Risk management in financing

1. Risk management in financing Presented by Thilo Kusch, CFO May 2010

2. Overview – Magyar Telekom Group at a glance International presence • Integrated operations in Hungary, Macedonia and Montenegro • leading telecommunications service provider in all three countries • leading SI/IT service provider in Hungary Ukraine Ukraine Ukraine Moldova Moldova Moldova Hungary Hungary Hungary Slovenia Croatia • EUR 2.5bn market capitalization • Stock exchange listings • listed on NYSE and Budapest Stock Exchange • traded in London Majority owned by Deutsche Telekom (59.2%) Romania Romania Romania Croatia Croatia Serbia BiH Serbia Kosovo Bulgaria Bulgaria Bulgaria Montenegro Montenegro Montenegro Macedonia Macedonia Macedonia Albania Albania Greece Integrated Integrated Pop/Alternative Pop/Alternative Pop/Alternative Strategy One Company 3Screen Company ICT leadership Service innovation Regional presence

3. Investors’ Expectation Free cash flow to drive investors’ interest • Different forms of free operating cash flow usage - capital expenditure, dividend payment, share buyback , M&A • Usage of free cash flow inspected thoroughly by the investor community • Therefore, investors’ return expectations among primary considerations Usage of free operatingcash flow % of the generated free operating cash

4. Finance strategy - Enhancing financial flexibilityIncrease operational efficiency-> Create room to invest into our future Revenues Revenues - Direct and operating expenses Efficiency improvement Less Efficiency Revenues +/- Operating Working Capital Room to invest Less room to invest Building our future - Investments (Capex) Dividend expectations, Aquisitions = operating Cash-flow ~Stable 2010 future 4

5. Operating Free Cash Flow Q1 2010Ebitda drop almost compensated by Capex and oWC savings -7,4 bn Ebitda 66,6 59,2 -oWC -12,0 -10,7 -Capex -19,9 -15,5 -1,7 bn =oFcF 34,7 33,0 2009 Actual 2010 Actual

6. Overview of MT financials In supporting MT’s business goals MT Finance faces market risks Refinancing risk Liquidity risk • HUF 400bn debt portfolio • HUF 650bn annual revenue • HUF 250bn EBITDA • HUF 80bn free cash-flow • HUF 70-80bn peak in annual financing need (dividend payment) FX risk Interest rate risk

7. Volatile interest rates – smoothened financing cost Average interest rate of the debt portfolio has been smoothened over time not reflecting the prompt fluctuations in inter-bank interest rates: • controlledaverage maturity • balanced fix-floater ratio No debtor can be independent from the market environment in the long run The best goal achievable is to smoothen the strong market fluctuations over time

8. Cautious level of Sound liquidity indebtedness position retained • In line with Magyar Telekom’s dividend policy we keep the net debt ratio within the range of 30-40% • The conservative approach made possible to manage the financing and refinancing needs even among market turbulences • Financing willingness of banks drop dramatically, but widespread connections with substantial Hungarian banks allowed us to raise necessary financing funds • Maturity structure has contributed to retain a strong liquidity position despite lack of liquidity on financial market

9. FX hedge strategy Cash-flow, P&L and balance sheet cannot be hedged at the same time; focus on cash-flow risk management • Significant part of our capex is EUR denominated • Smaller part of the opex is also exposed to HUF depreciation • Exposure is mitigated by dividend incomes from Macedonia and Montenegro and by some operating revenues Temporary fluctuations in P&L (e.g. translational effects) but no impact on CF

10. Lessons learned Responses needed from MT Refinancing risk Liquidity risk • Balanced debt portfolio • Maturity structure • Fix-floater ratio • Diversified financing sources • FX denomination • Stronger focus on cash generation • Sufficient financing buffers to be held • Enhanced counterparty risk valuation in investing transactions • Extended horizon of risk management FX risk Interest rate risk