Telekom Austria Ag · VIE:TKA

Telekom Austria — A1 Telekom Austria Group — Q2 2019 Earnings Presentation

50 slides from Telekom Austria's earnings presentation, Jul 16, 2019

  1. Slide 1: Results for the first half and second quarter 2019

    Results for the first half and second quarter 2019 July 16, 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 half and second quarter 2019

    Operational and financial highlights for the first half and second quarter 2019

  4. Slide 4: Service revenue growth in all markets led to higher operational EBITDA

    Service revenue growth in all markets led to higher operational EBITDA IFRS 16 IFRS 16 based Group (in EUR million) Q2 2019 Q2 2018 % change Total revenues 1,122.6 1,094.3 2.6% Service revenues 943.7 916.3 3.0% EBITDA excl. restructuring* 413.2 397.6 3.9% CAPEX 256.8 168.1 52.7%  Service revenue gr

  5. Slide 5: Growth especially driven by CEE markets in Q2 2019

    Growth especially driven by CEE markets in Q2 2019 Total revenues Service Revenues EBITDA excl. restructuring (in EUR mn) (in EUR mn) (in EUR mn) 18.3 1,122.6 9.7 1,094.3 19.6 943.7 +2.6% 8.2 916.3 8.4 413.2 +3.0% 10.3 397.6 +3.9% Revenues Austria International Revenues Service Austria International

  6. Slide 6: Austria: strong solutions & connectivity revenues together with stable costs

    Austria: strong solutions & connectivity revenues together with stable costs translated into operational EBITDA growth ARPU ARPL Operational data (in EUR) (in EUR)  +1.5% contract subscriber number driven by high demand for mobile Δ: +2.6% WiFi routers and high-value tariffs Δ: +0.1% 31.2 30.4  AR

  7. Slide 7: CEE: Ongoing mobile and fixed-line service revenue growth

    CEE: Ongoing mobile and fixed-line service revenue growth; growing operational EBITDA in most CEE markets Highlights CEE EBITDA Bulgaria: (in EUR mn; Q2 %-change vs. PY)  Fixed-line: strong performance in the business segment as well as Δ: -1.9% successful up- and cross-selling in residential led t

  8. Slide 8: 1-6 M 2019: Lower free cash flow mostly driven by higher CAPEX paid

    1-6 M 2019: Lower free cash flow mostly driven by higher CAPEX paid due to frequencies (in EUR million) Q2 2019 Q2 2018 % change 1-6 M 2019 1-6 M 2018 % change Net cash flow from operating activities 360.7 364.8 -1.1% 668.8 688.6 -2.9% Capital expenditures paid -257.1 -178.6 43.9% -473.2 -366.4 29.2

  9. Slide 9: Focus Points Telekom Austria Group

    Telekom 4 Austria Group

  10. Slide 10: Competitive advantage through biggest fiber network in Austria and 5G

    Competitive advantage through the combination of the biggest fiber network in Austria with the opportunities of 5G As a pioneer in offering convergent solutions we know how to design a network architecture which fulfills highly diverse customer needs.  Densest fibre network in Austria  5G as compl

  11. Slide 11: Holistic A1 Security Portfolio for business customers

    Holistic A1 Security Portfolio for business customers ranging from physical protection over trainings to risk identification Benefits for our business customers • Throughout Austria Object • Certified security experts Security • Highly-secure data centres • Protection for company locations, properti

  12. Slide 12: Outlook for the full year 2019

    Outlook for the full year 2019

  13. Slide 13: A1 Telekom Austria Group outlook for the full year 2019 unchanged

    A1 Telekom Austria Group outlook for the full year 2019 unchanged July 16, 2019 Consensus 2019 Total revenues ~+2% +1.6% CAPEX ~ EUR 770 mn EUR 772 mn* Proposed dividend EUR 0.21 / share - *CAPEX consensus excl. spectrum  Outlook based on reported figures; assumed devaluation of BYN vs. EUR of up t

  14. Slide 14: Appendix 1

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

  15. Slide 15: The leading regional communications player providing convergent telecommunication services

    The leading regional communications player providing convergent telecommunication services as of June 30, 2019 (in ‘000) Austria Bulgaria Croatia Mobile market position #1 Mobile market position: #1 Mobile market position #2 Mobile subscribers: Mobile subscribers: Mobile subscribers:  5,241 (Q2 201

  16. Slide 16: A1 Telekom Austria Group – Profit and Loss

    A1 Telekom Austria Group – Profit and Loss (in EUR million) Q2 2019 Q2 2018 % change Service Revenues 943.7 916.3 3.0% Equipment Revenues 149.8 151.7 -1.3% Other operating income 29.1 26.3 10.8% Total Revenues 1,122.6 1,094.3 2.6% Cost of Service -325.2 -314.5 -3.4% Cost of Equipment -143.8 -145.8 1

  17. Slide 17: 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) Q2 2019 Q2 2018 % change Austria 658.5 648.8 1.5% Bulgaria 115.4 111.0 4.0% Croatia 106.5 106.2 0.3% Belarus 105.2 98.0 7.3% Slovenia 51.5 50.8 1.

  18. Slide 18: A1 Telekom Austria Group – Headcount development

    A1 Telekom Austria Group – Headcount development FTE (Average Period) Q2 2019 Q2 2018 % change Austria 7,905 8,200 -3.6% International 10,297 10,349 -0.5% Corporate 388 351 10.6% A1 Telekom Austria Group 18,590 18,900 -1.6% FTE (End of Period) Q2 2019 Q2 2018 % change Austria 7,875 8,182 -3.8% Inter

  19. Slide 19: A1 Telekom Austria Group – Capital expenditure split

    A1 Telekom Austria Group – Capital expenditure split Capital Expenditures (in EUR million) Q2 2019 Q2 2018 % change Austria 181.4 112.7 61.0% Bulgaria 16.3 13.5 20.9% Croatia 21.6 22.6 -4.2% Belarus 20.5 4.4 n.m. Slovenia 3.9 4.2 -6.0% Serbia 7.7 5.5 38.5% North Macedonia 3.9 4.6 -14.2% Corporate &

  20. Slide 20: A1 Telekom Austria Group – Net debt

    A1 Telekom Austria Group – Net debt per June 30, 2019 Net Debt pre IFRS 16 (in EUR million) 30 June 2019 31 December 2018 % change Long-term Debt 2,538.0 2,536.8 0.0% Short-term Borrowings 297.2 245.3 21.2% Cash and Cash Equivalents and Short-term Investments -44.1 -63.6 30.7% Net Debt pre IFRS 16 o

  21. Slide 21: A1 Telekom Austria Group – Financial debt maturity profile

    A1 Telekom Austria Group – Financial debt maturity profile as of June 30, 2019 747.5 746.8 744.7 297.2 299.0 0.0 0.0 0.0 2019 2020 2021 2022 2023 2024 2025 2026  EUR 2,835.2 mn short-and long-term borrowings as of June 30, 2019  Average cost of debt of 2.64%  Cash and cash equivalents and short-t

  22. Slide 22: A1 Telekom Austria Group – Debt profile

    A1 Telekom Austria Group – Debt profile as of June 30, 2019 Overview debt instruments Fixed/floating mix 10% 10% 90% 90% 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)  Aver

  23. Slide 23: 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 31.2 30.4 3,362.7 3,334.3 3,327.7 3,303.3 3,283.7 191.3 191.6 192.1 190.6 189.0 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPL ARPL-rel

  24. Slide 24: Segment Austria – Mobile key performance indicators

    Segment Austria – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 14.5 14.8 14.2 14.4 14.5 1.5 1.6 1.5 1.5 235.0 1.4 230.6 230.9 229.9 226.8 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies (incl. promoti

  25. Slide 25: 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 %) 2.8 2.7 4.7 4.5 35.6 37.3 Mobile Broadband Other Operators 23.6 27.0 16.9 17.8 Unbundled Lines 3.0 3.0 22.9 23.7 Cable 16.7 36.3 4.1 3.9 16.8 3

  26. Slide 26: 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) 13.2 1,014.7 1,017.6 1,029.0 1,028.7 1,040.5 12.8 12.9 12.5 12.6 21.1 20.6 20.8 19.8 20.1 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPL ARPL-relevan

  27. Slide 27: 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 5.2 5.2 5.2 5.4 5.6 1.4 1.4 1.4 61.6 62.8 61.8 61.8 64.5 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies (incl. promotional deal

  28. Slide 28: 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) 30.3 30.3 30.4 30.5 30.0 694.9 703.6 668.5 681.8 658.2 26.8 26.7 27.0 27.2 26.9 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPL ARPL-relevant revenues

  29. Slide 29: 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 10.9 10.1 9.9 2.0 1.8 1.7 67.1 58.4 56.6 59.8 53.8 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies (incl. promotional d

  30. Slide 30: 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 6 2 4 .4 5 .6 5 .6 5 .9 5 .5 5 .4 6 .4 6 .9 7 .0 7 .1 7 .4 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPL ARPL-r

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

    Segment Belarus – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 4.6 1.7 4.3 4.4 4.2 4.2 1.6 1.4 1.4 67.6 1.4 63.2 63.9 60.9 61.0 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies (incl. promotional deals

  32. Slide 32: 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) 190.4 35.7 35.5 36.4 186.6 34.8 35.3 182.1 176.9 178.1 8.2 8.2 7.6 7.6 7.6 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPL ARPL-relevant revenues Fixe

  33. Slide 33: 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 1.5 14.6 14.4 14.4 31.5 14.0 1.3 1.3 1.3 1.3 30.5 30.1 30.2 29.4 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies Mobile penetration

  34. Slide 34: Segment Serbia – Mobile key performance indicators

    Segment Serbia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 7.2 7.2 3.1 3.1 3.2 6.9 6.8 6.5 2.7 2.7 48.7 47.4 45.1 44.6 43.1 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies (incl. promotional deals)

  35. Slide 35: 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) 324.9 327.9 329.3 11.0 11.0 314.6 319.9 10.9 10.9 10.8 4.8 4.9 4.9 4.7 4.9 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPL ARPL-relevant reve

  36. Slide 36: 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 %) 6.0 2.5 5.6 5.7 1.7 1.4 1.5 5.3 5.3 1.2 18.9 19.4 18.0 17.3 17.2 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 Q2 18 Q3 18 Q4 18 Q1 19 Q2 19 ARPU Service revenues Subsidies (incl. promoti

  37. Slide 37: Appendix 2 – Adoption of IFRS 16

    Appendix 2 – Adoption of IFRS 16

  38. Slide 38: 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

  39. Slide 39: 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

  40. Slide 40: 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

  41. Slide 41: Appendix 3 – Regulatory topics

    Appendix 3 – Regulatory topics

  42. Slide 42: 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

  43. Slide 43: 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

  44. Slide 44: 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 +

  45. Slide 45: Appendix 4 – Personnel restructuring in Austria

    Appendix 4 – Personnel restructuring in Austria

  46. Slide 46: 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 Q2 19 2013 2014 2015 2016 2017 2018 Q1 19 Q2 19 149.0 86.4* 69.5** 95.0 9.1 70.1 19.6 21.0 Transfer to government 22 52 49 6 3 0 0 0 FTE

  47. Slide 47: 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. 2012 104.0 expected for the next few years addressing 2013 108.0 2014 107.1 civil servants 2015 101.9  Target: decreas

  48. Slide 48: Appendix 5 – Corporate sustainability

    Appendix 5 – Corporate sustainability

  49. Slide 49: 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 2019 49

  50. Slide 50: 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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