OT - Optima Telekom d.d. Annual Report of the Group for 2016. Optima Annual Report of the Group 2 Telekom for 2016. Annual Report of the Group Optima for 2016. Telekom 3 I. Management Report 6 1 Introduction 7 2 Statement by the Chairman of the Board 8 3 Market Overview 9 4 Economic Environment 9 5 Regulatory Environment 10 6 Business Indicators and Segments 12 a Residential Sales Segment 12 b Business Sales Segment 13 c Infrastructure, Optical Fiber Network and Internal Services Development 14 7 Financial Results of the Group 17 a Consolidated Revenue 18 b Earnings before Interest, Taxation and Depreciation – EBITDA 18 c Net Profit / (Loss) 18 d Capital Investments in 2016 18 e Risk Management 19 8 Purchase of Own Shares 20 II. Statement Regarding the Application of the Code of Corporate Governance 20 1 Internal Audit in the Company and Risk Management in Correlation with Financial Reporting 21 2 Significant Shareholders in the Company as per 31.12.2016 21 3 Rules on Appointment and Recall of the members of the Board of Directors and the Supervisory Board and Their Powers 22 4 Changes in the Company’s Governing Bodies 22 III. Independent Auditor’s Report on the Annual Report and Consolidated Financial Reports IV. Financial Reports of the Group Optima Annual Report of the Group 4 Telekom for 2016. Corporate Governance and General Information Supervisory Board Siniša Đuranović — chairman Ariana Bazala-Mišetić— deputy chairman Marina Brajković — member Jasenka Anica Kreković — member Marko Makek — member Ana Hanžeković — member Rozana Grgorinić — member Maša Serdinšek — member Ivica Hunjek, Member — employee representative Board of Directors Zoran Kežman — chairman Irena Domjanović — member Mirela Šešerko — member Tomislav Tadić — member iban HR3023600001101848050 Zagrebačka banka d.d. Zagreb Commercial Court of Zagreb oib 36004425025 mbs 040035070 mb 0820431 Share capital amount 635.568.080,00 hrk Number of shares 63.556.808, nominal value of HRK 10.00 each Annual Report of the Group Optima for 2016. Telekom 5 Optima Telekom Group Members and Regional Centers Headquarters - Company Management Members of the Optima Telekom Group: — Optima direct d.o.o, ot-Optima Telekom d.d. Trg Josipa Broza Tita 1, 52460 Buje Bani 75a, Buzin — OT-Optima Telekom d.o.o, Ulica 15. maja 10 000 Zagreb, Hrvatska 21, 6 000 Koper, Republika Slovenija tel +385 1 54 92 699 — Optima telekom za upravljanje fax +385 1 54 92 019 nekretninama i savjetovanje d.o.o., Bani 75a, 10 000 Zagreb Region West Region East OT-Optima Telekom d.d OT-Optima Telekom d.d Andrije Kačića Miošića 13 Vinkovačka 2 51 000 Rijeka, Hrvatska 31 000 Osijek, Hrvatska tel +385 51 492 799 tel +385 31 492 999 fax +385 51 492 709 fax +385 31 210 459 OT Centar tel +385 51 554 651 Region Nord Region South OT-Optima Telekom d.d. OT-Optima Telekom d.d. Bani 75a, Buzin Vinkovačka ulica 19 10 000 Zagreb, Hrvatska 21 000 Split, Hrvatska tel +385 1 54 92 301 tel +385 21 492 899 fax +385 1 54 92 309 fax +385 21 492 829 OT Centar 7. domobranske pukovnije 1/3, Zadar tel +385 23 492 860 Ivana Matijaševića 14, Dubrovnik tel +385 20 220 640 Optima Annual Report of the Group 6 Telekom for 2016. I. Management Report Throughout the report under the term „Com- pany“ is considered also „the Group“, given that the operations solely apply to OT - Op- tima telekom and subsidiares have irrelevant impact. Annual Report of the Group Optima for 2016. Telekom 7 Introduction I. 1 In 2016, the Company has continued to opera- sions required for the registration of the mer- te successfully, which is also evident from the ger with the competent Court Registers. After fact that the Company concluded a Merger the adoption of all proposed General Meeting Agreement with an electronic communicati- decisions, they will obtain legal effect upon ons operator, H1 TELEKOM d.d. Split, Dračevac AZTN’s positive decision on the clearance of 2/d, OIB: 88551335012, dated 29 July 2016. the concentration between the Company and Pursuant to the above Agreement, after obta- H1 telekom d.d., as well as a positive decision ining the required approvals and consents, H1 regarding the motion filed by Hrvatski tele- as the merged company will be merged with kom d.d., Zagreb, Roberta Frangeša Mihano- Optima as the acquiring company. Assets, ri- vića 9, OIB 81793146560 (hereinafter: HT) to ghts and obligations of H1 will be transferred prolong the conditionally approved concen- to Optima in their entirety, without the need tration between HT and OT – OPTIMA Telekom to liquidate the merged company. In consi- d.d. based on the decision Class: UP/I 034- deration for the transferred assets, rights 03/2013-02/007 dated 19 March 2014, for an and obligations of H1, Optima shall transfer additional period of three years. the appropriate ratio of Optima shares to H1 shareholders. The purpose of the merger All approvals required to carry out the merger is to achieve positive synergies between the have not been obtained until the date of this companies and to increase Optima’s value for report. its current and new shareholders (former H1 shareholders). The Company has determined During the observed period, the Supervisory that connecting business-wise, organisatio- Board has reappointed the Chairman of the nally, legally and financially is in the mutual in- Board of Directors, Mr. Zoran Kežman, and terest of Optima and H1, considering that the the Members of the Board of Directors, Ms. merger and achieving the envisaged synergies Mirela Šešerko and Mr. Tomislav Tadić to the will increase business efficiency and decrease same functions. Pursuant to the mentioned costs, which could accordingly have a positive Supervisory Board decision, the term of appo- impact on the value of Optima as the third intment is two years, starting at the end of respectable operator in the fixed telephony the previous term. market. There were no changes to the Company’s su- pervisory body, and the ordinary General Mee- Pursuant to the Competition Act, on 29 July ting took place on 26 April 2016. 2016 Optima has filed a Notification of a Pro- posed Concentration between Optima and H1 Just as in the previous two-year period, the with the Croatian Competition Agency. The Company continues to duly perform all due proceedings are pending. obligations undertaken in the Pre-bankruptcy Considering these circumstances, Hrvatski Te- Settlement executed before the Commercial lekom d.d., Zagreb, Roberta Frangeša Mihano- Court of Zagreb on 30 April 2016, case refe- vića 9, OIB: 81793146560, being the company rence Stpn-354/13, and reports to the public that gained control over the management of regarding the said actions in accordance with the Company by virtue of AZTN decision Class: the Financial Operations and Pre-bankruptcy UP/I 034-03/2013-02/007 of 19 March 2014, fi- Settlement Act via FINA’s website, www.fina. led a motion dated 29 July 2016 with the AZTN hr. to prolong temporary management until 2021. Apart from publications on Fina’s website re- AZTN decision is pending. garding the issues related to the implemen- Pursuant to the relevant provisions of the tation of the Pre-bankruptcy Settlement, the Companies Act, as well as Statute provisions, Company is informing the public on the fulfil- the Company has convened an extraordinary ment of obligations in a timely and transpa- General Meeting for 25 January 2017. The Ge- rent fashion in accordance with the relevant neral Meeting is to decide on the approval of laws and regulations in the field of capital the Merger Agreement, as well as other deci- markets. Optima Annual Report of the Group 8 Telekom for 2016. I. 2 Statement by the Chairman of the Board Another successful year is behind us. Thanks to our proactive market approach and orien- tation towards customers through the pro- vision of quality and substantial services, in 2016 we also realised excellent financial re- sults and market achievments. We are parti- cularly proud of reversing the income trends. Thanks to the customer base expansion, we have achieved an increase of overall opera- ting income by 3.8 per cent and additionally strengthened our market position. The income increase consequently influenced the increase of the operative result, i.e. EBITDA, which is 2.9 per cent higher in 2016 than in 2015. Our po- sitive results are even more significant when taking into perspective the negative income Zoran Kežman, trends in the entire fixed networks market Chairman of the Board during the last several years. Along with the abovementioned, and thanks The successes from 2016 are motivating us to the synergy effects under HT’s manage- additionally for new achievments in 2017. We ment, we have realised significant operati- wish to raise customer satisfaction even more ve savings, which has enabled us to invest by focusing on all the steps the customer is further into the development of services and taking with us, from improving the services technologies. Our investments have mostly themselves, purchase methods, to technical been oriented towards the expansion of the support during the use of the services. With VDSL technology, providing our customers that, we shall certainly continue to invest with higher internet speeds, as well as towar- into further development of the infrastru- ds our own network infrastructure, in order cture which allows for high internet speeds. to improve the quality of services and expand Considering the excellent results we are ac- functionalities. Moreover, in order to remain hieving in the ICT segment, we shall continue competitive in the corporate sector, we con- to expand this portfolio.