Telekom Austria Ag · VIE:TKA

Telekom Austria — Q3 2008 Earnings Presentation

55 slides from Telekom Austria's earnings presentation, Nov 12, 2008

  1. Slide 1: Telekom Austria Group Results for the Third Quarter 2008

    Telekom Austria Group Results for the Third Quarter 2008 Vienna, November 12, 2008

  2. 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.

  3. Slide 3: Agenda

    Agenda ƒ Key Developments ƒ Fixed Net ƒ Mobile Communication ƒ Financial Overview ƒ Outlook Results for the Third Quarter 2008 3

  4. Slide 4: Key Developments

    Key Developments Results for the Third Quarter 2008 4

  5. Slide 5: Telekom Austria Group – Third Quarter 2008

    Telekom Austria Group – Third Quarter 2008 ƒ Revenues grow by 4.0% to EUR 1,328.0 million driven by international operations including the consolidation of Velcom ƒ EBITDA increases by 3.6% to EUR 539.9 million as EBITDA growth in Mobile Communication including the consolidation of Velcom offsets lo

  6. Slide 6: Revenue and EBITDA Growth Driven by Mobile Communication Segment

    Revenue and EBITDA Growth Driven by Mobile Communication Segment Revenues EBITDA (EUR million) (EUR million) 4.0% 3.6% 1,328.0 539.9 521.2 1,277.1 3Q 08 3Q 07 3Q 08 3Q 07 Net Income Earnings per Share (EUR million) (EUR) -6.2% 162.9 173.7 -5.5% 0.37 0.39 3Q 08 3Q 07 3Q 08 3Q 07 Results for the Third

  7. Slide 7: Fixed Net

    Fixed Net Results for the Third Quarter 2008 7

  8. Slide 8: Lower Costs and Gradual Improvement of EBITDA Trend

    Lower Costs and Gradual Improvement of EBITDA Trend Revenues & EBITDA (EUR million) ƒ Revenues decline by 8.2% due to -8.2% reduction of access lines, minutes 496.9 541.4 and lower Internet revenues -11.3% 165.7 186.8 ƒ Opex decline by 7.0% as cost saving program becomes effective Revenues EBITDA 3Q

  9. Slide 9: Line Loss more than Halved while ARPL Remains Nearly Stable

    Line Loss more than Halved while ARPL Remains Nearly Stable Line Loss ƒ Substantially lower churn (in 000) reflects improved customer 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 retention -27.7 ƒ Line loss reduced by 53.5% -32.4 -35.1 -47.6 -59.6 ƒ Fourth consecutive quarter with substantially lower line loss Ave

  10. Slide 10: Fixed Net Retail Defends Market Share Against Growing Mobile Broadband

    Fixed Net Retail Defends Market Share Against Growing Mobile Broadband Broadband Market Shares 3Q 08 ƒ Telekom Austria’s Fixed Net 22.7% broadband market share stable 29.7% at 29.7% 10.8% 2.7% ƒ Focus on product bundles helps 13.7% to maintain market share and 20.4% 35% curb fixed-to-mobile substitu

  11. Slide 11: Christmas Promotion for Product Bundles Builds upon Success of Previous Bundles

    Christmas Promotion for Product Bundles Builds upon Success of Previous Bundles ƒ Product bundles increase customer retention and curb fixed-to-mobile substitution ƒ Improve price perception, reduce churn rates and increase customer Until Jan 20, 2009 loyalty for new broadband customers € 19,90 ƒ Pr

  12. Slide 12: Mobile Communication

    Mobile Communication Results for the Third Quarter 2008 12

  13. Slide 13: Double Digit Revenue and EBITDA Growth despite Impact from Roaming Regulation

    Double Digit Revenue and EBITDA Growth despite Impact from Roaming Regulation Revenues (EUR million) ƒ Subscriber base grows by 51.5% to 11.2% 17.0 million customers, subscriber 895.7 growth in all countries 805.3 ƒ Organic subscriber growth excluding Velcom of 20.1% 3Q 08 3Q 07 1.5 ƒ All operations

  14. Slide 14: Higher Profitability of mobilkom austria Drives EBITDA Growth

    Higher Profitability of mobilkom austria Drives EBITDA Growth Revenues (EUR million) ƒ Subscriber base of mobilkom austria grows by 13.0% to 4.4 million -1.6% 420.0 426.7 customers ƒ Moderate revenue decline despite roaming regulation 3Q 08 3Q 07 EBITDA ƒ EBITDA margin increases from 36.4% (EUR mill

  15. Slide 15: mobilkom austria Extends Market Leadership Based on Clear Propositions

    mobilkom austria Extends Market Leadership Based on Clear Propositions Market Shares As of September 2008 42.5% ƒ Market share increases from 32.5% 40.3% to 42.5% in 3Q 08 19.2% ƒ Lead over competitors continues 5.8% to grow 3Q 06 1Q 07 3Q 07 1Q 08 3Q 08 mobilkom austria T-Mobile incl. tele.ring ƒ M

  16. Slide 16: Revenue Growth in Bulgaria despite Competitive Environment

    Revenue Growth in Bulgaria despite Competitive Environment Revenues & EBITDA ƒ Mobiltel’s subscriber base grows by (EUR million) 2.6% 7.9% to 5.2 million customers 179.0 174.4 -1.4% 100.0 101.4 ƒ EU roaming regulation effects revenue and EBITDA development Revenues EBITDA 3Q 08 3Q 07 ƒ Revenues grow

  17. Slide 17: Integration of Velcom Bears Fruit

    Integration of Velcom Bears Fruit Revenues (EUR million) ƒ Subscriber base grows to 3.5 million from 3.4 82.4 million subscribers at end of 2Q 08 ƒ Market share increases to 44.7% from 44.4% at the end of 2Q 08 3Q 08 ƒ ARPU grows to EUR 7.6 from EUR 6.9 in 2Q 08 EBITDA (EUR million) ƒ Revenues of EU

  18. Slide 18: Strong Underlying Core Business in Croatia and Slovenia Hit by Roaming Regulation

    Strong Underlying Core Business in Croatia and Slovenia Hit by Roaming Regulation Revenues Vipnet Vipnet in Croatia (EUR million) -4.8% ƒ Subscriber base grows by 14.2% to 2.4 157.8 165.7 million customers ƒ EBITDA declines by 13.5% to EUR 73.1 3Q 08 3Q 07 million hit by lower roaming prices and exp

  19. Slide 19: Greenfield Operations Improve Results and Further Strengthen Market Position

    Greenfield Operations Improve Results and Further Strengthen Market Position Total Subscribers 3Q 08 Vip mobile in Serbia (in 000) ƒ Subscriber base of 752,600 with 752.6 86,000 net adds in 3Q 08 250.9 ƒ Market share of 7.9% compared to 7.2% at the end of 2Q 08 Serbia Macedonia Revenues 3Q 08 Vip op

  20. Slide 20: Financial Overview

    Financial Overview Results for the Third Quarter 2008 20

  21. Slide 21: Revenue & EBITDA Growth, Higher Interest Costs Weigh on Net Income

    Revenue & EBITDA Growth, Higher Interest Costs Weigh on Net Income (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Revenues 1,328.0 1,277.1 4.0% 3,863.8 3,630.9 6.4% EBITDA 539.9 521.2 3.6% 1,507.6 1,463.6 3.0% Operating income 261.7 257.8 1.5% 651.6 668.0 -2.5% Financial result -50.9 -3

  22. Slide 22: Lower Funding Need of Working Capital Supports Free Cash Flow Generation in 3Q 08

    Lower Funding Need of Working Capital Supports Free Cash Flow Generation in 3Q 08 (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Cash Flow from operations before 478.3 489.3 -2.2% 1,305.1 1,341.6 -2.7% working capital adjustments Change in working capital -44.8 -88.0 -49.1% -199.4 -144.

  23. Slide 23: Consolidation of Velcom and Higher Investments in Bulgaria Account for Increase in Capex

    Consolidation of Velcom and Higher Investments in Bulgaria Account for Increase in Capex (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Fixed Net 48.7 64.9 -25.0% 181.2 188.8 -4.0% Mobile Communication 135.3 63.8 111.9% 353.1 260.9 35.3% Ordinary capital expenditures 184.0 128.7 42.9% 5

  24. Slide 24: Smaller Asset Base mainly due to Depreciation & Amortization Exceeding Additions

    Smaller Asset Base mainly due to Depreciation & Amortization Exceeding Additions (EUR million) Sept. 30, 08 Dec. 31, 07 % change Long-term assets 7,450.8 7,677.5 -3.0% Current assets 1,319.2 1,326.2 -0.5% Total assets 8,770.0 9,003.7 -2.6% Current liabilities 1,972.2 2,557.2 -22.9% Long-term liabili

  25. Slide 25: Solid Debt Maturity Profile and Sufficient Access to Liquidity

    Solid Debt Maturity Profile and Sufficient Access to Liquidity Debt Maturity Profile as of ƒ As of November 12 remaining Sept 30, 2008 financing need for 2008 already (EUR million) 1,331 fully funded 1,161 ƒ Free Cash Flow and measures 707 718 initiated cover financing well 258 215 into 2010 without

  26. Slide 26: No Evidence of Changes in User Behavior in Eastern & Southeastern Europe

    No Evidence of Changes in User Behavior in Eastern & Southeastern Europe Mobiltel VIPnet Velcom Bulgaria Croatia Belarus ARPU as % of average salary* 3.4% 1.6% 3.2% 2007 2007 2007 166 163 93 93 92 148 86 87 79 Minutes of Use per subscriber 1Q 08 2Q 08 3Q 08 1Q 08 2Q 08 3Q 08 1Q 08 2Q 08 3Q 08 15.6 1

  27. Slide 27: Mobile Communication Spending Expected to be Fairly Resilient to Individual Spending Cuts

    Mobile Communication Spending Expected to be Fairly Resilient to Individual Spending Cuts Maslow's Hierarchy of Needs Sofia, October 2008 Self Actual- ization Esteem Needs Social Needs Safety Needs Physiological Needs ƒ Communication covers human need for social contact ƒ Social need closer to basis

  28. Slide 28: Announced Restructuring Measures Require Non-Cash Provision of approx. EUR 630 mn in 4Q 08

    Announced Restructuring Measures Require Non- Cash Provision of approx. EUR 630 mn in 4Q 08 ƒ Shrinking domestic fixed line market and ongoing fixed access line loss make restructuring measures imperative ƒ Restructuring program consists of non-cash provision for a labour displacement scheme for civ

  29. Slide 29: Outlook

    Outlook Results for the Third Quarter 2008 29

  30. Slide 30: Outlook 2008 for Operating Business Reiterated Despite Impact of Non-Cash Provision

    Outlook 2008 for Operating Business Reiterated Despite Impact of Non-Cash Provision on Reported Results Restructuring measure require non-cash provision, but do not impact operating performance of the Telekom Austria Group Actuals 2007 Outlook 2008 Guidance EUR million EBITDA 07 1,854.9 EBITDA +3% 2

  31. Slide 31: Telekom Austria Group Reiterates Outlook 2008 for Operating Business incl. DPS Guidance of 75c

    Telekom Austria Group Reiterates Outlook 2008 for Operating Business incl. DPS Guidance of 75c Expected Reported Results Expected Operating Including Restructuring Performance reiterated Outlook 2008 Program as of Nov 10, 08 Group Revenues 5% 5% EBITDA -30% 3% Operating income -85% Stable Net income

  32. Slide 32: Appendix

    Appendix Results for the Third Quarter 2008 32

  33. Slide 33: Regulatory Issues – Key Aspects (1)

    Regulatory Issues – Key Aspects (1) Mobile termination rates: The Austrian administrative court rescinded the last two SMP-decisions because the National Regulatory Authority imposed an ex-ante obligation on mobile operators retroactively which is illegal in the court’s view. With this revocation th

  34. Slide 34: Regulatory Issues – Key Aspects (2)

    Regulatory Issues – Key Aspects (2) Review of the Regulatory Electronic Communication Framework: The European Parliament has adopted in its first reading the proposals that are now subject to agreement of the Council of Telecoms Ministers. The provision to apply functional separation of networks und

  35. Slide 35: Regulatory Issues – Key Aspects (3)

    Regulatory Issues – Key Aspects (3) International roaming charges: As of end of September 2008 the EU- Commission filed its draft proposal to the EU Parliament and the Council to extend the existing roaming regulation. The proposal calls for: ƒ Extension of the voice roaming regulation at both whole

  36. Slide 36: Development of Revenues 3Q vs. 3Q

    Development of Revenues 3Q 08 vs. 3Q 07 Revenues (EUR million) 3.6 5.8 1,328.0 11.2 82.4 -7.9 2.4 1,277.1 -44.5 -6.7 4.6 Eliminations Vip mobile consolidation mobilkom Si.mobil Mobiltel Fixed Net Vip operator Vipnet Corporate, Revenues Revenues austria Others & 3Q 07 3Q 08 Velcom Results for the Thi

  37. Slide 37: Development of EBITDA 3Q 08 vs. 3Q 07

    EBITDA 3Q 07 521.2 (EUR million) EBITDA Fixed Net -21.1 mobilkom austria 4.2 Results for the Third Quarter 2008 Mobiltel -1.4 consolidation Velcom 41.9 Vipnet -11.4 -0.5 Si.mobil 3.4 Vip mobile 1.2 Vip operator Development of EBITDA 3Q 08 vs. 3Q 07 Corporate, Others & 2.4 Eliminations EBITDA 3Q 08 5

  38. Slide 38: Fixed Net - Access Lines

    Fixed Net - Access Lines (in 000) 3Q 08 3Q 07 % change PSTN access lines 1,953.4 2,071.4 -5.7% Basic ISDN access lines 335.7 369.3 -9.1% Multi ISDN access lines 6.4 6.8 -5.2% Naked broadband lines 43.7 34.5 26.7% Total access lines in service 2,339.2 2,482.0 -5.8% of these broadband access lines 835

  39. Slide 39: Fixed Net – Voice & Broadband Market Shares

    Fixed Net – Voice & Broadband Market Shares 70% 65% 60% 55% 50% 45% 40% 35% 30% 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 Local + National long distance traffic Fixed to mobile International Fixed Net broadband Results for the Third Quarter 2008 39

  40. Slide 40: Fixed Net Broadband

    Fixed Net Broadband Average Revenues per Access Line Fixed Net Broadband Net Adds incl. Wholesale (in EUR) (in 000) 33.3 33.3 33.0 32.7 32.6 66.9 28.6 8.9 8.9 -1.6 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 Fixed Broadband Access Lines (in 000) 745.8 757.5 766.4 665.2 626.7 272.8 28

  41. Slide 41: Fixed Net - Minutes and Average Tariffs

    Fixed Net - Minutes and Average Tariffs (in million minutes) 3Q 08 3Q 07 % change National 635 736 -13.7% Fixed-to-mobile 180 191 -6.1% International 100 108 -7.9% Total voice minutes 914 1,036 -11.7% Internet dial-up 72 167 -56.9% Total Fixed Net minutes 987 1,203 -18.0% (Average tariffs in EUR) 3Q

  42. Slide 42: Mobile Subscribers

    Mobile Subscribers (in 000) 3Q 08 3Q 07 % change Austria 4,355.8 3,853.7 13.0% Market share 42.5% 40.3% Bulgaria 5,193.7 4,813.7 7.9% Market share 49.9% 50.3% Belarus 3,525.0 - n.a. Market share 44.7% - Croatia 2,372.0 2,077.0 14.2% Market share 42.3% 43.2% Slovenia 552.2 479.9 15.1% Market share 27

  43. Slide 43: Operational Data – mobilkom austria

    Operational Data – mobilkom austria MoU per Subscriber ARPU & Data ARPU (in minutes) (in EUR) 174.0 186.1 183.4 177.1 169.5 31.4 28.4 28.7 28.1 27.8 6.6 7.1 7.0 6.9 7.0 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 Blended ARPU Data ARPU Quarterly Churn SAC per Gross Add* (in EUR) 7.5%

  44. Slide 44: Mobile Data - mobilkom austria

    Mobile Data - mobilkom austria Mobile Broadband Customers Number of SMS (in 000) (in million) 523 535 541 535 325 348 416 290 310 250 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 3Q 07 4Q 07 1Q 08 2Q 08 3Q 08 Vodafone Live! Customers Data in % of Revenues* (in 000) 32.1% 30.7% 31.6% 31.0% 1,776 1,780 1,750 1,738 2

  45. Slide 45: ARPU & MoU per Subscriber – Mobile Communication

    ARPU & MoU per Subscriber – Mobile Communication 174.0 169.5 162.8 120.9 127.7 MoU per 92.7 93.8 92.1 Subscriber 76.0 (in minutes) n.a. mobilkom Mobiltel Velcom Vipnet Si.mobil austria 31.4 27.8 24.9 25.8 ARPU 16.3 15.6 (in EUR) 10.4 10.1 7.6 n.a. mobilkom austria Mobiltel Velcom Vipnet Si.mobil Res

  46. Slide 46: Headcount Development

    Headcount* Development (average period) 3Q 08 3Q 07 change Fixed Net 9,371 9,737 -366 Mobile Communciation 8,311 6,444 1,867 Telekom Austria Group 17,682 16,182 1,500 (end of period) 3Q 08 3Q 07 change Fixed Net 9,337 9,732 -395 Mobile Communciation 8,368 6,495 1,873 Telekom Austria Group 17,705 16,

  47. Slide 47: Fixed Net - Revenue Breakdown

    Fixed Net - Revenue Breakdown (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Switched voice base traffic 79.2 88.9 -10.9% 242.1 261.2 -7.3% Switched voice monthly & other voice revenues 110.9 116.9 -5.1% 344.6 359.1 -4.0% Payphones & VAS 10.7 11.6 -7.8% 31.7 34.3 -7.6% Wholesale data &

  48. Slide 48: Fixed Net – Expense Breakdown

    Fixed Net – Expense Breakdown (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Material expense 20.1 19.6 2.6% 67.3 54.7 23.0% Employee costs 125.9 128.9 -2.3% 416.4 401.0 3.8% Depreciation, amortization and impairment charges 118.6 129.6 -8.5% 378.0 411.2 -8.1% Interconnection 84.1 103.2

  49. Slide 49: Mobile Communication - Revenue Breakdown

    Mobile Communication - Revenue Breakdown (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Traffic revenues 435.6 376.7 15.6% 1,226.8 1,074.6 14.2% Monthly rental 192.5 154.2 24.8% 561.6 437.2 28.5% Equipment 70.4 69.8 0.9% 185.6 193.1 -3.9% Roaming 62.5 86.2 -27.5% 152.5 200.5 -23.9% Inte

  50. Slide 50: Mobile Communication – Expense Breakdown

    Mobile Communication – Expense Breakdown (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Material expense 89.3 88.5 0.9% 244.1 236.9 3.0% Employee costs 66.2 56.3 17.6% 192.8 170.2 13.3% Depreciation, amortization and impairment charges 159.7 133.9 19.3% 478.3 384.7 24.3% Interconnection

  51. Slide 51: Revenues by Segment

    Revenues by Segment (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Fixed Net revenues 496.9 541.4 -8.2% 1,540.7 1,585.6 -2.8% Mobile Communication revenues 895.7 805.3 11.2% 2,506.5 2,238.9 12.0% Corporate, Other & Eliminations -64.6 -69.6 -7.2% -183.4 -193.6 -5.3% Operating revenues Te

  52. Slide 52: EBITDA and Operating Income by Segment

    EBITDA and Operating Income by Segment (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Fixed Net EBITDA 165.7 186.8 -11.3% 478.3 568.8 -15.9% Mobile Communciation EBITDA 378.9 339.0 11.8% 1,045.0 919.6 13.6% Corporate, Other & Eliminations -4.7 -4.6 2.2% -15.7 -24.8 -36.7% EBITDA Telekom

  53. Slide 53: Capital Expenditures by Segment

    Capital Expenditures by Segment (EUR million) 3Q 08 3Q 07 % change 1-9M 08 1-9M 07 % change Fixed Net tangible 40.8 57.6 -29.2% 141.6 166.1 -14.8% Mobile Communication tangible 100.3 67.4 48.8% 274.1 250.8 9.3% Tangible 141.1 125.0 12.9% 415.7 416.9 -0.3% Fixed Net intangible 7.9 7.3 8.2% 39.6 22.7

  54. Slide 54: Net Debt - Telekom Austria Group

    Net Debt - Telekom Austria Group (EUR million) Sep 30, 2008 Dec 31, 2007 % change Long-term debt 3,605.3 3,389.3 6.4% Short-term debt 784.5 1,236.1 -36.5% - Short-term portion of capital and cross border lease obligations -30.3 -8.7 - + Capital lease obligations 1.0 1.0 -3.8% Cash and cash equivalen

  55. Slide 55: Solid Debt Maturity Profile and Sufficient Access to Liquidity for 2008

    Solid Debt Maturity Profile and Sufficient Access to Liquidity for 2008 Ratings: Debt Maturity Profile as of Sept 30, 2008 ƒ S&P: BBB+ (stable outlook) (EUR million) ƒ Moody‘s: A3 (stable outlook) 1,331 1,161 Ratio: 707 718 ƒ Net Debt / EBITDA (last 12 months): 258 2.2x 215 Selected long-term debt i

Telekom Austria Group — Q3 2008 Earnings Presentation on 6ix