CONSOLIDATED ANNUAL REPORT OF MAGYAR TELEKOM TELECOMMUNICATIONS PUBLIC LIMITED COMPANY FOR THE YEAR ENDED DECEMBER 31, 2020 CONSOLIDATED FINANCIAL STATEMENTS AND MANAGEMENT REPORT OF MAGYAR TELEKOM TELECOMMUNICATIONS PUBLIC LIMITED COMPANY FOR THE YEAR ENDED DECEMBER 31, 2020 1 INDEX TO THE CONSOLIDATED ANNUAL REPORT CONSOLIDATED FINANCIAL STATEMENTS ............................................................................................................................... 4 INDEPENDENT AUDITOR’S REPORT ...................................................................................................................................................... 5 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - ASSETS ............................................................................................ 13 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION – LIABILITIES & EQUITY .................................................................. 14 CONSOLIDATED STATEMENTS OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME ............................................ 15 CONSOLIDATED STATEMENTS OF CASH FLOWS ............................................................................................................................ 17 CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY .............................................................................................................. 18 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS .......................................................................................................... 21 1 GENERAL INFORMATION ............................................................................................................................................................... 21 2 BASIS OF PREPARATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ..................................................... 23 3 CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS ..................................................................................................... 27 4 FINANCIAL INSTRUMENTS ............................................................................................................................................................ 31 5 FINANCIAL RISK MANAGEMENT .................................................................................................................................................. 49 6 INCOME TAX ..................................................................................................................................................................................... 57 7 INVENTORIES ................................................................................................................................................................................... 62 8 ASSETS HELD FOR SALE AND LIABILITIES ASSOCIATED WITH ASSETS HELD FOR SALE ............................................... 63 9 PROPERTY, PLANT AND EQUIPMENT ......................................................................................................................................... 63 10 INTANGIBLE ASSETS .................................................................................................................................................................... 67 11 INVESTMENTS IN ASSOCIATES AND JOINT ARRANGEMENTS .......................................................................................... 71 12 OTHER ASSETS .............................................................................................................................................................................. 73 13 PROVISIONS ................................................................................................................................................................................... 73 14 OTHER CURRENT LIABILITIES .................................................................................................................................................... 75 15 OTHER NON CURRENT LIABILITIES .......................................................................................................................................... 75 16 NON-CONTROLLING INTERESTS ............................................................................................................................................... 76 17 LEASES ............................................................................................................................................................................................ 77 18 REVENUE ........................................................................................................................................................................................ 83 19 DIRECT COSTS ............................................................................................................................................................................... 87 20 EMPLOYEE-RELATED EXPENSES .............................................................................................................................................. 88 21 OTHER OPERATING EXPENSES ................................................................................................................................................. 90 22 OTHER OPERATING INCOME ..................................................................................................................................................... 91 23 INTEREST INCOME ....................................................................................................................................................................... 91 24 INTEREST EXPENSE ...................................................................................................................................................................... 91 25 OTHER FINANCE EXPENSE – NET ............................................................................................................................................. 92 26 CHANGES IN THE GROUP ........................................................................................................................................................... 92 27 EARNINGS PER SHARE ................................................................................................................................................................ 93 28 PURCHASE OF PROPERTY, PLANT AND EQUIPMENT AND INTANGIBLE ASSETS .......................................................... 94 29 PURCHASE OF SUBSIDIARIES AND BUSINESS UNITS........................................................................................................... 94 30 CONTINGENT ASSETS AND LIABILITIES .................................................................................................................................. 95 2 31 PURCHASE COMMITMENTS ....................................................................................................................................................... 95 32 RELATED-PARTY TRANSACTIONS ............................................................................................................................................ 96 33 REPORTABLE SEGMENTS AND INFORMATION ABOUT GEOGRAPHICAL AREAS ........................................................... 98 34 REGULATED MARKETS AND PROCEDURES .......................................................................................................................... 102 35 EVENTS AFTER THE REPORTING PERIOD .............................................................................................................................. 107 CONSOLIDATED BUSINESS REPORT ..................................................................................................................................... 108 3 CONSOLIDATED FINANCIAL STATEMENTS OF MAGYAR TELEKOM TELECOMMUNICATIONS PUBLIC LIMITED COMPANY FOR THE YEAR ENDED DECEMBER 31, 2020 PREPARED IN ACCORDANCE WITH INTERNATIONAL FINANCIAL REPORTING STANDARDS AS ENDORSED BY THE EUROPEAN UNION (EU IFRS) 4 INDEPENDENT AUDITOR’S REPORT 5 6 7 8 9 10 11 12 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION - ASSETS (in HUF millions) At December 31, At December 31, Note 2019 2020 ASSETS Current assets Cash and cash equivalents ......................................... 4.2.1 13,398 14,689 Trade................................ receivables................................ ..................................................................................... 4.2.2, 18 170,503 158,857 Other................................ assets ............................................................................................................................... 12.1 6,437 6,022 Other current financial assets .................................... 4.2.3.1 8,996 42,487 Contract assets .............................................................. 18.4 16,306 16,878 Current income tax receivable ................................... 6.1 434 473 Inventories....................................................................... 7 19,833 18,395 235,907 257,801 Assets held for sale ....................................................... 8 659 489 Total current assets ................................................. 236,566 258,290 Non-current assets Property, plant and equipment .................................. 9 426,826 432,436 Right-of-use assets ....................................................... 9, 17 106,682 121,335 Intangible assets ........................................................... 10 425,821 498,817 Investments