annual report for the business year 2018 · with the seat in vienna, logosoft d.o.o. sarajevo and,...

ANNUAL REPORT FOR THE BUSINESS YEAR 2018

Annual Report 20181

LETTER TO THE SHAREHOLDERS

MTEL, AD BANJA LUKA

1.1. MAIN BUSINESS INDICATORS IN 2018

1.2. CORPORATE PROFILE

1.3. ENVIROMENT AND REGULATORY FRAMEWORK

1.4. CORPORATE SOCIAL RESPONSIBILITY

1.5. SERVICES AND SERVICE USERS

1.6. FINANCIAL REVIEW OF 2018

1.7. CAPITAL INVESTMENTS

1.8. HUMAN RESOURCES

1.9. INFORMATION TO THE INVESTORS

MTEL GROUP

2.1. MTEL GROUP STRUCTURE

2.2. FINANCIAL INDICATORS OF THE MTEL GROUP

BUSINESS OPERATIONS

2.3. LOGOSOFT, DOO SARAJEVO

2.4. MTEL AUSTRIA GmbH

CONTACTS

3

4

5

6

20

28

37

46

56

60

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Annual Report 20182

Dear Shareholders,

The business year behind us has been marked with

good decisions and good results, which is best shown

in the financial indicators but, also, in the customer

number rise, having always been the most adequate

proof that the business framework was well and

carefully laid against all business-related parameters.

Last year required our full attention since we saw our

business focus, among other things, in the strategy

for acquisition of the cable operators. Definition of the

new strategy and realization of its aims, related to the

acquisition of two operators, has brought new values

to the Company, however, new challenges as well.

Extending the business and investing into significant

Company’s value increase is one of the key factors

on which the Company’s long-term future relies upon.

Allow me to say that presently, the Mtel Company -

namely Mtel Group, which includes Mtel Austria GmbH

with the seat in Vienna, Logosoft d.o.o. Sarajevo and,

since 2019, Blicnet d.o.o. and Telrad Net, is the most

serious market player in the BiH telecommunication

industry. Our vision is to persist staying focused on

investing our knowledge and resources in the strategic

projects and closely following all trends at the global

telecommunications market.

Along with these big business moves we have

successfully realized, the business results for 2018

show the rise of customer base in almost all segments.

This is the sign that the Mtel Company, in a very

demanding business environment, adapts to the

market needs thus directing the business to the point

dictated by the era of swift changes and expansion of

the cutting edge services in the telecommunications

industry.

Optic infrastructure development has been one of the

primary goals in 2018 as well, and the results of this

network, and the other market demands realization,

are also shown in the integrated services revenues

increase of even 14,2%, relative to the previous

year. With this investment, we have provided our

customers with the state-of–the-art technology, not

only those who live in the urban areas, but also those

in the smaller towns and rural areas, which makes

an important advantage over the competition.

In the mobile telephony segment, in 2018 we have

managed to stabilize the customer base. This step

forward is the result of a carefully considered response

to the general trend of decreasing communications

through traditional services in the global scene. Close

following of the regional and local trends in this field,

as well as timely reaction to them, will certainly be

one of the primary goals of the Company in the

oncoming period.

It is important to say that Mtel has been fully prepared

for introduction of the 4G LTE mobile network since

2013, in terms of both technical capacities and human

resources. This way, Mtel will provide all the benefits

of this contemporary network to the customers, as

soon as necessary regulatory requirements are meet

in BiH, which has been expected for years. Along with

faster data and multimedia contents transmission,

this network will certainly provide for development

of new, more improved services that will be at our

customers’ disposal throughout BiH.

We have finished last year with net profit increase

of BAM one million, relative to the previous year. We

commence this year enriched with the experience

in good business moves, namely acquisitions, rise

of the customer base, positive financial results, with

refreshed existing and introduced new services that

follow global trends, and good communication with

our business partners as well as the community in

which we operate.

In the oncoming period, we will continue to realize

the goals we have set, as well as the new ones, in

line with the market demand, with a single focus

– step ahead of the others, we wish to be the first

customer’s choice in the digital world of services.

I would like to thank our customers, employees and

the shareholders for putting your trust in us year after

year, creating the climate of trust, understanding and

mutual respect.

Marko Lopičić, CEO

LETTER TO THE SHAREHOLDERS

Annual Report 20183

MTEL, AD BANJA LUKA

1.

1.1. MAIN BUSINESS INDICATORS IN 2018

1.2. CORPORATE PROFILE

1.3. ENVIRONMENT AND REGULATORY FRAMEWORK

1.4. CORPORATE SOCIAL RESPONSIBILITY

1.5. SERVICES AND SERVICE USERS

1.6. FINANCIAL REVIEW OF 2018

1.7. CAPITAL INVESTMENTS

1.8. HUMAN RESOURCES

1.9. INFORMATION TO INVESTORS

Annual Report 20184

INTEGRATED SERVICES Integrated services revenue

+7,4 BAMm

REVENUES

+12.408

USERS

52,259,7

2017 2018 2017

97,1

109,5

2018

BA

Mm

Integrated services users

MOBILE TELEPHONY Revenue from mobile telephonysubscription

+2,7 BAMmREVENUE FROM

MOBILE TELEPHONY

SUBSCRIPTION

NET PROFIT

+1,0 BAMm

NETPROFIT

+14.486NUMBER OFPOSTPAID

USERS

71,1 73,7

2017 2018 2017

364,6

379,1

2018

BA

Mm

thou

sand

thou

sand

EBIT margin

Net profit

15,15%

60,161,0

15,81%

2017 2018

BA

Mm

INVESTMENTS

+14,4 BAMmINVESTMENTS

IN ACCESSNETWORK

Investments in access network

16,2

30,5

2017 2018

BA

Mm

Numbers of postpaid users

MAIN BUSINESS INDICATORS IN 2018

1.1.

Annual Report 20185

1.2.

CORPORATE PROFILE

1.2.1. BACKGROUND AND ORIGIN

1.2.2. ACTIVITIES

1.2.3. MANAGEMENT BODIES

1.2.4. MISSION, VISION AND STRATEGY

1.2.5. STATEMENT ON THE CORPORATE MANAGEMENT STANDARDS APPLICATION

1.2.6. CORPORATE VALUES

Annual Report 20186

The Public State Enterprise for Telecommunications

of the Republic of Srpska, Banja Luka, registered on

20 December 1996, pursued the activities as a fully

government-owned company until 12 December 2002.

Then it was performed the ownership transformation

into a joint stock company, and the name changed

into Telekomunikacije Republike Srpske a.d. Banja

Luka.

Until late 1996, the postal, telegraph and telephony

services in the Republic of Srpska were performed

within a single enterprise Public State Enterprise for

PTT Traffic of the Republic of Srpska.

Since 1 January 1997, pursuant to the provisions of

the Communication Systems, Radio-traffic and Postal,

Telegraph and Telephony Traffic Law, the Company

divided into two new enterprises – Telekom Srpske,

Public State Enterprise and Srpske pošte, Public State

Enterprise.

In the course of 2002, pursuant to the Law on

Privatization in the Republic of Srpska and the

Republic of Srpska Government’s Decision, 20% of

the government share in the Company was privatized

through vouchers, out of which 10,5% related to the

privatization-investment funds, and 9,5% to physical

persons. The remaining 80% share (government

capital – 65%, Pension and Disability Insurance Fund –

10% and Restitution Fund – 5%) was privatized under

the Special Privatization Program of the Republic

of Srpska Government, pursuant to the Law on

Privatization of the Government-owned Capital in

the Companies.

Pursuant to the Basic Court Decision, dated 12

December 2002, it was registered the change of

name into „Telekomunikacije RS”, a.d. Banja Luka, as

well as the status change. Pursuant to the Decision

of the Basic Court in Banja Luka, dated 28 June

2007, it was registered the status change – ownership

transformation through sale of the total government

share to the Telekom Srbija, a.d. Beograd.

Having purchased 65% of the government capital,

Telekom Srbija became the major owner of Mtel. As

at 31 December 2018, the ownership structure of

Mtel is as follows:

• Telekom Srbija, a.d. Beograd, Srbija – 65,01%;

• Penzijski rezervni fond, a.d., Banja Luka (Pension

Reserves Fund) – 8,92%;

• Fond za restituciju Republike Srpske, a.d. Banja

Luka (Restitution Fund) – 5,03%;

• DUIF Kristal invest a.d. – OMIF Future Fund – 3,18%;

• Other shareholders – 17,86%.

•

As at 31/12/2018, Mtel has capital share in three

companies, as follows:

• Mtel Austria GmbH, having its registered seat in

Vienna, with 100% share,

• Logosoft d.o.o. Sarajevo, with 100% share,

• Društvo za telekomunikacije MTEL d.o.o. Podgorica

with 49% share.

1.2.1.

BACKGROUND AND ORIGIN

Share (31/12/2018)

Logosoft d.o.o. Sarajevo

100%Mtel Austria GmbH

100%MTEL d.o.o. Podgorica

49%

Basic data

Corporate name

Seat

Date of incorporation

Date of acquiring ownership

Value of registered capital

Number and type of issued shares

web site

Main activity

Telekomunikacije Republike Srpske a.d.

Vuka Karadžića 2, Banja Luka

20/12/1996

28/6/2007

BAM 491 million

491.383.755 regular shares

mtel.ba

Telecommuncations - provision of the telecommunication and related services i.e. voice, data, text, sound and picture transmission

Annual Report 20187

1.2.2.

ACTIVITIES

Pursuing the activities as one of the three national

telecom operators in Bosnia and Herzegovina, Mtel a.d.

Banja Luka offers unique communication solutions.

Following the requirements of more and more dynamic

market, Mtel provides the most contemporary

telecommunication services in the field of mobile

telephony, fixed telephony, digital television, Internet

and data.

Mtel’s main business activities are telecommunications,

provision of the telecommunication and related

services, namely voice, data, text, sound and picture

transmission respectively, encompassing:

• activities in the wire telecommunications,

• activities in the wireless telecommunications,

• activities in the satellite telecommunications and

• other telecommunication activities.

Along with the main activity, with the aim of more

efficient and rational business operations, Mtel

provides a variety of other telecommunication

services, including other fixed and mobile telephony

and data services, leased lines, private lines, services

in the entire network area, additional services in the

mobile telephony, Internet and multimedia services.

Mtel also provides services in the sphere of

the telecommunication infrastructure leasing,

construction, management and protection. Along

with these, the Company also pursues other activities,

ancillary to the registered activity, usually performed

along with the registered activities, to the lesser

extent or from time to time.

With continuous following of the world trends

and cutting-edge technologies in the field of

telecommunications, Mtel listens carefully to the

customers’ wishes and needs. Knowing they want

more than just making phone calls, Mtel introduces

new technologies and offers a wide range of additional

services in BiH.

Integrated business solutions, with calls and data

in the mobile and fixed network, provided for the

business users, create the preconditions for successful

business operations.

Along with provision of the high-quality services and

application of the latest information technologies,

Mtel invests much in sports, culture, education, and

humanitarian projects and, by pursuing activities

with corporate social responsibility, contributes

to development of the recognized values in its

environment.

Annual Report 20188

Since Mtel is a shareholding company i.e. a joint stock

company, the provisions of the Law on Commercial

Companies define its business operations. Pursuant

to these provisions and the Mtel Statute, the joint

stock Company bodies are the following:

• Shareholders Assembly,

• Management Board,

• Board of Directors,

• CEO,

• Auditing Board,

• Internal Auditor.

SHAREHOLDERS ASSEMBLY

Shareholders Assembly involves all the shareholders.

By rule, the CEO, Management Board members and

the Independent Auditor attend the Shareholders

Assembly sessions.

MANAGEMENT BOARD

On the day of 31 December 2018, the following

members: Predrag Ćulibrk, Vesna Lončar, Dejan

Carević, Slavko Mitrović, Draško Marković and Branko

Malović performed the Management Board functions.

CEO

The Company CEO is Marko Lopičić.

BOARD OF DIRECTORS

The Mtel’s Board of Directors includes the CEO, Marko

Lopičić, and the Executive Directors:

• Executive Director for Technics – Miodrag Vojinović,

• Executive Director for Marketing and Sales –

Radmila Bojanić

• Executive Director for Finances – Jasmina Lopičić

• Executive Director for Corporate Affairs – Vladimir

Četrović

• Executive Director for Operations – Nikola Rudović.

AUDITING BOARD

On the day of 31 December 2018, the following

members: Vladislava Argyrakis and Milan Simić

performed the Auditing Board functions.

INTERNAL AUDITING

Internal Auditing, headed by Mirjana Matanović -

Bundalo, is organized as Mtel’s support function.

1.2.3.

MANAGEMENT BODIES

Annual Report 20189

MARKO LOPIČIĆ,CEO

Marko Lopičić was born in 1975 in Kraljevo. He

graduated from the Faculty of Law of the Belgrade

University in 2000.

He commenced his career with the Telekom Srbija,

a.d. in 2000. He worked in the legal representation

within the Legal and General Affairs Secretariat

and, afterwards, he performed the duties of the

Normative Department Head, within the Budget and

Control Division, and the duties of the Legal Support

Department Head, within the Services Division.

He was appointed the Mtel a.d. Banja Luka Executive

Director for Corporate Affairs on 19 June 2007. As

the management team member, he was in charge for

Human Resources, relations with the regulator and

legal affairs, as well as for the activities of the Company

Secretariat and relations with the shareholders.

The Company Management Board elected Marko

Lopičić the Mtel a.d. Banja Luka CEO on 8 June 2016.

MIODRAG VOJINOVIĆ,Executive Director for Technics

Miodrag Vojinović was born in 1972 in Banja Luka. He

graduated from the Faculty of Electrical Engineering

of the Banja Luka University in 1999. He additionally

advanced in the field of telecommunications in the

USA, China, Germany and Austria.

After having been the Telekom Srpske scholarship

grant recipient, he commenced working for this

Company in 2000, and he moved from the position

of junior engineer, senior engineer, department head

and sector head respectively to the function director.

He has participated in the projects such are: prepaid

system, IPTV, wireless access network modernization,

introduction of FTTH, ngHLR, number portability, IMS,

mobile broadband, SBC, and many other. He speaks

English and German.


Director for Technics on 24 March 2015.

JASMINA LOPIČIĆ, Executive Director for Finances

Jasmina Lopičić was born in 1972 in Belgrade. She

graduated from the Faculty of Economics of the

Belgrade University in 1996.

She started her career in JP PTT Srbija in 1997,

in the Division for Economic Affairs. She has been

employed with the Telekom Srbija a.d. Beograd since

1998. She was appointed the Director of the Economic

Estimates Sector in 1999 and, in 2005, the Director of

the Budget and Control Sector within the Economic

Affairs Division in the Telekom Srbija, a.d.

From 2001 to 2004, she was a member of the

Telekom Srbija a.d. Supervisory Board and, in the

period of 2004-2008, a member of the Telekom Srbija

Management Board. From 2010 to 2018, she was a

member of the Mtel Podgorica Board of Directors.

She speaks English. She is married and a mother of

two.

She was appointed the Mtel a.d. Banja Luka Executive

Director for Finances on 19 June 2007.

Annual Report 201810

VLADIMIR ČETROVIĆ,Executive Director for Corporate Affairs

Vladimir Četrović was born in 1968. He graduated

from the Faculty of Law of the Belgrade University.

He started his career as an apprentice lawyer in 1996

and he has been employed with Telekom Srbija a.d.

Beograd since 1998, in the Legal Affairs Secretariat as

the Company’s legal representative. He was appointed

the Director of the Legal Affairs Division in JP PTT

Srbija in 2004 and, in 2007, the General Manager

of Mobtel PTT d.o.o. From 2009 to 2010, he was an

advisor to the JP PTT Srbija General Manager.

In January 2010, he joined the Mtel team as the

Head of Legal Affairs Sector within the Division for

Corporate Affairs.


Director for Corporate Affairs on 14 June 2016.

NIKOLA RUDOVIĆ,Executive Director for Operations

Nikola Rudović was born in 1978 in Bar. He graduated

from the Faculty of Law of the Belgrade University

in 2003, and, in 2004 completed the “PERIKLES“

- School for Social and Political Leadership by the

“Centar za demokratiju“ Fund, financed by the

European Commission.

He passed the judicial examination in 2007. Since 2007,

he has been the member of the Belgrade Lawyers’

Chamber as a lawyer specialized in corporate law.

In January 2013, he joined the Mtel team as the

CEO’s Advisor and, since December 2013, he has

been performing the duties of the Strategy Function

Director. He speaks English.


Director for Operations on 25 April 2014.

RADMILA BOJANIĆ,Executive Director for Marketing and Sales

Radmila Bojanić was born in 1972 in Gradiška. She

graduated in 1997 from the Faculty of Electrical

Engineering of the Banja Luka University. She

continued her academic education in 2004 at the

Faculty of Economics of the Banja Luka University,

having obtained the title of Master of Science in

Economics and later, in 2010, the title of Doctor of

Science in Economics at the Singidunum University

in Belgrade.

She started her career in the Mtel Company in

1998 and moved from the position of engineer and

participant in numerous strategic projects to various

managerial positions in the Division for Marketing

and Sales.

From 2010 until 2013 she was the Head of Business

Customers Sales Sector, and from 2013 until April 2017

she was a Head of Sector for Business Customers Sales

and Wholesale. The year before her appointment to

the Executive Director’s position, she was responsible

for sales to the residential customers as well.

She is an author of several scientific papers in the

sphere of management in the telecommunications

industry and quality management. She speaks English.

She was appointed the Mtel a.d. Banja Luka Executive

Director for Marketing and Sales on 5 April 2017.


MISSION, VISION AND STRATEGY

1.2.4.Mission

“Following closely the tradition that binds us, we

offer our customers a unique digital experience,

making their lives better, easier and more joyful”

Vision

“Step ahead of the others, we want to be the first

customer’s choice in the digital world of services”

Based on the Mission and Vision, it was adopted the

Company’s Strategic Business Plan for the period of

2018-2020. The Strategic plan defines the Company’s

main determinations in the oncoming period, related

to the identification and exploitation of new resources

and the revenues growth, namely orientation towards

further growth in the integrated services, mobile

telephony and mobile internet segments, as well as

towards development of the digital services, as well

as the improvement of the present market position

and internal business aspects.

Methodology tool for implementation of the

Company’s strategy, by which it is ensured uniformity

in the sense of the Strategic Plan, is the Strategic Map

and the harmonized results list. The Strategic Map

aims at making the strategy comprehensible to all

employees, and contributing to futher development

of the organizational culture in which the strategy

is a continuous proccess. The Company’s Strategic

Map for the period of 2018–2020 is based on the

strategic theme: “Market position improvement and

digital transformation“.

The Stategic Theme consists of seven strategic tasks,

fifteen strategic initiatives, as well as the strategic

activities seen through the following four prospectives:

• Financial – How will our shareholders see us? The

primary focus is put on the business revenues

and profit stabilization, namely further growth

of the revenues generated from the integrated

and postpaid services and mobile internet, and

realization of the income from the digital services,

with the aim of establishing a new, long-term source

of income.

• Customer – How should our customers see us? Mtel

will focus on improvement of the customer base

stability and development of the services portfolio.

A special attention will be paid to identification

of the specific market segments. Having in mind

the customers’ needs, development of technology

and competitive relations, the investment cycle will

continue in the broadband infrastructure in the fixed

and mobile network, this being the precondition

for development of the existing and introduction of

new services. The focus will be put on improvement

of the digital channels in marketing and sales, as

well as in development of ICT service, payment

service and IoT service portfolios.

• Internal – In which processes must we be excellent

in order to satisfy our shareholders and customers?

With the aim of achieving excellence, one of

the preconditions for satifying the needs of our

shareholders and customers, it is important to

realize the initiatives and activities within the task

defined as the operational efficiency and business

processes improvement. This will be achieved

through improvement of the business processes

management, improvement of the Data Analytics

system, development of the TC/service platforms

and the IP transformation, as well as through

development of the integrated Core IT system.

• Learning prospective – How to harmonize the non-

material resources in order to achieve excellence

in the processes? Mtel will continue to improve

the employees’ dedication, motivation and

competences and build new organizational culture

on the principles of the employees’ cooperation,

innovativeness and establish an adequate

administrative framework, which will allow for

unimpeded and efficient business operations.

Company’s Stategic Business Plan

for the 2018-2020 Period


Financial prospective

Stabilize Company’s business income and profit

Strategic tasks

Strategic prospective

User prospective

Internal prospective

Learning prospective

Increase revenues from integrated services, mobile postpaid and mobile internet

Realize revenues from digital services

Improve the customer base structure

Improve the digital services portfolio

Improve operational efficiency and business processes

Improve the employees’ dedication and competences


The Company operates in a complex environment, in

terms of market, environment and trends of digital

transformation in all domains and omnipresent

internet and mobile business operations, and tends

to establish optimal management by applying

the management system, to achieve a long-term

fulfillment of all interested parties’ expectations.

In late 2017, the Company established the integrated

management system (IMS), which unifies the

requirements of two internationally recognized

standards: ISO 9001:2015 and ISO/IEC 27001:2013,

for all business processess in the Company.

The Company Strategy outlines the fundamental

principles of the company management related to

the integrated management system:

• Continuous achieving of the results,

• Improving the quality of services and processes,

• Process Management,

• Achieving success based on employees’ competencies

and engagement,

• Developing stable and fair relations with partners

and suppliers,

• Taking responsibility for a sustainable future.

Continuous achieving of the results

Basic Principles of the Quality Management

System

Integrated Management System

(IMS)

Improving the quality of services and processes

Process Management

Achieving success based on employees’ competencies and engagement

Developing stable and fair relations with partners and suppliers

Taking responsibility for a sustainable future


The IMS Rules of Procedure define the integrated

management system policy that represents the

framework for establishing and reconsidering the IMS

aims, including the quality and information security

aims, according to which the Organization undertakes

to periodically reconsider the IMS, for the purpose

of securing the business processes efficiency and

continual improvement. In the course of 2018, it was

performed the internal audit of all organizational

units, for all business processess and, at the end of

the year, it was successfully conducted the external

audit of the Company, in line with both mentioned

standards.

The IMS Policy defines the following principles:

• Fulfillment of the customers’ requirements for high

quality product and services, to maintain a long-

term customer satisfaction,

• Developing competencies that motivate employees

to actively participate in the improvement of all

business aspects,

• Ensuring enjoyment of the rights and equal

treatment to all our shareholders,

• Compliance with laws, regulatory and other

regulations, in order to maintain a fair and effective

market competition,

• Developing long-term and correct relations with

partners and suppliers,

• Providing a continuous technical and technological

development in line with the global trends in the

telecommunications industry,

• Corporate social responsibility, systematically

and permanently building the tradition of quality

relations with the society and environment in which

the Company operates,

• Protection of the Company’s trade secrets, business

partners and clients, as well as protection of their

privacy,

• Permanent care for information integrity, availability

and confidentiality,

• Security of information, as well as of other assets,

to the risk-proportionate extent, through the

effective application of the protective measures

and procedures, in accordance with the financial

justification and Company’s technological strategy.


Quality Management System - QMS represents the

manner in which the Company manages the quality of

products, services and business operations (relations

with all interested parties), as well as the quality of

the organization itself (relations with the employees

and resources, corporate culture).

Quality Management System – QMS requires the

Company to implement the key business processes

management, which Mtel realizes using Business

Process Management (BPM), and permanent shaping,

informatization and monitoring of the business

processes. Management of the key business processes

in the Company enables accommodation to the

changes brought by modern business, bringing along

digital transformation in all areas, along with new

rules, new methods and new people. These changes

lay the foundations for a new business culture and

new business success criteria. The business processes

improvement entails the improved competitiveness

and a better market position through raising the

efficiency and effectiveness.

The importance of the Information Security

Management System – ISMS introduction does not

solely include business operations compliant to the

legal and market requirements, but also the most

important thing – the customer relations improvement

and growing Mtel services users’ trust.

The ISM system, implemented in the Company,

provides for an adequate customer information

protection in all phases of the processing, since the

tasks and responsibilities related to the information

security are clearly defined for all organizational

levels and the employees.

The obtained certificate confirms that Mtel has reduced

the information security risks to the lowest possible

level, that a better control has been implemented over

the information flows, as well as that the potential

information security risks have been properly and

timely addressed. Thus Mtel services users may rest

assure that their exchanged information has been

processed in line with the internationally recognized

practice.

ISO 9001:2015

Quality Management System

ISO/IEC 27001:2013 Information

Security Management System


1.2.5.

STATEMENT ON THE CORPORATE MANAGEMENT STANDARDS APPLICATION

Mtel has its own Code of Conduct and Corporate

Management, which fully employs and ensures

the application of the the corporate management

principles in the Company. The Code more thoroughly

stipulates the mechanisms for functioning of the the

Company bodies’ and protection of interests in mutual

relations of various stakeholders in the Company.

The established corporate principles provide the

mechanisms for determination of the Company

aims, resources for their realization and monitoring

of the effects, as well as create a permanent and

consistent controlling system of the Company bodies’

work and protection of interests in mutual relations

of all interested parties.

With application of the corporate management

principles and its own Code of Conduct and Corporate

Management Standard in 2018, the Company has

ensured efficient application of the Company’s

corporate management principles.

The application of the corporate management

principles provides for transparent business

operations and quality protection of all interested

parties, aimed at creating a long-term economic value

for the shareholders.

Mtel develops and operates in accordance with

good corporate management practice, and tries to

improve the competitive capacities with strategy,

business policy and practice, with the aim of creating

a favorable environment for the investment activities.

Corporate management represents an important

segment of the Company’s market operations, and

Mtel will continue to monitor compliance of the

organization and activities in the Company with the

principles contained in the Code.

In 2019, the Company will adhere to the main Code

principles related to transparent business operations,

clearly defined operating procedures for important

decision-making bodies, avoidance of the conflict

of interests, efficient internal control and efficient

accountability system, thus ensuring further

improvement of the corporate relations among the

interested parties, and improvement of the business

results, as well as the improvement of the Company’s

operations, its growth and development, for the

benefit of all shareholders.

As a responsible and market-oriented company, Mtel

will apply the corporate manegement principles and

realize its rights on fair principles of the market

operations, fulfilling its obligations in a responsible

manner, by which it will try to provide for a sustainable

prosperity of the Company and its shareholders.

Mtel’s statement on harmonization of the organization

and activities with the Code of Conduct, i.e. the

corporate management standards, forms an integral

part of this Report, and is published on the Company’s

Internet site, under the Section „Investitori“: http://

www.mtel.ba and the Stock Exchange Internet site:

http://www.blberza.com


CORPORATE VALUES

1.2.6.

Corporate values of the Company are strong and

concise expression of our corporate culture thus we

try to make them our guidebook and reminder on

what we should do and how we should do it in our

immediate business environment. With these values,

we set the landmarks towards more successful business

and the results we wish to achieve.

Commitment to Customers

Mtel’s Corporate

Values

Well-coordinated Team

Corporate Responsibility

Orientation towards Changes

Constant Growth and Company Development

Company Ambassadors


Corporate Responsibility

Good business practices, compliance with the rules,

procedures and laws is an absolute must of our

business in relations with our customers and business

partners, and with our shareholders as well.

Guided by positive values, we conduct business so that

we systematically and continuously build a tradition

of quality relations with the society and environment

in which we operate, wishing to be recognized as the

company whose business philosophy is clearly directed

towards ethics in business, as the basis on which it

builds the business identity. Social responsibility of

the Company is also manifested in the employees’

common belief that the professional knowledge and

experience should be shared not only within the

company, but outside too, and in our colleagues’

readiness to support the academic community and

participate in the future professionals’ development.

Orientation towards Changes

Orientation towards changes includes close following

of the contemporary requirements, being one of the

most important features of all successful companies.

Every day we learn and adapt to new trends in the

business world, in order to properly address major and

rapid changes the future brings, and we responsibly

deal with all new business challenges. In the course

of 2018, we have tried to build the culture that will

be the common factor of the unity and strength

of all our employees. Thus we have tried to raise

the innovativeness to the level that is optimal for a

contemporary telecommunication company, which we

consider ourselves to be. To this aim, we have initiated

development of the programs for exchange of ideas

and initiatives, which will be based on Design Thinking

methodology, and ensure the ideas are based on the

customers’ needs, but sustainable, enforceable and

cost-effectiveas well. We have also organized the first

internal conference entitled “Technology Is People“,

as well as the meetups that the Company organized

in cooperation with ICT HUB.

Constant Growth and Development

of the Company

On the path of implementation and fulfillment of our

Company’s mission and vision in times of rapid and

major changes, we do our best to keep pace with

the global trends in the telecommunications industry,

to maintain the leading position on the Bosnia and

Herzegovina territory, conquer new markets and

stay recognized in the region as a team that has a

significant impact on its Company’s market share

growth.

Company Ambassadors

We are unique ambassadors of our Company at

our workstations and outside of the Company. Our

dedication to the Company and our work result in the

quality business that bears the signature of all of us.

Commitment to the Customers

We beieve our customers are our mirror, and the

image of their satisfaction is the very image and

measure of our success. Our customers are our

partners in achieving business goals, our start point,

and the ultimate aim of our business is their very

satisfaction.

Well-coordinated Team

We always focuse on strengthening the confidence and

improving the communication between hierarchical

levels, as well as to simplifying the work with

colleagues, customers and associates. By improving

our knowledge, we invest in ourselves, since we

wish to be the best for the benefit of the customers,

community and our Company. It is important to us to

be professional and competent, in order to respond

to the market challenges, and be the best in our

business. We try to improve the cooperation, being the

precondition for a successful business and productive

work climate, through series of team building activities

and workshops, attended by the employees from all

hierarchy levels throughout Bosnia and Herzegovina.


1.3.1. MACROECONOMIC ENVIRONMENT

1.3.2. TELECOMMUNICATIONS MARKET IN BOSNIA AND HERZEGOVINA

1.3.3. PESTEL ANALYSIS

1.3.4. REGULATORY FRAMEWORK

1.3.

ENVIRONMENT AND REGULATORY FRAMEWORK


1.3.1.

MACROECONOMIC ENVIRONMENT

According to the analysis of the World Bank,

published in January 2019, global growth

of the world economy is slowing down and

loosing impetus, since 2017 ended with

the global GDP growth of 3,1%, which was

significantly higher than expected, while the

anticipated growth of the world economy

for 2018 was 3,0%1. Generally, the world

economy is recovering, this being the result of

the investment, production and trade growth.

Projections are that this positive trend will

become slightly moderate, therefore for the

period 2019-2020, the anticipated growth is

2,8% to 2,9%2. The trade war between the

United States and China may reflect in slowing

down the developing countries economic

growth.

GDP growth in the European Union has

reached 2,4% in 2017, thus being 0,7

percentage points higher than expected3. Due

to the anticipation that domestic demand will

lose its intensity, GDP EU growth is expected

to be 1,9% in 2018. Though it is lower from

the achieved in 2017, it is notably stronger

than previously projected. For the period

2019-2020, it is foreseen 1,6% growth rate.

1 World Bank: „Global Economic Prospect“, January 2019. – Table 1.1 , Real GDP; 2 Ibidem; 3 Ibidem; 4 Ibidem;5 World Bank: „Global Economic Prospects“, January 2019 - str. 28.; 6 www.focus-economics.com/countries/bosnia-and-herzegovina; 7 www.worldbank.org/en/country/bosniaandherzegovina/overiew; 8 www.focus-economics.com/counties/bosnia-and-herzegovina

Over the longer term, the EU growth rates

are constrained by shrinking of the working

population in the majority of the Eurozone

economies4.

According to the World Bank estimates, the

year 2018 is expected to be a turning point for

the global economy because, for the first time

in the last ten years, that is since 2008 and

great global recession, the negative output

gaps in the previous period are expected to

be overcome and the world economy will

continue to develop in the positive direction.

Practically, it means that, after long ten years,

the global demand for products and services,

that is outputs, will be higher than the offer5.

According to the economic portal www.

focus-economics.com, in 2017 Bosnia and

Herzegovina achieved the growth of 2,3%6.

From the macroeconomic trends prospective,

the analysts foresee unfreezing of the

pending disbursements from the international

credit institutions has a positive impact on

the movement of the BiH economy in 2018.

According to the Portal analysts, the chances

for economic growth of Bosnia and Herzegovina

in 2019 remain very promising. Opening of

new jobs, more remittances from the abroad-

living BiH citizens, and growing tourism

sector should foster the increase of private

consumption, while the direct international

investments will have a significant influence

on the total investments made in BiH. Shared

government (three peoples’ influence) could

slow down the important reforms that are

necessary for the country’s stable future. The

FocusEconomics Panel participants expect

the real GDP growth in BiH to be 3,1% in

2019, as well as in 2018.

According to the World Bank analyses, the

BiH’s key economic challenge is the disbalance

of its economic model: public policies and

incentives are skewed toward the public

rather than the private sector, consumption

rather than investment, and imports rather

than exports7. Due to the steady growth in

the EU, it is thus expected that these positive

trends should contribute to improving of the

BiH economy. Thus the 3,1% GDP growth is

anticipated for 20188.


TELECOMMUNICATIONS MARKET IN BOSNIA AND HERZEGOVINA

1.3.2.In the telecommunications industry, the processes

of market liberation and competition increasing

have continued. Due to the mobile telephony

revenues decrease, large European telecom and

cable companies purchase smaller operators.

This trend is present both in the regional market

and in the BiH telecommunications market, and

is expected to continue in the following years.

In 2017, it was adopted the Electronic

Communications Sector Policy for the period

of 2017-2021, a strategic document for further

development of the electronic communications

market. Adoption of the will enable further

development and improvement of the

telecommunications industry, next generation

networks (NGN), introduction of the 4G

network, new investments and increase of the

competitiveness level. It has also been developed

the Broadband Access Development Strategy,

given that BiH was the only country in the region

that did not have this document.

All deadlines have been exceeded for the

transition from analogue to the digital terrestrial

broadcasting and 4G mobile network (4G

LTE) introduction. Preparations for 4G mobile

telephony introduction are finished, telecom

operators are ready for transfer, but the licence

price has not been agreed yet. The BiH Council

of Ministers returned the price proposal, created

by the CRA, to be re-done and additionally

explained, and the low price was stated to be

the main reason.

Fluctuation of the population, gross domestic

product, employment rate, degree of informatic

literacy, are just several of the factors that

influence the customer number fluctuation,

market shareand the revenues realized at the

BiH telecommunications market.

The estimated total revenue in the

telecommunications market of Bosnia and

Herzegovina in 2018 is BAM 1.3649 billion, which

is slightly lower than the 2017 realization (BAM

1.375 billion10).

Since 2013, the revenues from the mobile

telephony services have been recording a

decrease in the total market share in BiH,

however, it is still the highest one. The estimated

revenues from the mobile telephony services in

2018 is around BAM 55411 million, i.e. 40,62%12of

the total estimated TC market revenues. The

revenues from the mobile telephony services

9Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 10Telecommunication indicators of BiH in 2017; 11Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 12Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 13Telecommunication indicators of BiH in 2017; 14Telecommunication indicators of BiH in 2017; 15Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 16Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 17Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 18 Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 19 Telecommunication indicators of BiH in 2017; 20Telecommunication indicators of BiH in 2017.; 21Telecommunication indicators of BiH in 2017;

in 2017 were BAM 569.244.67013 i.e. 41,38% of

the total estimated market revenues.

The revenues from the fixed telephony services

continuously decrease, and they were BAM

294.352.34814 in 2017, or 21,38% of the total

estimated market revenues. The estimated

revenues from the fixed telephony services in

2018 were around BAM 27515 million, or 20,16%16

of the total estimated TC market revenues.

The estimated revenues from the Internet

services in 2018 were around BAM 14017 million

or 10,26%18 of the total estimated TC market

revenues. The realized revenues from the Internet

services in 2017 were BAM 111.024.86819 or

8,07% of the total estimated market revenues.

The estimated other revenues20 (cable television,

data, etc.) for 2018, namely their participation

in the total estimated market revenues, will not

significantly change, relative to the year 2017,

when they were BAM 40121 million or 29,16% of

the total estimated market revenues.


At the end of 2018, the public telephony services

through fixed telecommunication networks in BiH

were provided by 15 operators, out of which three

with the License for Public Fixed Telephony Operator22

(BH Telecom d.d. Sarajevo, Telekom Srpske a.d. Banja

Luka and Hrvatske telekomunikacije d.d. Mostar), and

12 operators with the License for Provision of the

Public Fixed telephony Services.23

The tree operators with the Public Fixed Telephony

Operator License have a significant market share,

sales volumes and realized revenues, as well as the

number of employees.

The number of the fixed telephny subscribers of the

SMP operators in BiH was 632.91421 at the end of

the year 2017, and it is estimated that, at the end

of 2018, there will be 581.341 customers25, while the

growth rate, relative to 2017, is -8,1%26. The decreasing

number of the fixed telephony customers is most

obvious in the SMP operators, given that these

operators have the largest customer bases and that

the replacement of the fixed services with the mobile

Three operators hold the License for GSM and UMTS

Services in Bosnia and Herzegovina: JP BH Telecom

d.d. Sarajevo, Telekomunikacije Republike Srpske a.d.

Banja Luka and JP Hrvatske Telekomunikacije d.d.

Mostar.

The operators, registered as providers of mobile public

telephony services, which provide mobile telephony

services based on commercial agreements with

holders of Licenses for GSM and UMTS services are:

Blic.Net d.o.o. Banja Luka, Logosoft d.o.o. Sarajevo,

ELTA-KABEL d.o.o. Doboj and TELRAD NET d.o.o.

Bijeljina, and DASTO SEMTEL d.o.o. Bijeljina.32

At the end of 2017, the total number of the mobile

subscribers in BiH was 3.412.69833, and it was

estimated that this number would be 3.440.08234

at the end of 2018.

The number of prepaid users is still several times

higher than the postpaid ones. The participation of

the postpaid users was 26,07%35 at the end of Q4

2017 and it was estimated that, at the end of 2018,

the participation would be 28,21%, still lower than

in the countries of the Region and EU. According to

the data of the regulatory agencies of the countries

in the region, in 2018, the participation of postpaid

users in Croatia is around 50%, in Serbia - 56%, and

ones has been ongoing for years. On the other hand,

the decrease in the the fixed telephony customers’

number is compensated for with users’ transfer to

the integrated services provided via fixed network.

The number of the new operators’ subscribers in

the fixed was 125.23027 at the end of 2017, and the

estimates were it would be 140.73928 at the end of

2018.

The BiH telecommunications market liberalization,

particularly the number portability service for the

fixed public telephony services users, has increased

the fixed telephony market competitiveness. The

growing trend in the total number of the ported

numbers in the fixed network in BiH continued in

2017, thus it increased to 65.95729. It is estimated

that this number will be 81.60230 at the end of the

year 2018.

It is estimated that the fixed telephony penetration

rate in BiH will be approx. 20,87%31 at the end of

2018.

22Fixed telepohony; 23Fixed telephone services; 24Quarterly comparative data of the electronic communications market Q4 2017; 25Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 26Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 27Quarterly comparative data of the electronic communications market Q4 2017; 28Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 29Quarterly comparative data of the electronic communications market Q4 2017; 30Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 31Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.;

32List of registered providers of mobile telephon services; 33Telecommunication indicators of BiH in 2017; 34Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 35Quarterly comparative data of the electronic communications market Q4 2017; 36Ekip, Ratel, Hakom; 37Quarterly comparative data of the electronic communications market Q4 2017; 38Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 39Ekip, Ratel, Hakom; 40Quarterly comparative data of the electronic communications market Q4 2017; 41Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.

in Montenegro - 50%36. The European average of

the postpaid users’ participation in the total mobile

telephony customer base is around 50%.

The penetration rate in the mobile telephony in BiH

was 97,42%37 at the end of 2017, and it was estimated

that, the penetration rate would reach 99,32%38 at

the end of 2018. Such penetration rate in the mobile

telephony is still below the latest available values

in the surrounding countries (Montenegro 182,96%,

Serbia 122%, and Croatia 106,11%39). The mobile

telephony penetration rate in Europe is around 125%.

The increased use of the applications, substitutes

for voice calls (like Viber, Skype, Gtalk, Whatsapp),

and substitutes for SMS and MMS (like Whatsapp,

Google Talk, Facebook Mesenger, Viber, Skype) led to

decrease in the outgoing international voice traffic

and number of SMS and MMS messages.

Implementation of the number portability service in

the mobile telephony started in 2013. The total number

of ported numbers in the mobile network at the end

of 2017 was 50.25740, and it was estimated that, at

the end of 2018, this number would be 60.89641,

which makes approx. 21,17% increase, relative to the

previous year.

Fixed Telephony Mobile Telephony


The internet access service market is marked

by the access speeds increase for all users, and

telecommunication service and ICT domain services

(cloud, data centers, security)integration. The

Internet services penetration rate in the BiH market

is characterized with continuous growth, with the

broadband access as the growth generator. The use

rate of the Internet via fixed network, at the end

of 2017 was 85,25%42, and it was estimated that it

would be 90,28%43 at the end of 2018.

The number of the fixed broadband access users

in BiH was 663.68244 at the end of 2017 and it

was estimated that, at the end of 2018, it would be

706.79645. The broadband Internet access rate in the

fixed networks, which was 19,83% at the end of 2017,

is estimated to reach 21,36%46 at the end of 2018.

Such penetration rate in BiH and certain countries in

the region, shows that, despite the rise of the fixed

broadband Internet access user number, Bosnia

and Herzegovina still belongs to the group of less

developed countries in the region and is significantly

below the EU average.

Use of broadband services has been increasing every

year thus the number of users has reached 99,97% of

the total Internet subscribers’ number. The dominant

Internet access type is xDSL, with 398.11047 users at

the end of 2017, and it is estimated that, at the end

of 2018, this number will be 420.58648.

The number of cable Internet access users at the end

of 2017 was 221.25149, and it was estimated that, at

the end of 2018, this number would be 228.69850.

We can see a significant increase in use of the

internet via mobile networks in BiH. The operators

offer mobile internet by means of USB modems and

SIM card with the voice traffic disabled and purposed

solely for the data. Given the increasing customers’

need for use of the internet via mobile networks, the

operators create tariff packages that include more

and more free mobile internet. It should be noted

that the operators in the surrounding countries offer

tariff packages with mobile internet services on the

4th generation networks. BiH is behind the countries

of the region in that sense, as well as in terms of the

broadband internet penetration rate in the mobile

network.

The broadband Internet development, together with

the telecommunications market liberalization, has

influenced the service packages offer that includes

several telecommunication services: Internet, fixed

telephony, mobile telephony and television. While the

percentage of the subscribers with the internet in the

package grows, the percentage of the subscribers

with the fixed telephony decreases. The users choose

packages with internet, and use VoIP substitutes,

such are Viber and Skype, for the fixed telephony.

42Quarterly comparative data of the electronic communications market Q4 2017; 43Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 44Quarterly comparative data of the electronic communications market Q4 2017; 45Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 46Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.;47Quarterly comparative data of the electronic communications market Q4 2017; 48Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.; 49Quarterly comparative data of the electronic communications market Q4 2017; 50Internal estimate obtained by means of the SAS Visual Analytic forecast tools on the basis of the oficial data of CRA for 2017.

The multimedia market in BiH, from the SMP operators’

standpoint, is marked by a constant growth of the

package services users number, new customers

acquisition or retention of the existing ones, by making

the xDSL users and voice services users become the

2P, 3P or 4P package services users.

All three dominant operators have improved their

offer in terms of delivering the multimedia contents,

by offering new services in this segment, as well as

an improved service access (multiscreen).

Audiovisual and radio media services market constantly

grows and, according to the latest available data from

the CRA BiH51, as at 30/06/2017, the penetration rate

of the audiovisual and radio media services users’

was 70,53%.

As at 30/06/2017, KDS service was the most present

one, with the share of 47,49%, followed by the IPTV

service with 34,91%, and DTH service with the share

of 17,60%.

In the last three years, the number of the subscribers

via KDS slightly decreases, while the participation of

the connections via IPTV records a slight increase.

Smaller operators, due to the unfavorable business

conditions, are leaving the market. In 2016, twenty-

eight operators provided their services via cable

networks and seven of them via IPTV. One cable

operator offers its services via DTH.

KDS and IPTV service are typically offered to the end

users as an independent service but, more and more

often, they are offered within the packages (combined

with one or more electronic services, publicly available

telephony service and/or broadband internet access

and/or publicly avaiable mobile telephony service).

The mobile TV service is more and more present, as

well as the broadband internet access via fixed and

mobile network.

51Market analysis of retail distribution of audiovisual media services and media radio services, April 2018

Internet Services Multimedia


1.3.3.

PESTEL ANALYSIS

PESTEL analysis of the Bosnia and Herzegovina

market shows that the Company still has no direct

control over majority of the factors. This aggravates

the development of the very sector, by which the

significance of the results the Company has realized

so far is re-emphasized.

Main characteristics of the individual factors (PESTEL)

are:

Political factors:

• Complex inner structure of Bosnia and Herzegovina

with two entities, one district and numerous cantons;

• Low level of political support to development of the

ICT and lack of adequate development programs,

which would result in a higher level of primary

demand for this type of service;

• Inadequate institutional approach to the ICT market

monitoring;

• Negative impact of the political relations to the

economic development.

Economic factors:

• Relatively weak economy structure, with regard

to a small number of companies which create new

value;

• Low level of the economic development, hence a

slow economic recovery;

• Stable currency, due to the Currency Board

existence;

• Relatively high unemployment rate, particularly of

young people;

• Low level of the population’s consumer power.

Social-cultural factors:

• Social-cultural factors:

• High participation of the rural population and

relatively old population;

• Emigration of the working-age population;

• Negative birth rate;

• Relatively low general education level of the

population, but also quite fast acceptance of

new technologies and services by the younger

population.

Technological factors:

• Relatively fast transfer of technology to the Bosnia

and Herzegovina market, thanks to the SMP

operators;

• Low technological literacy level of the population;

• Good network development, particularly in the

mobile telephony segment.

Legislation:

• Seven service providers in the mobile telephony

market, and twelve alternative operators which

operate in the fixed telephony market, as well as a

significant number of ISPs with a tendency to grow,

along with other indicators that can be monitored

in regular reports of the Agency, confirm the high

level of liberalization in the BiH telecommunications

market;

• Relatively rigid attitude of the Regulatory Agency

towards the SMP operators, according to the

concept by which, in certain segments, market

liberalization is based predominantly on reducing

the impact of SMP operators.


REGULATORY FRAMEWORK

1.3.4.Regulation of the Bosnia and Herzegovina

telecommunications market falls within the competence

of the Communications Regulatory Agency (herein

referred to as the “Agency”) and is based on the Law

on Communications (Official Gazette of BiH, No. 31/03,

75/06, 32/10 and 98/12), Electronic Communications

Sector Policy, Policy Implementation Action Plan and

the by-laws.

The existing BiH regulatory framework is based on

the EU regulatory framework, characterized by a

constant telecommunications market monitoring and

analysis, as well as by passing the required regulatory

acts, with the aim of its permanent development, in

the sense of the services number increase, as well

as in terms of marketing and technical innovations.

The BiH telecommunications market was liberalized

in the early 2006 and, at the end of 2018, in this

market there were operating:

• 3 significant market power (SMP) operators;

according to the Significant Market Power Operators

List (Official Gazette of BiH, no. 73/12), Mtel a.d.

Banja Luka, BH Telecom d.d. Sarajevo and HT d.o.o.

Mostar have been declared the significant market

power operators in the fixed and mobile telephony

and leased lines market;

• 12 holders of the License for Provision of the Public

Fixed telephony Services;

• 76 holders of the License for Performing the

Activities of the Operator of the Public Electronic

Communication Networks;

• 67 holders of the License for Provision of the

Internet Access.

• 5 registered providers of the mobile telephony

services.

Mtel pursues the activities in accordance with the

valid licenses granted by the Agency, as follows:

• License for the Public Fixed Telephony Operator,

since 30 May 2017,

• License for Pursuing the Activities of the Internet

Access Provider, since 15 March 2013,

• License for Provision of the GSM Services, since

12 October 2004,

• License for Provision of Mobile Telephony Services

on the Universal Mobile Telecommunications

Systems (UMTS), since 26 March 2009,

• License for Distribution of Audiovisual Media

Services and Media Radio Services, since 9 February

2017.

According to the Annex I of the License for Provision

of Mobile Telephony Services on the Universal Mobile

Telecommunications Systems, dated December 2010,

Mtel is allowed to provide the UMTS services on the

GSM frequency band. According to the Annex I of

the License for Provision of GSM Services, Mtel is

allowed to use additional frequency band - E-GSM,

since June 2012.


Within the liberalization process of the

telecommunication market and in accordance with the

regulatory framework, the following Mtel’s reference

offers are in place:

1. Reference Interconnection Offer for the Mtel’s fixed

network,

2. Reference Interconnection Offer for the Mtel’s

mobile network,

3. Reference Interconnection Offer for unbundled

local loop access,

4. Reference Interconnection Offer for leased lines

wholesale.

The most important regulatory activities in the course

of 2018:

• In April 2018, the Council of the Agency adopted

the following Rules:

» Rule on use of radiofrequency bands of 3400-

3600 MHz and 3600-3800 MHz for MFCN;

» Rule 83/2018 on use of radiofrequency band of

800 MHz for MFCN;

» Rule 84/2018 on use of radiofrequency band of

2600 MHz for MFCN);

» Rule 85/2018 on Plan of purpose and use of

the radiofrequency spectrum in Bosnia and

Herzegovina.

• In April 2018, the Council of the Agency approved

the Proposal of Market Analysis of the retail

distribution of audiovisual media services and

radio media services for the public consultations

procedure.

• In July 2018, the Agency Council adopted the Rule

87/2018 on use of the radiofrequency band of

1452-1492 MHz for MFCN SDL;

• In July 2018, the Agency Council adopted the

Market analysis of completion (termination) of calls

on individual public telephony networks on fixed

location (second round).

• In August 2018, the Agency Council adopted the

Rule 88/2018 on Cost Accounting.

• In August 2018, the Agency Council approved

the draft Rule on distribution of contents of the

audiovisual media services and radio media services

for the public consultations procedure.

• In December 2018, the Agency Council adopted

the following rules:

» Rule 89/2018 on the license fees of the

Regulatory Communications Agency;

» Rule 90/2018 on provision of management

services to electronic communication networks

in the digital terrestrial radiodifusion.


CORPORATE SOCIAL RESPONSIBILITY

1.4.

1.4.1. HUMANITY

1.4.2. CULTURE AND EDUCATION

1.4.3. MUSIC

1.4.4. SPORT

1.4.5. ECOLOGY

1.4.6. EMPLOYEES

1.4.7. AWARDS AND RECOGNITIONS


In 2018, along with the excellent business result, the

Mtel Company added to the book of its successful

results the traditionally important one – continuation

of support to the community in which it operates.

Within the framework of corporate social responsibility,

Mtel has taken part in many activities and created

several projects with the aim of initating positive

changes and helping the people in need.

The Mtel Company considers investing in the corporate

social responsibility projects to be the investment in

the future of the community in which it operates and

exists, and interaction that creates the atmosphere

of the positive values affirmation.


1.4.1.

HUMANITY

Many great humanity projects, having been realized

for many years with the help of our Company, speak

best of our true wish to invest in the community, to

contribute more and better to the positive changes

for all community members, especially the youngest

ones.

Traditional humanitarian action “With Love to Brave

Hearts” was held for the ninth time in 2018. Mtel

has again supported this humane fundraising for the

youngest ones and the most vulnerable categories,

in the form of donation and a short humanitarian

number purposed for this event.

In 2018, the cooperation continued with the “Blue

Phone”, counseling line for the youngest population,

aimed at offering support and psychological help to

the children victims of violence or children who faced

problems in their community.

Supporting the Project “Together We Mean Good“

the aim of which was fundraising for the Gynecology

and Obstetrics Clinic of the Clinical Center in Banja

Luka, Mtel has continued a long-lasting practice of

donating funds for creating better conditions for stay

and treatment in the clinics, particularly in the case

of newborn babies and their mothers.

Traditionally, on the St. Nicholas Day, Mtel presented

the gifts to the young residents of the Children’s

Home “Rada Vranješević“, children in the “Dr Miroslav

Zotović“ Institute for Physical Medicine in Banja Luka,

and the youngest ones in the “Sveta Evgenija, carica

Milica“ Trebinje kindergarten.

In the spirit of humanity, Mtel has supported an

inclusive manifestation entitled “I, like you, also exist!“

held in Banja Luka on the occassion of the World

Down Syndrome Day. This event was dedicated to

the abilities of people and children with the Down

syndrome, as well as to inclusion of the children and

young people with Down syndrome in all cultural and

social events.

The Mtel company tries to support many activities

that are aimed at raising awareness of the vulnerable

groups and help them to achieve better position in

society so, this year again, it has supported the

marking of the World Autism Day.

Also this year we have supported „Mrvice“ -

Association of the parents of prematurely born

babies, which has organized fundraising campaign

for purchase of beds for the neonatology wards in

the Republic of Srpska.


CULTURE AND EDUCATION

1.4.2.The Mtel Company has selected the members for its 8th

generation of m:stipendisti (scholarship grants recipients)

in 2018, and presented the grants to the students of

the electrical engineering faculties from Bosnia and

Herzegovina. So far, Mtel scholarships have been given to

188 best students in BiH, and during 2018, the competition

was announced for the ninth generation of m:stipendisti.

For the second time, this year Mtel has realized a corporate

social responsibility project, entitled App Competition, in

creation of mobile applications for Android and iOS, which

is a joint project of Telekom Srbija, Mtel BiH and Mtel

Montenegro. In BiH, the competition was purposed for

secondary school students from 21 schools throughout

BiH, who had the chance to show their knowledge,

creativity and good ideas, and be awarded for it.

In 2018, the Mtel Company has launched a new developing

IT platform – Playground, with the aim of connecting

people from the IT community and creating new values

for the future. The Playground is designed to gather

talents – creative people, designers, programmers,

academic staff and business partners, as well as those

interested in technological entrepreneurship, in one place,

and the very Platform has originated primarily as the

result of the wish to contribute to the local IT community

development, as well as to keep the pace with the digital

transformation and the latest ICT trends. In 2018, many

activities have been held, as well as educational events,

gatherings, and a start-up academy was launched under

the name of Playground Challenge.

As one of forms of the long-lasting successful cooperation

with the Banja Luka Academy of Arts, in 2018 it was

realized a project of creative painting of the protective

fence in the Vuka Karadzica street, nearby the Company

building. For this purpose, a young artists’ team – 10

Academy students of the Fine Arts Department, has made

a creative solutions in various forms and techniques.

Twelve selected visual solutions are finally placed at the

fence thus enriching this space and making the city more

beautiful

In November 2018, the Mtel Company and the City

of Banja Luka have signed a contract on donation for

construction of the Congress Center in this city, thus the

preconditions have been created for announcing the first

international architecture competition for a large city

building construction, after many years.

The Mtel Company fosters traditional friendships with

many institutions, which promote culture and arts, such

are the following:

• City Theater „Jazavac“ from Banja Luka, organizer

of the 10th Actors’ Festival „Zaplet“, as well as the

children’s manifestation entitled „Kulturica“,

• National Theater of RS, with its traditional „Teatar

fest“, and

• Children’s Theater of the Republic of Srpska, who is

the organizer of the „Snješkovo” event.

In 2018, the Academy of Arts of the Banja Luka University

has organized a culture event entitled “Days of Vlado

S. Milošević“, which was held in April and, in May, the

Museum of Modern Arts marked the 13th European Night

of Museums, with the exhibition “Punktumi“ in focus,

having included the selection of 100 artworks of 80

authors from 17 European countries. The Mtel Company

has supported these manifestations as well.

Within the Project entitled Safety of Children on the

Internet, Mtel has supported the initiative for safe use

of the internet by children and young people. This is

a continuation of the cooperation with the Agency for

Information Society of the Republic of Srpska, which has

been promoting safe use of the internet by the young

population for eight years now.

Mtel Company has, again this year for the 4th time,

in cooperation with the RS Agency for Traffic Safety,

successfully realized a CRS campain under the slogan “Be

smarter than your smartphone! Don’t use your phone &

drive!” (original slogan: „Ne gubi glavu - ne koristi telefon

dok voziš!“). For this participation, Mtel has received

the recognition from the Republic of Srpska Agency for

Traffic Safety for its contribution to the improvement

of the traffic safety and activities of the RS Agency for

Traffic Safety.

On the occasion of the Faculty Day, Mtel has traditionally

awarded three best students of the Faculty of Electrical

Engineering in Banja Luka, with tablets and mobile

phones, which is just one of the forms of cooperation

between this educational institution and Mtel that has

been going on for decades.

For many years, Mtel has been fostering the practice of

donating the equipment to the schools in BiH, in order

to create better conditions for schooling of the young

people. In 2018, many elementary schools have joined

a large group of educational institutions to which Mtel

has already donated the school furniture, computer and

sports equipment.

In 2018, Mtel has participated at the Competition entitled

“Stories from the Neighborhood”, launched by the Mondo

Portal, for the second time. The competition was open

for the participants from BiH, Serbia, Montenegro and

Croatia, and the aim was to offer an opportunity to the

young, anonymous or unestablished writers to show their

talent to the world.

This year again, the Mtel Company has been a part of the

wonderland story of „Zimzograd“ in Banja Luka, which

has offered plenty fun contents for all visitors.


1.4.3.

MUSICAs a socially responsible company, Mtel has supported

various music events in 2018, which have hosted

prominent artist from the region and the world:

• International competition of pianists „Banjalučki

bijenale 2018“, held for the sixth time, where the

school and university students have competed in

the disciplines of piano solo and piano duo.

• „Đurđevdanski festival dječije pjesme“, (children’s

festival) celebrated its 25th anniversary in 2018.

The participants of the festival - 23 of them, from

RS, BiH, Serbia, Croatia, Montenegro, Macedonia,

Slovenia, Bulgaria, Italy and Russia presented 16

selected compositions.

• „O.K. fest“, held on Tjetnište, within which, during

the three festival days, around 30.000 visitors

have enjoyed the preformances of the top-class

musicians from the international and national

music scene, projections of the films in the open,

books promotions, rafting, mountain climbing and

many other charms of the O.K. fest and National

Park of Sutjeska.

• „Demofest“ traditionally held for 11th time at the

Kastel fortress in Banja Luka. Mtel has been a

friend of this largest regional music event for demo

bands since its very beginning, thus the support

was extended to them this year as well.

• The seventh „Fresh Wave festival“, which lasted

three days and hosted over 80 electronic music

performers, and presented the international DJ

stars.

• Exit Festival 84 on the Jahorina mountain, the

biggest winter music party. The popular international

and regional musicians have performed on 5 night

and day floors.

• The fifth international „Festival folklora i festival

trube“ (folklore festival and trumpet festival),

was organized by the City of Trebinje Tourist

Organization with the friendly support of the Mtel

Company.

• Ivan Bosiljčić’s concert entitled A Couple of Verses

for Us („Par stihova za nas“), which is this famous

actor’s author project. An unusual blend of lyrics

and poetry of the greatest poets like Šantić, Rakić,

Antić, Dedić, Rajić, Yesenin and Baudelaire, has

made this evening a special present for all romance-

lovers.

• Concert of Jelena Tomašević, a popular Serbian

singer who held her first solo concert in Sarajevo

with the Mtel’s friendly support.

• Concert of well-known artist and traditional songs

singer, Amira Medunjanin. At this concert, by which

she marked 15 years of her suuccessful musical

carrier, Amira was accompanied by the Norvegian

orchestra of ”Trondheim Solistene“.

• Members of the Russian Kazakhs folklore ensemble

have visited Banja Luka in 2018, having shown

why they belong to the world top-quality folklore

ensembles.


SPORT1.4.4.

The Mtel Company is a sponsor of many sport clubs

and many sports events as well, thus it participates

in promotion of the healthy lifestyle and sport spirit

building, particularly amongst the youngest ones. The

most important sport events:

• BL m:tel halfmaraton – this sports event includes

various children’s races, relay race, halfmaraton and

Fun&Run race, which was particularly interesting

for its amusing atmosphere.

• Kayak Canoe Club Banja Luka Vrbas gathered the

best athletes from all over the world in the World

Cup in Kayak and Canoe on Wild Waters „Banjaluka

- Vrbas 2018“.

• Banja Luka Open 2018 – international swimming

meeting „Banja Luka Open 2018“, gathered

swimmers from 12 countries, who have competed

for medals, records and the World Championship

norms.

• ATP CHALLENGER „Srpska Open“ 2018 – our

friendly support to realization of the ATP Challenger

Tour event, held on the courts of the Tennis Club

Mladost in Banja Luka.

• M:tel Open, tennis tournament held in Prijedor – this

year again, the Mtel Company has supported this

very important sports event, and proudly stands

beside the name of this Tournament.

• International cycling race Beograd – Banja Luka

2018, - the race is on the international cycling union

(UCI) calendar and represents a universal event

and one of the greatest sport events in the region.

• Together for Borac - in February 2018 well-known

local bands held a big concert entitled “Together

for Borac“, with the aim of supporting the „Borac

m:tel“ handball club.

• Winter Days on Kozara 2018 - the Mtel Company

supported this traditional manifestation (original

name: „Dani zime na Kozari“), held in February

on Mrakovica, with the aim of promoting tourist

potential of the Kozara mountain,

• m:tel Winter Adventure on Jahorina – unforgettable

gathering and games, realized by the Mtel Company

for the youngest visitors of this mountain in

February and March 2018.

Along with the above mentioned, the Mtel Company

is a sponsor of many other sports clubs such are:

Vaterpolo klub Banja Luka, OK Borac, KK Igokea, RK

Borac, FK Borac, Teniski savez RS, FK Krupa, KK Rooki.


1.4.5.

ECOLOGY

In accordance with the practice of a responsible

attitude towards the environment, the Mtel Company

puts a special emphasis on adherence to the laws, as

well as on specific activities in the field of environment

and people protection.

In regard with the environment and people protection

in 2018, as in the previous years, the greatest

attention was on the base stations operations and

electromagnetic radiation, which were emitted from

the antenna system. To this aim, in the course of

2018, Mtel cooperated with all Republic and national

bodies in charge for monitoring and realization of the

obligations in protection of environment and people,

mostly with the RS Ministry of Health and Social

Welfare, the RS Republic Inspection Administration

(Health and Sanitary Inspection), the RS Institute of

Public Health, as well as with the BiH Communications

Regulatory Agency.

During 2018, there were 174 reports made on

systematic testing of electric field non-ionizing

radiation level on the mobile telephony base stations,

while 500 measurements of electromagnetic radiation

level were conducted at base stations throughout

Bosnia and Herzegovina. For the purpose of obtaining

the construction and operation permits for the base

stations, under the applicable legislation, 483 requests

were sent to the Ministry of Health and Social Welfare.

For the purpose of obtaining the security certificates

for operation of the base stations on the Bosnia and

Herzegovina territory, 363 Security Declarations were

sent to the Communications Regulatory Agency.

The Republic Administration for Inspection Affairs,

Health and Communal Inspection, continually oversaw

the operations of the Mtel’s mobile telephony base

stations, and carried out inspections at 18 locations

of base stations in the Republic of Srpska.

As in the previous years, in 2018, Mtel has regularly

performed its obligations towards the ZEOS eko-

sistem Company, in line with the Contract on transfer

of the obligation of management and disposal of

waste electric and electronic equipment. ZEOS is a

system operator authorized by the FBiH Environment

Protection Fund. The Fund received a regular report

for 2017 on quantity of the packaging waste, placed

on the FBiH territory through our sales points or

in other way. The fee, provided for the purpose of

management of the waste packaging placed on the

FBiH territory, has been paid to the Environment

Protection Fund.


EMPLOYEES1.4.6.

Given that the employees’ development happens on

daily basis, and that it is not reserved solely for the

formal education and training, we have recognized

the need for strenghtening and directing this

informal development process. Since the Company

management has a specific responsibility for

everyday’s development of the employees and their

leading to the success and result, in the course of

2018 we have commenced the development of the

couching culture, primarily on the managerial level.

Company’s care of the employees, their motivation,

dedication and satisfaction, is manifested through

several activities, originating as the recommendations

from the researches realized in 2017. After researching

motivation and dedication, a series of workshops has

been organized and, on the level of every sector in the

Company, defined the challenges and created action

plans for improvement of dedication and motivation

in the near future.

Social reponsibility of the Company is manifested,

among other things, in the common attitude of

the employees that the professional knowledge

and experience should be shared, not only on

the Company level, but also outside of it, and in

readiness of our colleagues to support the academic

community and participate in development of future

professionals. To that aim, in the course of 2018,

it has been launched or continued the cooperation

with a number of universities across BiH and around.

We commenced cooperation with the Faculty of

Economics, within which it was provided professional

practice for a number of students. We have concluded

the agreement on cooperation with the Faculty of

Technical Sciences from Novi Sad, within which it

was provided professional practice for the students

of this Faculty.

In 2018, it was organized the first internal conference

entitled ”Technology is people“, and, along with this,

Mtel is proud of our colleagues’ participation at the

meetups that the Company organized in cooperation

with the ICT HUB, with the aim of approaching the

startup way of thinking, which could become a

necessary supplement to the large corporate models

in the future.

Employees promote humanity as a role model through

the Voluntary Blood Donors’ Active, which has been

supported and helped by the Mtel Company for years.


1.4.7.

AWARDS AND RECOGNITIONS

As in the previous years, the community has recognized

the efforts our Company puts in the affirmation of

positive values, which has been confirmed by the

awards and recognitions we received in 2018.

Recognition for contribution to the

corporate social responsibility

development in 2017 – RS Chamber

of Commerce

On the 15th manifestation - Election of the Best Ones

in RS Economy („Izbor najuspješnijih u privredi RS“),

traditionally organized by the Republic of Srpska

Chamber of Commerce, with the aim of affirmation and

promotion of successful companies and businessmen,

the Mtel Company has received a prestigious award for

its contribution to the corporate social responsibility

development.

The Republic of Srpska Chamber of Commerce has

awarded the mentioned recognitions on the basis of

the established criteria and collected data. This illustrates

the fact that investing in the community through the

corporate responsibility is an investment that the society

recognizes as an important segment of the contemporary

business.

This recognition is one of many that the Mtel Company

has been receiving for years for its corporate social

responsibility in the business operations, which

distinguishes it as the company that bases its business

on making investments in true values.

Recognition for contribution to the

improvement of the traffic safety

and the work of the Republic of

Srpska Traffic Safety Agency, 2018

Within the 7th International Traffic Safety Conference,

organized in Banja Luka by the Republic of Srpska

Traffic Safety Agency and Ministry of Transport and

Communications, the Mtel Company has received the

recognition for support to realization of preventive

activities in the sphere of traffic safety in the year

2018.

For the 4th year, the Mtel Company, has given its

contribution to the safer roads, through its socially

responsible campaign against the use of mobile

phones behind the steering wheel.


1.5.

SERVICES AND SERVICE USERS

1.5.1. CHANGES IN THE 2018 SERVICE OFFER

1.5.2. SERVICE USERS IN 2018

1.5.2.1. MOBILE TELEPHONY

1.5.2.2. FIXED TELEPHONY

1.5.2.3. INTEGRATED SERVICES

1.5.2.4. NET SERVICES

1.5.2.5. TV SERVICES


1.5.1.

CHANGES IN THE 2018 SERVICES OFFER

Introduction of new services and improvement of the

existing ones, primarily integrated, TV, and mobile

telephony services, with the aim of satisfying the end

users, are the activities that characterize the year

2018 in the services segment.

New services implemented in 2018:

• Web self-care portal. New service related to the

implementation of the corporate site and self-care

web portal, the aim of which is improvement of the

Company’s products and services presentation

part, in the sense of digital shop-window, i.e. one-

stop-shop principle. The project also entails the

systematization of new products and services

through the product catalogue, electronic payment

for products and services and the self-care solution

implementation. This enables the existing users

to manage their services, as well as to submit the

request for new services. In line with the above,

in the course of 2018, we have realized all Project

milestones, which include implementation of the

corporate site with improved presentation part,

creation of a new products catalogue, optimized

for digital presence, e-commerce for new and

existing users, e-commerce for telesales, electronic

payment of the Top-ups, implementation of the

re-designed self-care portal, and Android self-care

application.

• DTH service. This service is introduced in late 2018,

under the name of m:SAT, and it means the delivery

of TV program via satellite to the relevant terminal

equipment installed at the user’s location, where

the program content is organized into television

programs package. For the purpose of providing

this Service, the user is delivered the terminal

equipment consisting of: satellite receiver, satellite

antenna with the kit and LNB (Low Noise Block).

Within the m:SAT service, the users have three

m:SAT TV program packages: m:SAT S, m:SAT M

and m:SAT L, as well as the possibility of having the

m:SAT service at the additional satellite receiver.

This Service is purposed for the residential users

and realized in cooperation with the Telekom Srbija.

Numerous improvements of the existing services

have been performed in 2018, as follows:

• IPTV functionality and contents improvement with

new applications implemented on the IPTV platform:

Dječija TV, Vijesti and Sportski rezultati (Children

TV, News and Sports Results), by which the users,

along with watching the classic TV, can follow the

news on the Mondo and Nezavisne novine portals,

as well as the sports results. The basic IPTV service

package is enriched with number of national and

international channels.

• The mobile telephony postpaid service improvement:

» New postpaid tariffs have been created,

characterized by high internet bonus, roaming

internet in MTS and Mtel-CG, as well as flat

traffic in the Mtel network.

» Mobile internet in roaming tariff options are

introduced in the following operators’ networks

– T mobile Croatia, Austria and Germany, as well

as in Telekom Slovenija.

» Significant discounts on the subscription are

offered to the postpaid tariff models users

whose priority is the subscription fee, due to the

possibility of purchasing the hardware, rather

than the contractual obligation.

» New tariff models have been created for the

business users with minimum spending: tariff

model „m:biz minimalna potrošnja“, which offers

a contracted minimum monthly spending in line

with the group members number, as well as the

corresponding budget for purchase of mobile

telephones, and the „m:biz Net“ tariff model

with 20 GB mobile internet bonus and 1.000

SMS messages.

• The prepaid mobile telephony services have

been improved with new tariff prepaid models

Standardica, Opuštencija, XY net. Introduction

of the tarif model Opuštencija offers the users

a higher protection from unwanted spending and

intensified use of tariff options. New tariff model

- XY net offers higher internet bonuses.


• The fixed broadband access speed has been

increased for business customers, since new

multimedia and internet services require higher

access speeds. In accordance with this, new tariff

model has been introduced, with access speed of

up to 100/20 Mbps per VDSL and GPON technoloy,

and, on the existing tariff packages, upload access

speeds have been increased.

• We have improved the terminal equipment offer,

by purchasing a number of various mobile phones

models and brands, extended offer of TV sets,

various models of tablets, SONY PS4 consoles and

GoPro cameras.

• ICT service offer has been improved as well. Mtel

has continued the development and implementation

of various ITC services in 2018, with the aim of

extending the service portfolio beyond basic

telecommunication services. ICT services that have

been commercially placed in 2018 are:

» Cloud Security service that includes provision

of the managed NGFirewall solution together

with Unified Threat Management services and

reporting on all activities for the business

customers, with the monthly fee and without

initial investing in the system implementation.

There are offered 4 service packages.

» Virtual Private Server service that enables the

users to rent and use virtual servers in the

Mtel Data Center. VPS service is created on the

basis of processor strength rental on the daily or

monthly level, operational memory, data storage

space and required port speed, by selection of

the Linux OS or Windows server operational

system.


SERVICE USERS IN 2018

1.5.2.

Mtel a.d. Banja Luka offers the most contemporary

telecommunication services in the mobile telephony,

fixed telephony, digital television, internet and data.

Operating on more and more dynamic market, the

Company closely follows global trends and the latest

technological achievements in the telecommunication

industry, and carefully listens to its customers’ wishes

and needs.

In 2018, the service portfolios have been improved in

the sphere of the integrated and TV services, mobile

telephony service as well as internet service, with

the aim of retaining the customers and increasing

customer satisfaction, as well as for attracting new

customers. In line with this, the customer base

has been stabilized, which is shown in the slower

decreasing trend of the fixed customers’ number,

as well as the rising of the integrated and mobile

telephony services customers number thus the

customer base was represented with over 1,6 million

users in 2018.

The customer base has increased for 0,6% in 2018,

with the highest rise shown in the integrated services

segment, particularly the packages with TV service

offer.

Mobile telephony

Users

Traffic

Market share of mobile telephony in BiH

Fixed telephony

Integrated services

NET

Users

Traffic

Market share of fixed telephony in BiH

million

million

thousand

million

Users thousand

1,32

1.101

38,79%

1,31

1.084

38,24%

1,3%

1,6%

227,3

455

32,39%

235,3

523

32,31%

-3,4%

-13,1%

Users

Market share of broadband in BiH

thousand 143,0

19,83%

134,1

19,67%

6,7%

109,5 97,1 12,8%

2018Customers and Market Share 2017 % change


MOBILE TELEPHONY

1.5.2.1.

Mtel provides high quality services in the mobile

telephony, and closely follows global trends with its

offer, providing the users with the top-quality prepaid,

postpaid, VPN, M2M and mobile telephony services

in the the fixed telephony, television and internet

package.

As at 31/12/2018, the mobile telephony users’ number

is 1,32 million, out of which there are 379.064 postpaid

users and 942.563 prepaid users.

In the total number of the mobile telephony customers,

the most significant growth is within the postpaid

subscriber base - by 4%, with expected tendency to

grow further, which is one of the Company’s aims for

the oncoming period. In 2018, the postpaid users have

participated in the total mobile telephony customer

base with 28,7%.

+1,3%

Mobile Telephony Users

1,311,32

2017 2018

mill

ion

+4,0%

Postpaid Users of Mobile Telephony

364,6379,1

2017 2018

thou

sand

+0,2%

Prepaid Users of Mobile Telephony

940,5942,6

2017 2018

thou

sand

In the course of 2018, in the segment of postpaid

services, along with the „Pretplata“ tariffs, there were

also introduced the Pretplata plus tariffs, which offer

unlimited communication, depending on the selected

model, and the users may select the desired model

according to their needs and wishes. Also offered

are mobile telephones the users may purchase under

attractive prices and pay in installments.

In the business customers’ segment, there are offered

m:biz tariff models with postpaid way of payment,

which offer various monthly bonuses (calls, SMS,

mobile internet) for various amounts of monthly

subscription.

In the total mobile telephony customer base, the

prepaid users participate with 71,3%, and record

around 0,2% growth, relative to the previous year.

This is the direct consequence of various promotional

offers, intended to retain the users of this kind of

service.

The offer is also improved for the prepaid users in the

segment of the mobile internet service, as a response

to the rising influence of the OTT services, primarily

Viber, thus new tariff models entitled „Standardica“,

„Opuštencija“ and „XY net“ have been introduced. In

comparison with the standard prepaid service offer

(Standardica), the Opuštencija tariff model protects

the user from unwanted mobile internet spending.

The prepaid users are also offered the XY net tariff

model, which allows the users to purchase Internet

options with 30 GB mobile internet quote.

The traffic realized within the mobile telephony is 1,1

billion minutes, which is 1,6% higher than the previous

year. The growing traffic, compared to the year 2017,

is a direct result of increased number of the postpaid

tariff models users with higher monthly subscriptions,

within which the users receive significantly higher

minute bonuses.


FIXED TELEPHONY

1.5.2.2.In 2018, the fixed telephony market, as in previous

years, is characterized by the customer number

decrease, since certain number of the fixed telephony

users has been migrating to the integrated services

packages. This influences the fixed telephony market

preservation and creates additional value for the

operator, but also for the customers.

In the BiH market, it is notable a substitutive relation

of the fixed and mobile telephony, more and more

prominent use of the OTT services, and the customer

number decrease in the segment of the number

portability service. Also notable is a negative influence

of the emigration of the population to the other

countries.

Mtel offers its customers the fixed telephony services

as a standalone service or as a service within the

integrated services package.

The total fixed telephony customers number is

227.251, which is 3,4% lower than the previous year.

Out of the total customer number, 83,3% relates to

the residential users, (POTS, VoBB, ISDN BRI, CLL,

prepaid users and package services users), while

16,7% are business customers (POTS, VoBB, ISDN

BRI, ISDN PRI, CLL, IP centrex, package services).

In 2018, the decreasing trend of the fixed telephony

customer number has continued. The number of the

fixed telephony customers records a decrease in

the standalone services segment (POTS, ISDN, CLL,

Prepaid), while the number of the fixed telephony

customers in the integrated services packages records

further growth, this being the consequence of the

customers’ migration from the basic voice services

to the integrated services packages.

With the aim of retaining the customers in the fixed

telephony, Mtel offers a unique “fixed prepaid“ service

(„fiksna prepaid“), used by around 14 thousand

customers.

Business users base records growth, relative to the

previous year. The number of the IP Centrex service

users is 44,9% higher than the previous year.

The total realized traffic within the fixed telephony

services in 2018 is 454,7 million minutes, out of which

79,9% relates to the residential users’ traffic and

20,1% to the traffic generated by the business users.

43,4%

0,1%

39,9%

16,6%

Structure of Fixed TelephonyUsers 2018

Business users non-integrated

Business users integrated

Residential users integrated

Residential users non-integrated


INTEGRATED SERVICES

1.5.2.3.

Mtel offers its customers various services within

multiple packages and, in various combinations, it

unifies fixed and mobile telephony services, Internet

access services via ADSL and TV services tailored

to the customer needs, with the aim of raising the

customer satisfaction and loyalty level.

As at 31/12/2018, the total number of the integrated

services users is 109.543, which is 12,8% more,

relative to the previous year.

Out of the total integrated services users, the major

participants are the two-service package users, than

the three-service package users and, finally, the users

of the four-service package. Relative to the year 2017,

the highest customer number rise of approx. eight

thousand or 20,0% is realized within the three-service

package segment.

In 2018, the integrated services packages are

enhanced with new TV contents, higher internet

access speeds, as well as with higher mobile internet

bonuses. We should emphasize a siginificant number

of promotional activities, launched with the aim of

increasing the integrated services customer number

and transition of the users from minor cable operators.

Within the package, the users are provided with

flat traffic in the fixed telephony towards the Mtel

network, selection of one Friend Number in the mobile

telephony, with a more favorable call price, selection

of ADSL service speed, and other benefits. Integrated

services retain a good market position and extend

the fixed telephony lifespan.

+12,8%

Integrated Services Users

97,1109,5

2017 2018

thou

sand


In the course of 2018, the trend of data services offer

improvement has continued, with increased access

speeds, faster connection realization, quality and free

technical support, and introduction of new packages,

intended for various user groups. Broadband internet

access in the m:tel network infrastructure is possible

through ADSL, VDSL and GPON, depending on the

connection type and the technology available at the

user’s location.

As at 31/12/2018, the total number of the NET users is

143.001, which is 6,7% more, relative to the previous

year. In the total NET users structure, the integrated

services packages users have the major participation

and make 67,4% of the total NET customer base.

Higher number of residential Net users within the

package is the result of increased Net service

bandwidth speed, particularly for the optic users (100

Mbps), while the internet speed has been enhanced

in the business customers’ segment, which is an

imperative for the business users, if they wish to

keep pace with the latest applications and programs.

NET SERVICES1.5.2.4.

+6,7%

Net Services Users

134,1143,0

2017 2018

thou

sand


TV service represents a platform for offering the

television programs and additional contents, such are

the videoteque and electronic program guide.

As at 31/12/2018, the total number of the TV users

is 91.359, i.e. 22,3% higher, relative to the previous

year.

TV SERVICES1.5.2.5.

The TV users’ number grows year after year, which

is in line with the popularity of IPTV service, which

Mtel has been providing since 2010.

The TV service is offered within the package for

residential and business users, as well as a selfstanding

service for the business users. The number of

residential TV users is significantly higher and makes

97,6% of the total service users number.

Basic TV package with over 250 TV channels has

been created for the needs of the whole family, and

includes exclusive info, film, music, sport, and children’s

channels. Mtel provides the Pickbox videoteqe that

offers thousands of hours of popular TV series of

various genres, as well as rich film contents, purposed

for the youngest generation.+22,3%

TV Services Users

74,791,4

2017 2018

thou

sand

Enjoyment of the TV contents is now enriched with

pause, rewind, record and catch-up services.

Through various promotional actions, Mtel offers its

customers the monthly subscription subsidies and

possibility of purchasing hardware, as well as a good

offer of the top brand LCD TV sets with excellent

characteristics.


1.6.1. FINANCIAL RESULTS IN 2018

1.6.2. BUSINESS OPERATIONS SEGMENTS

1.6.3. FINANCIAL INSTRUMENTS

1.6.4. FINANCIAL RISKS MANAGEMENT

1.6.5. EVENTS AFTER THE REPORTING PERIOD

1.6.

FINANCIAL REVIEW OF 2018


1.6.1.

FINANCIAL RESULTS IN 2018

The business year of 2018 is marked with the BAM

61,0 million net profit, which is 1,6% higher, relative

to 2017, primarily due to higher realization of the

revenues - of 1,1%, relative to the previous year.

The EBITDA margin in 2018 is on the level of 38,78%,

while the EBIT margin is on the level of 15,81%.

Gross business result, prior to depreciation, is BAM

166,7 million in 2018, which is BAM 1,7 million higher,


The realized net profit margin in 2018 is 14,19% and

it shows that the Company realizes BAM 0,14 net

profit on each BAM 1 of the realized sales.

Key Business Operations Indicators

Total income (BAMm)

Total expenditures (BAMm)

EBITDA (BAMm)

EBITDA margin

EBIT (BAMm)

EBIT margin

Gross profit (BAMm)

Net profit (BAMm)

Total assets/equity and liabilities (BAMm)

ROE

ROA

2018

431,9

363,7

166,7

38,78%

68,0

15,81%

68,2

61,0

968,5

9,04%

6,73%

2017

427,2

360,4

165,0

38,91%

64,3

15,15%

66,8

60,1

843,6

8,90%

7,07%

% promjene

1,1%

0,9%

1,0%

5,8%

2,1%

1,6%

14,8%

EBITDA margin

EBITDA

38,91% 38,78%

165,0166,7

2017 2018

BA

Mm

Gros profit margin

Net profit margin

15,76%15,86%

14,16%14,19%

2017 2018


As at 31/12/2018, the total assets are BAM 968,5

million, which is 14,8% higher, relative to 31/12/2017,

due to the increase in the construction objects value,

being the result of the business building purchase, with

the aim of a long-term financial effects realization, as

well as due to the cash balance, which has amounted

to BAM 69,8 million in 2018.

Current assets

Non-current assets

Equity

Long-term liabilities

Short-term liabilities

Assets

Balance Sheet Structure (BAMm)

31/12/2017 31/12/2018 31/12/2017 31/12/2018

Equity and liabilities

Total income from businessactivity

408,6421,3

2017 2018

BA

Mm

BA

Mm

BA

Mm

ROE

8,90%9,04%

2017 2018

843,6968,5

701,5

142,1

737,8

230,7

843,6968,5

672,9

133,2

676,8

125,9

37,5 165,8

Current assets

Non-current assets

Equity



Assets


31/12/2017 31/12/2018 31/12/2017 31/12/2018



408,6421,3

2017 2018

BA

Mm

BA

Mm

BA

Mm

ROE

8,90%9,04%

2017 2018

843,6968,5

701,5

142,1

737,8

230,7

843,6968,5

672,9

133,2

676,8

125,9

37,5 165,8

Current assets

Non-current assets

Equity



Assets


31/12/2017 31/12/2018 31/12/2017 31/12/2018



408,6421,3

2017 2018

BA

Mm

BA

Mm

BA

Mm

ROE

8,90%9,04%

2017 2018

843,6968,5

701,5

142,1

737,8

230,7

843,6968,5

672,9

133,2

676,8

125,9

37,5 165,8


In 2018, the total revenues amount to BAM 431,9

million, which represents 1,1% growth, relative to

the year 2017, this being primarily the result of the

integrated services and other revenues growth. In

the total realized revenues, the mobile telephony

revenues participate with 44,7%, the fixed telephony

revenues with 16,1%, and the integrated services

revenues participate with 13,8%.

The total revenues in the mobile telephony are

realized in the amount of BAM 192,9 million, and

participate with the highest percentage of 44,7% in

the total revenues. Being the result of the latest trends

following and putting efforts in the mobile telephony

service portfolio improvement, as well as due to the

customer number increase for almost 17 thousand

in 2018, there has been realized the 3,9% growth in

the income from the mobile telephony subscription.

On the other hand, in the mobile telephony segment,

the traffic volume related to the the OTT services

use has decreased, which lead to 5,4% decrease in

the traffic income, relative to 2017.

With the aim of delivering a higher value to the user,

and increasing the customer satisfaction and loyalty

level, the integrated services packages have been

improved with new TV contents, higher internet

access speeds and higher mobile internet bonuses

in 2018. Significant number of promotional actions

have been conducted for acquisition of the integrated

services users, such as monthly subscription discounts,

numerous attractive devices available under the

subsidized prices, all having influenced the user

Revenues

number increase and, also, transfer of the users from

smaller cable operators to Mtel. The result of the

above is 14,2% growth of the integrated services

revenue, relative to the year 2017.

Sales of products, namely smart devices, within the

services is one of the significant Company’s income

generators. The subject of sale are the mobile

telephones, 3G equipment, tablets, lap tops, LCD

TV sets, fixed telephones, as well as the additional

equipment for these devices.

The total revenues, realized in 2018 on the basis of the

sale of products, amount to BAM 39,5 million, which

represents 2,8% growth, relative to the year 2017. The

revenues growth is the result of the increased number

of sold products, but also the high-level segment

devices sales, due to their price being significantly

higher, relative to the price of other devices.

For years, the fixed telephony market has been

characterized by decreasing user number and

revenues, which is in line with the changes in the

customer communication manner, conditioned by

the changes in life. Therefore, the customers are

abandoning the fixed telephony more and more,

switching to the mobile telephony and integrated

services, since these services provide more contents

adapted to the users’ modern communication needs.

In accordance with the above, the realized fixed

telephony income is BAM 69,5 million in 2018.

Mtel provides the internet access service via ADSL,

VDSL and FTTH technology, and it is the subject of

constant investment and improvement, with the aim

of providing the service to the users at the maximum

possible speeds. The internet service revenues

realization is BAM 20,9 million in 2018.

29,3%

32,6% 29,4%

0,1%0,2%

8,4%

Traffic

Subscription

Leased lines

Connection

National interconnection

Other revenue

Fixed TelephonyRevenue Structure

+14,2%

Integrated services revenue

52,259,7

2017 2018B

AM

m

+2,8%

Related services

38,439,5

2017 2018

BA

Mm


In 2018, the total expenditures are BAM 363,7 million,

which is 0,9% higher, relative to the year 2017.

In the total expenditures structure, realized in 2018,

the mobile telephony expenditures participate

with 57,6%, and the fixed telephony and internet

expenditures participate with 42,4%.

Significant category of expenditures having recorded

36,7%, growth in 2018, relative to the year 2017, is

the costs of contents, this being the result of 22,3%

increase in the customer number and increase in the

TV channels number, due to the integrated packages

improvement with new TV contents.

Expenditures

Maintenance costs have recorded 11,9% growth in

2018, relative to the previous year, primarily due to

the increased costs of the information technologies

maintenance.

In the expenditures structure in 2018, there is a

significant reduction of the rental costs of 15,6%,

relative to the previous year, being the result of the

business building purchase, with the aim of the long-

term positive financial effects realization.

Depreciation costs are 2,0% lower in 2018, relative

to the year 2017, this being the result of a permanent

investing in modernization and enhancement of

the capacities, by which we directly influence the

extension of the real estate, facilities and equipment

lifespan.

+36,7%

+22,3%

Content cost

TV Services Users

9,9

13,6

2017 2018

thou

sand

BA

Mm

74,791,4

+11,9%

Maintance cost

17,7 19,8

2017 2018B

AM

m

-15,6%

Rental costs

17,014,4

2017 2018

BA

Mm -2,0%

Depreciation costs

100,8

98,7

2017 2018

BA

Mm


BUSINESS OPERATIONS SEGMENTS

1.6.2.According to the segment, the fixed telephony

revenues are BAM 182,4 million and the mobile

telephony revenues are BAM 249,5 million.

In the year 2018, the fixed telephony expenditures

are BAM 154,1 million while the expenditures in the

mobile telephony are BAM 209,6 million.

Fixed and mobile telephony segment in 2018

182,4

249,5

154,1

209,6

28,339,9

Income Expenditures Gross profit

BA

Mm

Mobile telephony segment Fixed telephony segment

At the end of 2018, Mtel has over 227.000 fixed

telephony customers and 143.001 of the NET Users.

The integrated services users’ number is 109.543,

which is 12,8% increase, relative to the previous year.

The TV services users’ number is 91.359 at the end

of 2018, which is 22,3% increase relative to the year

2017.

The number of the mobile telephony customers is

1,32 million, which represents an increase of 1,3%,


In the course of 2018, the most important capital

investments in the fixed telephony are realized in

the cable transport network and access network

and equipment, while the most important capital

investments in the Internet are realized in the terminal

equipment and IPTV.

The most important investments in the mobile

telephony have been made into the wireless access

network, construction of the mobile telephony objects

and services, and service systems in the mobile

network. The most important investments in IT have

been made into the IT support to the corporate

systems and into the servers and storages.


FINANCIAL INSTRUMENTS

1.6.3.

The aim of the capital management is for the Company

to remain capable of maintaining the business

operations indefinite continuity in foreseeable future,

in order to preserve the optimal capital structure with

the aim of reducing capital expenses, and provide

the dividends to its shareholders.

The Company monitors the capital on the the

indebtness coefficient basis.

The Company’s Management Board reviews the

capital structure on need basis. Upon the review,

the Company balances the capital structure through

new long-term investments, as well as by taking new

loans or purchasing the existing ones. The overall

capital management strategy of the Company remains

unchanged.

Capital Management


FINANCIAL RISKS MANAGEMENT

1.6.4.

In its regular business operations, Mtel is exposed

to certain financial risks in various forms, as

follows: market risk, liquidity risk and credit risk.

Risk management is directed towards minimizing

potential adverse effects to the Mtel’s financial status

and business operations in the quite unpredictable

situation at the financial markets.

Risk management is defined by the Company’s

accounting policies. Mtel does not enter into

transactions with the derived financial instruments

(derivatives), such are interest rate swaps or forwards.

Market risk includes the risk of the foreign currency

exchange rate fluctuation, risk of the interest rate

change and risk of the capital prices changes

respectively.

• Risk of the foreign currency exchange rate fluctuation

- although Mtel performs part of its transactions

in the foreign currency, the Management’s opinion

is that it is not exposed to any significant risk of

the foreign currency exchange rate fluctuation in

its business operations in the country and abroad,

since the business transactions are performed

mostly in the local currency (convertible mark

-BAM), as well as in EUR, to which the convertible

mark is related by the fixed exchange rate (1 EUR

= 1,95583 BAM).

• Risk of the interest rates change – Mtel is exposed

to various risks, which, through the changes of

the interest rates level, affect its financial position

and cash flows. Given that Mtel does not have any

significant interest-bearing assets, the income is

quite independent in terms of the market interest

rates changes. The Mtel’s risk of the interest

rates change arises primarily from the long-term

loans received from the suppliers. The changeable

interest rate loans expose Mtel to the cash flow

interest risk, while the fixed interest rate loans

expose Mtel to the risk of changes in the interest

rate fair value. During the year, having ended on

31 December 2018, most of the liabilities under

the loans had variable interest rates, related to

the EURIBOR. The liabilities under the changeable

interest rate loans have mostly been in foreign

currency (EUR).

• Risk of the capital value change – in the 2018

reporting period, Mtel has been exposed to certain

risk of changes in the registered securities prices.

These investments are purposed more for strategic

purposes, rather than for the daily trading purposes,

and are not subject to the active transactions.

Market Risk


Liquidity management is centralized on the Mtel

Company’s level. The responsibility for liquidity rests

with the management, which has established specific

procedures related to the short-term and long-term

liquidity risk. Mtel manages its assets and liabilities

in the manner that allows it to fulfil its obligations

at all times.

Mtel has a sufficient amount of high-liquidity assets

(cash and cash equivalents) at its disposal, as well

as a continuous inflow of funds from the services

realization, which enables it to service the obligations

in due time. Mtel does not use any financial derivatives.

For the risk management purposes, Mtel has adopted

the financial policies that define dispersion within

the decision-making levels in the process of specific

goods/services procurement. This dispersion has

been made by establishing the limits to which the

individual persons, or the bodies of Mtel, may decide

on the particular procurement.

Credit risk is related to the risk when the other party

does not perform its contractual obligations towards

Mtel, which will result in the Mtel’s financial loss.

Mtel has adopted the policies for monitoring of the

partner’s credit standing, as well as for requesting

certain warranties (collaterals) where possible, all with

the aim of reducing the potential risk of financial

losses, caused by non-performance of the contractual

obligations.

The credit risk arises in relation with the receivables

from legal entities and physical persons, cash and

cash equivalents, deposits with banks and financial

institutions, as well as the commitments. Mtel is

exposed to the credit risk to the limited extent. The

credit risk security was established by undertaking

certain measures and activities on the Mtel’s level.

Mtel does not have a significant credit risk

concentration related to the receivables, since it has

numerous mutually non-related customers with small

amount of respective debts. Along with the services

suspension, the following collection mechanisms are

also used: debt re-programming, settlement with legal

entities, legal actions, out of court settlements, etc.

Repayment of the credits, extended to the Mtel’s

employees, is secured by application of the

administrative measure, namely deduction of the

particular amount from the salary. The employees

who leave the Company regulate the outstanding

debt repayment at the moment of their actual leaving

from Mtel.

Liquidity Risk Credit Risk


EVENTS AFTER THE REPORTING PERIOD

1.6.5.

On the day of 31 January 2019, it was realized the

Share Purchase and Transfer Agreement, for 100%

capital share in the Company Blicnet d.o.o. Banja

Luka, by which the 100% capital share in the Blicnet

d.o.o. Banja Luka was transferred to the Mtel a.d.

Banja Luka. On the day of 6 February 2019, it was

realized the Share Purchase and Transfer Agreement,

for 100% capital share in the Company Telrad Net

d.o.o. Bijeljina, by which the 100% capital share in

the Telrad Net d.o.o. Bijeljina was transferred to the

Mtel a.d. Banja Luka. Transfer of the share from

the Seller to the Purchaser causes the change in

the ownership structure, so that the ownership of

the share is transferred to the Purchaser, by which

the Purchaser obtains all the rights, obligations and

authorizations originating from the share. On the basis

of the mentioned Agreements, the Company obtained

the right to register as the owner of the share in

the relevant court registers, by which it became the

legal and actual owner of the share and acquired all

the rights the owner of the share in the mentioned

companies was entitled to acquire.

On the day of 31 January 2019, the District Commercial

Court in Banja Luka issued the Decision by which the

Company was registered as the 100% share owner

of the Blicnet d.o.o. Banja Luka and, on the day of

6 February 2019, the District Commercial Court in

Bijeljina issued the Decision by which the Company

was registered as the 100% share owner of the Telrad

Net d.o.o. Bijeljina.


1.7.

CAPITAL INVESTMENTS


In the course of 2018, there have been realized the

investments, with the aim of further enhancement

of the services portfolio that Mtel provides to the

customers in all segments of the telecommunication

services and introduction of new services, with

continuous activities in the fixed and mobile network

and internet modernization.

With the primary aim to realize a long-term financial

effects, Mtel has bought a business building in 2018,

which is the only building in Banja Luka that satisfies

the Company’s spatial, infrastructural and logistic

needs.

The total realized investments in 2018 amount to

BAM 152,6 million.

Capital investments

75,9

152,6

2017 2018

BA

Mm


The capital investments in the mobile telephony have

been realized in the amount of BAM 16,9 million in

2018. The most important investments are realized

in the wireless access network and construction of

mobile telephony objects, services, service systems,

and core and service mobile network platforms.

In the course of 2018, a total of 123 mobile telephony

base stations and 17 repeaters were put into

operations, thus, at the end of 2018, there was a total

of 1.450 base stations, and 99 pico repeaters. Along

with this, the coverage, capacity and service quality

have been enhanced through introduction of 3G on

900 MHz, introduction of F2 and F3 on 2100 MHz,

while the LTE1800 MHz equipment installation has

been preformed on the total of 120 locations and LTE

800 MHz on 60 locations. The mentioned equipment

will be put into operation when the Communication

Regulatory Agency (CRA) issues the required licenses.

Along with construction of each new location, the

conditions are met for the exisitng wireless transport

network optimization, in regard with the hops number

or protection level reduction.

One of the significant activities in 2018 has been

the connection of Mtel and Deutsche Telekom signal

networks, by SIGTRAN protocol stack and traffic

migration from E1 links to the IP/SIGTRAN. On the

Mtel cloud, it has been installed the system for mobile

users protection on the internet, by means of the user

traffic re-routing and the user notifying on potentially

insecure web sites.

In the core mobile network, it has been performed

the preparation and connection of the PS Core and

CS Core networks for the purpose of introduction

of the LTE technology and services. Following the

trends, we have procured the test equipment for

construction of the LoRaWAN network with the aim

of testing the commercial market potential in the IoT

service domain.

In the course of 2018, the conditions have been met

for further mGo application improvement, which also

entails the existing version re-designing in accordance

with the latest market trends, in terms of Company’s

strategic aims and, also, global directions of the

android and IOS platforms development. The mGo

application is enriched with new services, avilable to

the users, such as: real time account balance check for

the data traffic, minutes, SMS, IPTV program scheme,

speed test for mobile internet, presentation of the

offer to the user depending on their consumption and

actual campaigns, user’s application for the electronic

subscriber bill delivery, information on m:tel points of

sale and customer care, and other similar services.

The Mtel Company recognizes the importance of the

online business and customer care thus, in 2018, it

has significantly improved the Company site (mobile

first buy), but also the self care activities through

the site and specialized application „Moj m:tel“ on

the key platforms (Android and iOS).

Capital Investments in the Mobile

Telephony

The greatest capital investments in 2018 have been

realized in the fixed telephony segment, in the amount

of BAM 38,4 million, that is in the segment of cable

transport and access network construction.

In 2018, the optical access network construction in

the cities of the Republic of Srpska has continued, to

make the new broadband technology approach every

user. Optic network enables multiple internet speeds

increase, better service quality with a set of new

functions, through the possibility of use of the most

contemporary Mtel IPTV packages, not only in the

major cities, but also in the smaller towns and rural

environments. This is the case of a revolutionarily

better technology, enabled by investing significant

funds in the access network and technical capacities,

thus having created the preconditions for provision

of the top quality services to the customers.

With intensive contruction of the backbones and

regional optic cable links, primarily on the City of

Banja Luka territory where the total of 143 km cable

ducts have been, the integrated services users’

number has increased. We have continued the access

network modernization projects in the IJ Doboj and

IJ Zvornik areas, as well as the optic access network

construction in the IJ Prijedor, IJ Brčko, IJ Istočno

Sarajevo, IJ Foča and IJ Trebinje, and transfer of the

users to the VDSL and GPON technology, for the

purpose of quality broadband service provision.

Capital Investments in the Fixed

Telephony

The preparation and performance of the works in the

OTN/DWDM network enhancement have continued

in 2018. Additional capacities have been realized for

new traffic requests with construction of the DWDM

structure on the lines Višegrad – Užice, Šipovo –

Mrkonjić Grad and Banja Luka – Mrkonjić Grad, and

new protection route has been established over the

Republic of Serbia territory on the line Bijeljina –

Telekom Srbija network – Višegrad.

The Time Pictra synchronization supervision system

upgrade to the latest version has been finished.

The activities continued in the fixed Backhauling

optimization, with alteration of the access network

elements connection to the IP/MPLS network,

formation of new IP/MPLS aggregation points and

optic rings, and their protection on the link level.


Capital investments in the Internet are realized in the

amount of BAM 14,1 million in 2018. The majority of

this year’s investments into Internet relates to the

procurement of the terminal equipment for business

and residential users (IAD, STB, ONT, VoIP gateway

equipment, routers and other user equipment), as

well as to new terminal equipment types testing for

the purpose of their installation at the end users’.

It should be noted a permanent IPTV users’ number

rising and, in line with these trends, the capacities of

the IPTV STB system have been enhanced, as well

as the capacities of the system, both in terms of

number of nPVR and OTT channels, thus the following

functionalities are enabled on the platform: pause

contents, watching over, catch-up, and contents

recording available on 100 channels instead of

previously available 30 channels.

Since TV is more than just watching TV program, the

IPTV service is enhanced with two new applications:

Vijesti (News) and Sportski rezultati (Sport Results).

The applications are designed in the way that the

Capital Investments in the Internet

users, by means of a remote control, may easily

access the desired news, see the gallery of pictures

or video, and share the news on their Twitter account.

Both applications are linked to the Interactive Guide

and, in the course of watching the TV channel,

enable showing the announcement in case the

“breaking news” appears on the portals or in case an

important sports match finishes. Along with these two

applications, there is also developed an application,

namely additional mode for the youngest ones, which

offers a full parental control of time limit, selection

of age appropriate contents, as well as a completely

new look, fully adapted to the youngest ones.

A special attention is given to the improvement of

the OTT service, and, along with increased number of

OTT channels, it is also enabled the use of non-linear

functionalities like pause contents, watching over, 72h

catch-up, and the recorded contents reproduction.

Along with this, it was performed the adaptation of

new versions of multiscreen applications (TV To Go

for telephone, tablet and PC), all with the aim of

improving the customer experience.

Capital investments in the information technologies

have been realized in the amount of BAM 9,9 million

in 2018.

In 2018, several strategic directions marked the Mtel

Company activities: improvement of digital channels

in marketing and sales, development of the ICT

service portfolio, and improvement in the business

processes management through number of projects

and upgrades on the internal business systems.

In the course of the year, mobile applications for iOS

and Android have been developed, having enabled the

users to review their services, accounts and requests

and, on the corporate portal, it has been enabled the

Card payment via web for electronic top-ups and the

prepaid tariff plans purchase.

In the ICT services domain, it has been completed

the Cloud platform migration to the KVM hypervisor

and OpenStack, with installation of new hardware,

enhancement of the storage, and transfer of all existing

internal and external virtual machines to the new

Capital Investments in the

Information Technologies

infrastructure, by which the security and complete

system performances have been enhanced. New ICT

service for agricultural producers has been realized,

purposed mainly for automated management of the

agricultural production by application of contemporary

technologies and scientific achievements. The Service

has been realized on the Mtel Cloud infrastructure, on

the shared business model basis. Important is also the

presentation of new ICT and Cloud service portfolio in

the Chamber of Commerce entitled “Cloud services

for more efficient business“, and participation at

the Microsoft Community BH conference with the

presentation “m:tel – one stop shop for ICT services“.

Implementation of new technological solutions has

also continued in the infrastructure, such as storage

systems virtualization or network functionalities

virtualization system installation, and numerous

projects, contributing to the IT security enhancement,

have been successfully implemented as well.


1.8.

HUMAN RESOURCES


As at 31 December 2018, the total number of employees

is 2.131, that is six staff less, relative to the end of

the previous year. Out of the total headcount, there

are 1.295 or 60,8% males, whereas there are 836

or 39,2% females.

In terms of the staff qualification structure on the

Company level, the secondary school certificate

holders have the greatest participation (54,5% or

1.162 staff). The second most numerous category are

the university degree holders (39,1% or 834 staff),

which also includes the master’s and doctor’s degree

holders.

In terms of age, the major share in the total headcount

belongs to the 41-50 age group with 39,5% or 842

employees, as well as to the group of over 50, with

32,8% or 700 employees.

Total number of employees

2.137 2.131

31/12/2017 31/12/2018

54,5% 39,1%

0,1%2,1%

4,2%

Staff Qualification Structurein 2018

Two-year college degree

Highly skilled

Skilled

Ph. D, M.Sc, University degree

Secondary school

7,5%

20,2%

39,5%

32,8%

41 to 50 years

Over 50 years

Under 30 years

Staff Age Structurein 2018

31 to 40 years


In the course of last year, various types of training

have been organized with the aim of business

processes improvement through improvement of the

employees’ competences in various spheres (in th

sphere of technics, management, sales) as well as

the communication improvement.

Having in mind a long-lasting experience in the

staff education and knowing the Company’s internal

potential to develop educational activities in line

with its own business needs, the priority was set to

organization of internal trainings and the Internal

academy – „m:akademija” activities.

Following the annual education plan, we have

organized a large number of in-house and internal

trainings for all Company’s organizational units.

Two team buildings have also been organized for the

Executive Board members and newly recruited staff.

The second year of the Internal Academy activities is

organized in two semesters. A total of 46 trainings has

been realized for about 1.000 participants, and 36

internal trainers have been engaged in the realization.

Internal trainings have been held in the sphere of

technics, sales, project management, other business

skills and software and applications.

In the course of 2018, the following activities have

been realized:

• The culture of innovativeness improvement through

the employees education on design thinking tools,

i.e. customer-oriented solutions of the business

problems,

• The culture of cooperation improvement through

internal events, entitled Strengthening the Synergy,

which have been attended by the management

representatives and the Executive Units employees,

with the aim of strenthening the team,

• The culture of administration reduction, which

entails the HR process digitalization through

development and putting into operation of the

module for submission and approval of the requests

for education and business trips,

Education Internal Trainings Activities in Improvement of the

Company’s Organizational Culture

• The HR process harmonization with the Company’s

corporate values, by means of correction of

the performance evaluation process through

harmonization of the main competences with the

corporate values,

• The couching culture through educations on the

intensive, result-oriented cooperation model on

all levels of the management, but also on the

operational levels, have been organized throughout

the year.


INFORMATION TO THE INVESTORS

1.9.


The total realized turnover of Mtel is BAM 3,38

million, which makes 3,4% of the total realized

regular turnover, according to the Banja Luka Stock

Exchange annual statistical report, while 853 realized

transactions put Mtel at the second place in the total

realized turnover of the Banja Luka Stock Exchange

in 2018.

The average price of the Mtel’s share in 2018 is BAM

0,95, the minimum share price is BAM 0,77, while the

maximum realized price is BAM 1,06.

On the last day of the Mtel’s shares trading in 2018,

the share price is BAM 0,83.

As at 31 December 2018, the market capitalization is

BAM 407,85 million.

At the Shareholders Assembly session, held on 7

December 2018, it was passed the Decision on

Payment of the Interim Dividend from the H1 2018

profit, in the amount of BAM 22,57 million.

The interim dividend was distributed equally over all

Company’s shares upon the principle – the same face

value of BAM 0,046 per share.

Telekom Srbija a.d.Beograd, Srbija

Pension Reservs Funda.d. Banja Luka

Restitution fundRepublic of Srpska

a.d. Banja Luka

DUIF Kristal invest a.d.OMIF Future fund

Other shareholders

65,01%

8,92%

5,03%

3,30%

17,74%

65,01%

8,92%

5,03%

3,18%

17,86%

20172018 Mtel Shareholders Structure

The decreasing profitability of majority of the

companies, whose shares are traded at the stock

exchange, has caused the reduced investors’ interest

in investing into shares.

Due to the high yield with acceptable risk, the investors

have changed the focus and oriented towards bonds

trading, which consequently leads to decrease in the

shares trding at the Banja Luka Stock Exchange year

after year.

Pursuant to the Law on Securities and Rulebook on

the Registration and Transfer of the Securities with

the Central Securities Register, as at 15 April 2003,

the Mtel’s share capital was divided into 260.230.389

regular shares with the face value of BAM 1.

The Mtel a.d. Banja Luka shares have been quoted at

the Banja Luka Stock Exchange since 11 May 2004.

As at 31 December 2018, the share capital value was

BAM 491,38 million.

In the shareholders structure, the majority relates

to Telekom Srbija, with 65,01% share in the total

capital of Mtel. The Mtel shareholders structure on

31/12/2018 is presented in the chart below:

Information to Investors

Number of transactions

Total turnover (BAMm)

Market capitalization (BAMm)

Paid dividend (BAMm)

EPS (Earnings per share)

ROIC (Return on invested capital )

2018

853

3,4

407,8

56,2

0,124

8,74%

2017

1.000

5,3

516,0

63,5

0,122

9,54%

% change

-14,7%

-36,6%

-21,0%

-11,5%

1,8%


2.

MTEL GROUP

2.1. MTEL GROUP STRUCTURE

2.2. MTEL GROUP FINANCIAL INDICATORS

2.3. LOGOSOFT, DOO SARAJEVO

2.4. MTEL AUSTRIA GmbH


As at 31 December 2018, within the Mtel

Group there are the parent company - Mtel

a.d. Banja Luka and two subsidiaries with

100% of the parent company share: Mtel

Austria GmbH, with the corporate seat in

Vienna, and Logosoft d.o.o. Sarajevo.

MTELGROUP

Logosoft d.o.o.Sarajevo

Mtel a.d.Banja Luka

Mtel AustriaGmbH

2.1.

MTEL GROUP STRUCTURE


FINANCIAL INDICATORS OF THE MTEL GROUP BUSINESS OPERATIONS

2.2. The business year 2018 has been characterized with

BAM 60,9 million realized net profit, representing

8,1% increase relative to the previous year.

The realized EBITDA margin is 13,65%.

The total revenues at the Mtel Group level, in the

amount of BAM 460,5 million, have recorded 3,4%

growth, relative to the year 2017.

Total income (BAMm)

Total expenditures (BAMm)

EBITDA (BAMm)

EBITDA margin

EBIT (BAMm)

EBIT margin

Gross profit (BAMm)

Net profit (BAMm)

Total assets/equity and liabilities (BAMm)

Total number of users (in million)

Total number of employees

460,5

392,3

163,2

36,09%

61,7

13,65%

68,2

60,9

973,6

1,66

2.259

445,6

382,5

159,9

36,58%

55,1

12,62%

63,1

56,3

841,5

1,63

2.253

3,4%

2,6%

2,1%

11,9%

8,2%

8,1%

15,7%

1,6%

0,3%

Key Business Operations Indicators 2018 2017 % change

+8,1%

Net profit margin

Net profit

12,88%13,47%

56,360,9

2017 2018

BA

Mm +1,6%

Total number of users

1,631,66

2017 2018

mill

ion


LOGOSOFT, DOO SARAJEVO

2.3.

The Company of “Logosoft d.o.o. Sarajevo” was

founded in 1995 as a computer engineering company.

The past 24 years of successful business are

characterized by innovations in the field of various

concepts and technologies, by which the Company

is recognized as the leader at the contemporary,

business information-communication solutions

market. Since its establishing, the Company has been

expanding its services portfolio, from the Internet

access services, over its own fiber infrastructure, to

the fixed and mobile telephony services, IP television,

network integration activities, software and business

solutions, colocation and cloud services in its own

Data Center, as well as the IT education.

Logosoft d.o.o. Sarajevo has continued to spread its

operations outside the BiH market, by establishing

the company – „mts sistemi i integracije d.o.o.

Beograd“ in Serbia, with 100% ownership share,

thus having extended the volume of its successful

business operations to the regional level. With this,

Logosoft has made an important step ahead towards

fulfillment of the Company’s positioning strategy,

both within the MTS group and global ICT market.

Offer the cutting-edge information-telecommunication

services, create extraordinary business solutions, and

provide our subscribers with the best value for their

money, with continuous investing into the services

development and our employees’ education, as well

as into the relationships with the end users.

By following the global trends, we create the

contemporary business information-communication

solutions, facilitate everyday communication and

create a better living and business environment for

the modern people.

Company Background and Origin Mission Vision


Logosoft has strengthened its position and set high

standards for provision of the business information-

communication services. Logosoft business platform

unifies the permanent Internet links services,

connection of distant locations – VPN, fixed and

mobile telephony, mobile Internet lease service,

Office365 solution of server and office applications,

local, global and hybrid cloud solutions and, as

such, represents an excellent business, information-

communication solution.

Development of various business solutions in the

system integration domain, software development

and establishment of the new generation Logosoft

Data Center, as well as the implementation of

various solutions on the Microsoft platforms, have

promoted Logosoft into a reputable business partner

of many companies in BiH market. Several years

of experience in the Microsoft Dynamics NAV and

Microsoft Dynamics CRM solution implementation

projects, distinguish Logosoft both on the Bosnia

and Herzegovina territory and in the region. The

Logosoft Company is the only Microsoft partner

with the Microsoft Gold ERP partner competence

in Bosnia and Herzegovina, which has a localization

CfMD module for NAV 2018, as well as the salaries

calculation module for the BiH market, which

represents a significant comparative advantage over

the competitor companies.

„Logosoft Edukacija” is the first Microsoft-certified

training center and certified VUE and Certiport

test center, with greatest number of trainings in

technical knowledge, required for IT professionals

and programmers.

Through its business policy, the Logosoft Company

provides a continuous support to development

and promotion of culture, sport, art and education

in Bosnia and Herzegovina, which is one of the

fundamental characteristics of the Company’s

socially responsible operations and business policy.

In 2018, they have supported and contributed to

successful operations of the Sarajevo Philharmonic,

Kamerni teatar 55 and Youth Theater, as well as

provided a financial support in realization of the

Bosnian Culture Center Sarajevo. Having supported

IT education, Logosoft has been the partner of the

greatest IT Conference in BiH - Microsoft NetWork,

for 8th time, and 7th MSCommunity BiH conference,

the most important gatherings of IT professionals

from BiH and region. The same support has also

been given to the Infoteh Jahorina 2018 tehnical

conference. In 2018, the cooperation with the Faculty

of Natural Sciences and Mathematics Sarajevo

continued, and the support has also been given to

the Mathematicians Association of the Sarajevo

Canton, by which Logosoft has directly supported

the education process of young people and children.

The Logosoft Company has expressed its support

and determination for a safe society by supporting

the European Safety Conference - EUROCRIM 2018,

which gathered the greatest global experts in the

field of criminology and criminalistics. Logosoft has

also supported “The Safer Internet Day“, aimed at

promoting the efforts and activities in prevention

of children and youngsters abuse on the Internet.

The Logosoft’s stable busines operations on the

national market and expansion of the business into

both regional and European market, have been the

characteristics of the year 2018. Partnership with

global cloud vendors – Microsoft and Cisco, and direct

connections with the largest global Tier 1 parent

providers, has enabled the Company to plan and

work on joint implementation of the cloud-based

services and high level of services availability and

reliability on the local and regional level.

In 2018, Logosoft has received two prestigious

certificates, which confirmed its compliance with

the requirements of the International ISO standards,

ISO/IEC 27001:2013 for the information security

management system and ISO/IEC 20000-1:2011 for

IT services management system.

Activities Corporate Social Responsibility

Main Characteristics of the 2018

Business Operations

With continuous support extended in 2018 to the

„Pomozi.ba” Association, the Children’s Psychiatry

Ward and Gastroenterohepatology Ward of the

University Clinical Center Sarajevo, Association of

the Persons with Children’s Palsy of the Sarajevo

Canton, Association of Persons with PTSP - “Life“,

Association ”Culture of Rememberance“, „Edhem

Mulabdić“ Grammar School Maglaj, the School of

Mechanical Engineering Students’ Association, they

have confirmed their sincere wish to improve the

quality of life in the country, by pursuing the activities

with corporate social responsibility.

In the course of 2018, the Company has obtained

the extension of the Cisco Cloud and Managed

Service Provider Master (CMSP Master) status,

thus having re-confirmed that the Logosoft Data

Centar has satisfied all strict technical, security

and organizational requirements for the Cisco

partners who offer cloud services based on the Cisco

infrastructural solutions. With this, the Company has

confirmed the position of the regional leader in the

field of the cloud-based services and technologies.

The proof of the above stated is BAM 1,7 million net

profit, realized by Logosoft in the course of 2018.


MTEL AUSTRIA GMBH

2.4.

The subsidiary - Mtel Austria GmbH, with the seat in

Vienna, founded by Mtel a.d. Banja Luka, commenced

its commercial operations on 1 October 2015, and the

entering and registration of this newly established

company with the register of the relevant authorities

of the Republic of Austria was done on 1 July 2014.

Lead by the tradition and strength of the Telekom

Srbija Group, we provide our customers with a unique

communication experience that makes their life in

Austria easier and better, and their connections with

the motherland - stronger and closer.

Under the corporate slogan - Closer to Home!

(Näher daheim!), we offer mobile telephony services,

primarily purposed and tailored for our customers

in Austria, originating from Bosnia and Herzegovina,

Serbia or Montenegro, those who often travel there

or those who need a frequent communication with

the people from these countries.

Regulation of the telecommunication market in

Austria falls within the competence of Regulatory

Agency – Rundfunk & Telekom Regulirungs (RTR), and

it is based on the Republic of Austria Communications

Law.

A step ahead of the others! We wish to be the

customers’ first choice in the communication world

of services.

Company Background and Origin

Mission

Strategic Goals and Values

Regulatory Framework

Vision


The 2018 business operations of Mtel Austria are

marked with the new market presentation strategy

and orientation towards enhancement of the postpaid

offer and growth of the postpaid customer base,

with maintaining a continuous growth of the prepaid

customer base. The number of the mobile telephony

users on 31/12/2018 recorded a growth of 56,8%


The enhanced participation of the postpaid users

in the customer base, for 8 percent, is the result

of the targeted offer and communication, as well

as recognized potential for further growth of this

customer base.

In the course of 2018, the service tariffs have been

re-designed and the high-class telephones sale has

been introduced. Improvement of the postpaid offer

included unlimited calls to EU, in Austria, towards the

networks of the Telekom Srbija Group, and unlimited

calls from Serbia, BiH, MNE towards all networks in

Main Characteristics of the 2018

Business Operations

Austria and Telekom Srbija Group networks. Also,

the mobile internet quote was enhanced within the

monthly subscription.

Use of the Mtel Austria services constantly grows

and it is expected to continue in the oncoming

period, as the result of enhanced use of the services

by the existing customer base, as well as due to

generating a number of new customers, particulaly

in the postpaid segment.

In the course of 2018, intensive campaigns have been

launched in the sphere of the integrated marketing

communcations: digital marketing, advertising, direct

marketing, sales improvement, events and social

responsibility. Digital marketing was the dominant

way of communication, particularly in the second

half of the year.

The logo of the Mtel Austria Company has been

changed and the corporate website re-designed.


Vuka Karadžića 2

78 000 Banja Luka

Tel: +387 (51) 240 100, +387 (51) 240 101

Fax: +387 (51) 211 150

www.mtel.ba

Ausstellungsstrasse 50 / 2. Stock

1020 Wien

Austria

Tel: +4312051073194

www.mtel.at

Igmanska 9, Bosna i Hercegovina

71120 Sarajevo – Novo Sarajevo

Tel: +387 (33) 931 900

Fax: +387 (33) 931 901

www.logosoft.ba

Telekomunikacije Republike Srpske,

a.d. Banja Luka

Mtel Austria

GmbH

LOGOSOFT, d.o.o.

SarajevoCONTACTS


annual report for the business year 2018 · with the seat in vienna, logosoft d.o.o. sarajevo and,...

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