Telekom Austria Ag · VIE:TKA
Telekom Austria — Q2 2014 Earnings Presentation
52 slides from Telekom Austria's earnings presentation, Aug 13, 2014
Slide 1: Roadshow Presentation Q2 2014 Results
Roadshow Presentation Q2 2014 Results
Slide 2: Cautionary statement
Cautionary statement 'This presentation contains forward-looking statements. These forward-looking statements are usually accompanied by words such as 'believe', 'intend', 'anticipate', 'plan', 'expect' and similar expressions. Actual events may differ materially from those anticipated in these forw
Slide 3: The leading regional communications player providing convergent telecommunication services
The leading regional communications player providing convergent telecommunication services as of 30 June 2014 (in ‘000, in %) Austria* Slovenia Belarus Mobile: Mobile: Mobile: > Market share: 41.5% (Q2 2013: 42.5%) > Market share: 29.8% (Q2 2013: 29.9%) > Market share: 42.5% (Q2 2013: 43.7%) > Subsc
Slide 4: Telekom Austria Group Strategy - Overview
Telekom Austria Group Strategy - Overview Results for the first half and second quarter 2014 4
Slide 5: Cash-use policy – Focus remains on deleveraging via cash flow
Cash-use policy – Focus remains on deleveraging via cash flow 1st priority BBB (stable) target rating is priority Current rating: Baa2 (outlook stable) by Moody’s and BBB (outlook stable) by S&P 2nd priority Financial flexibility 3rd priority Distribution policy Dividend 2014: EUR 0.05* * * Intended
Slide 6: Operational and financial highlights for the first half 2014
Operational and financial highlights for the first half 2014 Results for the first half and second quarter 2014 6
Slide 7: H1 2014 – Successful execution of strategy – focus on convergence and turnaround (1/2)
H1 2014 – Successful execution of strategy – focus on convergence and turnaround (1/2) > Group revenues decline by 7.3% and EBITDA comparable declines by 7.2% mainly driven by regulation, macro-economic effects in CEE as well as extraordinary effects of EUR 28.2 mn net in Austria > Clean (without ex
Slide 8: H1 2014 – Successful execution of strategy – focus on convergence and turnaround (2/2)
H1 2014 – Successful execution of strategy – focus on convergence and turnaround (1/2) > Belarus and Additional Markets segment achieve revenue and EBITDA comparable growth > Spectrum prolongations and acquisitions in Bulgaria and Slovenia strengthen network > Next step in implementation of successf
Slide 9: Key financial developments in the second quarter 2014
Key financial developments in the second quarter 2014 Results for the first half and second quarter 2014 9
Slide 10: Q2 2014: Extraordinary effects and impairment overshadow strong operational performance
Q2 2014: Extraordinary effects and impairment overshadow strong operational performance > Revenues decline by 3.1% and EBITDA (in EUR million) Q2 2014 Q2 2013 % change comparable grew by 2.0% on a clean Revenues 963.0 1,043.2 -7.7% basis** EBITDA comparable* 299.4 330.3 -9.3% > Regulatory impact on
Slide 11: EUR 28.2 mn extraordinary negative revenue net effect in Austria
EUR 28.2 mn extraordinary negative revenue net effect in Austria Background > Implementation of new revenue assurance Monthly fee and traffic: EUR -39.4 mn interface enables more accurate revenue Data and ICT: EUR -7.8 mn estimation Wholesale (incl. roaming): EUR 17.0 mn > Adjustments to operating r
Slide 12: EUR 400 mn impairment in Bulgaria due to WACC, macroeconomics and changed expectations
EUR 400 mn impairment in Bulgaria due to WACC, macroeconomics and changed expectations What changed Macroeconomic and political problems resurfaced in H1 2014 1,172 Competitive environment ~50% Downgrade of Bulgaria to BBB- (S&P) on 13.06.2014 ~50% 678 Reasons for impairment Market conditions:
Slide 13: Revenue decline driven mainly by extraordinary effects in Austria and regulatory interventions
Revenue decline driven mainly by extraordinary 1,250 effects in Austria and regulatory interventions 1,200 Quarterly revenue development 1,150 (in EUR million) -7.7% Regulatory effect: EUR -43.7 mn 1,100 1,043.2 -81.9 1,050 1,000 -9.8 8.9 4.2 963.0 -5.5 4.1 950 900 Revenues Austria Bulgaria Croatia
Slide 14: Cost savings result in stable EBITDA comparable
Cost savings result in stable EBITDA comparable (clean of extraordinary and FX effects) Quarterly EBITDA comparable development (in EUR million) -9.3% Regulatory effect: EUR -13.4 mn 330.3 -17.0 -4.2 -9.3 1.1 0.6 -2.0 299.4 EBITDA comp. Austria Bulgaria Croatia Belarus Additional Others* EBITDA comp
Slide 15: Free cash flow falls due to increased cash requirements for working capital
Free cash flow falls due to increased cash requirements for working capital (in EUR million) Q2 2014 Q2 2013 % change 1-6 M 2014 1-6 M 2013 % change Gross cash flow 303.4 299.4 1.3% 587.4 596.5 -1.5% Change in working capital -78.8 2.9 n.m. -213.9 -102.5 n.m. Cashflow from operating activities 224.5
Slide 16: Focus points
Focus points Results for the first half and second quarter 2014 16
Slide 17: Austria: Profitability benefits from approx. EUR 40 mn Opex savings in Q2 2014
Austria: Profitability benefits from approx. EUR 40 mn Opex savings in Q2 2014* Market-related costs: Enhancing customer profitability > Material expenses: Lower subsidies > Marketing and sales expenses: Less campaigning Internal costs: Enhancing operational efficiency (absolute Δ in EUR million) >
Slide 18: Austria: Strongly improved revenue trends – successful strategic focus on high value customers
Austria: Strongly improved revenue trends – successfull strategic focus on high value customers Fixed line KPIs Mobile KPIs +42.6% A1 classic subscribers -2.6% +6.0% 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14 TV costumers Bandwidth upgrades (16 Mbit +) 2Q 13 3Q 13 4Q 13 1Q 14 2Q 14
Slide 19: Broadband funding by the Austrian government
Broadband funding by the Austrian government EUR 200 mn broadband funding as of 2016 (Tranche 1) The tender process will begin in 2015 Funding program will be designed and executed analogous to the current ELER model Geographical focus points will be defined by the Austrian ministry for transp
Slide 20: Technological innovation: Network Function Virtualisation (NFV) - A paradigm shift for networks
Technological innovation: Network Function Virtualisation (NFV) - A paradigm shift for networks Advantage: Standardisation like container Declaration of Independence > Simpler and more automated networks * > Higher quality of delivered services > Enlarging the vendors’ space > Easier innovation Cost
Slide 21: "Direct2home" satellite product was awarded a prize by Global Telecoms Business
"Direct2home" satellite product was awarded a prize by Global Telecoms Business (GTB) Market & Customers Key Facts > Addressable market: 75 Mio. households in CEE > Product launch September 2013 > Vipnet: 28.500 end-customers active > Revenue H1 2014: approx. EUR 1 mn > Mobiltel: planned launch with
Slide 22: Outlook for the full year 2014
Outlook for the full year 2014 Results for the first half and second quarter 2014 22
Slide 23: Telekom Austria Group outlook for the full year 2014 refined
Telekom Austria Group outlook for the full year 2014 refined Financial outlook for 2014 refined 13 August 2014 26 February 2014 Revenues Revenues Approx. -3.5% Approx. -3.0% CAPEX* CAPEX* EUR 650-700 mn Approx. EUR 700 mn Proposed Proposed Dividend** dividend** EUR 0.05 EUR 0.05 * Does not include i
Slide 24: Appendix 1
Appendix 1 Results for the first half and second quarter 2014 24
Slide 25: Telekom Austria Group – Revenue breakdown
Telekom Austria Group – Revenue breakdown Revenue Split - Segment Austria (in EUR million) Q2 2014 Q2 2013 % change Monthly fee and traffic 413.6 457.6 -9.6% Data and ICT solutions 45.7 53.0 -13.8% Wholesale (incl. Roaming) 48.1 36.3 32.6% Interconnection 47.3 70.7 -33.2% Equipment 20.3 42.2 -52.0%
Slide 26: Telekom Austria Group – Expense breakdown
Telekom Austria Group – Expense breakdown Operating Expense - Segment Austria (in EUR million) Q2 2014 Q2 2013 % change Material expense 55.8 81.8 -31.8% Employee costs 167.5 174.0 -3.7% Interconnection 44.4 65.2 -31.8% Maintenance and repairs 26.0 25.1 3.5% Services received 29.3 29.7 -1.5% Other s
Slide 27: Telekom Austria Group – Headcount development
Telekom Austria Group – Headcount development FTE (Average period) Q2 2014 Q2 2013 % change Austria 8,854 9,234 -4.1% International 7,034 7,029 0.1% Telekom Austria Group* 16,062 16,418 -2.2% FTE (End of period) Q2 2014 Q2 2013 % change Austria 8,837 9,225 -4.2% International 7,035 6,975 0.9% Teleko
Slide 28: Telekom Austria Group – Capital expenditures split
Telekom Austria Group – Capital expenditures split Capital Expenditures (in EUR million) Q2 2014 Q2 2013 % change Segment Austria 79.9 122.4 -34.7% Segment Bulgaria 41.2 12.7 223.2% Segment Croatia 18.4 14.7 25.2% Segment Belarus 7.3 7.3 -0.1% Segment Additional Markets 82.8 19.3 n.m. Slovenia 70.6
Slide 29: Telekom Austria Group – Net debt
Telekom Austria Group – Net debt Net debt (in EUR million) 30 June 2014 31 December 2013 % change Long-term debt 3,084.5 3,737.7 -17.5% Short-term borrowings* 805.4 232.2 246.9% Cash and cash equivalents, short-term and long term investments, installment sales, finance lease receivables -201.7 -274.
Slide 30: Telekom Austria Group – Debt maturity profile
Telekom Austria Group – Debt maturity profile Debt Maturity Profile (Including Accrued Interest)* (in EUR million) 824.6 742.3 741.0 566.5 304.6 297.7 220.7 114.2 62.7 15.4 2014** 2015 2016 2017 2018 2019 2020 2021 2022 2023 > EUR 3,889.8 mn of short- and long-term borrowings as of 30 June 2014** >
Slide 31: Telekom Austria Group – Debt profile
Telekom Austria Group – Debt profile Overview debt instruments Fixed-floating mix 4.8% 20.8% 79.2% 95.2% Loans Bonds Floating Fix Lines of credit Ratings > Undrawn committed credit lines > S&P: BBB (outlook stable) amounting to EUR 1,060 mn > Moody’s: Baa2 (outlook stable) > Average term to maturity
Slide 32: 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 EUR million) (in ‘000) 30.8 30.9 31.3 30.6 2,274 2,274 2,284 2,288 2,275 30.3 213.7 10.3 3.8 210.4 210.6 210.2 207.4 -0.6 -6.8 -12.6 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2
Slide 33: Segment Austria – Mobile key performance indicators
Segment Austria* – Mobile key performance indicators ARPU & ARPU-relevant revenues* MoU per subscriber* (in EUR) (in min) 16.3 16.3 15.7 15.2 16.2 143.8 143.8 144.0 138.4 133.4 283.8 282.3 268.8 270.2 259.2 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 ARPU ARPU relevant revenues Mobil
Slide 34: Segment Austria – Broadband market split
Segment Austria – Broadband market split Market share total broadband* Market share mobile broadband* (in %) (in %) 7.7% 7.1% 13.0% 16.3% Tele.ring T-mobile 40.0% 41.9% Hutchison 29.7% Mobile Broadband 31.0% Other Operations A1 Unbundled Lines 5.2% 39.3% 34.7% 4.8% 15.3% Cable 16.2% Q2 13 Q2 14 A1 M
Slide 35: Segment Austria – Voice market split
Segment Austria – Voice market split Market share total minutes Market share fixed-line minutes (in %) (in %) 13.5% 13.9% 4.5% 3.9% 21.4% 22.3% 86.2% 86.7% 60.6% 59.9% 5.2% 5.2% 8.5% 8.2% Q2 13 Q2 14 Q2 13 Q2 14 Fixed Line Telekom Austria Fixed Line Others Mobile A1 Tele2/UTA UPC Others Results for
Slide 36: Segment Bulgaria – Fixed-line key performance indicators
Segment Bulgaria* – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total fixed access lines (in EUR, in EUR million) (in ‘000) 14.0 14.3 14.5 13.2 13.2 163.5 160.4 159.9 6.7 6.8 6.7 6.5 6.4 154.4 153.0 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 ARPL ARPL-relevan
Slide 37: Segment Bulgaria – Mobile key performance indicators
Segment Bulgaria* – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 129.6 125.3 126.0 125.2 6.5 6.5 122.1 6.3 6.2 6.0 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 207.6 217.1 146.1% 192.9 144.8%
Slide 38: Segment Croatia – Fixed-line key performance indicators
Segment Croatia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total fixed access lines (in EUR, in EUR million) (in ‘000) 22.7 22.6 22.1 21.6 21.3 202.1 208.0 193.1 13.2 188.8 12.7 12.8 179.3 12.4 11.9 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 ARPL ARPL-rele
Slide 39: Segment Croatia – Mobile key performance indicators
Segment Croatia – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 136.4 146.6 12.0 130.6 129.4 129.8 11.7 11.1 11.1 10.5 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 199.8 121.0% 178.2 168.8 173
Slide 40: Segment Belarus – Mobile key performance indicators
Segment Belarus – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 4.9 5.0 198.5 197.0 197.7 194.6 4.7 4.7 4.7 184.6 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 123.0% 122.8% 262.3 121.6% 252.6
Slide 41: Segment Additional Markets – Mobile key performance indicators
Segment Additional Markets – Mobile key performance indicators Slovenia - ARPU Slovenia - MoU per subscriber (in EUR) (in min) 188.7 190.7 192.2 185.8 20.8 21.4 19.8 19.8 176.1 17.2 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Republic of Serbia - ARPU Republic of Macedonia - ARPU (in
Slide 42: Appendix 2 – Regulatory topics
Appendix 2 – Regulatory topics Results for the first half and second quarter 2014 42
Slide 43: Negative impact from regulation in 2013 - 2016
Negative impact from regulation in 2013 - 2016 Telekom Austria Group roaming Telekom Austria Group revenues interconnection revenues EUR -64 mn Approx. EUR -58 mn Approx. EUR -130 mn* EUR -160 mn** 2012 2013 2016E 2012 2013 2016E Negative regulatory impact for 2013 is included in outlook for 2014 *
Slide 44: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates EU Pressure on National Regulatory Authorities to Further Decrease Rates (in EURc) Jul Nov Jan Jul Sep Jan Jul 2013 2013 2014 2014 2014 2015 2015 Austria 2.01 0.8049 0.8049 0.8049 0.8049 0.8049 0.8049 Bulgaria 1.18 1.18 1.02 1.02 1.02 0.97 0.97 Croatia 2.54** 2
Slide 45: EU Roaming Price Regulation
EU Roaming Price Regulation RETAIL (in EURc) Before July 2012 July 2013 July 2014 Data (per MB) none 70 45 20 Voice-calls made (per minute) 35 29 24 19 Voice-calls received (per minute) 11 8 7 5 SMS (per SMS) 11 9 8 6 WHOLESALE (in EURc) Before July 2012 July 2013 July 2014 Data (per MB) 50 25 15 5
Slide 46: Upcoming spectrum tenders/prolongations/assignments
Upcoming spectrum tenders/prolongations/assignments Tender planned/expected Comments Austria 2019 (2100 MHz) 800 MHz, 1800 MHz, 2100: undecided Bulgaria 2015 (2600 MHz) 2015 (2100 MHz) 2100 MHz: 1x 5 MHz Croatia 2016 (2600 MHz) 2600 MHz: Tender foreseen in 2016 900 & 1800 MHz: Spectrum holdings in B
Slide 47: Appendix 3 – Personnel restructuring in Austria
Appendix 3 – Personnel restructuring in Austria Results for the first half and second quarter 2014 47
Slide 48: Quarterly overview – Restructuring charges and provision vs. FTE
Quarterly overview – Restructuring charges and provision vs. FTE Overview restructuring charges FTEs addressed (in EUR million) Q1 Q2 Q1 Q2 2009 2010 2011 2012 2013 2014 2014 2009 2010 2011 2012 2013 2014 2014 Transfer to FTE effect -10.0 76.9 274.3 49.9 149.0 8.8 10.4 0 158 106 44 22 11 11 governme
Slide 49: Overview – Cash flow impact of restructuring
Overview – Cash flow impact of restructuring Overview cash flow impact* (in EUR million) Total cash-flow impact > Total cash flow impact comprises old 2008 14.7 and new programmes 2009 62.0 > Cash flow impact for Q2 2014 of EUR 2010 57.9 2011 93.4 28.3 mn 2012 104.0 > Total expected cash flow impact
Slide 50: Appendix 4 – Corporate sustainability
Appendix 4 – Corporate sustainability Results for the first half and second quarter 2014 50
Slide 51: Alignment with core business and materiality analysis define sustainability strategy
Alignment with core business and materiality analysis define sustainability strategy Results for the first half and second quarter 2014 51
Slide 52: Key figures
Key figures Selected Group-wide KPIs Ratings Products: Providing Responsible Products 2013 Customer contacts in customer service ('000) 40.640 Employees in customer service (in FTE) 3.627 ›Classification: C ›Classification: C+ (74 points out of 100) Environment: Living Green* 2013 Total CO2 Emission