Telekom Austria Ag · VIE:TKA
Telekom Austria — Q3 2012 Earnings Presentation
42 slides from Telekom Austria's earnings presentation, Nov 14, 2012
Slide 1: Results for the Third Quarter 2012
Results for the Third Quarter 2012 Vienna, 14 November 2012 1
Slide 2: Cautionary Statement
Cautionary Statement “This presentation contains certain forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements. Forward-looking information involves risks and uncertainties that could significantly affect expected results.
Slide 3: Agenda
Agenda > Operational and Financial Highlights for the Third Quarter 2012 > Key Financial Developments in the Third Quarter 2012 > Focus Points > Outlook for Full Year 2012 > Appendix Results for the Third Quarter 2012 3
Slide 4: Operational and Financial Highlights for the Third Quarter 2012
Operational and Financial Highlights for the Third Quarter 2012 Results for the Third Quarter 2012 4
Slide 5: Fixed Line Performance and OPEX Savings Dampen Effects of Mobile Pricing and Regulatory Pressure
Fixed Line Performance and OPEX Savings Dampen Effects of Mobile Pricing and Regulatory Pressure > Strong fixed line performance dampens negative impact of mobile service revenue declines in Austria, Bulgaria and Croatia > 1.3% ARPL growth in Austria > Continued severe mobile pricing pressure > OPEX
Slide 6: Key Financial Developments in the Third Quarter 2012
Key Financial Developments in the Third Quarter 2012 Results for the Third Quarter 2012 6
Slide 7: EBITDA Comparable Almost Stable Due to Cost Savings and Growth in Belarus and Add. Markets
EBITDA Comparable Almost Stable Due to Cost Savings and Growth in Belarus and Add. Markets (in EUR million) Q3 2012 Q3 2011 % change Revenues 1,093.7 1,111.4 -1.6% > Revenue increases in Belarus and EBITDA comparable* 410.4 412.9 -0.6% Additional Markets partly offset EBITDA comparable margin* 37.5%
Slide 8: Revenues - Belarus and Additional Markets Partly Offset Declines in Three Major Markets
Revenues - Belarus and Additional Markets Partly Offset Declines in Three Major Markets Austria Q3 2012: EUR 686.2 mn | -4.8% yoy Belarus: Q3 2012: EUR 81.0 mn | +42.5% yoy > Stable Fixed Line revenues due to increased demand for fixed > Price increases, higher usage and a larger subscriber base bro
Slide 9: EBITDA Comparable: Growth in Markets and Stable Group EBITDA Comparable Margin
EBITDA Comparable: Growth in 5 Markets and Stable Group EBITDA Comparable Margin Austria Q3 2012: EUR 240.8 mn | -3.0% yoy Belarus: Q3 2012: EUR 34.3 mn |+41.4% yoy | Bulgaria Q3 2012: EUR 54 .5 mn -20.2% yoy > Increase of 67.3% excluding > EUR 26.3 mn OPEX savings > Cost reductions driven by lower
Slide 10: Working Capital Requirements and CAPEX Drive Free Cash Flow Decline
Working Capital Requirements and CAPEX Drive Free Cash Flow Decline (in EUR million) Q3 2012 Q3 2011 % change 1-9 M 2012 1-9 M 2011 % change Gross cash flow 377.1 351.3 7.3% 1,008.1 1,037.7 -2.9% Change in working capital -55.0 20.3 n.a. -210.7 -203.0 3.8% Ordinary capital expenditures -158.4 -177.8
Slide 11: Focus Points
Focus Points Results for the Third Quarter 2012 11
Slide 12: Belarusian Segment – Price Increases Drive Turn-Around After FX Devaluations in 2011
Belarusian Segment – Price Increases Drive Turn- Around After FX Devaluations in 2011 Key Developments > Belarusian Ruble comparatively stable (-0.6% 1-9M 2012) compared to -63.2% in 2011 > Strong demand for mobile data and smartphones drives operating performance > Inflation allows for 4 price incr
Slide 13: Convergent Products Accelerate Stabilization of Fixed Service Revenues
Convergent Products Accelerate Stabilization of Fixed Service Revenues Mobile Service Revenue Fixed Service Revenue Major Drivers Q3 Growth Y-o-Y Q3 Growth Y-o-Y > Strong demand for fixed broadband solutions offsets loss of fixed voice Austria minutes and drives fixed service -6.8% -0.4% revenue sta
Slide 14: Convergence – Strong Growth in Bundle Gross-Adds in Bulgaria and Croatia
Convergence – Strong Growth in Bundle Gross-Adds in Bulgaria and Croatia Bulgaria – Bundle Products Gross-Adds Croatia – Bundle Products Net-Adds +6x +86% Acquisition of Megalan Acquisition and Spectrum Net B.net Sep-09 Mar-10 Sep-10 Mar-11 Sep-11 Mar-12 March 11 June 11 Sep-11 Dec-11 Mar-12 Jun-12
Slide 15: Convergence – In Austria Multi-Play Churn Approx. 4 Times Lower Than Single-Play Churn
Convergence – In Austria Multi-Play Churn Approx. 4 Times Lower Than Single-Play Churn Single vs. Multi-Play Churn ~13% ~10% -4x ~3% Fixed line Single play Fixed line and Mobile Mobile Single play Approximately 63% of Austrian customers prefer “All out of one hand”* * Austrian representative Survey
Slide 16: Strategic Focus Austria 2013ff
Strategic Focus Austria 2013ff > Price pressure and high subsidies in mobile market expected to continue Strategic focus: Convergence and high value customer segment Near-term pressure on EBITDA Limits impact on ARPU erosion comparable margin Optimal platform for potential future stabilization > Inc
Slide 17: Outlook
Outlook Results for the Third Quarter 2012 17
Slide 18: Telekom Austria Group Outlook for Full Year 2012 Results Reiterated
Telekom Austria Group Outlook for Full Year 2012 Results Reiterated Telekom Austria Group – Full Year 2012 On a constant currency basis for all markets as well as before any effects of hyperinflation accounting for the Belarusian segment. As of 16 August 2012 As of 14 November 2012 Revenues approx.
Slide 19: Appendix
Appendix 1 Results for the Third Quarter 2012 19
Slide 20: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (in EUR million) Q3 2012 Q3 2011 % change Monthly fee and traffic 480.9 507.4 -5.2% Data and ICT Solutions 49.1 48.1 2.0% Wholesale (incl. Roaming) 42.3 47.1 -10.2% Interconnection 77.6 82.4 -5.8% Equipment 31.0 25.3 22.2% Oth
Slide 21: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (in EUR million) Q3 2012 Q3 2011 % change Material expense 64.3 62.5 2.9% Employee costs 157.0 146.3 7.3% Interconnection 70.3 80.3 -12.5% Maintenance and repairs 28.1 31.2 -10.0% Services received 34.8 38.1 -8.7% Other su
Slide 22: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group - Mobile Communication Subscriber Base Mobile Subscribers (in 000) Q3 2012 Q3 2011 % change Austria 5,312 5,212 1.9% Market share 39.0% 40.3% Bulgaria 5,535 5,291 4.6% Market share 47.2% 48.4% Croatia 2,055 2,137 -3.9% Market share 38.7% 39.2% Belarus 4,750 4,533 4.8% Market sh
Slide 23: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q3 2012 Q3 2011 % change Austria 9,287 9,319 -0.3% International 7,276 7,457 -2.4% Telekom Austria Group* 16,724 16,937 -1.3% FTE (End of period) Q3 2012 Q3 2011 % change Austria 9,287 9,282 0.1% International 7,213 7,621 -5.4% Telek
Slide 24: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (in EUR million) Q3 2012 Q3 2011 % change Segment Austria 106.6 125.6 -15.1% Segment Bulgaria 9.6 17.7 -46.0% Segment Croatia 10.7 8.4 27.3% Segment Belarus 5.8 6.9 -16.5% Segment Additional Markets 25.7 19.0 35.1% Slovenia 3.5
Slide 25: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt (in EUR million) Sep. 30, 2012 Dez. 31, 2011 % change Long-term debt 2,906.7 2,960.4 -1.8% Short-term borrowings 966.9 1,052.4 -8.1% Cash and cash equivalents, short-term and long term investments, finance lease receivables -658.7 -657.7 0.2% Cash and cash e
Slide 26: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturity Profile* (in EUR million) 981 807 739 550 253 205 161 129 47 - - * 2012 2013** 2014 2015 2016 2017 2018 2019 2020 2021 2022 > EUR 3,873.8 mn of short- and long-term borrowings as of 30 September 2012 > Average cost of debt of approximately
Slide 27: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments Fixed-Floating Mix 72% 33% 28% 67% Bonds Loans Floating Fixed Lines of Credit Ratings > Undrawn committed lines of credit > S&P: BBB (stable outlook) amounting to EUR 1,060.0 mn > Moody’s: Baa1 (stable outlook) > Average term to maturity
Slide 28: 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 000) 40.0 39.5 250.0 39.0 38.5 38.0 37.5 245.0 37.0 36.5 36.0 35.5 35.0 34.5 32.5 32.2 240.0 34.0 33.5 33.0 31.8 31.9 31.5 2,336 32.5 32.0 235.0 2,327 2,320 2,288 2,
Slide 29: Segment Austria – Mobile Key Performance Indicators
Segment Austria – Mobile Key Performance Indicators ARPU & ARPU Relevant Revenues MoU per Subscriber (in EUR) (in min) 21.0 335.0 20.5 20.0 152.7 151.9 325.0 20.0 19.2 19.5 149.1 315.0 19.0 18.5 18.3 146.4 145.8 305.0 18.3 18.5 311.9 290.7 290.8 18.0 295.0 300.9 17.5 285.0 293.6 17.0 Q3 11 Q4 11 Q1
Slide 30: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Broadband Lines Market Share Voice Minutes (in %) (in %) Mobile 29.0% Broadband other operators 31.4% 6.3% Unbundled lines 5.7% 14.7% Cable 82.1% Mobile 85.1% 14.9% A1 18.3% Mobile broadband 17.9% A1 1.1% fixed wholesale 1.0% A1 Other fixed 30.6%
Slide 31: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria – Mobile Key Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 7.0 98.6 7.0 6.6 6.1 5.7 97.8 97.5 97.2 96.7 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 157.5% 324.7 155.4% 278.8 242.4 151.4%
Slide 32: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 13.4 108.5 104.3 12.8 12.4 12.6 96.5 95.8 92.6 11.7 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 192.9 206.5 127.0% 170.6 169.5 1
Slide 33: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 4.9 4.9 189.8 191.6 183.4 179.8 3.5 3.5 3.7 174.1 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 713.7 575.3 118.8% 119.4% 518.6 11
Slide 34: Segment Additional Markets – Mobile Key Performance Indicators
Segment Additional Markets – Mobile Key Performance Indicators Slovenia - ARPU Slovenia - MoU per Subscriber (in EUR) (in min) 22.7 23.0 179.1 178.3 177.0 21.4 21.6 167.9 20.7 155.4 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Q3 11 Q4 11 Q1 12 Q2 12 Q3 12 Republic of Serbia - ARPU Republic of Macedonia - ARPU (in
Slide 35: Appendix – Regulatory Topics
Appendix 2 – Regulatory Topics Results for the Third Quarter 2012 35
Slide 36: Negative Impact of Approx. EUR 175 mn on EBITDA Comparable Expected until 2013
Negative Impact of Approx. EUR 175 mn on EBITDA Comparable Expected until 2013* Key Points Impact EBITDA comp. Interconnection 2010 - 2013: EUR -75 mn Impact EBITDA comp. 2010 -2013: Impact EBITDA comp. EUR -175 mn Roaming 2010 - 2013: EUR -100 mn > EU commission: before January 1, Digital Dividend
Slide 37: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates July January July August January June July August January April July August January 2009 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2012 2013 Austria 4.00 3.50 3.01 2.51 2.01 market analysis during 2012 Bulgaria 11.76 10.48 6.65 2.70 2.30* Croatia 9.10 7
Slide 38: EU-Roaming Glide Path
EU-Roaming Glide Path July 2009 July 2010 July 2011 July 2012 July 2013 July 2014 Voice Wholesale 0.26 0.22 0.18 0.14 0.10 0.05 Retail active 0.43 0.39 0.35 0.29 0.24 0.19 Retail passive 0.19 0.15 0.11 0.08 0.07 0.05 SMS Wholesale 0.04 0.04 0.04 0.03 0.02 0.02 Retail 0.11 0.11 0.11 0.09 0.08 0.06 Da
Slide 39: Appendix – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the Third Quarter 2012 39
Slide 40: Overview – Restructuring Charges and Provision vs. FTE
Overview – Restructuring Charges and Provision vs. FTE Overview Restructuring Charges FTEs Addressed (in EUR million) 2008 2009 2010 2011 Q1 12 Q2 12 Q3 12 2008 2009 2010 2011 Q1 12 Q2 12 Q3 12 Transfer to government 0 0 158 106 9 18 3 FTE Effect 632.1 -10.0 76.9 233.7 4.4 6.6 10.6 Social plans 256
Slide 41: 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 2008 14.7 old as well as new programs 2009 62.0 > Total expected cash flow impact 2010 57.9 for 2012 of approximately 2011 89.0 EUR 100 mn Q1 2012 24.3 Q2
Slide 42: Restructuring – Explanatory Information
Restructuring – Explanatory Information > The following factors have to be taken in account when comparing “FTEs Addressed” to “Provisioned FTEs”: > FTEs of social plans may include receivers of one-time payments such as golden handshakes and can fluctuate due to retirement > Number of staff release