Telekom Austria Ag · VIE:TKA
Telekom Austria — Q2 2011 Earnings Presentation
43 slides from Telekom Austria's earnings presentation, Aug 17, 2011
Slide 1: Results for the Second Quarter 2011
Results for the Second Quarter 2011 Vienna, 17 August 2011 Results for the Second Quarter 2011 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-lookingg statements. Forward-looking g information involves risks and uncertainties that could significantly affect expected resul
Slide 3: Agenda
Agenda > Operational and Financial Highlights of the Second Quarter 2011 > Key Financial Developments of the Second Quarter 2011 > Focus Points > Outlook for Full Year 2011 pp > Appendix Results for the Second Quarter 2011 3
Slide 4: Operational and Financial Highlights of the Second Quarter 2011
Operational and Financial Highlights of the Second QQuarter 2011 Results for the Second Quarter 2011 4
Slide 5: Operational Development in Line With Management's Expectations
Operational Development in Line With Management’s Expectations > Mobile broadband and smartphones p drive subscriber numbers in all operations p > Bundle products strategy proves increasingly successful with continued access line growth and further trend towards ARPL stabilization > Continuation C t
Slide 6: Key Financial Developments of the Second Quarter 2011
Key Financial Developments of the Second Quarter 2011 Results for the Second Quarter 2011 6
Slide 7: Regulation, Weak Economies and Competition Remain Key Operational Challenges
Regulation, Weak Economies and Competition Remain Key Operational Challenges (EUR million) Q2 2011 Q2 2010 % change R Revenues 1,109.3 09 3 1,168.7 68 -5.1% % > 5.1% revenue decline and 8.6% lower EBITDA comparable* 380.8 416.5 -8.6% EBITDA comparable due to regulatory EBITDA comparable margin* 34.3
Slide 8: Strong Revenues in Additional Markets Limit Group Revenue Decline
Strong Revenues in Additional Markets Limit Group Revenue Decline to 1.8% Excluding FX Impact Austria: Belarus: > Demand for fixed broadband resulting in access line > Strong S operational i l performance f li limits i iimpact off FX devaluation d l i growth dampens impact from fixed voice minute de
Slide 9: Ongoing Focus on Cost Control, Results of Restructuring Program in Austria Visible
Ongoing Focus on Cost Control, Results of Restructuring Program in Austria Visible Bulgaria: Austria: > Extraordinary y effect in other operating p g Belarus: > EBITDA comparable driven by regulatory effects income > Negative EUR 17.0 mn effect from FX and demand for smartphones > Higher OPEX due to
Slide 10: FCF Expected to Improve as CAPEX Driven Rise in Working Capital Will Even Out
FCF Expected to Improve as CAPEX Driven Rise in Working Capital Will Even Out During 2H 2011 (EUR million) Q2 2011 Q2 2010 % change 1H 2011 1H 2010 % change Cash Flow from operations before working capital adjustments 350.6 383.6 -8.6% 686.4 769.5 -10.8% Change in working capital -38.0 -24.0 58.2% -
Slide 11: Focus Points
Focus Points Results for the Second Quarter 2011 11
Slide 12: Customer Focus and Innovation Drive Operational Performance
Customer Focus and Innovation Drive Operational Performance Austria: Belarus: > Relaunch of A1 as single brand for fixed and > Rise in mobile broadband customer base on mobile business the back of attractive and customized tariffs > A1 SmartKombi as first convergent product > Lower CAPEX after 3G la
Slide 13: First Operator in Austria to Follow Value Approach via SIM and Fixed Internet Service Fee
First Operator in Austria to Follow Value Approach via SIM and Fixed Internet Service Fee First Mover in Austrian Mobile and Fixed Other Operators p Follow Value Approach pp Line Market > SIM charge g of EUR 19.9 per p yyear for new customers and those who change tariffs March April May June July Au
Slide 14: FX Environment and Macro-Economic Indicators in Belarus
FX Environment and Macro-Economic Indicators in Belarus FX-Rate Development p 7 152 7,152 Refinancing g Rate Development p 18.0% 4,100 4,288 12.0% 3,973 10 5% 10.5% 10 5% 10.5% Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 BYR/EUR Official Rate by National Bank
Slide 15: Strong Domestic Trends – velcom Takes Measures to Mitigate FX Impact
Strong Domestic Trends – velcom Takes Measures to Mitigate FX Impact Revenues EBITDA comparable p CAPEX (in EUR million) (in EUR million) (in EUR million) + 27.2% without -56.9% + 19.3% without FX-Effect adjustment FX-Effect FX-Effect FX Effect FX-Effect 36.9 17.0 7.9 10.2 86.3 72.9 42.2 33.4 4 4 4.
Slide 16: Impact on opFCF for Full Year 2011 Expected to Be Limited to EUR 30-40 mn
Impact on opFCF for Full Year 2011 Expected to Be Limited to EUR 30-40 mn Expectation p velcom EBITDA Expectation p velcom opFCF p FY 2011 comparable FY 2011 - EUR 40-50 mn - EUR 30-40 mn FY 2011 pre FX FY 2011 post FX FY 2011 pre FX FY 2011 post FX Devaluation Devaluation Devaluation Devaluation Im
Slide 17: Outlook
Outlook Results for the Second Quarter 2011 17
Slide 18: Outlook for Full Year 2011 Refined and Adjusted for FX Impact
Outlook for Full Year 2011 Refined and Adjusted for FX Impact Telekom Austria Group p – Full Year 2011 On a constant currency basis, except Belarus* As of 11 May, 2011 As of 17 August, 2011 Revenues up to EUR 4.60 bn approx. EUR 4.50 bn EBITDA comparable up to EUR 1.60 bn up to EUR 1.55 bn CAPEX up
Slide 19: Telekom Austria Group Outlook Full Year 2011 Reflects FX-Impact in Belarus
Telekom Austria Group Outlook Full Year 2011 Reflects FX-Impact in Belarus Group EBITDA comparable Up to EUR 1.60 bn Group EBITDA comparable FX Devaluation in Belarus Up to EUR 1.55 bn Outlook as of 11 May, 2011 Outlook as of 17 August, 2011 > Group operational performance within range of initial ex
Slide 20: Appendix
Appendix pp 1 Results for the Second Quarter 2011 20
Slide 21: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (EUR million) Q2 2011 Q2 2010 % change Monthly fee and traffic 511.5 515.9 -0.9% Data and ICT Solutions 49.5 51.9 -4.6% Wholesale (incl. Roaming) 44.3 59.1 -25.0% Interconnection 86.7 104.9 -17.4% Equipment i 2 24.1 2 6 25.6 -
Slide 22: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (EUR million) Q2 2011 Q2 2010 % change Material expense 62.3 56.7 9.8% Employee costs 169.2 172.4 -1.9% Interconnection 81.3 97.2 -16.4% Maintenance and repairs 29.6 32.8 -10.0% S Services i received i d 40.9 09 53.9 39 -2
Slide 23: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group - Mobile Communication Subscriber Base Mobile Subscribers (in 000) Q2 2011 Q2 2010 % change Austria 5,176 4,967 4.2% Market share 40.8% 42.1% Bulgaria 5,295 5,241 1.0% Market share 49.3% 50.2% Croatia* 2,066 2,045 1.0% Market share* 39.2% 40.0% Belarus 4,461 4,145 7.6% Market s
Slide 24: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q2 2011 Q2 2010 % change Austria 9,506 10,090 -5.8% International 7,439 6,485 14.7% Telekom Austria Group* 17,106 16,569 3.2% FTE (End of period) Q2 2011 Q2 2010 % change Austria 9,372 10,040 -6.7% International 7,502 6,481 15.7% Tel
Slide 25: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (EUR million) Q2 2011 Q2 2010 % change Segment Austria 114.6 105.6 8.5% Segment Bulgaria 16.7 17.6 -4.8% Segment Croatia 8.8 17.1 -48.3% Segment Belarus 4.4 10.2 -57.2% Segment Additional Markets 12.3 9.6 27.7% Slovenia 2.1 1.4
Slide 26: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt (EUR million) June 30, 2011 Dec. 31, 2010 % change Long-term debt 3,333.4 3,146.4 5.9% Short-term borrowings 585.5 522.6 12.0% Cash and cash equivalents, short-term and long term investments, finance lease receivables -356.3 -355.0 0.4% Derivate financial in
Slide 27: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturityy Profile (EUR million) 871* 935 795 539 177 242 200 117 42 * 2011 2012 2013 2014 2015 2016 2017 2018 2019 *Includes approx. EUR 51.3 mn in 2012 related to velcom > EUR 3,918.6 mn of short- and long-term borrowings as of June 30, 2011 > Aver
Slide 28: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments Fixed-Floating g Mix 18% 53% 47% 82% Bonds Loans Floating Fixed Lines of Credit Ratings > Undrawn committed lines of credit > S&P: BBB (stable outlook)* amounting to EUR 1.0 bn > Moody’s: A3 (negative outlook) g term to maturityy of > Av
Slide 29: Segment Austria - Fixed Line Key Performance Indicators
Segment Austria - Fixed Line Key Performance Indicators ARPL & ARPL Relevant Revenues Total Fixed Access Lines & Net Adds (in EUR) (in 000) 40.0 39.5 250.0 2,322 2,323 39.0 38.5 2,325 38.0 37.5 37.0 36.5 245.0 2,315 36.0 35.5 33.2 34.0 8.0 35.0 34.5 34.0 32.8 32.5 32.2 2,315 33.5 33.0 240.0 32 32.5
Slide 30: Segment Austria – Mobile Key Performance Indicators
Segment Austria – Mobile Key Performance Indicators ARPU & ARPU Relevant Revenues MoU p per Subscriber (in EUR) (in min) 23.0 160.0 355.0 22.4 22.3 159.7 22.5 345.0 21.6 .6 22.0 155.0 335.0 21.5 152.0 325.0 20.5 21.0 149.5 330.5 334.2 20.1 20.5 315.0 326.3 20.0 305.0 317.4 19.5 295.0 309.9 19.0 Q2 1
Slide 31: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Broadband Lines Market Share Voice Minutes (in %) (in %) Mobile 27.6% Broadband 28.7% other operators 7.7% Unbundled lines 6.6% 79.8% Mobile 81.9% 15.5% Cable 14.9% A1 17.2% Mobile broadband 18.2% A1 1.4% fixed wholesale 1.1% A1 Other fixed 30.6%
Slide 32: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 8.7 8.5 111.8 8 2 8.2 7.6 104.2 104.1 101.5 102.6 7.3 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 162 142.6% 143.2% 126 142 1
Slide 33: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU* MoU p per Subscriber* (in EUR) (in min) 14.8 15.1 14.0 12 4 12.4 13 3 13.3 96.0 92.5 89.5 88.7 89.0 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Mobile Broadband Customers* Mobile Penetration* (in 000) (in %) 164 166 121.3% 119
Slide 34: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 6.7 186.0 6.4 6.2 6.1 4.9 9 174.1 176 3 176.3 169.2 168.6 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 275.4 115.4% 197.5 113.5
Slide 35: Segment Additional Markets – Mobile Key Performance Indicators
Segment Additional Markets – Mobile Key Performance Indicators Slovenia - ARPU Slovenia - MoU p per Subcriber (in EUR) (in min) 21.7 20.6 20 4 20.4 168.7 20 4 20.4 163.9 165 1 165.1 19.1 158.2 150.9 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Q2 10 Q3 10 Q4 10 Q1 11 Q2 11 Serbia - ARPU Macedonia - ARPU (in EUR) (
Slide 36: Appendix – Regulatory Topics
Appendix 2 – Regulatory g y Topics p Results for the Second Quarter 2011 36
Slide 37: Negative Impact of Approx. EUR 175 mn on EBITDA Comparable Expected until 2013
Negative Impact of Approx. EUR 175 mn on EBITDA Comparable Expected until 2013* Keyy Points Impact EBITDA comp. Interconnection 2010 - 2013: EUR -75 75 mn Impact EBITDA comp. 2011 -2013: Impact EBITDA comp. EUR -175 mn Roaming g 2010 - 2013: EUR -100 mn > EU commission: before Januaryy 1, Digital Di
Slide 38: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates July January July August January June July August January July August In EUR c ents 2009 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 market analysis during Austria 4.00 3.50 3.01 2.51 2.01 2011 6.65 (until market analysis started in Q1 2011-> decision exp
Slide 39: EU-Roaming Glide Path
EU-Roaming Glide Path July 2009 July 2010 July 2011 Voice Wholesale 0.26 0.22 0.18 Retail active 0.43 0.39 0.35 Retail passive 0.19 0.15 0.11 SMS Wholesale 0.04 0.04 0.04 Retail 0.11 0.11 0.11 Data Wholesale 1.00 0.80 0.50 Results for the Second Quarter 2011 39
Slide 40: Appendix – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the Second Quarter 2011 40
Slide 41: Overview – Restructuring Charges and Provision vs. FTE
Overview – Restructuring Charges and Provision vs. FTE Overview Restructuring g Charges g FTEs Addressed (in EUR million) 2008 2009 2010 Q1 2011 Q2 2011 2008 2009 2010 Q1 2011 Q2 2011 Transfer to government 0 0 158 24 46 FTE Effect 632 1 632.1 -10 0 -10.0 76 9 76.9 184 1 184.1 34 6 34.6 Social plans
Slide 42: Overview – Cash Flow Impact of Restructuring
Overview – Cash Flow Impact of Restructuring Overview Cash Flow Impact p (in EUR million) > Total cash flow impact comprises Total cash flow impact old as well as new programs 2008 14.7 > Total expected cash flow impact 2009 62.0 for 2011 of EUR 100-110 mn 2010 57 9 57.9 Q1 2011 21.5 Q2 2011 22.9 Re
Slide 43: Restructuring – Explanatory Information
Restructuring – Explanatory Information > The following factors have to be taken in account when comparing “FTEs Addressed” to “Provisioned FTEs”: > FTEs of social plans may include receivers of one-time payments such as golden h d h k and handshakes d can fl fluctuate t t d due tto ttransfer f tto