Contents I. Introduction of Slovak Telekom Group ■ Letter to Shareholders 3 ■ 2009 Milestones 6 ■ Company Profi le 10 ■ Corporate Governance at Slovak Telekom Group 17 II. Telecommunications Market in Slovakia ■ Legislative Conditions and Market Regulation 27 ■ Telecommunications Market Development 30 III. Report of the Company’s Management ■ Products and Services 35 ■ Information Technologies 50 ■ Human Resources – Partner in Business 53 ■ Effective Communication – a Must for Successful Business 57 ■ Corporate Responsibility – an Integral Part of Corporate Values 68 IV. Financial Results ■ Consolidated Financial Statements 73 ■ Separate Financial Statements 117 2 I. Introduction of Slovak Telekom Group mitted resources, from which we were able to pay out dividends to shareholders for Letter to Shareholders past periods in the cumulative amount of EUR 368.7 million. Dear Shareholders, The Slovak telecommunications market last year was characterised by a slight stag- nation, mainly of voice services of both fi xed and mobile networks, partly caused by The Annual Report submitted summarises the economic situation. On the other hand, the internet services segment continued the Slovak Telekom Group’s accomplish- to see growth, with the total estimated number of broadband connections exceeding ments in 2009. Because of the economic one million, a year-on-year increase of 22 %. Expansion of modern access infra- situation, the year provided multiple structure coverage signifi cantly contributed to this development. Slovak Telekom inspiring challenges. I am pleased that in also continued to build FTTx optical networks. At the end of the year, it registered achieving them we managed to respect 315,000 households able to use this state-of-the-art technology. At the same time, the interests of our customers, sharehold- the Company extended DSL technology penetration, especially in remote Slovak ers, and business partners. Miroslav Majoroš towns. Thanks to miniDSLAM devices, another group of households, more than Chairman of the Board of Directors 75,000, in over 400 remote towns, could use fast and reliable internet connection The consolidated results achieved by and President/CEO by the end of the year. T-Mobile Slovensko also continued increasing the broadband the Slovak Telekom Group, totalling EUR internet coverage. At the end of last year, the service was already available to 77 % 974.2 million, re-confi rmed the Group’s leading position on the telecommunica- of Slovak residents. The mobile broadband service was augmented with multiple tions market. The subsidiary T-Mobile Slovensko managed to maintain stable advantages over the year, with all customers offered both new rates of the HSDPA revenues amounting to EUR 555.8 million, despite the high saturation rate on the network and new HSUPA system upgrades (depending on the data hardware mobile services market and strong regulatory policy of the European Commission. supported). Thanks to the internal effi ciency enhancement programme started back in 2008, Thanks to increase in coverage, a growing number of households can now enjoy the Slovak Telekom Group succeeded in increasing earnings before interest, tax the most popular service under the T-Com brand: Magio digital television. In 2009, and depreciations to the level of EUR 432.0 million. Net profi t generated by the Magio Television became available to almost 25,000 Slovak residents, and is cur- Slovak Telekom Group witnessed a year-on-year increase of 24.3 %, thus totalling rently actively used by more than 60,000 customers. We also started to provide Magio EUR 145.5 million. These fi nancial results also contributed to creation of uncom- Television through the state-of-the-art satellite technology DVB-S2. Slovak Telekom ■ Introduction of Slovak Telekom Group ■ Letter to Shareholders 3 thus became the fi rst Slovak multimedia operator offering interactive digital television communication for these customers. Among voice plans, the Podnikateľ monthly plan by means of fi xed networks (both metallic and optical) as well as satellite technology. remained the key product, containing free minutes for calls made to all EU and USA networks, within the monthly fee, even in the basic package. Business customers are Again in 2009, Slovak Telekom Group’s focus was on innovating its portfolio of the target group of a full array of roaming services and products. Several attractive both fi xed and mobile voice services. Fixed line, now positioned as a family line, offers are available for customers in the data roaming area, intended to establish ef- has become a universal tool for making calls to all networks, with its usage even in- fective data communication abroad through notebooks and mobile devices. creasing in calls to Slovak mobile networks. The Company concurrently intensively managed the gradual migration of customers from the traditional voice service The Group continued to profi le itself as a provider of comprehensive information segment to internet telephony service (VoIP). Slovak Telekom registered 1.1 million and communication services. As part of this strategy, last year Slovak Telekom suc- fi xed lines at the end of the last year. Multiple attractive products contributed to the cessfully accomplished negotiations regarding acquisition of a majority stake in the stabilisation of the number of fi xed lines compared to other dominant operators PosAm company, which is ranked among the pre-eminent providers of application active in the Central Europe region. solutions, services and infrastructure solutions to corporate customers. Through this acquisition, we sent a clear signal to customers that they have a reliable partner Concerning mobile voice services, T-Mobile Slovensko brought out a number of on the market, able to assume responsibility for ICT infrastructure operation and novelties in all customer segments during the last year. Multiple forms of fl exible development so customers can focus on their core business activities. supplementary services and a brand-new part of the voice services portfolio were introduced. The Company also continued offering customers effective combina- Wholesale services, in the form of selling and leasing data services and infrastruc- tions of communication services for families and friends, in line with its new motto ture and providing national and international voice services, again contributed presented at the beginning of the calendar year. T-Mobile Slovensko further contin- markedly to the Group’s total revenues last year. These services generated a full ued reducing prices of roaming calls made within the European Union and in other 16.3 % of Slovak Telecom’s total revenues. The number of the hubbing partners countries, and again last year prepared a promotional offer providing even more continued to rise; the volume of hubbing traffi c transmitted increased year-on-year advantageous prices during the summer. by nearly 50 %. The Group’s products and comprehensive solutions for business people and compa- The current economic situation also affected customer behaviour. First of all, they were nies, whether small or big, have been put together so as to best meet customers’ com- more aware of consumption, especially in using premium mobile services and mobile munication needs. In fi xed voice services, we mainly focus on optional calling plans content services. In spite of the fact that traditional content downloading services offering universal use of free minutes for calls to mobile networks and abroad, and were used less last year than in years before, new projects helped T-Mobile achieve free calls into the fi xed network. BiznisPartner was the most popular plan in traditional excellent results in this area. One such concept was unlimited music downloading voice operations last year. For new or small companies and freelancers, T-Com had a for a monthly fee. The Company developed the concept of micropayments which is comprehensive communication solution on offer – the Benefi t programme, providing one of brand-new areas of mobile business, and this role of cell phones will certainly a practical combination of voice services, high-speed DSL internet connection, and markedly increase in the future. For example, regarding transportation services were the functions of a modern Private Branch Exchange. T-Mobile Slovakia also prepared added to enable purchase by SMS of mass transit tickets in Košice and parking fees a number of attractive offers last year in an effort to arrange comfortable and reliable in three Slovak cities. It is also already possible to order CDs, DVDs, periodicals and ■ Introduction of Slovak Telekom Group ■ Letter to Shareholders 4 fi lms by SMS, and of course the trend of obtaining such services as travel or mountain gies and support systems, employees, and managers. The strategy of the newly insurance continues. established company will be to continue to use both brands, T-Mobile and T-Com. In internet content Slovak Telekom is active through the Zoznam and Zoznam Mobile Integration will be the key feature of 2010. Developments internationally indicate that companies. These companies again brought out multiple novelties in 2009, in the the ability to provide integrated solutions for products and services is the main con- form of redesigning the services provided and launching new services in segments dition for telecommunications operators in the saturated markets to stay competitive. where they had not been active. The oVoľbách.sk website is one such new service, I am certain that