Company are not exposed to variable interest rates.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
100 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
e) Foreign currency risk
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. There is no significant exposure to any other currencies; so, the currency risk is low.
f) 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 (Note 42). The Group's and
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.
g) Capital management
The primary objective of the Group’s and Company’s capital management is to ensure business support and maximise
shareholder value. The capital structure of the Group comprises of issued share capital, reserves and retained earnings
and totals EUR 1,658,553 thousand as at 31 December 2023 (31 December 2022: EUR 1,634,444 thousand).
The capital structure of the Company comprises issued share capital, reserves and retained earnings and totals EUR
1,670,870 thousand as at 31 December 2023 (31 December 2022: EUR 1,653,015 thousand).
The Group and Company manage its capital structure and makes adjustments to it, in light of changes in economic
conditions. To maintain or adjust the capital structure, the Group and 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 2023 and 31 December 2022 (Notes 33 and 36).
For details about debt structure, please see note 43.
The Group and the Company continuously monitor both capital and net debt as relevant components. Management
considers that the amount of capital and the structure of net debt are adequate.
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 consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
101 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
g) 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 2023
IEN-RK: Section A - Calculation of Regulatory Capital
| EUR | ||
| No. | Item | Amount |
| 1. | REGULATORY CAPITAL | 1,212,968,768.15 |
| 2. | EQUITY TIER 1 CAPITAL | 1,212,968,768.15 |
| 3. | COMMON EQUITY TIER 1 CAPITAL | 1,212,968,768.15 |
| 4. | Capital instruments | 1,359,742,172.00 |
| 5. | Share premium | 0.00 |
| (-) Direct, indirect and synthetic holdings | ||
| 6. | by the institution of Common Equity Tier | -21,226,327.67 |
| 1 Capital | ||
| 7. | Retained earnings or (-) carry back | 117,966,162.60 |
| losses | ||
| 8. | Losses for the current fiscal year | 0.00 |
| 9. | Accumulated other comprehensive | 11,737.04 |
| income | ||
| 10. | Other reserves | 67,889,447.76 |
| 11. | (+)/(–) Adjustments to the Common | 0.00 |
| Equity Tier 1 from prudential filters | ||
| 12. | Intangible assets | -293,053,165.62 |
| (-) Deferred tax assets that rely on | ||
| 13. | future profitability and not arise from | 0.00 |
| temporary differences | ||
| 14. | (-) Pension fund assets under | 0.00 |
| management | ||
| 15. | (-) Reciprocal cross holdings in | 0.00 |
| Common Equity Tier 1 | ||
| 16. | (-) Deduction from Common Equity Tier | 0.00 |
| 1 items that exceed Additional Tier 1 | ||
| (-) Holdings of Common Equity Tier 1 | ||
| 17. | instruments where an institution does | 0.00 |
| not have a significant investment in a | ||
| financial sector entity |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
102 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
g) 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 2023
IEN-RK: Section A - Calculation of Regulatory Capital
| EUR | ||
| No. | Item | Amount |
| 18. | (-) Deferred tax assets that rely on future profitability and arise from | -18,461,257.96 |
| temporary differences | ||
| 19. | (-) Holdings of Common Equity Tier 1 instruments where an institution | 0.00 |
| has a significant investment in a financial sector entity | ||
| 20. | (-) Deduction over treshold (17.65%) | 0.00 |
| 21. | (-) Deduction from Common Equity Tier 1 items - other | 0.00 |
| 22. | ADDITIONAL TIER 1 CAPITAL | 0.00 |
| 23. | Capital instruments | 0.00 |
| 24. | Share premium | 0.00 |
| 25. | (-) Direct, indirect and synthetic holdings by the institution of Additional | 0.00 |
| Tier 1 Capital | ||
| 26. | (-) Reciprocal cross holdings in Additional Tier 1 | 0.00 |
| 27. | (-) Holdings of Additional Tier 1 instruments where an institution does | 0.00 |
| not have a significant investment in a financial sector entity | ||
| 28. | (-) Holdings of Additional Tier 1 instruments where an institution has a | 0.00 |
| significant investment in a financial sector entity | ||
| 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 | 0.00 |
| (deducted from Common Equity Tier 1) | ||
| 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 | 0.00 |
| Capital |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
103 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
g) 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 2023
IEN-RK: Section A - Calculation of Regulatory Capital
| EUR | ||
| No. | Item | Amount |
| 36. | (-) Reciprocal cross holdings in Tier 2 | 0.00 |
| (-) Holdings of Tier 2 instruments where | ||
| 37. | an institution does not have a significant | 0.00 |
| investment in a financial sector entity | ||
| (-) Holdings of Tier 2 instruments where | ||
| 38. | an institution has a significant | 0.00 |
| investment in a financial sector entity | ||
| Deduction from Tier 2 Capital items that | ||
| 39. | exceed Tier 2 Capital (deducted from | 0.00 |
| Additional Tier 1) | ||
| 40. | (-) Deduction from Tier 2 items - other | 0.00 |
| 41. | Notes | 0.00 |
| 42. | Profit for the year | 125,161,197.98 |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
104 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
g) 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 2023
IEN- RK: Section B – Capital available to calculate the amount of regulatory capital
| EUR | EUR | |||
| Capital available to | ||||
| Number | Item | Total amount | calculate the amount | Excess |
| of regulatory capital | ||||
| 1 | 2 | 3 | ||
| 1. | Common Equity Tier 1 Capital | 1,212,968,768.15 | 1,212,968,768.15 | |
| 2. | Additonal Tier 1 Capital | 0.00 | 0.00 | 0.00 |
| 3. | Equity Tier 1 Capital | 1,212,968,768.15 | 1,212,968,768.15 | |
| 4. | Tier 1 Capital | 0.00 | 0.00 | 0.00 |
| 5. | Regulatory Capital | 1,212,968,768.15 |
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 2023
IEN-MRK: Section A - Minimum required regulatory capital for electronic money institutions
| EUR | ||
| Number | Calculation | Amount |
| 1. | Average unused electronic money | 146.98 |
| 2. | Minimum required regulatory capital for electronic money institutions | 2.94 |
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
105 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
g) 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 2023
IPP-MRK: Section A - Minimum required regulatory capital for payment institutions
| EUR | ||
| Number | Item | Amount |
| 1. | Total amount of payment transactions in the previous year | 26,407,971.26 |
| 2. | Payment volume | 2,200,664.27 |
| 3. | Total amount (4., 5. ,6., 7., 8.) | 88,026.57 |
| 4. | 4% of payment volume up to the amount of EUR 5 million | 88,026.57 |
| 5. | 2.5% of payment volume over the amount of EUR 5 million and up to the | 0.00 |
| amount of EUR 10 million | ||
| 6. | 1% of payment volume over the amount of EUR 10 million and up to the | 0.00 |
| amount of EUR 100 million | ||
| 7. | 0.5% of payment volume over the amount of EUR 100 million and up to the | 0.00 |
| amount of EUR 250 million | ||
| 8. | 0.25% of payment volume over the amount of EUR 250 million | 0.00 |
| 9. | Factor k | 1.00 |
| 10. | Minimum required regulatory capital for payment institutions | 88,026.57 |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
106 Croatian Telecom Inc.
41 Financial risk management objectives and policies (continued)
h) Offsetting
The following financial assets and financial liabilities are subject to offsetting:
| Group | Trade receivables | Trade payables | ||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Gross recognised amounts | 40,507 | 44,738 | 54,238 | 63,487 |
| Offsetting amount | (9,567) | (14,728) | (9,567) | (14,728) |
| 30,940 | 30,010 | 44,671 | 48,759 | |
| Company | Trade receivables | Trade payables | ||
| 31 December | 31 December | 31 December | 31 December | |
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Gross recognized amounts | 9,039 | 9,515 | 21,911 | 27,814 |
| Offsetting amount | (5,319) | (7,218) | (5,319) | (7,218) |
| 3,720 | 2,297 | 16,592 | 20,596 | |
The offseting is applied in particular to receivables and payables with related parties and with mobile and fixed network
operators.
Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
107 Croatian Telecom Inc.
42 Financial instruments
Recurring fair value measurement
The level in fair value hierarchy into which the recurring fair value measurements are categorised are as follows:
| Group | 31 December 2023 | 31 December 2022 | ||||
| EUR thousand | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Financial assets at fair value | ||||||
| through other comprehensive | 144 | - | 766 | 419 | - | 766 |
| income, non-current | ||||||
| Cash flow hedge derivative | - | - | (172) | - | - | - |
| Company | 31 December 2023 | 31 December 2022 | ||||
| EUR thousand | Level 1 | Level 2 | Level 3 | Level 1 | Level 2 | Level 3 |
| Financial assets at fair value through | ||||||
| other comprehensive income, non- | 69 | - | 766 | 342 | - | 766 |
| current | ||||||
| Cash flow hedge derivative | - | - | (172) | - | - | - |
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
108 Croatian Telecom Inc.
43 Net debt reconciliation
| Group | Cash/bank | Liquid | Other fin. liabilities | Other fin. liabilities | Lease liabilities | Total |
| overdraft | investments | (spectrum and content) | (spectrum and | |||
| within 1 y | content) after 1 y | |||||
| EUR thousand | ||||||
| Net debt as at 31 December 2021 | 381,074 | 5,043 | (11,547) | (17,519) | (82,328) | 274,723 |
| Cash flow | (7,652) | 8,457 | 43,233 | - | 42,127 | 86,165 |
| Reclassification of current portion | - | - | (46,085) | 46,085 | - | - |
| Additions - increase in related asset | - | - | - | (44,587) | (33,870) | (78,457) |
| (intangible assets and ROA) | ||||||
| Termination/modification of lease contracts | - | - | - | - | 3,698 | 3,698 |
| Net debt as at 31 December 2022 | 373,422 | 13,500 | (14,399) | (16,021) | (70,373) | 286,129 |
| Cash flow | (140,344) | (3,500) | 34,613 | - | 45,568 | (63,663) |
| Reclassification of current portion | - | - | (47,352) | 47,352 | - | - |
| Additions - increase in related asset | - | - | - | (38,060) | (45,409) | (83,469) |
| (intangible assets and ROA) | ||||||
| Termination/modification of lease contracts | - | - | - | - | 1,985 | 1,985 |
| Other non-financial movements | - | - | (1,183) | (2,162) | 1,261 | (2,084) |
| Net debt as at 31 December 2023 | 233,078 | 10,000 | (28,321) | (8,891) | (66,968) | 138,898 |
Liquid investments consist of bank deposits and financial assets at fair value through other comprehensive income.
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Notes to the consolidated and separate financial statements (continued) DRAFT
For the year ended 31 December 2023 STRICTLY CONFIDENTIAL
109 Croatian Telecom Inc.
43 Net debt reconciliation (continued)
| Cash/bank | Other fin. liabilities | Other fin. liabilities | |||
| Company | overdraft | (spectrum and content) | (spectrum and content) | Lease liabilities | Total |
| within 1 year | after 1 year | ||||
| EUR thousand | |||||
| Net debt as at 31 December 2021 | 333,584 | (13,538) | (13,405) | (71,843) | 234,798 |
| Cash flow | 6,191 | 36,368 | - | 38,528 | 81,087 |
| Reclassification of current portion | - | (33,055) | 33,055 | - | - |
| Additions | - | - | (30,767) | (32,238) | (63,005) |
| Termination/modification of lease | - | - | - | 2,881 | 2,881 |
| contracts | |||||
| Merger of subsidiary (Note 3) | - | (2,654) | - | - | (2,654) |
| Other non financial movements | - | 398 | - | - | 398 |
| Net debt as at 31 December 2022 | 339,775 | (12,481) | (11,117) | (62,672) | 253,505 |
| Cash flow | (148,933) | 26,659 | - | 40,556 | (81,718) |
| Reclassification of current portion | - | (35,003) | 35,003 | - | - |
| Additions | - | - | (30,798) | (39,763) | (70,561) |
| Termination/modification of lease | - | - | - | 1,898 | 1,898 |
| contracts | |||||
| Other non financial movements | - | 5,319 | - | 1,261 | 6,580 |
| Net debt as at 31 December 2023 | 190,842 | (15,506) | (6,912) | (58,720) | 109,704 |
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__________
__________
__________
Notes to the consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
110 Croatian Telecom Inc.
44 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) 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.
On 16 March 2023 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, which is valid till 22 February 2033.
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 two (2) years starting from 1 December 2022 with the obligation to
provide following universal services during the mentioned period:
1. 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,
2. 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,
3. special measures for persons with disabilities to access services from points 1 and 2 above, including access
to emergency services, in the same way as other end-users,
Notes to the consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
111 Croatian Telecom Inc.
44 Authorization for Services and Applicable Fees (continued)
a) Service authorization for the performance of electronic communications services in a fixed and mobile network
(continued)
4. 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
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.
Following the public auction procedure for issuing licenses for the use of radio frequency spectrum, on 8 March 2023,
HAKOM passed a decision based on which the Company was issued new licenses for the use of radio frequency
spectrum in the 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz frequency bands, which are valid from 19
October 2024 until 19 October 2039:
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 consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
112 Croatian Telecom Inc.
44 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 2023, 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. 151/2022 and
37/2023),
- 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), of 12
August 2021 (spectrum in 700 MHz, 3600 MHz and 26 GHz frequency bands), and of 8. March 2023 (spectrum
in 800 MHz, 900 MHz, 1800 MHz, 2100 MHz and 2600 MHz)
- 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.
154/2022 and 72/2023).
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 and
0.5% of the total annual gross income generated by media service providers who have permission for satellite, internet,
cable transmission and other permitted forms of audiovisual program transmission 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 for the promotion of audiovisual creativity.
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.
Notes to the consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
113 Croatian Telecom Inc.
44 Authorization for Services and Applicable Fees (continued)
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 0,4 – 1,33 EUR/m2/y depending on
the property type.
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 0,63 EUR/m2/y for ECI laid on highways and 0,32 EUR/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 consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
114 Croatian Telecom Inc.
45 Share-based and non share-based payment transactions
Long-term incentive plans (LTI) are cash-based plans and were introduced in 2020, 2021, 2022 and 2023 at Group
level.
LTI 2019 ended on 31 December 2022 and the Supervisory Board has determined final target achievement and awarded
amount which was paid to plan participants in July 2023.
The LTI (Long term incentive) plan initiated in 2023, covers the period from 1 January 2023 to 31 December 2026.
LTI plans are linked to the to the performance of four indicators of the Deutsche Telekom Group: ROCE (Return on
Capital Employed), Adjusted EPS (Earnings per Share), Customer satisfaction and Employee satisfaction.
EU Game Changer Incentive Program is cash-based plan that was 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.
Movements on cash-based incentive plans are presented in Note 30.
Share Matching Plan (SMP) is equity-based plan, for the award of bonus shares to managers, is active in 2023. The
term of the 2023 SMP covers the period from 1 July 2023 to 30 June 2027. 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 2019 covered the period from 1 July
2019 to 30 June 2023 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 2019. 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 2023 as a part of the Share Matching Plan (SMP) 2019 is
shown in the following table:
| Full entitlement for the entire SMP 2018 | The part of the | |||
| duration | entitlement | |||
| Share | relating to HT* | |||
| Matching | Matching | Non-cash | Non-cash | Non-cash |
| Plan (SMP) | DT AG | benefit per | benefit | benefit |
| shares | share | |||
| (pieces) | (in EUR) | (in EUR) | (in EUR) | |
| 2019 | 3,893 | 19.198 | 74,738 | 74,738 |
All gains and expenses resulting from changes of the related provisions for all LTI, Game Changer and SMP plans
recognized for employee services received during the year are shown in the following table:
| Group | Company | |||
| EUR thousand | 2023 | 2022 | 2023 | 2022 |
| Expenses | 2,825 | 2,173 | 2,731 | 1,971 |
| 2,825 | 2,173 | 2,731 | 1,971 | |
__________
__________
__________
__________
___________
___________
___________
Notes to the consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
115 Croatian Telecom Inc.
46 Auditor’s fees
The auditors of the Group’s financial statements have rendered services of EUR 592 thousand in 2023 (2022: EUR 696
thousand) and of the Company’s financial statements have rendered services of EUR 380 thousand in 2023 (2022:
EUR 496 thousand). Services rendered in 2023 and 2022 relate to audits and reviews of the financial statements,
Reports on related party transactions and Remuneration report.
Total amounts for 2022 are also including services for audit of financial statements prepared for regulatory purposes,
provided by auditors from the previous year. Auditor’s fees for 2023 are not including amount for this service, because
the service is still provided by auditors from the previous year.
47 Subsequent events
On 1 January 2024, Company merged its subsidiary Iskon Internet d.d. With the date of incorporation into the court
register (2 January 2024), Iskon Internet d.d. ceased to operate as a separate business entity and is no longer active
in the court register, while the entire assets and all rights and obligations were transferred to the Company. After the
merger, the products and services provided by Iskon will continue to be provided within the portfolio of the Company
under Iskon's brand.
The carrying value of transferred assets and liabilities of Iskon Internet d.d. as at the date of merger were:
| in EUR thousand | |
| Non-current assets | 14,114 |
| Current assets | 30,418 |
| Liabilities | 36,465 |
| Total net assets | 8,067 |
| Goodwill | 10,090 |
| Investment in Iskon Internet d.d. | (46,349) |
| Total effect of merger on retained earnings of the Company | (28,192) |
Since this merger is considered as business combination under common control, there is no material effect in the aspect
of consolidated financial statements of the Group.
On 1 January 2024, the technological unit Ericsson Nikola Tesla Servisi d.o.o. (ENTS) for construction and maintenance
of the Croatian Telecom network, which was initially outsourced to ENTS in September 2014, became part of the HT
Group. The now former technological unit of ENTS has been transferred together with the employees to HT Servisi
d.o.o. (daughter company fully owned by Croatian Telecom which was established on 15 November 2023), based on
the Agreement on the transfer of a part of the economic activity concluded with ENTS. Value of the acquisition
transaction is EUR 327 thousand. Carrying amount of net assets of HTS on the date of acquisition of business unit is
EUR 27 thousand.
Notes to the consolidated financial statements (continued) DRAFT
For the year ended 31 December 2023
116 Croatian Telecom Inc.
47 Subsequent events (continued)
In December 2023 the Management Board withdrew 775,842 Company shares without nominal value, without the share
capital of the Company being decreased. Thereby the total number of shares has decreased from 78,775,842 shares
to 78,000,000 shares without nominal value, while the remaining shares’ participation in the share capital is being
increased. The change of total number of shares of the Company has been entered into the register of the Commercial
Court in Zagreb on 2 January 2024.
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: Elvira Gonzalez Sevilla (Chairperson)
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: EUR 1,359,742,172 | Total number of shares issued: 78,000,000 shares without nominal value
CONFIDENTIAL
No.: C3-IS-13-642435-05/2024
Zagreb, 15 March 2024
Pursuant to Articles 11, 13 and 31 of the Articles of Association of Croatian Telecom Inc. (HT d.d.
Herald, No. 1/2024), 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, 18/23 and 130/23), the Management Board of Croatian
Telecom Inc., on 15 March 2024, adopted the following
D E C I S I O N
1. Separate and consolidated financial statements for the year ended 31 December 2023
are determined, the Reports by the certified auditor Deloitte for the year ended 31
December 2023 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
Members of the Supervisory Board
Treasury and Accounting Sector
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: Elvira Gonzalez Sevilla (Chairperson)
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: EUR 1,359,742,172 | Total number of shares issued: 78,000,000 shares without nominal value
CONFIDENTIAL
No.: C3-IS-13-642435-06-01/2024
Zagreb, 15 March 2024
Pursuant to Articles 11, 25, 31 and 32 of the Articles of Association of Croatian Telecom Inc. (HT d.d.
Herald, No. 1/2024), and 220 and 222 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, 18/23 and 130/23),
the Management Board of Croatian Telecom Inc., on 15 March 2024, adopted the following
D E C I S I O N
I) The Management Board of Hrvatski Telekom d.d. 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 2023
1. It is determined that Hrvatski Telekom d.d. in the business year ending with 31 December 2023 realized
net profit in the amount of EUR 125.161.197,98.
Net profit amount stated herein shall be used accordingly:
• A part of net profit in the amount of EUR 119.340.000,00 EUR shall be paid out as dividend to
shareholders, in the amount of EUR 1,53 per share.
• A part of net profit in the amount of EUR 5.821.197,98 shall be allocated to retained earnings.
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 13
th
, 2024 (record date).
Date on which security of Hrvatski Telekom d.d. will be traded without dividend payment right is May
10
th
, 2024 (ex date). Dividend payment claim matures on May 20
th
, 2024 (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 Hrvatski Telekom d.d., 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
Members of the Supervisory Board
Legal Affairs Department
Controlling Sector
Treasury and Accounting Sector
MB and SB Secretary
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-01-370852-06-01/2023
Zagreb, 19 March 2024
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, 18/23 and
130/23), pursuant to Articles 11, 18 and 31 of the Articles of Association of Croatian Telecom Inc. (HT d.d.
Herald, No. 1/2024) 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. 5/2023 – clean text), the Supervisory Board of Croatian
Telecom Inc., at their 1
st
session in 2024, held on 19 March 2024, 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 2023 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 2023.
Therefore, the annual financial statements of the Company and consolidated financial statements of
HT Group for the business year 2023 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.
Elvira Gonzalez Sevilla
Chairwoman 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-01-370852-06-02/2023
Zagreb, 19 March 2024
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, 18/23 and 130/23),
pursuant to Articles 18, 25, 31 and 32 of the Articles of Association of Croatian Telecom Inc. (HT d.d.
Herald, No. 1/2024) 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. 5/2023 – clean text), the Supervisory Board of Croatian
Telecom Inc., at their 1
st
session in 2024, held on 19 March 2024, 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 2023, as
follows:
“P R O P O S A L
of Decision on utilization of profit for the year 2023
1. It is determined that Croatian Telecom Inc. in the business year ending with 31 December 2023 realized
net profit in the amount of EUR 125,161,197.98.
Net profit amount stated herein shall be used accordingly:
• A part of net profit in the amount of EUR 119,340,000.00 shall be paid out as dividend to
shareholders, in the amount of EUR 1.53 per share.
• A part of net profit in the amount of EUR 5,821,197.98 shall be allocated to retained earnings.
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 13
th
, 2024 (record date).
Date on which security of Croatian Telecom Inc. will be traded without dividend payment right is May
10
th
, 2024 (ex date). Dividend payment claim matures on May 20
th
, 2024 (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.
Elvira Gonzalez Sevilla
Chairwoman of the Supervisory Board
This is to certify that this Decision is
identical as the signed original thereof