Telekom Austria Ag · VIE:TKA
Telekom Austria — FY2014 Earnings Presentation
54 slides from Telekom Austria's earnings presentation, Feb 10, 2015
Slide 1: Results for the full year and fourth quarter 2014
Results for the full year and fourth quarter 2014 Vienna, 10 February 2015
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 full year 2014
Operational and financial highlights for the full year 2014 Results for the full year and fourth quarter 2014 3
Slide 4: FY 2014: Group turnaround gains momentum and reflects effectiveness of strategic measures taken
FY 2014: Group turnaround gains momentum and reflects effectiveness of strategic measures taken > Structural revenue improvements and stabilisation of EBITDA comparable underline success of turnaround strategy > Sequential revenue improvements throughout 2014 result in EUR 4.0 bn Group revenues (-4.
Slide 5: FY 2014: Group turnaround gains momentum and reflects effectiveness of strategic measures taken
FY 2014: Group turnaround gains momentum and reflects effectiveness of strategic measures taken > Operating results in Belarus outpace FX deterioration in 2014, but approx. 25% devaluation in January 2015 already equivalent to full year business plan assumptions > Slowing revenue declines in Bulgari
Slide 6: EBITDA comparable stabilisation and margin improvements due to cost cutting initiatives
EBITDA comparable stabilisation and margin improvements due to cost cutting initiatives Telekom Austria Group Segment Austria EBITDA comp./EBITDA comp. margin EBITDA comparable (in EUR billion; %) (in EUR billion) 1.6 35% +7.6% 1.5 34% +1.4% 1.4 33% 0.81 1.3 32% 1.2 0.76 0.76 1.1 31% 0.75 1.0 30% 20
Slide 7: Balance sheet strengthened following successful capital increase
Balance sheet strengthened following successful capital increase Net debt Equity (in EUR billion) (in EUR billion) +52.0% 4.0 -28.3% 2.5 2.0 3.5 1.5 3.0 1.0 2.5 0.5 2.0 0.0 2011 2012 2013 2014 2011 2012 2013 2014 Net debt/EBITDA in line with peer average European incuments 2014e of 2.1x Results for
Slide 8: Key financial developments in the fourth quarter 2014
Key financial developments in the fourth quarter 2014 Results for the full year and fourth quarter 2014 8
Slide 9: Q4 2014: Improved revenue trends, strong EBITDA comparable growth in Austria
Q4 2014: Improved revenue trends, strong EBITDA comparable growth in Austria > Revenue decline slows to 2.4% driven (in EUR million) Q4 2014 Q4 2013 % change by better trends in Austria while FX Revenues 1,030.3 1,055.7 -2.4% impacts revenues in Belarus EBITDA comparable* 252.1 262.3 -3.9% > Austria
Slide 10: Restructuring in Austria: FTE reduction on track; interest rate and one-off effect increase charge
Restructuring in Austria: FTE reduction on track; interest rate and one-off effect increase charge EUR mn Comments FTE reduction -45.9 Transfer to government: 21 FTEs; Social plans: 127 FTEs Interest rate Lower interest rates require additional contribution to -42.6 adjustment restructuring provisio
Slide 11: Significant slowdown in revenue decline
1,300 Significant slowdown in revenue decline 1,250 1,200 Quarterly revenue development (in EUR million) 1,150 -2.4% Regulatory effect: EUR –17.6 mn 1,100 1,055.7 -16.1 -4.6 0.4 -8.0 1,050 1.8 1.1 1,030.3 1,000 950 900 Revenues Austria Bulgaria Croatia Belarus Additional Others Revenues Q4 2013 Mark
Slide 12: EBITDA comparable growth in Austria offset by higher costs in Croatia
EBITDA comparable growth in Austria offset by higher costs in Croatia Quarterly EBITDA comparable development (in EUR million) -3.9% Clean EBITDA: +10.0%* 9.9 -2.3 -11.4 262.3 -1.5 -3.5 -1.5 252.1 EBITDA comp. Austria Bulgaria Croatia Belarus Additional Others EBITDA comp. Q4 2013 Markets Q4 2014 Se
Slide 13: Positive free cash flow in 2014 due to lower CAPEX
Positive free cash flow in 2014 due to lower CAPEX (in EUR million) Q4 2014 Q4 2013 % change FY 2014 FY 2013 % change Gross cash flow 273.8 227.7 20.2% 1,190.4 1,137.2 4.7% Change in working capital -46.4 34.3 n.m. -289.0 -85.7 n.m. Cashflow from operating activities 227.4 262.0 -13.2% 901.4 1,051.6
Slide 14: Focus points
Focus points Results for the full year and fourth quarter 2014 14
Slide 15: Austria: SAC and SRC as well as structural cost offset negative one-off effects in 2014
Austria: SAC and SRC as well as structural cost offset negative one-off effects in 2014 EBITDA comparable (in EUR million) approx. -2% approx. +6% approx. -2% Regulation Market Costs Approx. EUR 25 mn savings 755.4 745.3 EBITDA Regulation ARPU ARPL Wholesale Data & ICT SAC and SRC One-off One-off Ma
Slide 16: Spillover of Russian devaluation weakens Belarus' real performance despite operational hedges
Spillover of Russian devaluation weakens Belarus’ real performance despite operational hedges Response to 25% devaluation in Dec 2014 - Devaluation 2014 2015ytd Jan 2015: EUR - BYR 9.0% 16.6% > Maintaining minimum BYR balance EUR - RUB 35.5% 8.4% > Immediate payment and pre-payment of FX-denominated
Slide 17: Update on Digital Single Market (DSM): Potential delays may push back further regulatory downside
Update on Digital Single Market (DSM): Potential delays may push back further regulatory downside Overview discussion points of Council of EU: DSM topics currently on agenda DSM topics currently dropped from agenda > Net neutrality > Intra-EU calls > Roam-like-at-home (new proposal vs. > Access enab
Slide 18: Core business: Broadband rollout in Austria
Core business: Broadband rollout in Austria 2014 more than 70% households were reached with A1 Fiber Power 16! > Goal 2015: > Approx. EUR 400 mn from capital increase Increase the product coverage to be invested between 2015 - 2018 A1 Fibre Power 30 from 28% to Precondition: Announced broadband
Slide 19: Accelerating LTE rollout across the Group
Accelerating LTE rollout across the Group LTE population coverage YE 2014 LTE rollout strategy 2015 > A1 and Si.mobil will offer LTE nearly nation-wide Croatia >27% > Vip operator will reach more than half of the population with its LTE network Macedonia >42% > Vipnet will expand the LTE coverage fo
Slide 20: A1 and Si.mobil started next stage of LTE network rollout with carrier aggregation
A1 and Si.mobil started next stage of LTE network rollout with carrier aggregation > Duplicates the available bandwidth for the customer Carrier aggregation based on existing LTE networks A1 has presented LTE carrier aggregation for the first time in the world based on two 20-MHz frequency block
Slide 21: Technology innovation: Network Function Virtualization (NFV) as paradigm shift
Technology innovation: Network Function Virtualization (NFV) as paradigm shift The network is on a journey to convergence The networking declaration of independence… Highlights 2014: Four NFV trials in four countries done The benefits of virtualization are proven Results for the full year and fo
Slide 22: Outlook for the full year 2015
Outlook for the full year 2015 Results for the full year and fourth quarter 2014 22
Slide 23: Telekom Austria Group outlook for the full year 2015
Telekom Austria Group outlook for the full year 2015 10 February 2015 Consensus Revenues Revenues Approx. +2% +0.8% CAPEX* CAPEX* EUR 700-750 mn EUR 711 mn Proposed ProposedDividend** dividend** EUR 0.05 - On a constant currency basis with the exception of Belarus; assumed BYR devaluation of 20% * D
Slide 24: Appendix 1
Appendix 1 Results for the full year and fourth quarter 2014 24
Slide 25: The leading regional communications player providing convergent telecommunication services
The leading regional communications player providing convergent telecommunication services as of 31 December 2014 (in ‘000, in %) Austria Slovenia Belarus Mobile: Mobile: Mobile: > Market share: 41.1% (Q4 2013: 42.6%) > Market share: 29.2% (Q4 2013: 30.0%) > Market share: 42.4% (Q4 2013: 42.5%) > Su
Slide 26: 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 27: Telekom Austria Group – Revenue breakdown
Telekom Austria Group – Revenue breakdown Revenue Split - Segment Austria (in EUR million) Q4 2014 Q4 2013 % change Monthly fee and traffic 455.6 456.4 -0.2% Data and ICT solutions 64.5 63.9 0.9% Wholesale (incl. Roaming) 28.5 33.9 -15.8% Interconnection 50.2 55.9 -10.1% Equipment 45.6 50.6 -9.9% Ot
Slide 28: Telekom Austria Group – Expense breakdown
Telekom Austria Group – Expense breakdown Operating Expense - Segment Austria (in EUR million) Q4 2014 Q4 2013 % change Material expense 74.5 107.2 -30.5% Employee costs 206.2 180.0 14.5% Interconnection 45.7 48.2 -5.2% Maintenance and repairs 31.4 35.4 -11.1% Services received 27.2 29.0 -6.1% Other
Slide 29: Telekom Austria Group – Headcount development
Telekom Austria Group – Headcount development FTE (Average period) Q4 2014 Q4 2013 % change Austria 8,735 9,019 -3.1% International 7,412 7,022 5.6% Telekom Austria Group* 16,325 16,203 0.8% FTE (End of period) Q4 2014 Q4 2013 % change Austria 8,635 8,804 -1.9% International 7,424 7,076 4.9% Telekom
Slide 30: Telekom Austria Group – Capital expenditures split
Telekom Austria Group – Capital expenditures split Capital Expenditures (in EUR million) Q4 2014 Q4 2013 % change Segment Austria 166.3 1,177.9 -85.9% Segment Bulgaria 43.6 26.0 67.9% Segment Croatia 25.8 41.4 -37.7% Segment Belarus 21.7 16.4 32.8% Segment Additional Markets 27.5 24.5 12.3% Slovenia
Slide 31: Telekom Austria Group – Net debt
Telekom Austria Group – Net debt Net debt* (in EUR million) 31 December 2014 31 December 2013 % change Long-term debt 3,385.0 3,737.7 -9.4% Short-term borrowings** 340.8 232.2 46.8% Cash and cash equivalents and short-term investments -1,032.5 -211.2 n.m. Net Debt** of Telekom Austria Group 2,693.3
Slide 32: Telekom Austria Group – Debt maturity profile
Telekom Austria Group – Debt maturity profile Debt Maturity Profile (Including Accrued Interest)* (in EUR million) 804.1 742.8 741.6 546.0 340.8 297.8 205.3 47.3 0.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 > EUR 3,725.8 mn of short- and long-term borrowings as of 31 December 2014 > Average cost
Slide 33: Telekom Austria Group – Debt profile
Telekom Austria Group – Debt profile Overview debt instruments Fixed-floating mix 0.1% 16.5% 83.5% 99.9% Loans Bonds Fixed Floating Lines of credit Ratings > Undrawn committed credit lines > S&P: BBB (outlook stable) amounting to EUR 1,000 mn > Moody’s: Baa2 (outlook stable) > Average term to maturi
Slide 34: 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) 2,288 2,287 31.3 2,284 30.6 30.3 30.2 30.5 2,275 2,275 213.7 10.3 3.8 11.6 210.2 0.4 207.4 206.0 208.5 -12.6 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 1
Slide 35: Segment Austria – Mobile key performance indicators
Segment Austria* – Mobile key performance indicators ARPU & ARPU-relevant revenues* MoU per subscriber* (in EUR) (in min) 15.7 16.2 16.9 16.5 15.2 143.8 138.1 137.8 139.0 141.0 270.2 277.4 268.6 268.8 259.2 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 ARPU ARPU relevant revenues Mobil
Slide 36: Segment Austria – Broadband market split
Segment Austria – Broadband market split Market share total broadband* Market share mobile broadband* (in %) (in %) 7.4% 6.7% 13.9% 17.2% Tele.ring T-mobile 41.0% 43.1% Hutchison A1 30.0% Mobile Broadband 31.4% 37.8% Other Operations 33.0% Unbundled Lines 4.9% 4.5% Q4 13 Q4 14 Cable 15.8% 16.9% Mark
Slide 37: Segment Austria – Voice market split
Segment Austria – Voice market split Market share total minutes Market share fixed-line minutes (in %) (in %) 13.8% 13.3% 4.1% 4.0% 21.4% 22.0% 86.1% 86.9% 60.7% 60.7% 5.3% 5.0% 8.7% 8.2% Q4 13 Q4 14 Q4 13 Q4 14 Fixed Line Telekom Austria Fixed Line Others Mobile A1 Tele2/UTA UPC Others Results for
Slide 38: 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 14.4 14.4 159.9 6.7 6.8 6.7 6.6 6.6 154.4 153.6 153.0 151.3 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 ARPL ARPL-relevan
Slide 39: Segment Bulgaria – Mobile key performance indicators
Segment Bulgaria* – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 129.6 129.7 129.6 126.0 125.2 6.3 6.2 6.2 6.0 5.9 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 217.1 227.8 248.9 152.7% 207.6
Slide 40: 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) 22.1 21.6 21.3 21.1 21.4 202.1 208.0 212.3 219.9 13.9 193.1 13.2 13.3 12.7 12.8 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 ARPL ARPL-rele
Slide 41: Segment Croatia – Mobile key performance indicators
Segment Croatia – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 136.4 146.6 145.0 150.7 129.8 11.1 11.4 11.2 11.1 10.5 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 173.6 178.4 168.8 160.3 144.
Slide 42: Segment Belarus – Mobile key performance indicators
Segment Belarus – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 5.0 6.2 198.8 201.4 194.6 197.7 4.7 4.7 4.5 184.6 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 123.0% 123.1% 123.3% 121.6% 122.8
Slide 43: Segment Additional Markets – Mobile key performance indicators
Segment Additional Markets – Mobile key performance indicators Slovenia - ARPU Slovenia - MoU per subscriber (in EUR) (in min) 188.7 190.7 192.2 188.0 190.4 19.8 19.8 19.6 17.2 17.3 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Republic of Serbia - ARPU Republic of Macedonia - ARPU (in
Slide 44: Appendix – Regulatory topics
Appendix 2 – Regulatory topics Results for the full year and fourth quarter 2014 44
Slide 45: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates EU Pressure on National Regulatory Authorities to Further Decrease Rates Jul Nov Jan Jul Sep Jan Jul 2013 2013 2014 2014 2014 2015 2015 Austria (EUR) 0.0201 0.008049 0.008049 0.008049 0.008049 0.008049 0.008049 Bulgaria (BGN) 0.023 0.023 0.02 0.02 0.02 0.019 0.
Slide 46: 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 47: Upcoming spectrum tenders/prolongations/assignments
Upcoming spectrum tenders/prolongations/assignments planned/expected Comments Austria 2019 (2100 MHz) - 2600-MHz band free from 1 Sept 2015; allocation Bulgaria 2015 (1800 MHz) procedure currently undecided 2100 MHz: dependant on LTE rollout dynamics and traffic 2015 (1800 MHz) development (on reque
Slide 48: Appendix – Personnel restructuring in Austria
Appendix 3 – Personnel restructuring in Austria Results for the full year and fourth quarter 2014 48
Slide 49: 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 Q3 Q4 Q1 Q2 Q3 Q4 FTE reduction 8.8 10.4 6.3 60.9* Transfer to Servicekom 11 11 9 21 -1.2 -11.3 -0.9 -26.0 government contribution Social plans 13 29 30 127 Interest
Slide 50: 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) 2009 2010 2011 2012 2013 2014 2009 2010 2011 2012 2013 2014 FTE reduction -10.0 76.9 274.3 49.9 149.0 86.4* Transfer to Servicekom 0 158 106 44 22 52 0.0 0.0 -40.6 -76.7 -1
Slide 51: Overview – Cash flow impact of restructuring
Overview – Cash flow impact of restructuring Overview cash flow impact* (in EUR million) Total cash-flow impact 2009 62.0 > Total cash flow impact comprises old 2010 57.9 and new programmes 2011 93.4 > Cash flow impact for Q4 2014 of EUR 2012 104.0 2013 108.0 25.5 mn Q1 2014 28.4 > Total cash flow i
Slide 52: Appendix – Corporate sustainability
Appendix 4 – Corporate sustainability Results for the full year and fourth quarter 2014 52
Slide 53: Alignment with core business and materiality analysis define sustainability strategy
Alignment with core business and materiality analysis define sustainability strategy Results for the full year and fourth quarter 2014 53
Slide 54: 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: B ›Classification: C+ (93 points out of 100) Environment: Living Green* 2013 Total CO2 Emission