Telekom Austria Ag · VIE:TKA
Telekom Austria — Q3 2010 Earnings Presentation
36 slides from Telekom Austria's earnings presentation, Nov 10, 2010
Slide 1: Results for the Third Quarter 2010
Results for the Third Quarter 2010 Vienna, November 10, 2010 1
Slide 2: Cautionary Statement
Cautionary Statement “This presentation contains certain forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements. Forward-looking information involves risks and uncertainties that could significantly affect expected results.
Slide 3: Agenda
Agenda > Telekom Austria Group – Highlights of 3Q 2010 > Key Financial Developments > Markets & Operations > Outlook O tl k FY 2010 > Appendix Results for the Third Quarter 2010 3
Slide 4: Telekom Austria Group – Highlights of the Third Quarter 2010
Telekom Austria Group p– Highlights of the Third Quarter 2010 > Further stabilization of fixed line losses to 1,200 in Q3 2010 versus 7,000 lines lost in Q3 2009 > Mobile subscriber growth of 5.4% to more than 19.4 million customers > Group revenues decline 3.8% to EUR 1,185.4 million driven by cont
Slide 5: Key Financial Developments
Key Financial Developments Results for the Third Quarter 2010 5
Slide 6: Revenue Decline Partially Mitigated by Growth in Belarus and Additional Markets
Revenue Decline Partiallyy Mitigated g byy Growth in Belarus and Segment Additional Markets (EUR million) Q3 10 Q3 09 % change > Revenues fell 3.8% due to Austria, Revenues 1,185.4 1,231.7 -3.8% Bulgaria and Croatia despite growth in EBITDA comparable* 449.1 489.8 -8.3% Belarus, the Republic of Serb
Slide 7: Stabilization of Line Losses and 5.4% Group Mobile Subscriber Growth Bolster Revenue
Stabilization of Line Losses and 5.4% Group p Mobile Subscriber Growth Bolster Revenue Decline Austria: Croatia: > Further F th stabilization t bili ti off fi fixed d li lines tto 1 1,200 200 li lines > Contract C t t subscriber b ib b base iincreases b by 7.2% 7 2% lost > Challenging economic envir
Slide 8: Focus Remains on Cost Control to Mitigate Regulatory Induced Pressure on EBITDA
Focus Remains on Cost Control to Mitigate g Regulatory Induced Pressure on EBITDA Austria: Bulgaria: Belarus: > 4.8% 4 8% OPEX decline d li driven di b llower material by t i l > Cost C t reductions d ti off 7 7.6% 6% mitigate iti t > EBITDA comparablebl and marketing expenses and interconnection im
Slide 9: Strong Free Cash Flow Generation Supported by Improved Working Capital and CAPEX
Strong g Free Cash Flow Generation Supported pp byy Improved Change in Working Capital and CAPEX (EUR million) Q3 10 Q3 09 % change 1-9M 10 1-9M 09 % change Cash Flow from operations before working 388.7 443.0 -12.3% 1,158.2 1,215.8 -4.7% capital adjustments Change in working capital -15.9 -75.0 -78
Slide 10: Markets & Operations
Markets & Operations Results for the Third Quarter 2010 10
Slide 11: Key Developments in Telekom Austria Group's Mobile Communication Markets
Keyy Developments p in Telekom Austria Group’s p Mobile Communication Markets Continued Mobile Subscriber Growth Significant Impact of Regulatory Actions (EUR million) Mobile Subscribers (in 000) Q3 10 Q3 09 % change Austria 5,018 4,719 6.3% Group 3Q 2009 4Q 2009 1Q 2010 2Q 2010 3Q 2010 Trend 5,236
Slide 12: Continued Focus on Cost Control - New Opportunities for Civil Servants Created
Continued Focus on Cost Control - New Opportunities for Civil Servants Created Civil Servants Addressed 2010 to Date September 30, 2010 M inistry of M inistry of M inistry of Ministry of Finance Total FTE Interior Justice Labour > Up to approximately 150 civil Permanently transferred 64 0 0 64 serva
Slide 13: Convergent Strategy Continued with Planned Acquisition of Megalan and Spectrum Net Orbitel
Convergent g Strategy gy Continued with Planned Acquisition of Megalan and Spectrum Net Orbitel Acquisition Highlights – Combined Entities Enterprise value EUR 83.0 mn > Fixed line operators with operational Equity value EUR 72.0 mn focus on Sofia and 12 other Bulgarian Performance element EUR 14.5
Slide 14: Success of Product Bundles Continues to Stabilize Access Line Losses in Austria
Success of Product Bundles Continues to Stabilize Access Line Losses in Austria Development aonTV versus Access Line Giganet Key Facts Losses > 1.5 mn households reachable with up (in 000) 12.6 to 30 Mbit/s via VDSL@CO* since 7.0 September 2010 8.0 6.0 3.2 1.2 > VDSL@CO* coverage of 38.0% of total -
Slide 15: Technology Leadership - LTE Will Further Strengthen Network Quality in Austria
Technology gy Leadership p - LTE Will Further Strengthen Network Quality in Austria LTE Tariff Overview A1 Brodband LTE > 2.6 GHz Auction finalized on 20 Datavolume 30 GB September 2010 Monthly Fee EUR 90.0 > 4 paired and 5 unpaired blocks Additional Datavolume EUR 6.9/GB acquired for a total consid
Slide 16: Outlook
Outlook Results for the Third Quarter 2010 16
Slide 17: Unchanged Full Year Outlook 2010 and Dividend Floor
Unchanged g Full Year Outlook 2010 and Dividend Floor Telekom Austria Group – Full Year 2010* (including merger of domestic operations) As of November 10, 2010 As of August 18, 2010 Revenues approx. EUR 4.7 bn EBITDA comparable bl EUR 1.60 – 1.65 bn CAPEX EUR 0.75 0 75 – 0.80 0 80 bn Operating p g F
Slide 18: Appendix
Appendix 1 Results for the Third Quarter 2010 18
Slide 19: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (EUR million) Q3 2010 Q3 2009 % change Monthly fee and traffic 532.9 544.8 -2.2% Data and ICT Solutions 53.9 46.2 16.8% Wholesale (incl (incl. Roaming) 44 3 44.3 59 2 59.2 -25 25.2% 2% Interconnection 92.5 107.1 -13.7% Equipme
Slide 20: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (EUR million) Q3 2010 Q3 2009 % change Material expense 59.1 64.9 -8.9% Employee costs 157.1 152.6 2.9% Interconnection 87 6 87.6 99 7 99.7 -12 12.2% 2% Maintenance and repairs 34.5 32.7 5.5% Services received 46.6 52.2 -1
Slide 21: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group p - Mobile Communication Subscriber Base Mobile Subscribers (in 000) Q3 10 Q3 09 % change Austria 5,018 4,719 6.3% Market share 41.5% 42.4% Bulgaria 5,236 5,243 -0.1% Market share 50.0% 49.7% Croatia 2,702 2,606 3.7% Market share 43.6% 42.9% Belarus 4,225 3,981 6.1% Market shar
Slide 22: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q3 2010 Q3 2009 % change Austria 9,967 10,326 -3.5% International 6,526 6,472 0.8% Telekom Austria Group 16,571 16,807 -1.4% FTE (End of period) Q3 2010 Q3 2009 % change Austria 9,834 10,302 -4.5% International 6,583 6,491 1.4% Telek
Slide 23: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (EUR million) Q3 2010 Q3 2009 % change Segment Austria 101.2 102.3 -1.1% Segment Bulgaria 15.6 11.7 32.7% Segment Croatia 4.7 9.9 -51.9% Segment Belarus 7.9 9.4 -16.4% Segment Additional Markets 17.5 21.1 -17.2% Slovenia 2.2 3.1
Slide 24: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt (EUR million) Sept. 30, 2010 Dec. 31, 2009 % change Long-term debt 3,072.5 3,234.8 -5.0% Short-term borrowings* 1,274.3 1,501.6 -15.1% Cash and cash equivalents, short-term and long term investments, finance lease receivables -987.4 -1,099.0 -10.2% D i t fi
Slide 25: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturity Profile (EUR million) Ratings: 1,292 > S&P: BBB (stable outlook) 946 > Moody Moody’s: s: A3 (stable outlook) 933 * 818 * 308 * 2010 2011 2012 2013 thereafter Lines of Credit > Undrawn committed lines of credit amounting g to EUR 1.1 bn > Av
Slide 26: Telekom Austria Group – Regulatory Issues and Key Aspects
Telekom Austria Group p – Regulatory g y Issues and Keyy Aspects > Next Generation Networks: In a decision on September 6, 2010, Telekom-Control- Kommission (TKK) has set the regulatory and framework parameters and conditions for the further roll-out of broandband (including fiber) in Austria. > Fre
Slide 27: Segment Austria - Fixed Net Key Performance Indicators
Segment g Austria - Fixed Net Keyy Performance Indicators ARPL* Fixed d Line Broadband db d Net Adds Add incl. l (in EUR) Wholesale (in EUR) 34 0 34.0 40.0 42 4 42.4 33.8 29.5 33.3 33.2 24.2 24.7 32.8 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 * Adjusted to new reporting structure a
Slide 28: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split M k Sh Market Share B Broadband db d Li Lines Market k Share h Voice Minutes (in %) (in %) Mobile 25.6% Broadband 28.0% other th operators t 8.7% Unbundled lines 7.2% 17.6% Cable 15.8% Mobile 77.5% 80.2% A1 TA 16.2% Mobile broadband 17.4% 1.8% A1 TA 1.3% fixe
Slide 29: Segment Austria – Mobile Key Performance Indicators
Segment g Austria – Mobile Keyy Performance Indicators ARPU* MoU per Subscriber (in EUR) (in min) 165.3 24.0 23 3 23.3 159.9 159.8 160.0 22.4 22.3 21.9 155.0 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 * Adjusted to new reporting structure as of Q3 2009 Mobile Broadband Customers* Mo
Slide 30: Segment Bulgaria – Mobile Key Performance Indicators
Segment g Bulgaria g – Mobile Keyy Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 102.6 9 1 9.1 9.0 101 5 101.5 98.2 98.6 8.5 8.2 95.5 8.0 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 98 142 0% 142.0% 67 7
Slide 31: Segment Croatia – Mobile Key Performance Indicators
Segment g Croatia – Mobile Keyy Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 12.6 80.5 12.0 12.0 74.7 11.4 71.6 71.3 11.0 68.5 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 179 140.6% 146 156 125 137 138.
Slide 32: Segment Belarus – Mobile Key Performance Indicators
Segment g Belarus – Mobile Keyy Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 6.4 . 6.7 6 2 6.2 174 1 174.1 5.5 5.5 169.2 158.5 156.4 149.4 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 108.2% 105.3% 106 3
Slide 33: Segment Additional Markets – Mobile Key Performance Indicators
Segment g Additional Markets – Mobile Keyy Performance Indicators Slovenia - ARPU Slovenia - MoU per Subcriber (in EUR) (in min) 158.2 23 0 23.0 154.1 153.4 21.7 150.9 20.8 20.6 19.4 139.8 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Serbia - ARPU Serbia - MoU per Subscriber (in EUR)
Slide 34: Segment Additional Markets – Mobile Key Performance Indicators
Segment g Additional Markets – Mobile Keyy Performance Indicators Macedonia - ARPU Macedonia - MoU per Subscriber (in EUR) (in min) 7 5 7.5 105 5 105.5 6.8 94.4 6.2 6.0 6.6 80.6 83.0 76.5 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Results for the Third Quarter 2010 34
Slide 35: Appendix – Glide Path of Mobile Termination Rates
Appendix 2 – Glide Path of Mobile Termination Rates Results for the Third Quarter 2010 35
Slide 36: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates July Jannuary July August January June July August January July August 2009 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 Austria 4.00 3.50 3.01 2.51 2.01 Bulgaria 11.76 10.48 6.65 new M TRs to be new M TRs to be calculated calculated annualy as EU27 annual