Slide 1: Results for the Fourth Quarter and Full Year 2013
Results for the Fourth Quarter and Full Year 2013 Vienna, 26 February 2014 1
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: Agenda
Agenda > Operational and Financial Highlights for the Full Year 2013 > Key Financial Developments in the Fourth Quarter 2013 > Focus Points > Outlook for the Full Year 2014 > Appendix Results for the Fourth Quarter and Full Year 2013 3
Slide 4: Operational and Financial Highlights for the Full Year 2013
Operational and Financial Highlights for the Full Year 2013 Results for the Fourth Quarter and Full Year 2013 4
Slide 5: FY 2013 – Infrastructure and Market-Orientated Investments to Address Continued Revenue Pressure
FY 2013 –Infrastructure and Market-Orientated Investments to Address Continued Revenue Pressure > 3.4% revenue and 11.6% EBITDA comparable decline driven by mature markets Austria, Bulgaria and Croatia, while Belarusian and Additional markets segments see continued growth > Regulatory effects contri
Slide 6: Full Year 2013 Revenues at Upper End of Guidance; CAPEX in Line with Expectation
Full Year 2013 Revenues at Upper End of Guidance; CAPEX in Line with Expectation Guidance Reported Revenues Approx. EUR 4.1 bn EUR 4.18 bn Reported: EUR 1,779.1 mn Excl. spectrum and CAPEX* EUR 650 - 700 mn acquisitions: EUR 649.6 mn * Does not include investments for spectrum and acquisitions R
Slide 7: Group EBITDA Comparable Excl. One-Off Effects in Line with Consensus
Group EBITDA Comparable Excl. EUR 8 mn One-Off Effects in Line with Consensus Group EBITDA Comparable Development (in EUR million) 0.1% 11.0 -3,1 1.295,2 1,304.5 1,287.4 EBITDA comparable One-off effects in One-off effects in CEE Clean EBITDA EBITDA comparable 2013 reported Austria (Q4 2013) (2013)
Slide 8: Austria: Strong Customer Growth And Historic Low Churn as Result of High-Value Focus
Austria: Strong Customer Growth And Historic Low Churn as Result of High-Value Focus ARPU-Relevant Revenues in Austria Churn Split (in EUR million) Q4 2013 1,155.3 - + 1,118.9 - - + ARPU- Regulation Tariff Churn Gross adds YESSS! & ARPU- relevant migration Others (Net) relevant revenues revenues A1
Slide 9: Austria: Regulation- and Market-Related Costs Offset EUR 71.8 mn Gross Cost Savings
Austria: Regulation- and Market-Related Costs Offset EUR 71.8 mn Gross Cost Savings (OPEX) EBITDA Comparable (in EUR million) -5% -9% -3% Regulation Market Costs 903.2 745.3 EBITDA Regulation 1 ARPU ARPL Wholesale Data&ICT High-value Fixed-line Inflation Other Gross cost EBITDA comparable relevant r
Slide 10: Key Financial Developments in the Fourth Quarter 2013
Key Financial Developments in the Fourth Quarter 2013 Results for the Fourth Quarter and Full Year 2013 10
Slide 11: Q4 2013: Regulation, Weak Macro and Competition Remain Key Operational Challenges
Q4 2013: Regulation, Weak Macro and Competition Remain Key Operational Challenges (in EUR million) Q4 2013 Q4 2012* % change > Declining revenue trends mainly driven by Revenues 1,055.7 1,117.8 -5.6% IC-rate cuts and lower equipment revenues in Austria EBITDA comparable** 262.3 319.1 -17.8% EBITDA c
Slide 12: Full Year 2013: EUR 45 mn Restructuring Charges Include 431 FTEs
Full Year 2013: EUR 45 mn Restructuring Charges Include 431 FTEs; EUR 30 mn Expected in 2014 Measures Taken and Affected Employees (in 2013) Transfer to FTE’s Total Social plan government reactivated FTE’s Gross restructuring Addressed FTEs (active staff) 22 409 431 charge of EUR 149 mn 2013 FTEs
Slide 13: Further Regulatory Effects in Croatia and BYR Devaluation Put Additional Pressure on Revenues
Further Regulatory Effects in Croatia and BYR Devaluation Put Additional Pressure on Revenues Quarterly Revenue Development (in EUR million) -5.6% 1,117.8 -54.7 -11.4 -10.9 4.4 4.8 5.8 1,055.7 Revenues Q4 Austria Bulgaria Croatia Belarus Additional Others** Revenues 2012* Markets Q4 2013 Segment Aus
Slide 14: Ongoing Focus on Cost Control Limits EBITDA Comparable Decline to 17.8%
Ongoing Focus on Cost Control Limits EBITDA Comparable Decline to 17.8% Quarterly EBITDA Comparable Development (in EUR million) -17.8% 319.1 -56.2 -11.1 2.7 5.5 3.1 262.3 -0.9 EBITDA comp. Austria Bulgaria Croatia Belarus Additional Others** EBITDA comp. Q4 2012* Markets Q4 2013 Segment Austria Int
Slide 15: Decline in Gross Cash Flow Fully Offset by Lower Working Capital Needs
Decline in Gross Cash Flow Fully Offset by Lower Working Capital Needs (in EUR million) Q4 2013 Q4 2012 % change 1-12 M 2013 1-12 M 2012 % change Gross cash flow 227.7 287.8 -20.9% 1,137.2 1,295.9 -12.2% Change in working capital 34.3 -37.2 n.m. -85.7 -248.0 n.m. Cashflow from operating activities 2
Slide 16: CAPEX 2013 in Line with Guidance
CAPEX 2013 in Line with Guidance CAPEX CAPEX for spectrum and CAPEX excl. spectrum CAPEX guidance*: reported: acquisitions: and acquisitions: EUR 650 mn – EUR 700 mn EUR 1,779 mn EUR 1,129.5 mn EUR 650 mn Spectrum tenders and Acquisitions in 2013 Austria 800, 900 and 1800 MHz bands EUR 1,030 mn Cr
Slide 17: Focus Points
Focus Points Results for the Fourth Quarter and Full Year 2013 17
Slide 18: Bulgaria: New Subscriber Counting Method Ensures Alignment With Competitor's Restatement
Bulgaria: New Subscriber Counting Method Ensures Alignment With Competitor’s Restatement Inactivity period: Prepaid customers 12 months (voucher validity) -> 3 months (active usage) Box services: One mobile subscriber instead of two Replicated fixed-line connection via 2 numbers Integrated Telecom S
Slide 19: Changes in Reporting Definitions Led to an Overall Reduction of Mobile Subscribers
Changes in Reporting Definitions Led to an Overall Reduction of Mobile Subscribers by Approx. 1 mn MTL Prepaid Box ITS MTL Total before after restatement customers services services restatement Impact Mobile subscriber -1,026 (in 000) 5,208 -498 -215 -313 4,181 (-20%) Mobile market -5.3%p share 44.3
Slide 20: Spectrum Sales in Bulgaria, Slovenia and Republic of Serbia in 2014
Spectrum Sales in Bulgaria, Slovenia and Republic of Serbia in 2014 Slovenia Bulgaria > Combinatorial clock auction for > Prolongation of 900-MHz and 1800-MHz > New Spectrum in 800-MHz and 2600-MHz licenses approved by parliament band > Fixed price will be set by National > Existing Spectrum in 900-
Slide 21: Austria: High-Bandwidth Fixed and Mobile Rollout Fully Leverages Convergence Potential
Austria: High-Bandwidth Fixed and Mobile Rollout Fully Leverages Convergence Potential Fixed Network Mobile Network NGA Rollout: (Total households coverage in ‘000; in % of total households) 2013 2014 LTE population coverage: Households in% in% > Ca. 35% end of 2013*** FTTEx (Completed in 2012) 1,87
Slide 22: Infrastructure Leadership Provides Key Differentiation
Infrastructure Leadership Provides Key Differentiation LTE services offered in Austria, Best network quality Slovenia and Croatia Austria: `Connect Test‘ (Basis: 360 Points) 472 Austria LTE 40%* population coverage 454 438 442 400 Slovenia LTE launched in Ljubljana, Maribor and Bled Best mobile netw
Slide 23: Outlook for the Full Year 2014
Outlook for the Full Year 2014 Results for the Fourth Quarter and Full Year 2013 23
Slide 24: Telekom Austria Group Outlook for the Full Year 2014
Telekom Austria Group Outlook for the Full Year 2014 Financial Outlook for 2014 Before any effects of hyperinflation accounting for the Belarusian segment Revenues Revenues Approx. - 3% CAPEX* CAPEX* Approx. EUR 700 mn Proposed Proposed Dividend** Dividend** EUR 0.05 * Does not include investments f
Slide 25: Key Expectations 2014
Key Expectations 2014 Austria > Continued focus on convergence and high-value customer segment > Leverage infrastructure roll-out and network leadership > Ongoing revenue pressure from regulation (MTR and roaming) > Potential new MVNO’s International Markets Bulgaria Belarus > Ca. 2% GDP growth > At
Slide 26: Operational Efficiency in 2014 – Continuous Saving Initiatives, Focus on Procurement Efficiency
Operational Efficiency in 2014 – Continuous Saving Initiatives, Focus on Procurement Efficiency Procurement initiatives targeting approx. EUR 100 mn gross OPEX and CAPEX savings: > traditional levers (renegotiate contracts, supplier consolidation) as well as demand- and process-optimisation > Initia
Slide 27: Appendix
Appendix 1 Results for the Fourth Quarter and Full Year 2013 27
Slide 28: The Leading Regional Communications Player Providing Convergent Telecommunication Services
The Leading Regional Communications Player Providing Convergent Telecommunication Services as of 31 December 2013 (in ‘000, in %) Austria* Slovenia Belarus Mobile: Mobile: Mobile: > Market share: 42.6% (Q4 2012: 37.9%) > Market share: 30.0% (Q4 2012 30.3%) > Market share: 42.5% (Q4 2012: 43.5%) > Su
Slide 29: Cash Use Policy – Focus Remains on Deleveraging Via Cash Flow
Cash Use Policy – Focus Remains on Deleveraging Via Cash Flow 1st priority BBB (stable) target rating is priority Current rating: Baa2 (stable) by Moody’s and BBB- (stable) by S&P 2nd priority Financial flexibility 3rd priority Distribution policy Dividend 2013 and 2014: EUR 0.05* * * Intended propo
Slide 30: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (in EUR million) Q4 2013 Q4 2012 % change Monthly fee and traffic 456.4 472.2 -3.3% Data and ICT solutions 63.9 62.2 2.7% Wholesale (incl. Roaming) 33.9 38.2 -11.2% Interconnection 55.9 74.9 -25.4% Equipment 50.6 68.7 -26.4% O
Slide 31: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (in EUR million) Q4 2013 Q4 2012 % change Material expense 107.2 104.5 2.5% Employee costs 180.0 182.4 -1.3% Interconnection 48.2 69.3 -30.4% Maintenance and repairs 35.4 33.1 6.7% Services received 29.0 26.1 11.1% Other s
Slide 32: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q4 2013 Q4 2012 % change Austria 9,019 9,254 -2.5% International 7,022 7,192 -2.4% Telekom Austria Group* 16,203 16,610 -2.5% FTE (End of period) Q4 2013 Q4 2012 % change Austria 8,804 9,077 -3.0% International 7,076 7,205 -1.8% Tele
Slide 33: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (in EUR million) Q4 2013 Q4 2012 % change Segment Austria 1,177.9 126.7 n.m. excl. CAPEX for Spectrum Auction 147.9 126.7 16.7% Segment Bulgaria 26.0 19.9 30.7% Segment Croatia 41.4 38.0 9.0% Segment Belarus 16.4 25.5 -35.8% Seg
Slide 34: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt (in EUR million) 31 December 2013 31 December 2012 % change Long-term debt 3,737.7 2,832.0 32.0% Short-term borrowings 232.2 1,078.6 -78.5% Cash and cash equivalents, short-term and long term investments, installment sales, finance lease receivables -274.1 -
Slide 35: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturity Profile (Including Accrued Interest)* (in EUR million) 824.1 741.7 740.5 566.2 297.6 232.2 268.8 220.7 62.7 15.4 2014 2015 2016 2017 2018* 2019 2020 2021 2022 2023 > EUR 3,969.9 mn of short- and long-term borrowings as of 31 December 2013 >
Slide 36: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments Fixed-Floating Mix 5.9% 21.8% 78.2% 94.1% Bonds Loans Variabel Fix Lines of Credit Ratings > Undrawn committed credit lines > S&P: BBB- (stable outlook) amounting to EUR 1,060 mn > Moody’s: Baa2 (stable outlook) > Average term to maturit
Slide 37: 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) 40 40 39 39 255 38 38 37 37 36 36 35 35 32.9 245 34 34 33 32.2 31.3 2,282 33 32 32 30.8 30.9 12 2,281 2,274 2,274 2,284 31 31 30 2,300 235 07 3
Slide 38: Segment Austria – Mobile Key Performance Indicators
Segment Austria* – Mobile Key Performance Indicators ARPU & ARPU-Relevant Revenues* MoU per Subscriber* (in EUR) (in min) 340 18.2 20 158.2 320 16.1 16.3 16.3 15.7 300 15 143.8 143.8 280 141.3 138.4 260 284.1 283.8 282.3 10 280.3 268.8 240 05 220 200 00 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q4 12 Q1 13 Q2 1
Slide 39: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Total Broadband* Market Share Mobile Broadband* (in %) (in %) 8.1% 7.4% Tele.ring 12.4% 13.9% T-mobile 26.3% 41.0% Mobile Broadband Hutchison 32.3% 30.0% 18.6% Other Operations Unbundled Lines Orange incl. 4.9% YESSS! 5.6% 34.6% 37.8% Cable A1 14
Slide 40: Segment Austria – Voice Market Split
Segment Austria – Voice Market Split Market Share Total Minutes Market Share Fixed-Line Minutes (in %) (in %) 13.7% 13.8% 4.5% 4.1% 21.0% 21.4% 85.7% 86.1% 60.8% 60.7% 5.4% 5.3% 8.9% 8.7% Q4 12 Q4 13 Q4 12 Q4 13 Fixed Line Telekom Austria Fixed Line Others Mobile A1 Tele2/UTA UPC Others Results for
Slide 41: 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) 17 17 10 16 16 14.0 10 15 15 13.5 13.5 13.2 13.2 163.4 163.5 14 14 09 13 13 12 12 09 11 11 10 08 160.4 10 09 09 08 159.9 08 08 6.7 07 07 6.6 6.5 6.4 07
Slide 42: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria* – Mobile Key Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 6.6 125.3 126.0 6.5 6.5 122.1 6.3 118.4 6.1 116.6 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Mobile Broadband Customers Mobile Penetration (in ‘000) (in %) 144.8% 192.9 144.2% 144.2% 144.
Slide 43: 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) 30 29 16 28 27 24.1 26 25 23.4 22.7 22.6 22.1 15 24 23 22 21 20 14 19 18 17 16 12.4 12.7 200 12 07 13 188.8 193.1 15 14 190 02 13 12 11.7 11.9 -03 179.3 1
Slide 44: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 12.1 12.0 130.6 129.4 129.8 11.7 11.4 118.4 11.1 110.8 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Mobile Broadband Customers* Mobile Penetration (in ‘000) (in %) 121.0% 199.8 161.4 178.2 16
Slide 45: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 4.9 4.9 198.5 197.0 194.6 4.8 193.0 4.7 4.7 182.4 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Mobile Broadband Customers* Mobile Penetration (in ‘000) (in %) 123.0% 246.5 120.7% 116.6% 116.8
Slide 46: 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 21.7 20.8 21.4 185.8 20.3 184.5 184.7 17.2 176.1 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Q4 12 Q1 13 Q2 13 Q3 13 Q4 13 Republic of Serbia - ARPU Republic of Macedonia - ARPU (in
Slide 47: Appendix – Regulatory Topics
Appendix 2 – Regulatory Topics Results for the Fourth Quarter and Full Year 2013 47
Slide 48: Negative Impact from Regulation in 2013 - 2016
Negative Impact from Regulation in 2013 - 2016 Telekom Austria Group Roaming Telekom Austria Group Revenues Interconnection Revenues (in EUR million) (in EUR million) Approx. EUR –130 mn* Approx. EUR –160 mn** 2012E 2016E 2012E 2016E Negative regulatory impact for 2013 is included in outlook for 201
Slide 49: Upcoming Spectrum Tenders
Upcoming Spectrum Tenders Tender planned Comments Austria 2019 (2100 MHz) 900 MHz & 1800 MHz: Prolongation of 2014 (900 MHz & spectrum holdings in 2014 Bulgaria 1800 MHz) 800 MHz: Tender in 2015 2015 (800 MHz, 1800 MHz & 2600 MHz) LTE spectrum tender in 2015 (1800 MHz & 2600 MHz) 2015 (2100 MHz) 210
Slide 50: 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 Jan Jul Nov Jan Jul Sep Jan Jul 2012 2013 2013 2013 2014 2014 2014 2015 2015 Austria 2.01 2.01 2.01 0.8049 0.8049 0.8049 0.8049 0.8049 0.8049 Bulgaria 2.70 2.35 1.18 1.18 1.0
Slide 51: 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 52: Appendix – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the Fourth Quarter and Full Year 2013 52
Slide 53: Quarterly Overview – Restructuring Charges and Provision vs. FTE
Quarterly Overview – Restructuring Charges and Provision vs. FTE Overview Restructuring Charges FTEs Addressed (in EUR million) 2013 2013 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 FTE effect 2.7 25.5 27.4 93.4 Transfer to government 7 2 6 7 Servicekom 0.0 -20.6* 0.3 -83.5* Social plans 13 66 92 238 Interest rate adju
Slide 54: Full Year Overview – Restructuring Charges and Provision vs. FTE
Full Year Overview – Restructuring Charges and Provision vs. FTE Overview Restructuring Charges FTEs Addressed (in EUR million) 2008 2009 2010 2011 2012 2013 2008 2009 2010 2011 2012 2013 FTE effect 632.1 -10.0 76.9 274.3 49.9 149.0 Transfer to government 0 0 158 106 44 22 Servicekom 0.0 0.0 0.0 -40
Slide 55: Overview – Cash-Flow Impact of Restructuring
Overview – Cash-Flow Impact of Restructuring Overview Cash Flow Impact* (in EUR million) Total cash-flow impact 2008 14.7 > Total cash-flow impact comprises old 2009 62.0 and new programmes 2010 57.9 > Total cash-flow impact for 2013 of 2011 93.4 EUR 108 mn 2012 104.0 > Total expected cash flow impa
Slide 56: Appendix – Spectrum Portfolio Austria
Appendix 4 – Spectrum Portfolio Austria Results for the Fourth Quarter and Full Year 2013 56
Slide 57: Spectrum Portfolio After Austrian Multiband Auction
Spectrum Portfolio After Austrian Multiband Auction * FDD UL/DL = Frequency Division Duplex Uplink/Downlink, TDD = Time Division Duplex ** Concrete position of spectrum within band is still to be assigned, Source: TKK, RTR Results for the Fourth Quarter and Full Year 2013 57
Slide 58: Appendix – Corporate Sustainability
Appendix 5 – Corporate Sustainability Results for the Fourth Quarter and Full Year 2013 58
Slide 59: Alignment With Core Business and Materiality Analysis Define Sustainability Strategy
Alignment With Core Business and Materiality Analysis Define Sustainability Strategy Corporate Sustainability @ Telekom Austria Group 59
Slide 60: Key Figures
Key Figures Selected Group-wide KPIs Ratings Products: Providing Responsible Products 2012 Customer contacts in customer service ('000) 45.569 E-billing share (in %) 29 › Classification: C › Classification: C+ Collected old mobile phones (in pcs) 73.877 (74 points out of 100) Environment: Living Gre