Telekom Austria Ag · VIE:TKA

Telekom Austria — A1 Telekom Austria Group — Q1 2019 Earnings Presentation

52 slides from Telekom Austria's earnings presentation, Apr 29, 2019

  1. Slide 1: Results for the first quarter 2019

    Results for the first quarter 2019 April 29, 2019, Vienna

  2. 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

  3. Slide 3: Operational and financial highlights for the first quarter

    Operational and financial highlights for the first quarter

  4. Slide 4: Highlights Q1 2019

    Highlights Q1 2019  Service revenue growth in all countries (+2.9% on Group level) and 1.9% higher EBITDA excl. restructuring, driven by a strong CEE contribution  Ongoing shift from prepaid to contract together with M2M benefits the mobile contract customer base (+3.6%); migrations to higher tari

  5. Slide 5: Strong service revenue trends translated into EBITDA growth

    Strong service revenue trends translated into EBITDA growth IFRS 16 IFRS 16 based Group (in EUR million) Q1 2019 Q1 2018 % change Total revenues 1,089.5 1,073.1 1.5% EBITDA 374.1 387.8 -3.5% excl. restructuring* 395.0 387.8 1.9% CAPEX 157.9 145.3 8.6%  Service revenue growth in all markets with gro

  6. Slide 6: Austria: Ongoing sound operational trends

    Austria: Ongoing sound operational trends; y-o-y impacted by positive effects in Q1 18 and lower equipment margin ARPU ARPL Operational data (in EUR) (in EUR)  Ongoing high demand for mobile WiFi routers and sound development Δ: +2.5% in high-value tariffs both benefit postpaid subscriber base (+1.

  7. Slide 7: Service revenue and EBITDA growth in all CEE segments in Q1 2019

    Service revenue and EBITDA growth in all CEE segments in Q1 2019 Highlights CEE EBITDA (in EUR mn) Bulgaria:  Fixed-line service revenue growth driven by both business and residential segment as well as TV offers Δ: +1.8%  Mobile: Ongoing solid trends in both business and residential segment Δ: +1

  8. Slide 8: Lower free cash flow due to higher CAPEX paid and working capital needs

    Lower free cash flow due to higher CAPEX paid and working capital needs (in EUR million) Q1 2019 Q1 2018 % change Net cash flow from operating activities 308.1 323.7 -4.8% Capital expenditures paid -216.1 -187.7 15.1% Lease principal paid -53.8 -52.1 3.4% Proceeds from sale of plant, property and eq

  9. Slide 9: Focus Points

    Telekom Austria

  10. Slide 10: Adoption of IFRS 16 – Summary of main impacts

    Adoption of IFRS 16 – Summary of main impacts  Lease contracts are capitalized resulting in RoU assets of Balance Sheet EUR 1,011 mn and lease liabilities of EUR 1,003 mn  Mobile sites ~50% of total RoU assets; average term of 7 years  Elimination of operating lease expense (OPEX) and booking as

  11. Slide 11: Austria: 3.5 GHz result below European average; CAPEX-efficient technology-mix

    Austria: 3.5 GHz result below European average; Network roll- out to be continued with CAPEX-efficient technology-mix  A1 Group acquired 100-140 MHz (depending on the TKA will continue to pursue CAPEX- region) for a total amount of EUR 64.3 mn (in CAPEX in efficient network roll-out Q2 2019).  The

  12. Slide 12: Close coordination of segments and customization allows profitable growth in CEE

    Close coordination of segments and customization to local requirements allows profitable growth in CEE  Rising contributions from all markets allows service revenue growth across CEE  Strengthened fixed-line proposition through organic growth and bolt-on M&A  Selective content investments benefit

  13. Slide 13: Belarus: cooperation with monopolist enables 4G services; rebranding started

    Belarus: cooperation with monopolist enables 4G services to customers; 3G capacity extended, rebranding started LTE cooperation & additional 3G frequencies Rebranding  Acquisition of additional spectrum (5 Mhz)  Phased rebranding started on April 8, 2019 in 2.1 Ghz which will extend the 3G capacit

  14. Slide 14: Outlook for the full year 2019

    Outlook for the full year 2019

  15. Slide 15: A1 Telekom Austria Group outlook for the full year 2019 unchanged

    A1 Telekom Austria Group outlook for the full year 2019 unchanged April 29, 2019 Consensus 2019 Total revenues ~+2% +1.6% CAPEX ~ EUR 770 mn EUR 768 mn* Proposed dividend EUR 0.21 / share - *CAPEX consensus excl. spectrum  Outlook based on reported figures; assumed devaluation of BYN vs. EUR of up

  16. Slide 16: Appendix 1

    Appendix 1 All figures are stated according to IFRS 16 on a reported basis

  17. Slide 17: The leading regional communications player providing convergent telecommunication services

    The leading regional communications player providing convergent telecommunication services as of March 31, 2019 (in ‘000) Austria Bulgaria Croatia Mobile market position #1 Mobile market position: #1 Mobile market position #2 Mobile subscribers: Mobile subscribers: Mobile subscribers:  5,309 (Q1 20

  18. Slide 18: A1 Telekom Austria Group – Profit and Loss

    A1 Telekom Austria Group – Profit and Loss (in EUR million) Q1 2019 Q1 2018 % change Service Revenues 924.4 898.5 2.9% Equipment Revenues 143.5 153.7 -6.6% Other operating income 21.5 20.9 3.1% Total Revenues 1,089.5 1,073.1 1.5% Cost of Service -316.2 -312.7 -1.1% Cost of Equipment -142.8 -140.4 -1

  19. Slide 19: Total revenues & costs and expenses per segment

    A1 Telekom Austria Group – Total revenues & costs and expenses per segment A1 Telekom Austria Group - Total Revenue Split Total Revenues (in EUR million) Q1 2019 Q1 2018 % change Austria 646.8 652.4 -0.9% Bulgaria 111.1 107.0 3.9% Croatia 102.1 99.5 2.6% Belarus 93.8 88.4 6.1% Slovenia 51.2 48.8 4.8

  20. Slide 20: Headcount development

    A1 Telekom Austria Group – Headcount development FTE (Average Period) Q1 2019 Q1 2018 % change Austria 7,960 8,241 -3.4% International 10,354 10,263 0.9% Corporate 380 348 9.4% A1 Telekom Austria Group 18,695 18,852 -0.8% FTE (End of Period) Q1 2019 Q1 2018 % change Austria 7,961 8,239 -3.4% Interna

  21. Slide 21: Capital expenditure split

    A1 Telekom Austria Group – Capital expenditure split Capital Expenditures (in EUR million) Q1 2019 Q1 2018 % change Austria 109.0 102.2 6.6% Bulgaria 10.1 11.1 -8.5% Croatia 24.7 13.8 79.7% Belarus 6.7 7.3 -8.9% Slovenia 2.2 3.1 -29.9% Republic of Serbia 2.7 5.6 -51.1% Republic of Macedonia 1.5 2.4

  22. Slide 22: Net debt

    A1 Telekom Austria Group – Net debt per March 31, 2019 Net Debt pre IFRS 16 (in EUR million) 31 March 2019 31 December 2018 % change Long-term Debt 2,537.2 2,536.8 0.0% Short-term Borrowings 199.5 245.3 -18.7% Cash and Cash Equivalents and Short-term Investments -53.3 -63.6 16.2% Net Debt pre IFRS 1

  23. Slide 23: Financial debt maturity profile

    A1 Telekom Austria Group – Financial debt maturity profile as of March 31, 2019 747.2 746.5 744.6 298.9 199.5 0.0 0.0 0.0 2019 2020 2021 2022 2023 2024 2025 2026  EUR 2,736.7 mn short-and long-term borrowings as of 31 March 2019  Average cost of debt of 2.73%  Cash and cash equivalents and short-

  24. Slide 24: Debt profile

    A1 Telekom Austria Group – Debt profile as of March 31, 2019 Overview debt instruments Fixed/floating mix 7% 7% 93% 93% Bonds Loans Fixed Floating Lines of credit Ratings  Undrawn committed credit lines  S&P: BBB (positive outlook) amounting to EUR 1,215 mn  Moody’s: Baa1 (stable outlook)  Avera

  25. Slide 25: Segment Austria – Fixed-line key performance indicators

    Segment Austria – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 30.8 31.1 31.2 30.4 30.4 3,378.7 3,362.7 3,334.3 3,327.7 3,303.3 192.6 191.3 191.6 192.1 190.6 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPL ARPL-rel

  26. Slide 26: Segment Austria – Mobile key performance indicators

    Segment Austria – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 1.7 14.5 14.5 14.8 14.2 14.4 1.5 1.6 1.5 1.5 235.0 231.2 230.6 230.9 226.8 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies (incl. promoti

  27. Slide 27: Segment Austria – Broadband market split

    Segment Austria – Broadband market split* Market share total broadband Market share mobile Market share fixed- (in %) broadband line broadband (in %) (in %) 2.5 2.7 4.4 4.6 35.2 36.6 Mobile Broadband Other Operators 23.6 25.5 16.8 17.5 Unbundled Lines 3.5 3.0 22.7 23.5 Cable 16.6 36.7 35.0 4.1 3.9 1

  28. Slide 28: Segment Bulgaria – Fixed-line key performance indicators

    Segment Bulgaria – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 12.8 12.9 1,017.6 1,029.0 1,028.7 1,005.1 1,014.7 12.5 12.6 12.2 20.6 20.8 19.8 20.1 19.3 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPL ARPL-relevan

  29. Slide 29: Segment Bulgaria – Mobile key performance indicators

    Segment Bulgaria – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 2.4 2.0 5.0 5.2 5.2 5.2 5.4 1.5 1.4 1.4 61.6 62.8 61.8 61.8 59.6 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies (incl. promotional deal

  30. Slide 30: Segment Croatia – Fixed-line key performance indicators

    Segment Croatia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 694.9 30.3 30.3 30.5 681.8 30.1 30.1 668.5 655.4 658.2 26.7 26.8 26.7 26.7 27.2 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPL ARPL-relevant revenues

  31. Slide 31: Segment Croatia – Mobile key performance indicators

    Segment Croatia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 12.1 3.2 2.9 11.0 2.4 10.0 10.1 9.9 2.0 1.7 67.1 58.4 56.6 53.8 52.8 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies (incl. promotional d

  32. Slide 32: Segment Belarus – Fixed-line key performance indicators

    Segment Belarus – Fixed-line key performance indicators ARPL & ARPL-relevant revenues* Total RGUs* (in EUR, in EUR million) (in ‘000) 6 5 7 .3 6 4 0 .2 6 1 4 .9 6 1 5 .8 4 7 5 .5 5 .9 5 .6 5 .6 5 .5 5 .4 5 .4 6 .4 6 .9 7 .0 7 .1 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPL ARPL-r

  33. Slide 33: Segment Belarus – Mobile key performance indicators

    Segment Belarus – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 4.3 4.4 1.7 4.1 4.2 4.2 1.6 1.5 1.4 1.4 63.2 63.9 59.0 60.9 61.0 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies (incl. promotional deals

  34. Slide 34: Segment Slovenia – Fixed-line key performance indicators

    Segment Slovenia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 36.7 36.4 186.6 35.7 35.5 34.8 182.1 176.9 178.1 171.4 8.2 7.8 7.6 7.6 7.6 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPL ARPL-relevant revenues Fixe

  35. Slide 35: Segment Slovenia – Mobile key performance indicators

    Segment Slovenia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 15.1 1.6 14.6 1.5 14.4 1.3 1.3 13.7 14.0 1.3 30.5 31.5 30.1 29.4 28.8 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies Mobile penetration

  36. Slide 36: Segment Serbia – Mobile key performance indicators

    Segment Serbia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 3.2 3.1 3.1 3.2 6.9 7.2 2.7 6.5 6.5 6.8 47.4 45.1 44.6 43.1 42.5 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies (incl. promotional deals)

  37. Slide 37: Segment North Macedonia – Fixed-line key performance indicators

    Segment North Macedonia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 394.6 383.1 11.9 367.8 348.6 355.6 11.5 11.4 11.3 11.2 5.5 5.3 5.5 5.2 5.6 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPL ARPL-relevant revenu

  38. Slide 38: Segment North Macedonia – Mobile key performance indicators

    Segment North Macedonia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 2.6 5.8 5.7 1.7 1.7 5.3 5.4 5.4 1.4 1.2 18.9 18.0 17.0 17.3 17.2 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 Q1 18 Q2 18 Q3 18 Q4 18 Q1 19 ARPU Service revenues Subsidies (incl. promotion

  39. Slide 39: Appendix 2 – Adoption of IFRS 16

    Appendix 2 – Adoption of IFRS 16

  40. Slide 40: Adoption of IFRS 16 – impact on the balance sheet

    Adoption of IFRS 16 – impact on the balance sheet IAS 17 IFRS 16 Operating Finance Lease All leases Lease Assets  Discounted future payments of all lease contracts are capitalized resulting in RoU assets of EUR 1,011 mn and lease liabilities of EUR 1,003 mn Liabilities  Optional exceptions for low

  41. Slide 41: Adoption of IFRS 16 – impact on the income statement

    Adoption of IFRS 16 – impact on the income statement IAS 17 IFRS 16 Operating Finance Lease All Leases Lease Revenues  Elimination of operating lease expense Lease (OPEX) and booking as depreciation and OPEX Expenses interest expenses under IFRS 16 EBITDA  IFRS 16 impact on earnings ratios FY Depr

  42. Slide 42: Adoption of IFRS 16 – impact on net debt

    Adoption of IFRS 16 – impact on net debt Dec 31, Mar 31, Dec 31, Mar 31, 2018 2019 2018 2019 pre IFRS 16 pre IFRS 16 IFRS 16 IFRS 16 in EUR mn based Gross debt 2,782.0 2,736.7 3,784.4 3,701.1 - Cash & cash equivalents -63.6 -53.3 -63.6 -53.3  Significant increase in financial Net debt 2,718.4 2,683

  43. Slide 43: Appendix 3 – Regulatory topics

    Appendix 3 – Regulatory topics

  44. Slide 44: Glide Path of Mobile Termination Rates

    Glide Path of Mobile Termination Rates No further reductions expected in 2019 Jul Jan Jul Jan Jul Jan 2015 2016 2016 2017 2017 2018 Austria (EUR) 0.008049 0.008049 0.008049 0.008049 0.008049 0.008049 Bulgaria (BGN) 0.019 0.019 0.019 0.014 0.014 0.014 Croatia (HRK)* 0.063 0.063 0.063 0.063 0.047 0.04

  45. Slide 45: Upcoming spectrum tenders/prolongations/assignments

    Upcoming spectrum tenders/prolongations/ assignments* Expected Comments 2020 (700, 1500, 2100 MHz) Austria 700/1500/2100 MHz auction planned for Q1/2020 2020 (2300 MHz) 2019 (800, 1800, 2100 MHz) Bulgaria 2020 (2600, 3400-3800 MHz) 2019 (2600 MHz) Croatia 2021 (700 MHz) 2020 (3500 MHz) Belarus 2021

  46. Slide 46: EU roaming price regulation

    EU roaming price regulation RETAIL (in EURc) July 2014 April 30, 2016 June 15, 2017 Data (per MB) 20 domestic tariff + 5* domestic tariff Voice-calls made 19 domestic tariff + 5* domestic tariff (per minute) Voice-calls received 5 weighted average MTR 0 (per minute) SMS (per SMS) 6 domestic tariff +

  47. Slide 47: Appendix 4 – Personnel restructuring in Austria

    Appendix 4 – Personnel restructuring in Austria

  48. Slide 48: Full Year Overview – Restructuring charges and provision vs. FTE

    Full Year Overview – Restructuring charges and provision vs. FTE Overview restructuring charges FTEs addressed (in EUR million) 2013 2014 2015 2016 2017 2018 Q1 19 2013 2014 2015 2016 2017 2018 Q1 19 Transfer to government 22 52 49 6 3 0 0 FTE reduction 149.0 86.4* 69.5** 95.0 9.1 70.1 19.6 Social p

  49. Slide 49: Overview – Cash flow impact of restructuring

    Overview – Cash flow impact of restructuring Restructuring cash flow impact Restructuring outlook 2019f Cash flow impact (in EUR million)  Restructuring charges of ~EUR 80 mn p.a. 2013 108.0 expected for the next few years addressing 2014 107.1 civil servants 2015 101.9  Target: decrease workforce

  50. Slide 50: Appendix 5 – Corporate sustainability

    Appendix 5 – Corporate sustainability

  51. 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 quarter 2019 51

  52. Slide 52: Key figures – Corporate Sustainability

    Key figures – Corporate Sustainability Selected group-wide KPIs Ratings Environment 2018 Total CO2 emissions (Scope 1+2 market-based in tonnes) 244,313 Classification: B Classification: B- Energy efficiency index (in Mwh/terabyte) 0.18 Paper consumption (in kg) 1,301,796 Collected old mobile phones

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