Telekom Austria Ag · VIE:TKA
Telekom Austria — FY2011 Earnings Presentation
57 slides from Telekom Austria's earnings presentation, Feb 23, 2012
Slide 1: Results for the Fourth Quarter and Full Year 2011
Results for the Fourth Quarter and Full Year 2011 Vienna, 23 February 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 Full Year 2011 > Key Financial Developments in the Fourth Quarter 2011 > Focus Points > Outlook for Full Year 2012 pp > Appendix Results for the Fourth Quarter and Full Year 2011 3
Slide 4: Operational and Financial Highlights for Full Year 2011
Operational and Financial Highlights for Full Year 2011 Results for the Fourth Quarter and Full Year 2011 4
Slide 5: 2011: External Headwinds Mitigated by Strong Operational Performance
2011: External Headwinds Mitigated by Strong Operational Performance > Successful measures to counter competitive pressure, regulation and macro developments impacted by hyperinflation accounting and foreign exchange translations > Convergence continues to drive access line growth in Austria and acq
Slide 6: Full Year 2011 Results in Line with Guidance
Full Year 2011 Results in Line with Guidance* Guidance Reported p Hyperinflation yp Excludingg and FX in Hyperinflation Belarus and FX in Belarus approx. pp R Revenues EUR 4 4.45 45 bn b EUR 213 213.6 6 mn EUR 4 4.67 67 bn b EUR 4.50 bn up to EBITDA comparable EUR 1.53 bn EUR 90.0 mn EUR 1.62 bn
Slide 7: Key Financial Developments in Fourth Quarter 2011
Key Financial Developments in Fourth Quarter 2011 Results for the Fourth Quarter and Full Year 2011 7
Slide 8: Stable Group EBITDA Margin Despite Competition, FX-Adjustments in Belarus and Regulation
Stable Group EBITDA Margin Despite Competition, FX-Adjustments in Belarus and Regulation (in EUR million) Q4 2011 Q4 2010 % change Revenues 1,115.9 1,170.8 -4.7% > On a clean basis revenues increased by EBITDA comparable* 336.9 353.4 -4.7% 3.9% and EBITDA comparable by 6.5% EBITDA comparable margin*
Slide 9: Convergence and Contributions from Additional Markets Mitigate Revenue Pressure
Convergence and Contributions from Additional Markets Mitigate Revenue Pressure Austria Q4 2011: EUR 752.0 mn | -1.9% yoy Belarus: Q4 2011: EUR 41.2 mn | -54.5% yoy > Revenue decline due to regulation and competition > EUR -100.1 100.1 mn net effect from hyperinflation accounting and > Loss of fixed
Slide 10: Favorable EBITDA Comparable Trends Despite Macro-Economic and Foreign Exchange Setbacks
Favorable EBITDA Comparable Trends Despite Macro-Economic and Foreign Exchange Setbacks Austria Q4 2011: EUR 226.5 mn | +3.4% yoy Belarus: Q4 2011: EUR 6.9 mn | -81.0% yoy > Positive impact from total one-off effects Bulgaria Q4 2011: EUR 58.1 mn | -19.2% yoy > Impact of hyperinflation accounting an
Slide 11: Q4 2011 EBITDA - Restructuring and Impairment Charges
Q4 2011 EBITDA - Restructuring and Impairment Charges EBITDA comparable Q4 Effect Comment > Net effect from restructuring g provision p of EUR -8.9 8 9 mn Restructuring EUR 49.6 mn and a reduction of restructuring personnel restructuring Austria charge via servicekom EUR -40.7 mn > No cash flow impa
Slide 12: Free Cash Flow Driven by FX-Adjustments and Lower CAPEX
Free Cash Flow Driven by FX-Adjustments and Lower CAPEX (in EUR million) Q4 2011 Q4 2010 % change 1-12 M 2011 1-12 M 2010 % change G Gross cash h fl flow 302 0 302.0 320 320.4 -5.8% 8% 1,339.6 339 6 1,478.6 86 -9.4% 9 % Change in working capital 76.6 42.7 79.4% -126.4 -81.0 55.9% Ordinary capital ex
Slide 13: CAPEX 7.8% Lower than Planned to Protect Operating Free Cash Flow
CAPEX 7.8% Lower than Planned to Protect Operating Free Cash Flow* -7.8% > CAPEX savings of 7.8% in 2011 versus initial guidance and 4.0% decline versus 2010 > CAPEX savings mainly due to > CAPEX optimization in support areas up to EUR 800.0 mn like IT, core and service network and EUR 763.6 mn Oper
Slide 14: Conservative Financial Portfolio Ensures Access to Capital Markets
Conservative Financial Portfolio Ensures Access to Capital Markets Balanced Debt Maturity Profile Solid Credit Ratings (in EUR million) > S&P: BBB (stable outlook) 1,052* 969** > Moody’s: Baa1 (stable outlook) 806 550 253 205 129 47 2012 2013 2014 2015 2016 2017 2018 2019 Significant Financial Flexi
Slide 15: Focus Points
Focus Points Results for the Fourth Quarter 2011 15
Slide 16: Continued Successful Implementation of Telekom Austria Group's Strategy in 2011
Continued Successful Implementation of Telekom Austria Group Group’ss Strategy in 2011 Strategy Telekom Austria Group Value enhancing growth Market consolidation Convergence opportunities in Austria Giganet in Austria and in Bulgaria i Croatia in C ti Operational Excellence SIM fee and modem Strict
Slide 17: Convergence as a Key Strategic Pillar Shows Clear Results
Convergence as a Key Strategic Pillar Shows Clear Results Austria Bulgaria Bundle Subscriber Growth > Fixed line service revenues 2011: (in 000) EUR 17.8 mn; EBITDA comparable: EUR 1200 980.8 1 023 1 1,023.1 1 035 8 1,035.8 + 13.6% 6 2 mn 6.2 911.8 956.3 400 1000 > 35% increase in fixed broadband 80
Slide 18: Telekom Austria Group Delivers on Giganet Plans in Austria
Telekom Austria Group Delivers on Giganet Plans in Austria Total Addressable Market (in 000, % of total households) YE 2010 Plan YE 2011 Achieved YE 2011 NGA Rollout 1,750 (42%) 2,110 (50%) 2,170 (52%) Rollout Criteria: Demand driven NGA-Rollout 2011: > Sales potential > Targeted FTTH/FTTB roll-ou
Slide 19: Announced Acquisition of Orange Austria Assets in Line With Group Strategy
Announced Acquisition of Orange Austria Assets in Line With Group Strategy Frequencies Base stations YESSS! ONE A total of 2 x 13.2 MHz of 100% of the mobile phone Intellectual property Up to 634 base stations paired frequencies operator YESSS! rights on the brand “ONE” ONE maximum amount of EUR 390
Slide 20: 2011 Restructuring Program Targets Achieved – New Initiatives for 2012
2011 Restructuring Program Targets Achieved – New Initiatives for 2012 Target as of 23 February 2011 Reported as of 31 December 2011 approx. 700 FTE 791 FTE > 75% - 85% to Social Plans > Social plans: 685 FTE (87%) > 15% – 25% Transfer T f tto G Governmentt > T Transfer f tto the th government:t 1
Slide 21: New Ambition Program – Operating Free Cash Flow Target Achieved Through Operational Excellence
New Ambition Program – Operating Free Cash Flow* Target Achieved Through Operational Excellence New Ambition Program (NAP) > Expanding on existing strategy, targeting operating free cash flow stabilization > Addresses revenues, OPEX and CAPEX > Measures are to be implemented in 2012 and 2013 > Part
Slide 22: NAP Closes OpFCF Gap Between Guidance and Consensus
NAP Closes OpFCF* Gap of Approx. EUR 130 mn Between Guidance and Consensus New guidance 2012: Capital Market approx. EUR 750 mn Day 2010: approx approx. EUR 800 mn per annum EUR 788.4 mn EUR 760 mn EUR 710 mn 2011 reported p 2012 2013 Consensus** New Ambition Program effect New Ambition Program ensu
Slide 23: Defined Activities Ensure Success of New Ambition Program
75 Defined Activities Ensure Success of New Ambition Program Revenue Contribution OPEX Contribution CAPEX Contribution 10% > Mobile data monetization 10% > Outsourcing 20% > Life cycle management 10% > Procurement efficiency 30% > Focus on small and 10% > Customer service efficiency medium enterpris
Slide 24: Outlook
Outlook Results for the Fourth Quarter 2011 24
Slide 25: Telekom Austria Group Outlook for Full Year 2012
Telekom Austria Group Outlook for Full Year 2012* On a constant currency basis for all markets as well as before any effects of potential inflation accounting for the Belarusian segment Revenues approx EUR 4 approx. 4.4 4 bn EBITDA comparable approx. EUR 1.5 bn CAPEX approx. EUR 0.75 bn Operating Fr
Slide 26: Appendix
Appendix pp 1 Results for the Fourth Quarter 2011 26
Slide 27: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (in EUR million) Q4 2011 Q4 2010 % change Monthly fee and traffic 502.7 514.6 -2.3% Data and ICT Solutions 55.3 60.9 -9.1% Wholesale (incl. Roaming) 60.7 42.6 42.6% Interconnection 85.2 95.8 -11.0% Equipment 45.5 39.7 14.4% Ot
Slide 28: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (in EUR million) Q4 2011 Q4 2010 % change Material expense 81.7 83.1 -1.7% Employee costs 165.8 167.1 -0.8% Interconnection 80.6 88.5 -8.9% Maintenance and repairs 36.0 40.2 -10.5% Services received d 31.3 34.3 -8.7% Other
Slide 29: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group - Mobile Communication Subscriber Base Mobile Subscribers (in 000) Q4 2011 Q4 2010 % change Austria 5,271 5,105 3.3% Market share 40.0% 41.4% Bulgaria 5,501 5,249 4.8% Market share 48.6% 49.6% Croatia* 2,018 2,028 -0.5% Market share* 39.2% 39.0% Belarus 4,620 4,354 6.1% Market
Slide 30: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q4 2011 Q4 2010 % change Austria 9,281 9,808 -5.4% International 7,693 6,611 16.4% Telekom Austria Group* 17,134 16,566 3.4% FTE (End of period) Q4 2011 Q4 2010 % change Austria 9,292 9,717 -4.4% International 7,761 6,634 17.0% Telek
Slide 31: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (in EUR million) Q4 2011 Q4 2010 % change Segment Austria 166.5 225.4 -26.1% Segment Bulgaria 22.2 24.5 -9.6% Segment Croatia 24.7 11.1 122.6% Segment Belarus 30.6 32.1 -4.8% Segment Additional Markets 40.2 27.2 47.8% Slovenia 1
Slide 32: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt (in EUR million) Dec. 31, 2011 Dec. 31, 2010 % change Long-term debt 2,960.4 3,146.4 -5.9% Short-term borrowings 1,052.4 522.6 101.4% Cash and cash equivalents, short-term and long term investments, finance lease receivables -657.7 -355.0 85.3% Derivate fina
Slide 33: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturityy Profile (in EUR million) 1,052* 969** 806 550 253 205 129 47 * 2012 2013 2014 2015 2016 2017 2018 2019 * Includes approx. EUR 32.5 mn related to velcom and EUR 5.7 mn to fixed line acquisitions in Bulgaria, which is reported in Other liabi
Slide 34: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments Fixed-Floating g Mix 18% 51% 49% 82% Bonds Loans Floating Fixed Lines of Credit Ratings > Undrawn committed lines of credit > S&P: BBB (stable outlook) amounting to EUR 1.0 bn > Moody’s: Baa1 (stable outlook) g term to maturityy of > Ave
Slide 35: 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 39.0 250.0 2,322 2,323 2,327 2,336 38.5 38.0 2,325 37.5 37.0 245.0 36.5 36.0 34.0 2,315 35.5 35.0 8.0 34.5 34.0 33.5 32.5 32.2 31.8 32.5 2,315 33 33.0
Slide 36: Segment Austria – Mobile Key Performance Indicators
Segment Austria – Mobile Key Performance Indicators ARPU & ARPU Relevant Revenues MoU p per Subscriber (in EUR) (in min) 23.0 355.0 159.7 21.6 22.0 345.0 20 5 20.5 21 0 21.0 152 0 152.0 152 7 152.7 335.0 20.1 20.0 149.5 325.0 20.0 146.4 19.2 315.0 326.3 19.0 317.4 300.9 18.0 305.0 309.9 311.9 295.0
Slide 37: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Broadband Lines Market Share Voice Minutes (in %) (in %) Mobile 28.2% Broadband 29.5% other operators 7.0% Unbundled lines 6.1% 6 1% 80.4% Mobile 83.0% 15.4% Cable 14.5% A1 17.8% Mobile broadband 18.4% A1 1.2% fixed wholesale 1.1% A1 Other fixed
Slide 38: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 8.7 7.6 7.3 7.0 111.8 7.0 104.2 104.1 98.6 97.5 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 192.0 151.4% 177.6 161.6 126.2 14
Slide 39: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU* MoU p per Subscriber* (in EUR) (in min) 14.0 97.1 96.5 13 4 13.4 13 4 13.4 92.6 88.8 89.8 12.5 12.4 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Mobile Broadband Customers* Mobile Penetration* (in 000) (in %) 127.0% 192.9 165.1
Slide 40: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 6.2 6.1 186.0 183.4 179.8 4 9 4.9 176 3 176.3 3.5 3.5 168.6 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 453.1 118.8% 349.6 115
Slide 41: 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 21 4 21.4 20.4 20.4 168.7 163.9 165.1 19.1 155.4 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Q4 10 Q1 11 Q2 11 Q3 11 Q4 11 Serbia - ARPU Macedonia - ARPU (in EUR) (in EUR) 8.
Slide 42: Appendix – Regulatory Topics
Appendix 2 – Regulatory g y Topics p Results for the Fourth Quarter 2011 42
Slide 43: 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 44: 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 3,06* 2,81* 2,35* Croatia
Slide 45: 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 Fourth Quarter and Full Year 2011 45
Slide 46: Appendix – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the Fourth Quarter 2011 46
Slide 47: Overview – Restructuring Charges and Provision vs. FTE
Overview – Restructuring Charges and Provision vs. FTE Overview Restructuring g Charges g FTEs Addressed (in EUR million) 2011 2011 2009 2010 Q1 Q2 Q3 Q4 FY 2009 2010 Q1 Q2 Q3 Q4 FY Transfer to governmentt 0 158 24 46 10 26 106 FTE Effect -10.0 76.9 184.1 34.6 6.1 8.9 233.7 Social plans 451 28 514 6
Slide 48: 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 cash flow impact for 2011 2010 57.9 of EUR 89.0 mn Q1 2011 21.5 Q2 2011 22.9 Q3 2011 21.8 Q4 201
Slide 49: 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
Slide 50: Appendix – Hyperinflation Accounting
Appendix 4 – Hyperinflation Accounting Results for the Fourth Quarter 2011 50
Slide 51: Segment Assets: Hyperinflation Accounting Will Lead to an Adjustment of Defined Assets Only
Segment Assets: Hyperinflation Accounting Will Lead to an Adjustment of Defined Assets Only Starting with the acquisition date of velcom at the end of 2007 all non non-monetary monetary items will have to be inflation adjusted as of their acquisition date, respectively Segment Assets* ms to be > Rep
Slide 52: Illustrative Example for Adjustments of Segment Assets in 2011 and 2012
Illustrative Example for Adjustments of Segment Assets in 2011 and 2012 Adjustments of segment assets as of year-end 2011: 2008 2009 2010 2011 31/12/2011 Annual CPI* (Factor) 113.3% 110.1% 109.9% 208.7% Adjustments**: 100 286 Total inflated 100 100 100 253 229 209 ∑ segment assets 2011 EoP: 977 Each
Slide 53: Segment Profit and Loss Statement: All Items will be Inflation Adjusted
Segment Profit and Loss Statement: All Items will be Inflation Adjusted > All items will have to be inflation adjusted j and converted to EUR at the period-end p FX rate instead of period-average Segment Belarus P&L Items > Revenues > Inflation adjustment starting with the date of recognition > e.g.
Slide 54: Impact on Group Equity: Asset Appreciation Triggers Impairment Test
Impact on Telekom Austria Group Equity: Asset Appreciation Triggers Impairment Test Group balance sheet and equity: > Appreciation A i ti off segmentt assetst will ill llead d tto an iincrease off G Group assets, t ii.e. goodwill d ill and d other th intangible assets, inventories, property, plant &
Slide 55: Impact on Telekom Austria Group Cash Flow and P&L
Impact on Telekom Austria Group Cash Flow and P&L Group Cash Flow > Cash flow will reflect inflated items of Belarus > Monetary Gain/Loss resulting from hyperinflation accounting will be eliminated as non-cash item in gross cash flow and will be allocated to monetary items, such as accounts receivab
Slide 56: Belarus: Impact of Hyperinflation Accounting and Foreign Exchange Translations in Full Year 2011
Belarus: Impact of Hyperinflation Accounting and Foreign Exchange Translations in Full Year 2011 Belarus Profit and Loss Statement for Full Year 2011 Excluding Hyperinflation Hyperinflation and FX Impairment Reported (in EUR million) and FX in Belarus Effects in Belarus Revenues 474.5 -213.6 0.0 260
Slide 57: Useful Links
Useful Links > IAS 29 > http://www.iasplus.com/standard/ias29.htm > Belarusian Institute of Statistics > http://belstat.gov.by/homep/en/indicators/prices.php > Belarusian National Bank > http://www.nbrb.by/engl/statistics/Rates/RatesDaily.asp http://www nbrb by/engl/statistics/Rates/RatesDaily asp R