Telekom Austria Ag · VIE:TKA
Telekom Austria — Q1 2014 Earnings Presentation
49 slides from Telekom Austria's earnings presentation, May 8, 2014
Slide 1: Results for the first quarter 2014
Results for the first quarter 2014 Vienna, 8 May 2014 1
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: Agenda
Agenda > Operational and financial highlights for the first quarter 2014 > Key financial developments in the first quarter 2014 > Focus points > Outlook for the full year 2014 > Appendix Results for the first quarter 2014 3
Slide 4: Operational and financial highlights for the first quarter 2014
Operational and financial highlights for the first quarter 2014 Results for the first quarter 2014 4
Slide 5: Q1 2014 – Improved EBITDA comparable margin while revenues continue to decline
Q1 2014 – Improved EBITDA comparable margin while revenues continue to decline > 7.0% year-on-year revenue decline driven by Austria and FX translation in Belarus; better trends in Bulgaria > EUR 56.6 mn OPEX savings driven by lower subsidies in Austria > Rising EBITDA comparable margins in Austria
Slide 6: Key financial developments in the first quarter 2014
Key financial developments in the first quarter 2014 Results for the first quarter 2014 6
Slide 7: Q1 2014: Continuing operational challenges as some trends start to improve
Q1 2014: Continuing operational challenges as some trends start to improve (in EUR million) Q1 2014 Q1 2013 % change > 7% revenue decline driven by mobile Revenues 975.9 1,049.0 -7.0% service revenue decline in Austria, mobile price pressure in Bulgaria, regulation in EBITDA comparable* 319.9 336.9
Slide 8: Group revenue decline primarily driven by Segment Austria
Group revenue decline primarily driven by Segment Austria Quarterly revenue development (in EUR million) -7.0% Regulatory effect: EUR -44.3 mn 1,049.0 -65.9 -6.3 -8.9 -0.6 6.7 2.0 975.9 Revenues Austria Bulgaria Croatia Belarus Additional Others* Revenues Q1 2013 Markets Q1 2014 Segment Austria Inte
Slide 9: Considerably improved EBITDA trends in Austria and Bulgaria
Considerably improved EBITDA trends in Austria and Bulgaria Quarterly EBITDA comparable development (in EUR million) -5.0% Regulatory effect: EUR -14.4 mn 336.9 -12.0 -2.3 -6.6 0.4 3.4 0.1 319.9 EBITDA comp. Austria Bulgaria Croatia Belarus Additional Others* EBITDA comp. Q1 2013 Markets Q1 2014 Seg
Slide 10: Free cash flow rises as lower CAPEX offsets declining gross cash flow
Free cash flow rises as lower CAPEX offsets declining gross cash flow (in EUR million) Q1 2014 Q1 2013 % change Gross cash flow 284.0 297.1 -4.4% Change in working capital -135.1 -105.4 n.m. Cashflow from operating activities 148.9 191.8 -22.4% Ordinary capital expenditures -99.4 -149.0 n.m. Proceed
Slide 11: Focus points
Focus points Results for the first quarter 2014 11
Slide 12: Austria: continued push for value generation with focus on existing customers in Q1
Austria: continued push for value generation with focus on existing customers in Q1 Announced Effective Announced Effective January 2014 February 2014 March 2014 April 2014 May 2014 June 2014 Announced Effective > Focus Q1 2014: Existing no-frill and premium mobile as well as fixed-line contract cus
Slide 13: Potential new MVNOs will add to existing competitive landscape
Potential new MVNOs will add to existing competitive landscape Expected new MVNOs Existing MVNOs/resellers Brand Timing Host ? ? ? > Regulation: 3 is required to accept up to 16 MVNOs and provide up to 30% of its network capacity > MVNOs represent a combined market share of below 2%* * Company data;
Slide 14: Digital Single Market (DSM): European parliament amends EC proposal
Digital Single Market (DSM): European parliament amends EC proposal EC proposal EP amended Reduction of international call charges No regulation because of existing and Intra-EU calls within the EU to domestic levels functioning competition Harmonised and strict customer protection End-user Consumer
Slide 15: Digital Single Market (DSM): Further negotiations expected after EU parliament elections
Digital Single Market (DSM): Further negotiations expected after EU parliament elections 3 Apr 22-25 May 6 Jul Nov Timing Elections ‘Trialogue’* or and meetings x outcome unknown DSM passed Progress report Inauguration > Amended TSM proposal passed in European Parliament on 3 April > Council of th
Slide 16: Spectrum sales in Bulgaria and Slovenia in line with expectations
Spectrum sales in Bulgaria and Slovenia in line with expectations Slovenia Bulgaria > 800 MHz: 2 x 10 MHz New spectrum > 2600 MHz: 2 x 35 MHz - (FDD*) + 25 MHz (TDD**) > 900 MHz: 2 x 15 MHz > 900 MHz: 2 x 11.2 MHz Existing spectrum > 1800 MHz: 2 x 30 MHz > 1800 MHz: 2 x 10 MHz > 2100 MHz: 25 MHz (TD
Slide 17: Outlook for the full year 2014
Outlook for the full year 2014 Results for the first quarter 2014 17
Slide 18: Telekom Austria Group outlook for the full year 2014 remains unchanged
Telekom Austria Group outlook for the full year 2014 remains unchanged Financial outlook for 2014 unchanged Before any effects of hyperinflation accounting for the Belarusian segment 8 May 2014 26 February 2014 Revenues Revenues Approx. -3% Approx. -3% CAPEX* CAPEX* Approx. EUR 700 mn Approx. EUR 70
Slide 19: Appendix
Appendix 1 Results for the first quarter 2014 19
Slide 20: The leading regional communications player providing convergent telecommunication services
The leading regional communications player providing convergent telecommunication services as of 31 March 2014 (in ‘000, in %) Austria* Slovenia Belarus Mobile: Mobile: Mobile: > Market share: 42.1% (Q1 2013: 42.9%) > Market share: 29.9% (Q1 2013: 30.0%) > Market share: 42.9% (Q1 2013: 43.6%) > Subs
Slide 21: Cash-use policy – Focus remains on deleveraging via cashflow
Cash-use policy – Focus remains on deleveraging via cashflow 1st priority BBB (stable) target rating is priority Current rating: Baa2 (outlook stable) by Moody’s and BBB- (credit watch positive) by S&P 2nd priority Financial flexibility 3rd priority Distribution policy Dividend 2013 and 2014: EUR 0.
Slide 22: Telekom Austria Group – Revenue breakdown
Telekom Austria Group – Revenue breakdown Revenue Split - Segment Austria (in EUR million) Q1 2014 Q1 2013 % change Monthly fee and traffic 446.4 469.7 -5.0% Data and ICT solutions 54.4 53.1 2.5% Wholesale (incl. Roaming) 40.7 41.8 -2.5% Interconnection 44.9 68.4 -34.4% Equipment 23.0 43.5 -47.0% Ot
Slide 23: Telekom Austria Group – Expense breakdown
Telekom Austria Group – Expense breakdown Operating Expense - Segment Austria (in EUR million) Q1 2014 Q1 2013 % change Material expense 52.3 81.2 -35.6% Employee costs 176.7 175.8 0.6% Interconnection 42.1 67.2 -37.5% Maintenance and repairs 22.7 23.0 -1.3% Services received 27.6 27.2 1.2% Other su
Slide 24: Telekom Austria Group – Headcount development
Telekom Austria Group – Headcount development FTE (Average period) Q1 2014 Q1 2013 % change Austria 8,866 9,191 -3.5% International 7,073 7,144 -1.0% Telekom Austria Group* 16,111 16,495 -2.3% FTE (End of period) Q1 2014 Q1 2013 % change Austria 8,895 9,235 -3.7% International 7,020 7,105 -1.2% Tele
Slide 25: Telekom Austria Group – Capital expenditures split
Telekom Austria Group – Capital expenditures split Capital Expenditures (in EUR million) Q1 2014 Q1 2013 % change Segment Austria 61.5 102.1 -39.8% Segment Bulgaria 6.6 11.1 -40.3% Segment Croatia 12.6 14.4 -12.1% Segment Belarus 8.3 4.2 98.5% Segment Additional Markets 10.4 17.2 -39.6% Slovenia 3.1
Slide 26: Telekom Austria Group – Net debt
Telekom Austria Group – Net debt Net debt (in EUR million) 31 March 2014 31 December 2013 % change Long-term debt 3,735.5 3,737.7 -0.1% Short-term borrowings* 255.2 232.2 9.9% Cash and cash equivalents, short-term and long term investments, installment sales, finance lease receivables -320.2 -274.1
Slide 27: Telekom Austria Group – Debt maturity profile
Telekom Austria Group – Debt maturity profile Debt Maturity Profile (Including Accrued Interest)* (in EUR million) 824.4 742.0 740.7 566.3 280.5 297.6 240.3** 220.7 62.7 15.4 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 > EUR 3,990.7 mn of short- and long-term borrowings as of 31 March 2014 > A
Slide 28: Telekom Austria Group – Debt profile
Telekom Austria Group – Debt profile Overview debt instruments Fixed-floating mix 7.0% 22.7% 77.3% 93.0% Bonds Loans Floating Fixed Lines of credit Ratings > Undrawn committed credit lines > S&P: BBB- (credit watch positive) amounting to EUR 1,010 mn > Moody’s: Baa2 (outlook stable) > Average term t
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 EUR million) (in ‘000) 32.2 30.8 30.9 31.3 30.6 2,281 2,274 2,284 2,288 2,274 220.8 213.7 10.3 210.4 210.6 210.2 -2.8 -1.3 -1.3 -6.8 -0.6 -0.6 +10.3 3.8 -6.8 Q1 13 Q2
Slide 30: Segment Austria – Mobile key performance indicators
Segment Austria* – Mobile key performance indicators ARPU & ARPU-relevant revenues* MoU per subscriber* (in EUR) (in min) 16.1 16.3 16.3 15.7 143.8 143.8 144.0 15.2 141.3 138.4 284.1 283.8 282.3 268.8 259.2 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 ARPU ARPU relevant revenues Mobil
Slide 31: Segment Austria – Broadband market split
Segment Austria – Broadband market split Market share total broadband* Market share mobile broadband* (in %) (in %) 7.9% 7.1% 12.6% 14.8% Tele.ring T-mobile 39.0% 41.6% Hutchison 29.1% Mobile Broadband 30.4% Other Operations A1 Unbundled Lines 40.5% 5.3% 36.5% 4.8% 15.2% Cable 16.0% Q1 13 Q1 14 19.9
Slide 32: Segment Austria – Voice market split
Segment Austria – Voice market split Market share total minutes Market share fixed-line minutes (in %) (in %) 13.5% 14.0% 4.5% 3.9% 21.4% 21.8% 85.1% 86.2% 60.6% 60.3% 5.6% 5.3% 9.2% 8.5% Q1 13 Q1 14 Q1 13 Q1 14 Fixed Line Telekom Austria Fixed Line Others Mobile A1 Tele2/UTA UPC Others Results for
Slide 33: 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) 13.5 14.0 14.3 13.2 13.2 163.4 163.5 160.4 159.9 6.6 6.7 6.8 6.5 6.4 154.4 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 ARPL ARPL-relevan
Slide 34: Segment Bulgaria – Mobile key performance indicators
Segment Bulgaria* – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 125.3 126.0 125.2 6.5 6.5 122.1 6.3 116.6 6.1 6.0 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 207.6 144.8% 192.9 144.6% 144.2
Slide 35: 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) 23.4 22.7 22.6 22.1 21.6 202.1 12.7 12.8 193.1 12.4 188.8 11.7 11.9 179.3 172.1 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 ARPL ARPL-rele
Slide 36: Segment Croatia – Mobile key performance indicators
Segment Croatia – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 136.4 12.0 130.6 129.4 129.8 11.7 11.4 11.1 10.5 118.4 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Mobile broadband customers* Mobile penetration (in ‘000) (in %) 199.8 121.0% 161.4 178.2 16
Slide 37: Segment Belarus – Mobile key performance indicators
Segment Belarus – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 4.9 198.5 197.0 194.6 4.8 184.6 4.7 4.7 4.7 182.4 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Mobile broadband customers* Mobile penetration (in ‘000) (in %) 123.0% 121.6% 246.5 252.6 120.7%
Slide 38: Segment Additional Markets – Mobile key performance indicators
Segment Additional Markets – Mobile key performance indicators Slovenia - ARPU Slovenia - MoU per subscriber (in EUR) (in min) 190.7 185.8 188.7 20.3 20.8 21.4 184.7 19.8 176.1 17.2 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Republic of Serbia - ARPU Republic of Macedonia - ARPU (in
Slide 39: Appendix 2 – Regulatory topics
Appendix 2 – Regulatory topics Results for the first quarter 2014 39
Slide 40: 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 41: Glidepath of mobile termination rates
Glidepath of mobile termination rates EU pressure on national regulatory authorities to further decrease rates (in EURc) Jul Jan Jul Nov Jan Jul Sep Jan Jul 2012 2013 2013 2013 2014 2014 2014 2015 2015 Austria 2.01 2.01 2.01 0.8049 0.8049 0.8049 0.8049 0.8049 0.8049 Bulgaria 2.70 2.35 1.18 1.18 1.02
Slide 42: 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 43: Upcoming spectrum tenders
Upcoming spectrum tenders Tender planned Comments Austria 2019 (2100 MHz) 800 MHz: Tender in 2015 Bulgaria 2015 (800 MHz, 1800 MHz & 2600 MHz) LTE spectrum tender in 2015 (1800 MHz & 2600 MHz) 2015 (2100 MHz) 2100 MHz: 1x 5 MHz Croatia 2016 (2600 MHz) 2600 MHz: Tender foreseen in 2016 900 & 1800 MHz
Slide 44: Appendix 3 – Personnel restructuring in Austria
Appendix 3 – Personnel restructuring in Austria Results for the first quarter 2014 44
Slide 45: Quarterly overview – Restructuring charges and provision vs. FTE
Quarterly overview – Restructuring charges and provision vs. FTE Overview restructuring charges FTEs addressed (in EUR million) 2009 2010 2011 2012 2013 Q1 2014 2009 2010 2011 2012 2013 Q1 2014 FTE effect -10.0 76.9 274.3 49.9 149.0 8.8 Transfer to government 0 158 106 44 22 11 Servicekom 0.0 0.0 -4
Slide 46: 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 2010 57.9 > Cash-flow impact for Q1 2014 of EUR 2011 93.4 28 mn 2012 104.0 > Total expected cash flow impact f
Slide 47: Appendix 4 – Corporate sustainability
Appendix 4 – Corporate sustainability Results for the first quarter 2014 47
Slide 48: 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 2014 48
Slide 49: Key figures
Key figures Selected Group-wide KPIs Ratings Products: Providing Responsible Products 2012 Customer contacts in customer service ('000) 45.569 E-billing share (in %) 29 ›Classification: C ›Classification: C+ Collected old mobile phones (in pcs) 73.877 (74 points out of 100) Environment: Living Green