Telekom Austria Ag · VIE:TKA
Telekom Austria — Q3 2014 Earnings Presentation
48 slides from Telekom Austria's earnings presentation, Oct 23, 2014
Slide 1: Results for the first nine months and third quarter 2014
Results for the first nine months and third quarter 2014 Vienna, 23 October 2014
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 first nine months 2014
Operational and financial highlights for the first nine months 2014 Results for the first nine months and third quarter 2014 3
Slide 4: 1-9 M 2014: EBITDA margin improvement driven by Austrian focus on cost reductions
1-9 M 2014: EBITDA margin improvement driven by Austrian focus on cost reductions > Group revenue decline improves to -4.5% supported by better trends in Austria in Q3 as well as strong growth in Belarus and the Additional Markets segment > Subsidy-driven equipment revenues support revenue trends in
Slide 5: 1-9 M 2014: Strong performance in Belarus; other CEE markets exposed to unfavourable trends
1-9 M 2014: Strong performance in Belarus; other CEE markets exposed to unfavourable trends > CEE: > Continued strong performance in Belarus on the back of inflation- linked price increases in 2013 and 2014 (FX development better than expected) and higher data usage > Macro and regulatory factors (e
Slide 6: Key financial developments in the third quarter 2014
Key financial developments in the third quarter 2014 Results for the first nine months and third quarter 2014 6
Slide 7: Q3 2014: Group revenues grew by 1.2% and clean EBITDA comparable by 7.2%
Q3 2014: Group revenues grew by 1.2% and clean EBITDA comparable by 7.2% (in EUR million) Q3 2014 Q3 2013 % change > Group revenue growth of 1.2% driven Revenues 1,048.7 1,036.0 1.2% by higher revenues from Belarus and EBITDA comparable* 414.6 357.9 15.8% Additional Markets EBITDA comparable margin*
Slide 8: Revenue growth driven mainly by Belarus and Additional Markets; improving trends in Austria
Revenue growth driven mainly by Belarus and 1,250 Additional Markets; improving trends in Austria 1,200 Quarterly revenue development 1,150 (in EUR million) 1,100 +1.2% Regulatory effect: EUR -24.2 mn 10.3 1.7 1,048.7 1,050 1,036.0 -22.6 27.8 -7.5 3.0 1,000 950 900 Revenues Austria Bulgaria Croatia
Slide 9: EBITDA comparable increase of 7.2% on a clean basis driven by cost cuts in Austria
EBITDA comparable increase of 7.2% on a clean basis* driven by cost cuts in Austria Quarterly EBITDA comparable development (in EUR million) +15.8% Clean*: +7.2% Regulatory effect: EUR -6.9 mn 25.9 414.6 29.1 -6.7 -6.0 16.4 -2.0 357.9 EBITDA comp. Austria Bulgaria Croatia Belarus Additional Others**
Slide 10: Free cash flow falls mainly due to lower accounts payable
Free cash flow falls mainly due to lower accounts payable (in EUR million) Q3 2014 Q3 2013 % change 1-9 M 2014 1-9 M 2013 % change Gross cash flow 329.2 313.0 5.2% 916.6 909.5 0.8% Change in working capital -28.6 -17.5 n.m. -242.6 -120.0 n.m. Cashflow from operating activities 300.6 295.5 1.7% 674.0
Slide 11: Focus points
Focus points Results for the first nine months and third quarter 2014 11
Slide 12: Austria: EBITDA comparable growth achieved through improved revenue trends and cost savings
Austria: EBITDA comparable growth achieved through improved revenue trends and cost savings EBITDA comparable (in EUR million) approx. -2% approx. +10% approx. +6% Regulation Market Costs 234.5 205.4 ~ EUR 6 mn non- recurring EBITDA Regulation ARPU ARPL Wholesale Data & ICT SAC and Reversal of Costs
Slide 13: Bulgaria: Addressing operational issues to target mid-term EBITDA comparable stabilisation
Bulgaria: Addressing operational issues to target mid-term EBITDA comparable stabilisation Identified issues Initiatives > High non-contract customer base > Value-based retention management (high churn/value risk) > Positioning of premium brand Mtel > Multi-brand strategy to fight versus no-frills b
Slide 14: Agreement to merge Macedonian Vip Operator with Telekom Slovenije Group's subsidiary One
Agreement to merge Macedonian Vip Operator with Telekom Slovenije Group’s subsidiary One > Telekom Austria Group to hold 55% of One facts (YE 2013) the combined entity > Revenues: EUR 75.5 mn > Call and put options for the exit of > EBITDA: EUR 14.4 mn Telekom Slovenije Group within three > #3 in Ma
Slide 15: Differentiation through infrastructure leadership: LTE coverage available in 4 markets
Differentiation through infrastructure leadership: LTE coverage available in 4 markets LTE Services in Austria, Slovenia, Croatia and Rep. of Macedonia Austria Croatia Slovenia Macedonia Q4 2010 Q1 2012 Q3 2012 Q3 2014 Coverage Monetising LTE Austria A1 Speed 4G/LTE 150 LTE 52% coverage of the pop
Slide 16: Online transformation to efficient Group-wide multi-country technology solutions
Online transformation to efficient Group-wide multi-country technology solutions New online sales channels New cash desk software > velcom opened online > State of the art cash desk store for private and technology Wincash business clients > One common core software to five > Si.mobil launched marke
Slide 17: Outlook for the full year 2014
Outlook for the full year 2014 Results for the first nine months and third quarter 2014 17
Slide 18: Telekom Austria Group outlook for the full year 2014 unchanged
Telekom Austria Group outlook for the full year 2014 unchanged Financial outlook for 2014 23 October 2014 13 August 2014 Revenues Revenues Approx. -3.5% Approx. -3.5% CAPEX* CAPEX* EUR 650-700 mn EUR 650-700 mn Proposed Proposed Dividend** dividend** EUR 0.05 EUR 0.05 * Does not include investments
Slide 19: Appendix
Appendix 1 Results for the first nine months and third 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 30 September 2014 (in ‘000, in %) Austria Slovenia Belarus Mobile: Mobile: Mobile: > Market share: 41.0% (Q3 2013: 42.7%) > Market share: 29.6% (Q3 2013: 29.6%) > Market share: 42.5% (Q3 2013: 42.9%) > S
Slide 21: 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 22: Telekom Austria Group – Revenue breakdown
Telekom Austria Group – Revenue breakdown Revenue Split - Segment Austria (in EUR million) Q3 2014 Q3 2013 % change Monthly fee and traffic 461.5 459.6 0.4% Data and ICT solutions 56.1 54.6 2.6% Wholesale (incl. Roaming) 30.3 28.9 5.0% Interconnection 49.4 65.5 -24.6% Equipment 24.0 33.8 -28.9% Othe
Slide 23: Telekom Austria Group – Expense breakdown
Telekom Austria Group – Expense breakdown Operating Expense - Segment Austria (in EUR million) Q3 2014 Q3 2013 % change Material expense 54.7 73.4 -25.6% Employee costs 153.8 153.9 0.0% Interconnection 47.8 59.4 -19.5% Maintenance and repairs 25.8 28.0 -8.0% Services received 28.1 27.3 2.9% Other su
Slide 24: Telekom Austria Group – Headcount development
Telekom Austria Group – Headcount development FTE (Average period) Q3 2014 Q3 2013 % change Austria 8,817 9,190 -4.1% International 7,136 6,929 3.0% Telekom Austria Group* 16,124 16,274 -0.9% FTE (End of period) Q3 2014 Q3 2013 % change Austria 8,806 9,136 -3.6% International 7,371 6,948 6.1% Teleko
Slide 25: Telekom Austria Group – Capital expenditures split
Telekom Austria Group – Capital expenditures split Capital Expenditures (in EUR million) Q3 2014 Q3 2013 % change Segment Austria 91.0 107.4 -15.3% Segment Bulgaria 11.5 10.4 10.6% Segment Croatia 13.2 12.0 10.3% Segment Belarus 11.1 6.1 81.9% Segment Additional Markets 16.8 31.7 -47.2% Slovenia 6.3
Slide 26: Telekom Austria Group – Net debt
Telekom Austria Group – Net debt Net debt (in EUR million) 30 September 2014 31 December 2013 % change Long-term debt 3,625.9 3,737.7 -3.0% Short-term borrowings* 280.8 232.2 20.9% Cash and cash equivalents, short-term and long term investments, installment sales, finance lease receivables -375.9 -2
Slide 27: Telekom Austria Group – Debt maturity profile
Telekom Austria Group – Debt maturity profile Debt Maturity Profile (Including Accrued Interest)* (in EUR million) 803.8 742.5 741.3 545.8 311.6 297.8 211.2 205.3 47.3 0.0 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 > EUR 3,906.8 mn of short- and long-term borrowings as of 30 September 2014 >
Slide 28: Telekom Austria Group – Debt profile
Telekom Austria Group – Debt profile Overview debt instruments Fixed-floating mix 4.7% 20.6% 79.4% 95.3% Loans Bonds Fixed Floating Lines of credit Ratings > Undrawn committed credit lines > S&P: BBB (outlook stable) amounting to EUR 825 mn > Moody’s: Baa2 (outlook stable) > Average term to maturity
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) 2,274 2,284 2,288 2,275 2,275 30.9 31.3 30.6 30.2 30.3 10.3 3.8 0.4 213.7 -0.6 210.6 210.2 207.4 206.0 -12.6 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 1
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) 149.7 16.3 16.2 16.9 143.8 144.0 15.7 15.2 138.4 133.4 282.3 277.4 268.8 259.2 270.2 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 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 %) 7.5% 6.9% 13.4% 16.9% Tele.ring T-mobile 40.6% 42.7% Hutchison 29.9% Mobile Broadband A1 31.5% Other Operations 38.5% 33.5% Unbundled Lines 5.1% 4.6% 15.4% Cable Q3 13 Q3 14 16.3% A1 M
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% 13.2% 4.0% 3.8% 21.5% 22.3% 85.6% 86.7% 61.0% 60.8% 5.4% 5.0% 9.0% 8.3% Q3 13 Q3 14 Q3 13 Q3 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) 14.0 14.3 14.5 14.4 13.2 160.4 159.9 6.7 6.8 6.7 6.4 6.6 154.4 153.0 151.3 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 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) 129.6 129.7 125.3 126.0 125.2 6.5 6.3 6.2 6.2 6.0 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 217.1 227.8 148.6% 207.6 192.9
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) 22.6 22.1 21.6 21.3 21.1 202.1 208.0 212.3 13.2 13.3 188.8 193.1 12.7 12.8 12.4 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 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) 136.4 146.6 145.0 129.4 129.8 11.7 11.4 11.1 11.1 10.5 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 199.8 121.0% 168.8 160.3 173
Slide 37: Segment Belarus – Mobile key performance indicators
Segment Belarus – Mobile key performance indicators ARPU MoU per subscriber (in EUR) (in min) 5.0 6.2 197.0 194.6 197.7 198.8 4.7 4.7 184.6 4.7 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Mobile broadband customers Mobile penetration (in ‘000) (in %) 123.0% 122.8% 123.1% 262.3 272.4
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) 188.7 190.7 192.2 188.0 21.4 19.8 19.8 19.6 176.1 17.2 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Republic of Serbia - ARPU Republic of Macedonia - ARPU (in
Slide 39: Appendix – Regulatory topics
Appendix 2 – Regulatory topics Results for the first nine months and third quarter 2014 39
Slide 40: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates EU Pressure on National Regulatory Authorities to Further Decrease Rates (in EURc) Jul Nov Jan Jul Sep Jan Jul 2013 2013 2014 2014 2014 2015 2015 Austria 2.01 0.8049 0.8049 0.8049 0.8049 0.8049 0.8049 Bulgaria 1.18 1.18 1.02 1.02 1.02 0.97 0.97 Croatia 2.54* 2.
Slide 41: 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 42: Upcoming spectrum tenders/prolongations/assignments
Upcoming spectrum tenders/prolongations/assignments planned/expected Comments Austria 2019 (2100 MHz) - 2600: undecided Bulgaria 2014 (1800 MHz) 2015 (1800 MHz) Croatia 2016 (2100 MHz) dependant on the interest shown by operators 2017 (2100 MHz & 2600 MHz) 2100 MHz: 4th block in Minsk region Belarus
Slide 43: Appendix – Personnel restructuring in Austria
Appendix 3 – Personnel restructuring in Austria Results for the first nine months and third quarter 2014 43
Slide 44: 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 Q1 Q2 Q3 2009 2010 2011 2012 2013 2014 2014 2014 2009 2010 2011 2012 2013 2014 2014 2014 Transfer to FTE effect -10.0 76.9 274.3 49.9 149.0 8.8 10.4 6.3 0 158 106
Slide 45: 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 2009 62.0 and new programmes 2010 57.9 > Cash flow impact for Q3 2014 of EUR 2011 93.4 25.0 mn 2012 104.0 2013 108.0 > Total expected cash
Slide 46: Appendix – Corporate sustainability
Appendix 4 – Corporate sustainability Results for the first nine months and third quarter 2014 46
Slide 47: Alignment with core business and materiality analysis define sustainability strategy
Alignment with core business and materiality analysis define sustainability strategy Results for the first nine months and third quarter 2014 47
Slide 48: 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