Slide 1: Results for the first half and second quarter 2014
Results for the first half and second quarter 2014 Vienna, 13 August 2014
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: 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 3
Slide 4: 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 5: 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 6: 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 6
Slide 7: 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 8: 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 9: 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 10: 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 11: Cost savings result in stable EBITDA comparable (clean of extraordinary and FX effects)
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 12: 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 13: Focus points
Focus points Results for the first half and second quarter 2014 13
Slide 14: 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 15: 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 16: Broadband funding by the Austrian government
Broadband funding by the Austrian government 16
Slide 17: 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 18: "Direct2home" satellite product was awarded a prize by Global Telecoms Business (GTB)
"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 19: Outlook for the full year 2014
Outlook for the full year 2014 Results for the first half and second quarter 2014 19
Slide 20: 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 21: Appendix 1
Appendix 1 Results for the first half and second quarter 2014 21
Slide 22: 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 23: Cash-use policy – Focus remains on deleveraging via cash flow
Cash-use policy – Focus remains on deleveraging via cash flow 1st priority BBB (stable) 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 propos
Slide 24: 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 25: 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 26: 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 27: 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 28: 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 29: 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 30: 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 31: 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 32: 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 33: 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 34: 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 35: 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 36: 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 37: 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 38: 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 39: 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 40: 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 41: Appendix 2 – Regulatory topics
Appendix 2 – Regulatory topics Results for the first half and second quarter 2014 41
Slide 42: Telekom Austria Group roaming revenues
Telekom Austria Group roaming revenues 2012 2013 2016E 2012 2013 2016E
Slide 43: 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 44: 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 45: 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 46: Appendix 3 – Personnel restructuring in Austria
Appendix 3 – Personnel restructuring in Austria Results for the first half and second quarter 2014 46
Slide 47: 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 48: 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 49: Appendix 4 – Corporate sustainability
Appendix 4 – Corporate sustainability Results for the first half and second quarter 2014 49
Slide 50: 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 50
Slide 51: 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