Good afternoon, everyone. I'm Diana Várkonyi, Head of Investor Relations at Magyar Telekom, and it is my pleasure to welcome you to our fourth quarter 2023 results conference call. Please note that today's presentation is also available on the investor relations section of our website. This event is being recorded for internal purpose only. By joining the presentation, you consent to being recorded. Throughout the presentation, your lines will remain muted. Once we commence the Q&A session, you will be able to ask a question using the Raise Hand function, after which your microphone will be enabled and you can unmute yourself to ask a question. Before we begin, I would like to draw your attention to the disclaimer on the second page of the presentation.
The information in this presentation includes forward-looking statements about expected future events and financial results, which are subject to risks and uncertainties. I am pleased to welcome Ms. Daria Dodonova, our CFO, and Mr. Tibor Rékasi, our CEO, who will take you through the presentation and answer any questions you may have. Now, I would like to hand over to Tibor to open the presentation.
Thank you, Dia. Good afternoon, everybody. First, I'd like to provide you with a summary of our progress in 2023 against the key strategic priorities and our directions going forward, as outlined on slide 3. During 2023, we continued to upgrade both our fixed and mobile networks in Hungary to meet the growing data demand for our-- of our customers. We made progress in the radio network modernization of our mobile network, reaching an 80% readiness by year-end, and extended the population-based outdoor 5G coverage to 65%. At the same time, we added 200,000 new gigabit-capable access points to our fixed network throughout the year, reaching over 3.6 million households and businesses with this technology.
The demand for these services is evidenced by the dynamic increase in network penetration, reaching an average usage rate of around 25% in just under a year. As communicated earlier, we are committed to continuing our network investments. In 2024, we plan to expand our gigabit network with at least a further 200,000 access points, while striving to get closer to the completion of our radio access network modernization process. These developments are essential to support the spread of digital solutions in the Hungarian economy, which is one of our top priorities. To foster this process, we offer products and services that support our customers in enjoying and benefiting from digital solutions.
These range from higher bandwidth broadband packages to enable households to seamlessly use their multiple connected devices, to thematic advisory series supporting small and medium-sized businesses in their digital transformation, or campus network solutions for industrial sites. We strongly believe that if we are able to provide customers with tools and services that enhance their user experience, this will ensure that we can create value for them and the company equally. In parallel, we are transforming our internal processes to benefit from enhanced digital solutions, data analysis tools or automation, both in customer service and back office functions. Our goal is to achieve superior customer satisfaction by providing outstanding experience in all our customer interactions and make this a key differentiator in the future.
Additionally, besides efficient networks and stable market positions, the third pillar of our strategy is resilient operation to provide a foundation of sustainable growth. In recent years, we have faced many external challenges, and I'm very proud that our efforts to mitigate these have been successful. One of the most important steps we took was introducing the inflation-based fee adjustment clause to our customer contracts, resulting in a subscription fee increase of 14.5% in March 2023, and an additional 15% increase from March 1, 2024. Another significant challenge we addressed was the sharp rise and strong fluctuation in the energy prices. To mitigate our exposure to this volatility, we have been proactively seeking opportunities to limit the energy consumption of our operations. For example, we have introduced an energy mapping system and a series of IT and network optimization initiatives.
As a result of these efforts in 2023, I'm pleased to report that we reduced our electricity consumption by 9% year-over-year. Additionally, we have implemented a diversified electricity procurement strategy, including renewable energy sources based on PPA contracts. These renewable sources will increasingly contribute within our overall consumption in the future. With this, let me move on to our next slide, presenting our 2023 financial achievements. Thanks to the success of our outlined initiatives, we met our guidance for 2023 on all metrics, as shown on slide 4. Revenue in 2023 grew by 13.8%, equally attributable to the effects of the inflation-based fee adjustment and the organic growth of the operation.
The latter was given by the expansion of our fixed and mobile customer base, the continued appeal of our value propositions, some increases in equipment sales and higher systems integration and IT revenues. Thanks to the fairly favorable revenue performance, which fully offset increases in indirect costs on the back of significant inflationary pressures, our EBITDA after lease rose by 16.4%, while our adjusted net income increased by 48.6% to HUF 93.6 billion for the full year of 2023. I'm pleased to add that we also recorded strong growth in free cash flow, up by over 70% year-on-year, at HUF 86.8 billion, reflecting the growth in underlying profitability as well as lower year-on-year investment spending levels. Now, turning to the operational developments in more detail, as presented on slide number 5.
In the Hungarian mobile market, the fourth quarter saw the continuation of our earlier underlying tendencies, namely further expansion of mobile data services, both in terms of customer levels and usage. Although with higher portion of our customers already using mobile data services, the growth potential in this customer segment is lower, we continue to witness significant expansion in the number of machine-to-machine SIM cards with an increasing range of services available via this technology. In parallel, mobile data usage of our customers advanced further, reaching an average of almost 13 gigabit per month in the last quarter, even though we decided not to provide the usual unlimited data promotion for the holiday period, but gave voice minutes this time.
The latter is visible in the fourth quarter's voice usage data, stabilizing on the previous quarter's level, while the significant increase in prepaid ARPU is also attributable to the absence of the promotional data offers. At the same time, postpaid ARPU continued to increase by close to 20% year-on-year, reflecting the impacts of the inflation-based fee adjustment and the growing data consumption of our users. These favorable tendencies combined led to blended ARPU increasing by 14.5% year-on-year in the fourth quarter, and with that, significantly contributing to the overall revenue growth recorded in 2023. Moving to slide 6, we see developments in the Hungarian fixed market. Our household base increased further year-on-year, and in line with our strategy, we were able to increase the ratio of those households that are subscribing for more than just one service from us.
As demonstrated by the lower charts, this growth is primarily driven by the uptake of our broadband service, with TV subscribers also steadily expanding. Both of these increases are strongly supported by the progress of the gigabit network rollout, as we see continuous strong demand for services on these technologies. I am particularly proud that despite the lower number of the new access points added to our gigabit network, we managed to connect similar number of customers to this network in 2023 as a year earlier. In parallel, the growth in broadband ARPU outpaced the level of the inflation-based fee adjustment by five percentage points, driven by customers increasing preference for higher bandwidth packages when signing up for gigabit technology. Additionally, we successfully capitalized on the inflation-based fee adjustment among TV subscribers, underscoring the attractiveness of our TV services.
Moreover, the implementation of this adjustment helped to ease voice revenue erosion, despite ongoing declines in customer base and usage levels. Going forward, we remain committed to consolidating our, our strong positions among Hungarian households, by simultaneously enhancing the value of services we offer to our customers. With that, I'd like to hand over to Daria, who will provide a more detailed view of our financial results.
Thank you, Tibor. Good afternoon, everybody. Let me delve deeper into the main drivers of our revenue performance, as shown on slide 7. The primary factor contributing to the revenue growth, both in the last quarter and throughout the full year, was the strong increase in mobile data revenue. This surge was driven by the continued expansion of our subscriber base, as well as higher usage levels in both Hungary and North Macedonia. The increase in fixed service revenue continued to be driven by growth across all service categories, particularly in broadband and pay TV services, as our customer base continued to expand in both countries. The Hungarian fee adjustment also played a significant role in sustaining this dynamic growth. Regarding equipment revenue, the continued growth in customer sales transactions and seasonal promotional offers in our Hungarian operations resulted in higher sales volumes, both for mobile and fixed equipment revenue.
Our SI/IT revenue witnessed a year-on-year increase due to higher revenue at our Hungarian operations, attributed to increased revenue from major projects. Turning to slide 8 and our profitability. I'm pleased to report a 17.4% year-on-year growth in EBITDA after leases in the fourth quarter, and 16.4% in 2023 compared to the base periods. Our gross profit increased by 15.8% in the fourth quarter, primarily due to the strong and sustained commercial momentum in telecommunication services, coupled with the Hungarian inflation-based fee adjustment. The year-on-year growth was 16.7%, amounting to a bit more than HUF 70 billion in 2023. The increased revenue resulted in a higher supplementary telecommunication tax, leading to more than HUF 5 billion additional expenses in 2023.
Our indirect cost increases were also driven by higher employee-related expenses, energy costs, and inflation-driven cost pressures, with later being particularly evident in our Hungarian operation. The higher employee-related expenses were a combined result of wage increases in Hungary and the in-sourcing of certain maintenance functions in North Macedonia. As Tibor mentioned earlier, we were exposed to very volatile energy price movements, and despite our efforts, we experienced a fourfold increase in electricity costs in 2023 compared to the base period. Slide 9 shows a year-on-year changes in net income, reflecting similar developments on a quarterly and annual basis. I'm pleased to report that our adjusted net income grew by 48.7% year-on-year, amounting to HUF 93.6 billion for the full year 2023. The reported net income increased by 25.4%.
As you can see from both charts, the main driver of our reported net income growth was the profitability. This growth in EBITDA was somewhat offset by net financial expenses due to high interest expenses and less favorable derivative-related fair value changes. While in the fourth quarter of 2023, net interest expenses decreased year-on-year due to a legal case-related provision reversal and lower interest related to installment sales transactions, other finance expenses increased, primarily reflecting less favorable results related to derivatives, mostly attributable to shifts in relevant yield curves. We witnessed a 4.8 higher depreciation and amortization expense, reflecting different dynamics of software license in Hungary within the year and IFRS 16 lease liability related depreciation expenses. Non-controlling interests reflect the performance of North Macedonian subsidiary, demonstrating improved profitability.
Income tax expenses were up by 20.4% year-on-year, at HUF 4.5 billion in the fourth quarter of 2023, reflecting the year-on-year increase in profit before tax, partially mitigated by a high amount of tax credits. Adjustments to reported net income for the full year 2023 of HUF 14.7 billion are primarily attributable to unrealized losses related to the measurement of derivatives at fair value. Now, turning to the slide 10, and Group's free cash flow generation and capital expenditure developments. Free cash flow generation, excluding spectrum-related payments, was higher compared to the base period by HUF 35.9 billion, representing a 70% increase.
This was primarily due to the positive contribution from a strong operational performance, offset by increased interest and other financial charges of HUF 8.3 billion, mainly due to higher interest payments on loans and bank charges, as well as an increased leasing interest component. The growth in working capital was driven by higher transaction volumes in equipment installment sales, especially due to promotions in Hungary in the fourth quarter. Regarding our investments during the year, CapEx after leases, excluding spectrum licenses, was down 17% year-on-year, amounting to HUF 105.1 billion in 2023. As the chart on the right hand side illustrates that the composition of our investments was somewhat different compared to the base period.
In 2023, we continued our fiber rollout investment at a slower pace, but due to the continued uptake of gigabit services in Hungary, we had stable investments in fiber connections. We also continued our mobile network modernization in Hungary, as Tibor mentioned at the beginning of our presentation, reaching 80% readiness. Overall, our network investments were slightly more than a quarter less in both countries. Slide 7 provides a summary of our 2024 targets. Thanks to our constant efforts to deliver seamless connectivity and superior customer experience, we expect to maintain our positive commercial momentum, which, coupled with a positive contribution of the inflation-based fee adjustments effective from March 2024, is expected to lead to revenue growth of 5%-10%. Regarding EBITDA after leases, we expect some further pressure on profitability stemming from the challenging economic landscape.
We also expect a decrease in energy expenses, especially electricity costs, as a result of reduced consumption and somewhat lower energy prices. Additionally, with the termination of utility tax in 2024, we anticipate EBITDA AL to grow. Our management guidance for EBITDA AL in 2024 is 20%-25% growth. We expect that some external macro challenges will impact us during 2024. Consequently, we expect adjusted net income to grow to approximately HUF 130 billion, while free cash flow, excluding spectrum license payments, is forecasted to increase to approximately HUF 120 billion. The latter is thanks to the positive trends of EBITDA AL, as well as the 2024 network rollout forecast, which is at least the same as the 2023 level.
In recent years, there have been several major events that significantly altered the financial outlook of the company. Therefore, looking further ahead, we decided to provide an outlook for midterm period at a later stage. Finally, let me say a few words on the Board of Directors shareholder remuneration proposal presented on slide 12. Two years ago, to improve transparency and visibility with regards to the company's shareholder remuneration, the Board of Directors decided to set a new shareholder remuneration policy for the 2020-2024 period. This policy envisages growth in annual shareholder remuneration as a combination of dividend payments and share buybacks, in line with improvements in the company's financial performance.
It also states that the total value of annual shareholder remuneration is expected to be between 60% and 80% of the company's annual consolidated adjusted net income generated during the preceding financial year. Having reviewed the company's 2023 financial performance and noting the improvement in profitability, considering the prevailing business environment and outlook, and aligning with the shareholder remuneration policy, the Board of Directors deems a yearly increase in total shareholder remuneration to be justified. Accordingly, the board proposes a total annual shareholder remuneration of up to HUF 65.56 billion, corresponding to approximately 70% of the HUF 93.6 billion consolidated annual adjusted net income generated during 2023.
As a result, Magyar Telekom's Board of Directors recommends for the approval at the company's Annual General Meeting, a total dividend payment of HUF 41.56 billion for the 2023 financial year. Based on the number of outstanding shares as of today, the cash dividend amounts to an equivalent of 44.7 HUF per share... 70 HUF per share. Furthermore, the board anticipates the value of the buyback to be up to HUF 24 billion. The execution of the buyback is subject to the necessary authorization of the general meeting, scheduled for the 16th of April. That concludes our presentation, and I will now hand back to Diana.
Thank you very much, Daria. We are happy to take any questions you may have. Please use the Raise Hand function, following which your microphone will be enabled, and you can unmute yourself to ask a question. Please use the Raise Hand function. Ah, Nora, just a second. Hello, Nora. You can unmute yourself and raise your questions. Nora, we don't hear you. I know that you can raise your question if you have any, because we see your hands up function. Now? Can we have another try, please? Unmute yourself, and maybe we will hear you now. Can you, can we test with you? Can you ask a question, please, Gabi Pászti?
Yes. Can you hear me?
Yeah, it's, it's perfect. So, Nora, can you please try once more because maybe there was some technical problem with your microphone? O r if you dial in once more, it will solve your problem. But if somebody has any further question, then we are happy to take that first, and Nora, maybe your technical problem will be solved with reconnection to the Teams. Nora, I got your question via email, so I will read out loud.
Share buyback represents a higher share of total remuneration in 2023 versus in 2022, while the book value per share will be most likely below the market price at the time of the buyback transaction. Can you please explain this? And the second question related to this one is: What metrics do you look at when deciding about share buyback? That's your first question, Nora. And the second is that, can you explain your expectation for energy cost in 2024, please? Thank you, Nora.
Good afternoon, Daria speaking. So let me start with the second question about the energy expenses and energy costs. On the energy costs, we expect two positive drivers, which will help us to reduce the energy costs overall year-over-year between 2024 and 2023. First of all, we are constantly working on the decrease of the energy demand, and as you know, in the year 2023, we decreased it by 9%, and we continue with our efforts in 2024. Second, when it comes to the energy prices, we expect double-digit decrease in energy, in particular, electricity prices in the year 2024 versus 2023. Your second question regarding the share buyback are in connection with the development of the share price.
Based on our understanding, and actually very much confirmed by the latest updates of the analysts, the current fair share or current fair price for our share price is still above the one which we have currently in the market. Their analysts are currently talking about the range of 900-1,000 HUF. Therefore, this is still very important for us that the shareholder remuneration actually being put on the growing path, and it delivers the additional value to the shareholders. And we believe that their fair price is not yet reached, although we have a significant development of our share price, and the share buyback is still very accretive instrument when it comes to the shareholder remuneration.
There was the second question in your first question about the decision related to the share buyback. What is the portion of the share buyback? It is always in the responsibility of the Board of Directors to make a proposal to the Annual General Meeting regarding the share between the cash dividend and the share buyback. The very important part is that, of course, the intention to put the shareholder remuneration on ground pass is always taken into consideration, as well as the 60%-80% of the adjusted net income as the range applicable for our shareholder remuneration. I hope it answers your questions, Nora.
If you have any question, please use the raise hand, raise hand function, and we enable your mic, and you can unmute yourself to ask a question. So if you have any further questions, then please raise your hands. Good afternoon, Piotr. You can unmute yourself and ask your questions.
Piotr Dzieciołowski and company. Thank you very much for letting me ask the questions, and congratulations on impressively strong fourth quarter and full year 2023 results. I wanted to ask you about your CapEx outlook for 2024 and 2025 in face of the accelerated rollout of the FTTH and 5G networks, according to the agreement with the government. That would be my first question. Second one, about the main drivers of the strong free cash flow outlook for this year. If you could walk us through the free cash flow bridge that led you to guide this to HUF 120 billion, I'll be grateful for that.
So Daria speaking. When it comes to the CapEx outlook, yes, it's not the guidance outlook for the years 2024, 2025, in particular, in connection with the commitments and the memorandum of understanding. Just let us remind ourselves that we committed to roll out 1 million additional gigabit-capable households by the year end 2027, and the ramp-up dynamic is actually completely up to our decision. For this year, 2024, we expect a comparable dynamic or comparable volumes when it comes to the number of households rollout in Hungary in 2024.
When it comes to the guidance for the free cash flow, practically, the guidance has several elements, of course, the strong guidance on the EBITDA, and the guidance supporting, more or less the, as I said, comparable number of households rollout in 2024. When it comes to the CapEx, this is the result which led us to the guidance of approximately HUF 120 billion for into free cash flow.
Thank you for the answers. One more question. When it comes to the regulatory framework for abolition of the supplementary telco tax, could you please provide us with some updates? Is there already project published for abolishing this tax, or is it still just part of this letter of intent with the government? On which stage is the abolition of this supplementary telco tax currently?
Current legal framework foresees that supplemental telco tax will exist till the end of 2024.
But the project is already, like, in the parliament. It's about to be approved.
Yes, indeed.
It's not just... Yes. Or, or is it just, for now, promise from the regulator side?
Actually, there is no project needed because, like Daria was saying, the current legal framework applies only for 2024. So there is no project needed to abolish the supplementary telco tax from 2025 because the current legal framework does not include supplementary telco tax from 2025.
Okay. Thank you. Thank you for the answer.
You're welcome.