Telekom Austria Ag · VIE:TKA
Telekom Austria — Q1 2012 Earnings Presentation
44 slides from Telekom Austria's earnings presentation, May 10, 2012
Slide 1: Results for the First Quarter 2012
Results for the First Quarter 2012 Vienna, 10 May 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-lookingg statements. Forward-looking g information involves risks and uncertainties that could significantly affect expected resul
Slide 3: Agenda
Agenda > Operational and Financial Highlights for the First Quarter 2012 > Key Financial Developments in the First Quarter 2012 > Focus Points > Outlook for Full Year 2012 > Appendix Results for the First Quarter 2012 3
Slide 4: Operational and Financial Highlights for the First Quarter 2012
Operational and Financial Highlights for the First Quarter 2012 Results for the First Quarter 2012 4
Slide 5: Challenging First Quarter Results in Reduced Revenues and EBITDA comparable
Challenging First Quarter Results in Reduced Revenues and EBITDA comparable > Intensified competition in Austria, Bulgaria and Croatia as well as macroeconomic headwinds in the CEE region drive first quarter 2012 > Group revenues and Group EBITDA comparable declined by 5.6% 5 6% and 8 8.9% 9% respec
Slide 6: Key Financial Developments in the First Quarter 2012
Key Financial Developments in the First Quarter 2012 Results for the First Quarter 2012 6
Slide 7: On a Clean Basis Revenues Increased by 3.0% and EBITDA Comparable by 0.9%
On a Clean Basis* Revenues Increased by 3.0% and EBITDA Comparable by 0.9% ((in EUR million)) Q1 2012 Q Q1 2011 % change Q g > Decline in Group revenues and Revenues 1,055.0 1,118.0 -5.6% EBITDA comparable driven by EBITDA comparable** 361.4 396.7 -8.9% Austria, Bulgaria and Belarus EBITDA comparabl
Slide 8: Intensified Competition, Macroeconomic Headwinds and Regulatory Cuts Drive Revenues
Intensified Competition, Macroeconomic Headwinds and Regulatory Cuts Drive Revenues Austria Q1 2012: EUR 706.3 mn | -4 4.3% 3% yoy Belarus: Q1 2012: EUR 60.2 mn | -33.1% 33.1% yoy > Further intensified competition and regulatory effects drive > EUR -93.2 mn net effect from hyperinflation accounting
Slide 9: EUR 29.1 mn OPEX Savings Dampen Impact of Revenue Decline on EBITDA Comparable
EUR 29.1 mn OPEX Savings Dampen Impact of Revenue Decline on EBITDA Comparable Austria 244 1 mn | -5 Q1 2012: EUR 244.1 5.8% 8% yoy 23 5 mn | -44 Belarus: Q1 2012: EUR 23.5 44.2% 2% yoy > OPEX decline of EUR 18.4 mn driven by > EUR 38.1 mn negative impact from > Sale of Mass Response Bulgaria Q1 201
Slide 10: Increase of Free Cash Flow Due to Lower Working Capital
Increase of Free Cash Flow Due to Lower Working Capital ((in EUR million)) Q1 2012 Q Q1 2011 Q % change g Gross cash flow 326.9 335.8 -2.6% Change in working capital -134.4 -185.2 -27.4% Ordinary capital expenditures -145.8 -120.4 21.1% Proceeds from sale of equipment 1.4 1.3 4.6% F Free cash h flow
Slide 11: EUR 750 mn Eurobond Successfully Placed With a Coupon Below Group Average Cost of Debt
EUR 750 mn Eurobond Successfully Placed With a Coupon Below Group Average Cost of Debt Terms and Conditions > Favorable new issue conditions Volume EUR 750.0 mn utilized Coupon 4.000% Announcement Date 26 March 2012 > 4.0% coupon p below average g cost Maturity Date 4 April 2022 of debt of approxima
Slide 12: Focus Points
Focus Points Results for the First Quarter 2012 12
Slide 13: Acquisition of Orange Austria Assets – Approval Process on Track
Acquisition of Orange Austria Assets – Approval Process on Track Acquisition of Orange Austria by Acquisition of Orange Austria Assets Hutchison 3G (H3G) by Telekom Austria from H3G End of May 2012: Filing planned to be 7 May 2012: Filing submitted to the submitted to the Austrian Competition Europe
Slide 14: Austrian Segment– Focus on Multiplay Customers and Convergence
Austrian Segment– Focus on Multiplay Customers and Convergence Strategic Rationale Development of ARPL (in EUR) Five quarters of continued 34.0 32.5 32.2 31.8 32.5 31.9 fixed access line g growth 32.0 30 0 30.0 provided clear signs of 28.0 26.0 24.0 stabilization 22.0 20.0 Q1 11 Q2 11 Q3 11 Q4 11 Q1
Slide 15: Bulgarian Segment: Cost Savings Mitigate Effects of Fierce Competition and Macroeconomic Headwinds
Bulgarian Segment: Cost Savings Mitigate Effects of Fierce Competition and Macroeconomic Headwinds Split of EUR 17 17.5 5 mn Revenue Decline Telekom Austria Group Response Year-on-year (in EUR mn) >Revenue RevenueProtection: protection: > Multibrand strategy: focus on bob to protect price levels of
Slide 16: New Ambition Program on Track - Approximately 87% of Measures Initiated
New Ambition Program on Track - Approximately 87% of Measures Initiated Austria: Bulgaria: > Focus on value preservation despite price > Target to reduce FTE by 250 to 300 aggression in 2012 > Increase Marketing Communication Efficiency > 87 FTE addressed in Q1 2012 > Focus F on small ll and d mediu
Slide 17: New Ambition Program on Track to Reach Target of EUR 40 mn Operating Free Cash Flow Impact
New Ambition Program on Track to Reach Target of EUR 40 mn Operating Free Cash Flow Impact New Ambition Program target 2012: EUR 40 mn operating free cash flow Will have a positive opFCF impact of Approx. 87% of measures planned for approx. EUR 38 mn by year end 2012 have already been initiated 2012
Slide 18: Outlook
Outlook Results for the First Quarter 2012 18
Slide 19: Telekom Austria Group Outlook for Full Year 2012 Confirmed
Telekom Austria Group Outlook for Full Year 2012* Confirmed 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. Revenues approx EUR 4 approx. 4.4 4 bn EBITDA comparable approx. EUR
Slide 20: Appendix
Appendix pp 1 Results for the First Quarter 2012 20
Slide 21: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split p - Segment g Austria ((in EUR million)) Q1 2012 Q Q1 2011 Q % change g Monthly fee and traffic 486.0 505.7 -3.9% Data and ICT Solutions 52.6 49.3 6.6% Wholesale (incl. Roaming) 46.1 51.5 -10.5% Interconnection 93.3 87.5 6.6% Equipment 25.8 31.
Slide 22: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating p g Expense p - Segment g Austria ((in EUR million)) Q1 2012 Q Q1 2011 Q % change g Material expense 64.1 65.6 -2.3% Employee costs 172.6 171.9 0.4% Interconnection 71.8 75.1 -4.4% Maintenance and repairs 22.1 25.2 -12.3% Services received 28.8 38.
Slide 23: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group - Mobile Communication Subscriber Base Mobile Subscribers ((in 000)) Q1 2012 Q Q1 2011 Q % change g Austria 5,286 5,145 2.7% Market share 39.5% 41.0% Bulgaria 5,486 5,277 4.0% Market share 48 4% 48.4% 49 3% 49.3% Croatia 1,964 2,002 -1.9% Market share 39.0% 38.9% Belarus 4,637
Slide 24: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE ((Average g pperiod)) Q1 2012 Q Q1 2011 Q % change g Austria 9,328 9,699 -3.8% International 7,721 6,745 14.5% Telekom Austria Group* 17,211 16,600 3.7% FTE (End of period) Q1 2012 Q1 2011 % change Austria 9 335 9,335 9 649 9,649 -3.3% 3 3% Internati
Slide 25: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital p Expenditures p ((in EUR million)) Q1 2012 Q Q1 2011 Q % change g Segment Austria 93.7 78.4 19.5% Segment Bulgaria 23.2 13.9 66.8% Segment Croatia 13.3 8.6 54.1% Segment Belarus 5.1 3.1 65.2% Segment Additional Markets 10.7 16.4 -34.5% Slov
Slide 26: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt ((in EUR million)) Mar. 31,, 2012 Dec. 31,, 2011 % change g Long-term debt 2,956.8 2,960.4 -0.1% Short-term borrowings 1,011.6 1,052.4 -3.9% Cash and cash equivalents, short-term and long term investments, finance lease receivables -658.7 -657.7 0.2% Derivat
Slide 27: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturityy Profile (in EUR million) 996* 980** 804 553 253 205 129 47 * 2012 2013 2014 2015 2016 2017 2018 2019 * Includes approx. EUR 31.7 mn related to velcom and EUR 5.9 mn to fixed line acquisitions in Bulgaria, which is reported in Other liabili
Slide 28: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments Fixed-Floating g Mix 35% 51% 49% 65% Bonds Loans Floating Fixed Lines of Credit Ratings > Undrawn committed lines of credit > S&P: BBB (stable outlook) amounting to EUR 913.0 mn > Moody’s: Baa1 (stable outlook) g term to maturityy of > A
Slide 29: Belarus: Impact of Hyperinflation Accounting and Foreign Exchange Translations in First Quarter 2012
Belarus: Impact of Hyperinflation Accounting and Foreign Exchange Translations in First Quarter 2012 Belarus Profit and Loss Statement for the First Quarter 2012 Excluding Hyperinflation Hyperinflation and FX Impairment Reported (in EUR million) and FX in Belarus Effects in Belarus Revenues 153 4 15
Slide 30: 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 39.5 270.0 39.0 38.5 38.0 37.5 260.0 37.0 36.5 36.0 35.5 35.0 34.5 32.5 32.2 32.5 250.0 34.0 33.5 33.0 31.8 31.9 32.5 32.0 31.5 31.0 240.0 2,323 2,327 2,33
Slide 31: Segment Austria – Mobile Key Performance Indicators
Segment Austria – Mobile Key Performance Indicators ARPU & ARPU Relevant Revenues MoU p per Subscriber (in EUR) (in min) 350.0 340.0 23.0 20.1 20.5 20.0 21.0 152.7 330.0 19 2 19.2 152.0 151.9 320.0 18.5 19.0 149 5 149.5 146.4 310.0 17.0 300.0 317.4 293.6 309.9 311.9 15.0 290.0 300.9 280.0 13.0 270.0
Slide 32: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Broadband Lines Market Share Voice Minutes (in %) (in %) Mobile 28.3% Broadband 30.4% other operators 6.7% Unbundled lines 5.9% 5 9% 80.9% Mobile 83.9% 15.1% Cable 14.3% A1 18.2% Mobile broadband 18.4% A1 1.2% fixed wholesale 1.0% A1 Other fixed
Slide 33: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 7.6 7.3 7.0 7.0 104.2 104.1 6.1 98.6 98 6 97.5 96.7 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 242.4 151.4% 151.7% 177.6 192
Slide 34: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU* MoU p per Subscriber* (in EUR) (in min) 13.4 13.4 97.1 96.5 95.8 12 5 12.5 12 4 12.4 92.6 89 8 89.8 11.7 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Mobile Broadband Customers* Mobile Penetration* (in 000) (in %) 192.9 127.0%
Slide 35: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 6.1 186.0 183.4 4 9 4.9 179.8 174.1 3.5 3.5 3.7 168.6 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 518.6 118.8% 119.4% 453.1 34
Slide 36: Segment Additional Markets – Mobile Key Performance Indicators
Segment Additional Markets – Mobile Key Performance Indicators Slovenia - ARPU Slovenia - MoU p per Subscriber (in EUR) (in min) 22.7 178.3 177.0 21 4 21.4 20.4 20.7 168.7 165.1 19.1 155.4 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Q1 11 Q2 11 Q3 11 Q4 11 Q1 12 Serbia - ARPU Macedonia - ARPU (in EUR) (in EUR) 8.
Slide 37: Appendix 2 – Regulatory Topics
Appendix 2 – Regulatory g y Topics p Results for the First Quarter 2012 37
Slide 38: 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* Keyy Points Impact EBITDA comp. Interconnection 2010 - 2013: EUR -75 75 mn Impact EBITDA comp. 2010 -2013: Impact EBITDA comp. EUR -175 mn Roaming g 2010 - 2013: EUR -100 mn > EU commission: before Januaryy 1, Digital Di
Slide 39: 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 4.00 3 50 3.50 3 01 3.01 2 51 2.51 2 01 2.01 market analysis during 2012 Bulgaria 11.76 10.48 6.65
Slide 40: EU-Roaming Glide Path
EU-Roaming Glide Path July 2009 July 2010 July 2011 Voice Wholesale 0.26 0.22 0.18 Retail active 0.43 0.39 0.35 Retail passive 0.19 0.15 0.11 SMS Wholesale 0.04 0.04 0.04 Retail 0.11 0.11 0.11 Data Wholesale 1.00 0.80 0.50 Results for the First Quarter 2012 40
Slide 41: Appendix 3 – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the First Quarter 2012 41
Slide 42: Overview – Restructuring Charges and Provision vs. FTE
Overview – Restructuring Charges and Provision vs. FTE Overview Restructuring g Charges g FTEs Addressed (in EUR million) 2008 2009 2010 2011 Q1 2011 2008 2009 2010 2011 Q1 2012 Transfer to governmentt 0 0 158 106 9 FTE Effect 632.1 -10.0 76.9 233.7 4.4 Social plans 256 451 28 685 0 Interest rate St
Slide 43: Overview – Cash Flow Impact of Restructuring
Overview – Cash Flow Impact of Restructuring Overview Cash Flow Impact p (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 pp y 2011 89.0 EUR 100 mn Q1 2012
Slide 44: 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 h d h k and handshakes d can fl fluctuate t t d due tto retirement ti t
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