Telekom Austria AG · VIE:TKA
Telekom Austria — FY2002 Earnings Presentation
59 slides from Telekom Austria's earnings presentation, March 2003
Slide 1: Results of the Financial Year 2002
Telekom Austria Group Results of the Financial Year 2002 March, 2003 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 § Key Developments § Operational Highlights Ÿ Wireline Ÿ Wireless § Financial Overview § Outlook 3
Slide 4: Key Developments
Key Developments 4
Slide 5: Telekom Austria Group 2002 Highlights
Telekom Austria Group 2002 Highlights § Business Ÿ Strengthened market position in all segments Ÿ Stabilization of fixed line business trend Ÿ Profitable growth in all mobile activities § Financial Ÿ First net profit after two years Ÿ Net debt declines in spite of buyback of mobile minorities § Corp
Slide 6: Telekom Austria – Full Year Results
Telekom Austria – Full Year Results Key Financial Indicators (EUR million) Revenues EBITDA Net profit Net debt CAPEX +1.3% +2.7% n.m. -2.4% -18.4% 3,908.2 12.8 3,859.3* FY 2001 1,514.8 1,474.8* FY 2002 3,282.1 3,204.2 812.2 662.4 -104.6 FY 2001 FY 2002 Dec.31 Dec.31 FY 2001 FY 2002 FY 2001 FY 2002 0
Slide 7: Telekom Austria vs. European Peers
Telekom Austria vs. European Peers § Telekom Austria compares well with its peer group Ÿ 39% EBITDA margin Ÿ Further reduction of capex and debt planned EBITDA Margin (EBITDA-Capex)/Revenues Net Debt/EBITDA (FY 2002 Figures) (FY 2002 Figures) (FY 2002 Figures) 40.0% 39.9% 38.8% 2.8x 36.0% 26.7% 26.0
Slide 8: Equity Offering and Liquidity Agreement
Equity Offering and Liquidity Agreement The new Austrian Government has reiterated its intention to proceed with a full privatization November 02 Offering Liquidity Agreement § Share offering of 75million § In the first nine month of 2003, shares by Telecom Italia the Government has the priority rig
Slide 9: Wireline
Wireline 9
Slide 10: Fixed Line, Data & Internet
Fixed Line, Data & Internet 2002 Results Key Highlights (EUR million) Revenues EBITDA** § Full year voice market share rises for the first time since -6.0% 1999 -6.6% § 4Q EBITDA includes 2,402.4* 2,259.4* extraordinary reversals and 99.5 330.2 119.6 905.7* provisions 330.0 54.7 846.0* 46.6 § Wireli
Slide 11: Improved Market Position
Improved Market Position • Targeted win-back marketing campaigns • Efficient use of the most important sales channels, primarily direct sales • Promotional campaigns to change price perception • Stronger position in business market following increased sales efforts Change in Voice Market Share Busin
Slide 12: Competition Update
Competition Update Voice Market Shares* Competitive Situation 8% 3% • No. of competitors falls from 4% 39 to 28 during 2002 6% • Tele2 continues to grow strongest in retail market 12% 53% • UTA focuses on business market, capital increase 14% announced Telekom Austria telering Others • Further conso
Slide 13: ADSL-Growth Driven by Marketing Push
ADSL-Growth Driven by Marketing Push Monthly Weekly ADSL ADSL Net Net adds Adds Highlights Start of simplified 8.135 product offering § ADSL to drive revenues 6.500 growth and customer retention § Net adds rise following Jan. Mar. Mai. Jul. Sep. Nov. Jan. simplified product offering 02 02 02 02 02 0
Slide 14: Wireline Business Initiatives
Wireline Business Initiatives Performance WIN+ Wireline Initiative WIN Wireline Initiative Focus on revenue generation and market performance in all segments Halt market share loss and Focus on end-to-end process reposition brand performance (quality, speed, cost) in service creation and Re-organize
Slide 15: Business Solutions Focus in 2003
Business Solutions Focus in 2003 Key Actions § Product push campaigns Ÿ Rising market share in VAS, business access, PABX and LAN services § Value-up migration Ÿ Customer retention through increased service portfolio, bundling of products and development of innovative solutions within the group § Ne
Slide 16: Private & Professional Focus in 2003
Private & Professional Focus in 2003 Key Actions § Accelerate marketing campaigns for existing voice and Internet products § Further efficiency drive for direct sales and shop distribution § Churn prevention Ÿ Additional promotional campaigns to change price perception Ÿ Segment specific approach Ÿ
Slide 17: Wireless
Wireless 17
Slide 18: Wireless - Geographic Breakdown
Wireless - Geographic Breakdown 2002 Results Key Highlights (EUR million) § Rise in revenues and in Revenues EBITDA profitability in 2002 +11.5% +15.7% § All mobile operations contribute positively to 1,909.4* 660.9* EBITDA 1,713.2* 79.2 48.1 303.5 571.3* 1.9 114.8 231.1 79.2 § mobilkom austria incr
Slide 19: Wireless – Austrian Market
Wireless – Austrian Market § Mobile penetration reaches 83.1% as of Dec. 31, 2002 § § Increasing market share during Q4 2002 Competitive Situation Subscriber Base (in 000) (in 000) tele.ring** 0,315 mobilkom austria 2,850 3,001 2,805 3,001 4.7% Connect* 1,398 20.7% 1,468 1,411 1,426 52.5% 44.4% 50.5
Slide 20: mobilkom austria - ARPU and Costs
mobilkom austria - ARPU and Costs § Average ARPU rises by 5% during 2002, average MoU by 8.7% § Seasonal decline of 4Q EBITDA as expected due to higher acquisition and marketing costs ahead of the increasing competition in Austria Average Monthly ARPUs SAC and SRC (in EUR) 58.4 59.0 41.6 (EUR millio
Slide 21: mobilkom austria - Mobile Data
mobilkom austria - Mobile Data Mobile Data Revenues Key Developments Data revenues (in EUR million) § Significant growth in GPRS users: 82.9 - GPRS user figures reach 223,000 as of December 31, 2002 70.5 +17.5% § Continuing upward SMS trend: - Chargeable SMS increase by 16% QoQ to 147million in Q4 2
Slide 22: mobilkom austria - Competition Update
mobilkom austria - Competition Update Competitive Situation Marketing Strategy § Very aggressive marketing campaigns by all competitors § mobilkom austria strengthens focus on service and innovation § Tele2 started as service operator using One’ s network; possible MVNO in 2H 03 § Branch solutions a
Slide 23: VIPnet - Operations and Financials
VIPnet - Operations and Financials Subscriber Base Key Highlights (‚000) 1,098 856 § Stable market share (48.2%) § Rising share of contract customers 531 (16%) and business market share (30%) following marketing focus on SME 2000 2001 2002 § ARPU declines by 5.2% to EUR 20 EBITDA Margin due to stron
Slide 24: Si.mobil - Operations and Financials
Si.mobil - Operations and Financials Subscriber Base Key Highlights 350 (‚000) 270 § First positive full-year EBITDA in 2002 130 § Accelerated subscriber growth in 4Q 02 § Contract share rises by 8.0 pp. to 44% 2000 2001 2002 § ARPU profits from rising contract EBITDA share and increases by 11.2% to
Slide 25: Partnership Agreement with Vodafone
Partnership Agreement with Vodafone § Agreement includes Austria, Croatia and Slovenia and, inter alia, the following acitivities: Ÿ Roaming Ÿ Development of products and services Ÿ Global account management Ÿ Purchasing / Supply Chain Management § Current status of cooperation Ÿ Eurocall roaming ta
Slide 26: Financial Overview
Financial Overview 26
Slide 27: Telekom Austria Results
Telekom Austria Results FY 2002 FY 2001 % 4Q 2002 4Q 2001 % Total man. revenues 3,908.2 3,859.3 1.3% 1,008.4 971.1 3.8% Total man. EBITDA 1,514.8 1,474.8 2.7% 303.9 309.7 -1.9% EBITDA margin 38.8% 38.2% 30.1% 31.9% Total man. EBIT 323.5 158.0 104.7% -62.0 -140.8 56.0% Consol. net profit 12.8 -104.6
Slide 28: Items Affecting Operating Results
Items Affecting Operating Results Fixed Line § Full year EUR 54.7million (4Q 02: EUR 24.3million) of reversal for early retirement costs § 4Q impacted by additional personnel (EUR 14.8million) and other operating (EUR 12.6 million) costs Data § Full year results include EUR 11.3 million of bad debt
Slide 29: Fixed Line - Costs Reduction in 2002
Fixed Line - Costs Reduction in 2002 § 80% completion of 5-year headcount reduction plan within two years § EUR 85 million of costs reductions in the fixed line segment during 2002 § 4Q impacted by reversals (EUR 24.3 million) and extraordinary costs (EUR 27.4 million) Personnel Costs in 2002 Other
Slide 30: Total managed equals Consolidated Net Profit
Total managed equals Consolidated Net Profit (EUR million) FY 02 FY 01 EBITDA 1.514,8 1.474,8 4Q includes EUR 30.9million Depreciation & due to accelerated depreciation -1.149,4 -1.171,7 amortization Impairment charge primarily Impairment charges -41,9 -145,1 for Czech On Line Idle workforce -29,4 -
Slide 31: Net Debt Reduction
Net Debt Reduction § Capex declines by 18%; capex to revenue ratio falls from 21% to 17% § Net debt continues to fall slightly in 4Q § Net debt/EBITDA 2.1; interest coverage of 8.8x; net gearing of 128% Capital Expenditures Net Debt (EUR million) (EUR million) 917.7 693 771 812.2 662.4 3,282 3,204 5
Slide 32: Outlook
Outlook 32
Slide 33: 2003 Outlook
2003 Outlook Wireline § Intensified marketing measures and further rigid costs control § Revenues and earnings are expected to stabilize in 2003 Wireless § Additional competitors expected both in Austria and in Croatia § Lower roaming revenues § Further increase in revenues and earnings but at lower
Slide 34: Cash Generation Remains the Focus ...
Cash Generation Remains the Focus ... Medium Term Group Targets Increasing Cash Generation Enhancing Revenue CAGR 2002 - 2006 ~2% shareholder value EBITDA CAGR 2002 - 2006 ~3% Capex/revenues < 15% Average yearly FCF ~ EUR 500million Net debt/equity 2003 120% Net debt/EBITDA 2003 2.0 1999 2000 2001 2
Slide 35: ... also in 2003
... also in 2003 § Capex expected to stabilize at EUR 660million notwithstanding higher UMTS investments § Wireline headcount reduction target of 600 employees § Efforts to lower wireline other operating costs by 4% through: Ÿ decrease in infrastructure and network costs Ÿ lower advertising and mark
Slide 36: International Expansion Strategy
International Expansion Strategy § Consistent with the principle of enhancing shareholder value, Telekom Austria will continue to explore “selected” acquisition opportunities § Stringent screening criteria and thorough review procedures requiring § attractive entry price § low penetration markets §
Slide 37: Appendix
Appendix 37
Slide 38: Fixed Line - Access Lines
Fixed Line - Access Lines (in thousands) Dec. 31, 2002 Dec. 31, 2001 % change PSTN access lines 2,659.1 2,759.8 -3.6% Basic ISDN access lines 430.1 398.7 7.9% Multi ISDN access lines 8.1 8.3 -2.4% Total access lines 3,097.3 3,166.8 -2.2% of these ADSL access lines 174.1 100.6 73.1% thereof wholesale
Slide 39: Fixed Line - Market Shares
Fixed Line - Market Shares (in %) 58.9 57.6 57.6 57.5 56.2 56.8 Local* 55.1 55.3 55.6 55.3 Total market share* 51.9 52.2 51.2 Fixed-to-mobile 50.1 49.7 50.1 Long distance 48.7 46.8 47.3 International 46.2 47.6 45.3 46.5 45.1 45.0 December 31, March 30, June 30, September 30, December 31, 01 02 02 02
Slide 40: Fixed Line - Minutes
Fixed Line - Minutes (in millions of minutes) 4Q 2002 4Q 2001 % change Local 972 1,037 -6.3% National long distance 226 206 9.8% Fixed-to-mobile 213 206 3.4% International 122 120 1.9% Internet dial up 1,134 1,145 -1.0% Total fixed line minutes 2,667 2,714 -1.7% Carrier services: Incoming internatio
Slide 41: Fixed Line – Average Tariffs
Fixed Line – Average Tariffs (EUR per minute) 4Q 2002 4Q 2001 % change Local 0.045 0.055 -17.4% National long distance 0.050 0.065 -19.4% Fixed-to-mobile 0.182 0.206 -11.7% International 0.203 0.225 -9.8% Internet dial up 0.016 0.017 -4.7% Total average* 0.077 0.088 -12.5% * Excluding Internet dial-
Slide 42: Mobile Subscribers
Mobile Subscribers Customers ('000s) Dec. 31, 2002 Dec. 31, 2001 % change Austria Contract 1,574.9 1,439.4 9.4% Prepaid 1,426.5 1,410.5 1.1% Total 3,001.4 2,849.9 5.3% Croatia Contract 176.0 119.0 47.9% Prepaid 921.8 736.7 25.1% Total 1,097.8 855.7 28.3% Slovenia Contract 154.5 97.5 58.5% Prepaid 19
Slide 43: mobilkom austria‘s Traffic and ARPU
mobilkom austria‘s Traffic and ARPU 4Q 2002 4Q 2001 Charged minutes (millions) * 1,088 1,001 Average number of customers ('000s) 2,940 2,829 Monthly MOU - charged 123.3 117.8 Average Monthly ARPU Contract 59.0 58.4 Average Monthly ARPU Prepaid 10.7 9.9 Average Monthly ARPU 36.2 34.1 * Rated MOUs of
Slide 44: mobilkom austria - Churn, MoU
mobilkom austria - Churn, MoU Quarterly GSM Churn Average MoU per Subscriber (in %) (in minutes) 10.3 123.3 117.8 117.5 120.5 118.7 113.2 109.2 7.6 6.2 5.1 2.8 2.2 4Q 01 4Q 02 4Q FY 1Q 2Q 3Q 4Q FY 01 01 02 02 02 02 02 Contract Prepaid Average 44
Slide 45: mobilkom austria - Mobile Data
mobilkom austria - Mobile Data GPRS Customers and MMS Users No. SMS and MMS per Quarter 223 (million) (in 000) 147 126 129 126 118 GPRS SMS 101 56 38 26 Dec. 31, March 31, June 30, Sep. 30, Dec. 31, 3Q 02 4Q 02 4Q 01 1Q 02 2Q 02 01 02 02 02 02 (in 000) 186 25 MMS MMS 11 38 Sep. 30, 02 Dec. 31, 02 3Q
Slide 46: Internet Subscribers
Internet Subscribers Austria Czech Republic Customers ('000s) Customers ('000s) 846.5 275.3 666.4 143.1 86 238.2 703.4 580.0 Dec. 31, 01 Dec. 31, 02 Dec. 31, 01 Dec. 31, 02 Dial-up ADSL 46
Slide 47: Headcount Development
Headcount* Development (average of period) FY 2002 FY 2001 Change Fixed Line** 10,973 13,088 -2,115 Mobile 3,530 3,251 279 Data 841 908 -67 Internet 370 302 68 Telekom Austria Group 15,714 17,549 -1,835 **including idle workforce 592 565 27 (end of period) Dec. 31, 2002 Dec. 31, 2001 Change Fixed Li
Slide 48: Fixed Line - Revenue Breakdown
Fixed Line - Revenue Breakdown 4Q 01 % FY 01 % FY 01 (EUR million) 4Q 02 change FY 02 previously change reported adjusted adjusted Traffic revenues 131.6 139.3 -5.5% 499.4 599.1 -16.6% 599.1 Monthly rental 155.4 159.7 -2.7% 619.1 635.5 -2.6% 635.5 Interconnection 96.1 91.2 5.4% 366.4 379.8 -3.5% 637
Slide 49: Fixed Line - Expense Breakdown
Fixed Line - Expense Breakdown FY 01 % FY 01 (EUR million) FY 02 previously adjusted change reported Material expense 55.5 66.5 -16.5% 66.5 Employee costs* 426.2 505.4 -15.2% 507.5 Depreciation and amortization 834.5 836.0 -0.2% 836.0 Loss from retirement of 5.1 0.0 - 0.0 long lived assets Interconn
Slide 50: Mobile - Revenue Breakdown
Mobile - Revenue Breakdown (EUR million) 4Q 02 4Q 01 % change FY 02 FY 01 % change Traffic revenues 262.9 208.1 26.3% 1,000.6 853.3 17.3% Monthly rental 74.7 63.9 16.9% 283.5 252.1 12.5% Equipment 57.2 67.1 -14.8% 175.2 181.0 -3.2% Roaming 27.4 27.6 -0.7% 155.9 147.8 5.5% Interconnection 70.2 69.4 1
Slide 51: Mobile - Expense Breakdown
Mobile - Expense Breakdown (EUR million) FY 02 FY 01 % change Material expense 252.3 250.7 0.6% Employee costs 158.6 134.5 17.9% Depreciation and amortization 268.8 267.8 0.4% Loss from retirement of 11.4 0.0 - long lived assets Interconnection 192.6 169.2 13.8% Repairs 59.3 39.9 48.6% Services rece
Slide 52: Operating Revenues by Segment
Operating Revenues by Segment 4Q 01 % FY FY 01 % FY 01 (EUR million) 4Q 02 previously adjusted change 02 adjusted change reported Fixed line services 546.1 534.7 2.1% 2,057.2 2,199.5 -6.5% 2,456.7 Data communications services 94.3 91.6 2.9% 330.0 330.2 -0.1% 330.2 Internet 32.4 37.2 -12.9% 119.6 99.
Slide 53: EBITDA by Segment
EBITDA by Segment % % (EUR million) 4Q 02 4Q 01 change FY 02 FY 01 change Fixed line services 187.5 179.4 4.5% 813.2 871.0 -6.6% Data communications services 10.7 20.7 -48.3% 46.6 54.7 -14.8% Internet -7.4 1.3 - -13.4 -20.1 33.3% Mobile communications services 105.0 110.7 -5.1% 660.9 571.3 15.7% Int
Slide 54: EBIT by Segment
EBIT by Segment % % (EUR million) 4Q 02 4Q 01 change FY 02 FY 01 change Fixed line services -64.4 -47.4 -35.9% -21.4 35.0 - Data communications services 3.1 9.9 -68.7% 10.5 19.3 -45.6% Internet -52.3 -121.8 57.1% -65.7 -150.0 56.2% Mobile communications services 43.4 34.9 24.4% 392.1 303.5 29.2% Int
Slide 55: Fixed line, Data and Internet - Revenues, EBITDA, EBIT
Fixed line, Data and Internet - Revenues, EBITDA, EBIT % % (EUR million) 4Q 02 4Q 01 change FY 02 FY 01 change Fixed line services 546.1 534.7 2.1% 2,057.2 2,199.5 -6.5% Data communications services 94.3 91.6 2.9% 330.0 330.2 -0.1% Internet 32.4 37.2 -12.9% 119.6 99.5 20.2% Intersegmental eliminatio
Slide 56: Capital Expenditures
Capital Expenditures* (EUR million) FY 02 FY 01 % change Fixed Line 307.5 397.5 -22.6% Data Communications 19.9 31.5 -36.8% Internet 13.3 20.0 -33.5% Mobile Communications 321.7 363.2 -11.4% Telekom Austria Group 662.4 812.2 -18.4% mobilkom austria 206.2 229.0 -10.0% VIPnet 72.2 103.2 -30.0% Si.mobi
Slide 57: Net Debt - Telekom Austria Group
Net Debt - Telekom Austria Group (EUR million) Dec. 31, 02 Dec. 31, 01 Long-term debt 2,079.9 2,005.2 Short-term debt 1,309.9 978.1 - Cross border lease, included in short-term debt -107.9 -87.5 + Capital lease obligations 7.3 7.5 + Related parties 0.4 - - Intercompany accounts 0.0 -286.5 Cash and c
Slide 58: Price Performance and Equity Offering
Price Performance and Equity Offering Share Price since IPO Ownership Structure 120 100 38.0% 47.2% 80 60 40 14.8% 20 Nov. March Sep. Jan. May Sep. Jan. March 00 01 01 02 02 02 03 03 Ö IAG (Republic of Austria) Telecom Italia Telekom Austria DJ Stoxx Telecom Austrian Traded Index Free float (incl. e
Slide 59: Regulatory Update
Regulatory Update Wireline Wireless § New regulator took office in § One of the lowest termination November 2002 rates in Europe § New Telecom Law to be introduced in 2H 2003 § Next decision (expected 2Q 03) Ÿ Focus on infrastructure should stabilize the current rates based providers and possibly br