Telekom Austria Ag · VIE:TKA
Telekom Austria — Q3 2011 Earnings Presentation
43 slides from Telekom Austria's earnings presentation, Nov 14, 2011
Slide 1: Results for the Third Quarter 2011
Results for the Third Quarter 2011 Vienna, 14 November 2011 Results for the Third Quarter 2011 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 of the Third Quarter 2011 > Key Financial Developments of the Third Quarter 2011 > Focus Points > Outlook for Full Year 2011 pp > Appendix Results for the Third Quarter 2011 3
Slide 4: Operational and Financial Highlights of the Third Quarter 2011
Operational and Financial Highlights of the Third Q Quarter 2011 Results for the Third Quarter 2011 4
Slide 5: Strong Focus on Operational Performance Dampens Impact of External Challenges
Strong Focus on Operational Performance Dampens Impact of External Challenges > Demand for fixed broadband and p product bundles drives fixed access line growth of 3,200 lines in Austria > Mobile broadband, no-frills and smartphones drive subscriber growth in all operations > Further convergence mil
Slide 6: Key Financial Developments of the Third Quarter 2011
Key Financial Developments of the Third Quarter 2011 Results for the Third Quarter 2011 6
Slide 7: Stable Group EBITDA Margin Despite Competition, FX-Adjustments in Belarus and Regulation
Stable Group EBITDA Margin Despite Competition, FX-Adjustments in Belarus and Regulation (EUR million) Q3 2011 Q3 2010 % change > Revenue decline of 6.2% and 8.1% lower Revenues 1,111.4 1,185.4 -6.2% EBITDA comparable, mainly driven by EBITDA comparable* 412.9 449.1 -8.1% competition in Austria and
Slide 8: Lower Results from Austria and Belarus Partly Offset by Revenue Growth in Additional Markets
Lower Results from Austria and Belarus Partly Offset by Revenue Growth in Additional Markets Austria: Belarus: > 40% off revenue d decline li d due to roaming i and d MTR regulation l i > Continued C i d strong operational i l performance f d despite i ffurther h FX > Pricing pressure results in mig
Slide 9: Ongoing Focus on Cost Control and Growth in Additional Markets Limits Negative FX-Impact
Ongoing Focus on Cost Control and Growth in Additional Markets Limits Negative FX-Impact Austria: Bulgaria: Belarus: > EBITDA comp. decline driven by regulatory > Strict focus on cost control > EBITDA comparable impacted by negative burdens absorbs fixed line costs EUR 33.2 mn FX effect; 36.1% incre
Slide 10: Free Cash Flow Driven by FX-Adjustments and Higher CAPEX
Free Cash Flow Driven by FX- Adjustments and Higher CAPEX (EUR million) Q3 2011 Q3 2010 % change 1-9M 2011 1-9M 2010 % change Cash Flow from operations before working capital adjustments 351.3 388.7 -9.6% 1,037.7 1,158.2 -10.4% Change in working capital 20.3 -15.9 n.a. -203.0 -123.8 64.0% Ordinary c
Slide 11: Focus Points
Focus Points Results for the Third Quarter 2011 11
Slide 12: Launch of No-Frills in Markets Based on Group No-Frills Strategy
Launch of No-Frills in 2 Markets Based on Group No-Frills Strategy Telekom Austria Group p No-Frills Strategy gy > Market maturity & high penetration requires market segmentation via multi – brand approach Strategic > No-frills brands shield against price aggression Rational > Limit value erosion of
Slide 13: Clear No-Frills Proposition Tailored to Specific Market Requirements
Clear No-Frills Proposition Tailored to Specific Market Requirements Contract - Type Distribution channels Add-on No-Frills Subsidies Launch date service Prepaid Postpaid Shops* Retailers Online brand for handsets charges Croatia 06/2006 Austria a 07/2006 Bulgaria a 10/20
Slide 14: No-Frills Proposition in Austria Proofs Successful
No-Frills Proposition in Austria Proofs Successfull A1 and No-Frills Customer Base > With penetration rate reaching approx. Bob launch 154% total market growth predominantly based on no-frills segment > 12.0%* 12 0%* ytd td no-frills f ill growth th vs. 4 4.4% 4% iin th the total mobile market > No-
Slide 15: Regulator Names 3Q 2012 for Combined Frequency Auction in Austria
Regulator Names 3Q 2012 for Combined Frequency Auction in Austria Expected Auctions in 2012 Austria Timing & Format 2600 MHz > Combinatorial clock auction for 800 MHz, 900 MHz, and 1800 MHz in Q3 2012 2100 MHz 800 Digital Dividend > Total of 75 MHz of 5 MHz blocks will be auctioned (60 MHz usable fr
Slide 16: Update on FX Environment and Macro-Economic Indicators in Belarus
Update on FX Environment and Macro-Economic Indicators in Belarus FX-Rate Development* p > Liquidity q y has been reestablished in Belarus 12,100 11,900 12,070 FX market based on free float on 14 12,000 * * September 2011 * 10,000 > Average trading volume of approximately EUR 46.6 mn per day 8,000 >
Slide 17: Strong Focus on Operational Performance to Mitigate FX-Impact
Strong Focus on Operational Performance to Mitigate FX-Impact Revenues CAPEX (in EUR million) (in EUR million) + 40.1% without FX-Effect FX-Effect 12.0% decline on quarterly comparison 73 8 73.8 7.9 6.9 93.2 56.9 Q3 2010 Q3 2011 Q3 2011 actual planned actual Q3 2010 Q3 2011 > Price increases of 10%
Slide 18: Outlook
Outlook Results for the Third Quarter 2011 18
Slide 19: Outlook for Full Year 2011 Confirmed Despite Further Devaluation in Belarus
Outlook for Full Year 2011 Confirmed Despite Further Devaluation in Belarus Telekom Austria Group – Full Year 2011 O a constant On t t currency b basis i ffor all ll markets k t as well ll as before b f any effects ff t off potential t ti l iinflation fl ti accounting ti ffor th the B Belarusian l i
Slide 20: Appendix
Appendix pp 1 Results for the Third Quarter 2011 20
Slide 21: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (EUR million) Q3 2011 Q3 2010 % change Monthly fee and traffic 507.4 532.9 -4.8% Data and ICT Solutions 48.1 53.9 -10.8% Wholesale (incl. Roaming) 47.1 44.3 6.3% Interconnection 82.4 92.5 -10.9% Equipment i 2 3 25.3 2 24.1 4.9
Slide 22: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (EUR million) Q3 2011 Q3 2010 % change Material expense 62.5 59.1 5.7% Employee costs 146.3 157.1 -6.8% Interconnection 80.3 87.6 -8.3% Maintenance and repairs 31.2 34.5 -9.6% S Services i received i d 38 38.1 46.6 66 -18.
Slide 23: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group - Mobile Communication Subscriber Base Mobile Subscribers (in 000) Q3 2011 Q3 2010 % change Austria 5,212 5,018 3.9% Market share 40.3% 41.5% Bulgaria 5,291 5,236 1.1% Market share 48.4% 50.0% Croatia* 2,173 2,139 1.6% Market share* 39.6% 40.0% Belarus 4,533 4,225 7.3% Market s
Slide 24: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q3 2011 Q3 2010 % change Austria 9,319 9,967 -6.5% International 7,457 6,526 14.3% Telekom Austria Group* 16,937 16,571 2.2% FTE (End of period) Q3 2011 Q3 2010 % change Austria 9,282 9,834 -5.6% International 7,621 6,582 15.8% Telek
Slide 25: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (EUR million) Q3 2011 Q3 2010 % change Segment Austria 125.6 101.2 24.1% Segment Bulgaria 17.7 15.6 13.8% Segment Croatia 8.4 4.7 77.6% Segment Belarus 6.9 7.9 -12.0% Segment Additional Markets 19.0 17.5 8.9% Slovenia 6.2 2.2 17
Slide 26: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt (EUR million) Sept. 30, 2011 Dec. 31, 2010 % change Long-term debt 3,029.5 3,146.4 -3.7% Short-term borrowings 947.3 522.6 81.2% Cash and cash equivalents, short-term and long term investments, finance lease receivables -509.0 -355.0 43.4% Derivate financial
Slide 27: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturityy Profile (EUR million) 1,034* 947 808 545 254 205 6 129 9 47 * 2011 2012 2013 2014 2015 2016 2017 2018 2019 *Includes approx. EUR 55.2 mn in 2012 related to velcom and EUR 5.5 mn to fixed line acquisitions in Bulgaria, which is reported in
Slide 28: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments* Fixed-Floating g Mix 18% 48% 52% 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: A3 (negative outlook)* g term to maturityy of > A
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 000) 40.0 39.5 39.0 250.0 2.322 2.323 2.327 38.5 38.0 37.5 2,325 37.0 36.5 245.0 2.315 36.0 35.5 35.0 33.2 34.0 8.0 34.5 34.0 32.5 32.2 31.8 2,315 33.5 33.0 240.0 32
Slide 30: Segment Austria – Mobile Key Performance Indicators
Segment Austria – Mobile Key Performance Indicators ARPU & ARPU Relevant Revenues MoU p per Subscriber (in EUR) (in min) 23.0 159.7 355.0 22.3 22.5 345.0 21.6 22.0 155.0 335.0 21.5 152 0 152.0 149.5 325.0 20.5 21.0 146.4 334.2 20.5 315.0 326.3 20.1 20.0 20.0 305.0 317.4 311.9 19.5 295.0 309.9 19.0 Q
Slide 31: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Broadband Lines Market Share Voice Minutes (in %) (in %) Mobile 28.0% Broadband 29.0% other operators 7.2% . Unbundled lines 6.3% 80.2% Mobile 82.1% 15.8% Cable 14.7% A1 17.4% Mobile broadband 18.3% A1 1.3% fixed wholesale 1.1% A1 Other fixed 30.
Slide 32: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 8.2 8.7 7.6 7.3 111.8 7.0 104.2 104.1 102.6 98.6 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 177.6 161.6 141.8 145.9% 126.2 9
Slide 33: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU* MoU p per Subscriber* (in EUR) (in min) 15.1 14.0 12 4 12.4 13 3 13.3 13 2 13.2 96 0 96.0 94 9 94.9 89.5 88.7 89.0 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Mobile Broadband Customers* Mobile Penetration* (in 000) (in %) 127
Slide 34: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 6.7 186.0 6.2 6.1 183.4 4 9 4.9 174.1 176 3 176.3 3.5 168.6 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 349.6 115.4% 116.0% 27
Slide 35: Segment Additional Markets – Mobile Key Performance Indicators
Segment Additional Markets – Mobile Key Performance Indicators Slovenia - ARPU Slovenia - MoU p per Subcriber (in EUR) (in min) 22.7 21.7 168.7 20.4 163.9 165.1 20.4 19.1 155.4 150.9 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Q3 10 Q4 10 Q1 11 Q2 11 Q3 11 Serbia - ARPU Macedonia - ARPU (in EUR) (in EUR) 7.4 8.3
Slide 36: Appendix – Regulatory Topics
Appendix 2 – Regulatory g y Topics p Results for the Third Quarter 2011 36
Slide 37: 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 38: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates July January July August January June July August January July August January In EUR c ents 2009 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 2013 market analysis during Austria 4.00 3.50 3.01 2.51 2.01 2011 6.65 (until market analysis started in Q1 2011->
Slide 39: 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 Third Quarter 2011 39
Slide 40: Appendix – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the Third Quarter 2011 40
Slide 41: 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 Q1 2011 Q2 2011 Q3 2011 2008 2009 2010 Q1 2011 Q2 2011 Q3 2011 Transfer to government 0 0 158 24 46 10 FTE Effect 632.1 -10.0 76.9 184.1 34.6 6.1 Social plans 256
Slide 42: 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 2011 of EUR 90 - 100 mn Q1 2011 21.5 Q2 2011 22.9 Q3 201
Slide 43: 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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