Telekom Austria Ag · VIE:TKA

Telekom Austria — A1 Telekom Austria Group — Q3 2019 Earnings Presentation

52 slides from Telekom Austria's earnings presentation, Oct 15, 2019

  1. Slide 1: Results for the first nine months and third quarter 2019

    Results for the first nine months and third quarter 2019 October 15, 2019, Vienna

  2. 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

  3. Slide 3: Operational and financial highlights for the first nine months and third quarter 2019

    Operational and financial highlights for the first nine months and third quarter 2019

  4. Slide 4: Highlights Q3 2019

    Highlights Q3 2019  Strong service revenue growth continued in Q3 2019 (+4.1% on Group level), driven by almost all markets (Slovenia and North Macedonia were stable)  EBITDA growth (5.1% excl. restructuring) was driven by all markets, with a strong contribution from CEE  Ongoing shift from prepa

  5. Slide 5: Solid trends resulted in operational EBITDA growth in all markets

    Solid trends resulted in operational EBITDA growth in all markets IFRS 16 IFRS 16 based Group (in EUR million) Q3 2019 Q3 2018 % change Total revenues 1,152.7 1,114.8 3.4% Service revenues 974.7 936.4 4.1% EBITDA excl. restructuring* 460.0 437.7 5.1% CAPEX 185.5 193.8 -4.3%  Strong service revenue

  6. Slide 6: Growth especially driven by CEE markets in Q3 2019

    Growth especially driven by CEE markets in Q3 2019 Total revenues Service Revenues EBITDA excl. restructuring (in EUR mn) (in EUR mn) (in EUR mn) 30.0 1,152.7 26.4 974.7 5.2 1,114.8 +3.4% 9.0 936.4 18.6 460.0 +4.1% 5.4 437.7 +5.1% Revenues Austria International Revenues Service Austria International

  7. Slide 7: Austria: Positive service revenues trends continued and translated into operational EBITDA growth

    Austria: Positive service revenues trends continued and translated into operational EBITDA growth ARPU ARPL Operational data (in EUR) (in EUR)  +1.9% contract subscriber number still driven by solid demand for Δ: +1.1% high-value tariffs and mobile WiFi routers Δ: +2.3% 31.1 30.8  Higher ARPU as m

  8. Slide 8: CEE: Ongoing strong mobile and fixed-line service revenue growth led to EBITDA growth in all CEE markets

    CEE: Ongoing strong mobile and fixed-line service revenue growth led to EBITDA growth in all CEE markets Highlights CEE EBITDA (in EUR mn; Q3 %-change vs. PY) Bulgaria:  Strong service revenue growth continued (+11.5%) Δ: 8.8%  Fixed-line driven by ongoing strong performance in the business Δ: +7.

  9. Slide 9: 1-9 M 2019: Lower free cash flow driven by higher CAPEX paid due to frequencies

    1-9 M 2019: Lower free cash flow driven by higher CAPEX paid due to frequencies (in EUR million) Q3 2019 Q3 2018 % change 1-9 M 2019 1-9 M 2018 % change Net cash flow from operating activities 427.9 352.7 21.3% 1,096.7 1,041.3 5.3% Capital expenditures paid -198.7 -192.2 3.4% -671.9 -558.6 20.3% Lea

  10. Slide 10: Focus Points

    Telekom Austria

  11. Slide 11: Belarus: Mobile service revenues back on solid growth path

    Belarus: Mobile service revenues back on solid growth path Mobile servie revenue growth (LCY) yoy 9.1%  Successful voluntary migration of grandfathered service plans, data monetization and portfolio overhaul have driven 5.1% mobile service revenues 3.9% 3.9%  Additional support from inflation-link

  12. Slide 12: Austria: Internet@Home market shows ongoing growth potential; launch of attractive fixed-line broadband promotions

    Austria: Internet@Home market shows ongoing growth potential; launch of attractive fixed-line broadband promotions Internet@Home RGUs (in millions)  Growth in Internet@Home market still largely driven by 2.0 +10% mobile WiFi routers 1.5  Successful upselling and price indexation led to ARPL 1.0 in

  13. Slide 13: Multiband spectrum auction in Austria expected for spring 2020; consultation of the tender documents

    Multiband spectrum auction in Austria expected for spring 2020; consultation of the tender documents  2 x 30 MHz FDD band (6 blocks à 5 MHz); available as of July 1, 2020 Band 28: 700 MHz  Coverage obligations for currently undersupplied municipalities, roads and railway tracks  40 MHz supplement

  14. Slide 14: Outlook for the full year 2019

    Outlook for the full year 2019

  15. Slide 15: A1 Telekom Austria Group outlook for the full year 2019 unchanged

    A1 Telekom Austria Group outlook for the full year 2019 unchanged October 15, 2019 Consensus 2019 Total revenues ~+2% +1.8% CAPEX ~ EUR 770 mn EUR 771 mn* Proposed dividend EUR 0.21 / share - *CAPEX consensus excl. spectrum  Outlook based on reported figures; assumed stable avg. BYN vs. EUR FX rate

  16. Slide 16: Appendix 1

    Appendix 1 All figures are stated according to IFRS 16 on a reported basis

  17. Slide 17: The leading regional communications player providing convergent telecommunication services

    The leading regional communications player providing convergent telecommunication services as of September 30, 2019 (in ‘000) Austria Bulgaria Croatia Mobile market position #1 Mobile market position: #1 Mobile market position #2 Mobile subscribers: Mobile subscribers: Mobile subscribers:  5,201 (Q

  18. Slide 18: A1 Telekom Austria Group – Profit and Loss

    A1 Telekom Austria Group – Profit and Loss (in EUR million) Q3 2019 Q3 2018 % change Service Revenues 974.7 936.4 4.1% Equipment Revenues 157.6 155.1 1.6% Other operating income 20.4 23.3 -12.4% Total Revenues 1,152.7 1,114.8 3.4% Cost of Service -324.8 -318.0 -2.1% Cost of Equipment -154.1 -144.9 -

  19. Slide 19: A1 Telekom Austria Group – Total revenues & costs and expenses per segment

    A1 Telekom Austria Group – Total revenues & costs and expenses per segment A1 Telekom Austria Group - Total Revenue Split Total Revenues (in EUR million) Q3 2019 Q3 2018 % change Austria 657.7 652.5 0.8% Bulgaria 122.0 109.2 11.8% Croatia 114.9 114.5 0.4% Belarus 113.2 104.3 8.6% Slovenia 52.5 52.3

  20. Slide 20: A1 Telekom Austria Group – workforce development

    A1 Telekom Austria Group – workforce development FTE (Average Period) Q3 2019 Q3 2018 % change Austria 7,793 8,141 -4.3% International 10,263 10,374 -1.1% Corporate 384 357 7.4% A1 Telekom Austria Group 18,439 18,872 -2.3% FTE (End of Period) Q3 2019 Q3 2018 % change Austria 7,787 8,128 -4.2% Intern

  21. Slide 21: A1 Telekom Austria Group – Capital expenditure split

    A1 Telekom Austria Group – Capital expenditure split Capital Expenditures (in EUR million) Q3 2019 Q3 2018 % change Austria 119.5 119.4 0.0% Bulgaria 20.7 26.3 -21.3% Croatia 15.0 19.8 -24.0% Belarus 8.4 15.0 -43.9% Slovenia 5.7 3.7 51.8% Serbia 9.5 6.8 39.6% North Macedonia 6.1 2.5 145.1% Corporate

  22. Slide 22: A1 Telekom Austria Group – Net debt

    A1 Telekom Austria Group – Net debt as of September 30, 2019 Net Debt pre IFRS 16 (in EUR million) 30 September 2019 31 December 2018 % change Long-term Debt 2,538.8 2,536.8 0.1% Short-term Borrowings 120.0 245.3 -51.1% Cash and Cash Equivalents and Short-term Investments -51.1 -63.6 19.6% Net Debt

  23. Slide 23: A1 Telekom Austria Group – Financial debt maturity profile

    A1 Telekom Austria Group – Financial debt maturity profile as of September 30, 2019 747.7 747.1 744.9 299.0 120.0 0.0 0.0 0.0 2019 2020 2021 2022 2023 2024 2025 2026  EUR 2,658.8 mn short-and long-term borrowings as of September 30, 2019  Average cost of debt of 2.81%  Cash and cash equivalents a

  24. Slide 24: A1 Telekom Austria Group – Debt profile

    A1 Telekom Austria Group – Debt profile as of September 30, 2019 Overview debt instruments Fixed/floating mix 4% 4% 96% 96% Bonds Loans Fixed Floating Lines of credit Ratings  Undrawn committed credit lines  S&P: BBB+ (stable outlook) amounting to EUR 1,215 mn  Moody’s: Baa1 (stable outlook)  Av

  25. Slide 25: Segment Austria – Fixed-line key performance indicators

    Segment Austria – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 30.8 31.1 31.2 31.2 31.1 3,334.3 3,327.7 3,303.3 3,283.7 3,260.3 191.6 192.1 190.6 189.0 186.4 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPL ARPL-rel

  26. Slide 26: Segment Austria – Mobile key performance indicators

    Segment Austria – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 14.8 14.5 15.2 14.2 14.4 1.6 1.6 1.5 1.5 235.0 237.3 1.4 230.9 229.9 226.8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies (incl. promoti

  27. Slide 27: Segment Austria – Broadband market split

    Segment Austria – Broadband market split* Market share total broadband Market share mobile Market share fixed- (in %) broadband line broadband (in %) (in %) 3.1 2.3 4.8 4.9 35.4 37.3 Mobile Broadband Other Operators 23.4 26.6 17.0 18.0 Unbundled Lines 3.0 23.0 24.0 3.0 Cable 16.8 35.6 34.9 4.0 3.7 1

  28. Slide 28: Segment Bulgaria – Fixed-line key performance indicators

    Segment Bulgaria – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 13.4 13.2 1,017.6 1,029.0 1,028.7 1,040.5 1,043.5 12.8 12.9 12.6 21.7 21.1 20.6 20.8 20.1 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPL ARPL-relevan

  29. Slide 29: Segment Bulgaria – Mobile key performance indicators

    Segment Bulgaria – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 2.4 2.0 5.4 5.6 5.9 5.2 5.2 1.4 1.4 1.4 68.6 62.8 61.8 61.8 64.5 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies (incl. promotional deal

  30. Slide 30: Segment Croatia – Fixed-line key performance indicators

    Segment Croatia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues* Total RGUs (in EUR, in EUR million) (in ‘000) 30.8 694.9 703.6 30.3 30.4 30.5 681.8 687.9 30.0 668.5 26.7 27.0 27.2 26.9 27.3 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPL ARPL-relevant revenues

  31. Slide 31: Segment Croatia – Mobile key performance indicators

    Segment Croatia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 12.1 12.0 3.2 2.9 10.9 2.1 10.1 9.9 2.0 1.8 67.1 68.3 56.6 59.8 53.8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies (incl. promotional d

  32. Slide 32: Segment Belarus – Fixed-line key performance indicators

    Segment Belarus – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 6 5 7 .3 6 4 0 .2 6 1 5 .8 6 2 4 .4 6 1 8 .7 6 .5 5 .5 5 .6 5 .9 5 .4 6 .9 7 .0 7 .1 7 .4 7 .8 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPL ARPL-rel

  33. Slide 33: Segment Belarus – Mobile key performance indicators

    Segment Belarus – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 5.0 4.6 1.7 4.4 4.2 4.2 1.6 72.5 1.5 67.6 1.4 1.4 63.9 60.9 61.0 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies (incl. promotional deals

  34. Slide 34: Segment Slovenia – Fixed-line key performance indicators

    Segment Slovenia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues Total RGUs (in EUR, in EUR million) (in ‘000) 36.4 193.9 35.5 35.3 190.4 34.8 34.9 186.6 182.1 178.1 8.2 8.2 8.2 7.6 7.6 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPL ARPL-relevant revenues Fixe

  35. Slide 35: Segment Slovenia – Mobile key performance indicators

    Segment Slovenia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 15.1 14.9 14.4 14.4 1.3 1.3 14.0 1.3 1.3 31.5 30.1 31.2 1.2 30.2 29.4 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies Mobile penetration

  36. Slide 36: Segment Serbia – Mobile key performance indicators

    Segment Serbia – Mobile key performance indicators ARPU & Service revenues Churn rate (in EUR, in EUR million) (in %) 7.2 7.2 7.5 3.1 3.2 3.0 6.5 6.8 2.7 2.7 51.9 48.7 47.4 44.6 43.1 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies (incl. promotional deals)

  37. Slide 37: Segment North Macedonia – Fixed-line key performance indicators

    Segment North Macedonia – Fixed-line key performance indicators ARPL & ARPL-relevant revenues* Total RGUs* (in EUR, in EUR million) (in ‘000) 324.9 327.9 329.3 330.4 11.0 319.9 10.9 10.9 10.8 10.7 4.9 4.9 4.9 4.8 4.9 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPL ARPL-relevant reve

  38. Slide 38: Segment North Macedonia – Mobile key performance indicators

    Segment North Macedonia – Mobile key performance indicators ARPU & Service revenues* Churn rate* (in EUR, in EUR million) (in %) 6.0 2.5 5.9 5.7 1.4 1.5 5.3 5.3 1.2 1.3 19.4 19.6 18.9 17.3 17.2 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 Q3 18 Q4 18 Q1 19 Q2 19 Q3 19 ARPU Service revenues Subsidies (incl. promoti

  39. Slide 39: Appendix 2 – Adoption of IFRS 16

    Appendix 2 – Adoption of IFRS 16

  40. Slide 40: Adoption of IFRS 16 – impact on the balance sheet

    Adoption of IFRS 16 – impact on the balance sheet IAS 17 IFRS 16 Operating Finance Lease All leases Lease Assets  Discounted future payments of all lease contracts are capitalized resulting in RoU assets of EUR 1,011 mn and lease liabilities of EUR 1,003 mn Liabilities  Optional exceptions for low

  41. Slide 41: Adoption of IFRS 16 – impact on the income statement

    Adoption of IFRS 16 – impact on the income statement IAS 17 IFRS 16 Operating Finance Lease All Leases Lease Revenues  Elimination of operating lease expense Lease (OPEX) and booking as depreciation and OPEX Expenses interest expenses under IFRS 16 EBITDA  IFRS 16 impact on earnings ratios FY Depr

  42. Slide 42: Adoption of IFRS 16 – impact on net debt

    Adoption of IFRS 16 – impact on net debt Dec 31, Sept 30, Dec 31, Sept 30, 2018 2019 2018 2019 pre IFRS 16 pre IFRS 16 IFRS 16 IFRS 16 in EUR mn based Gross debt 2,782.0 2,658.8 3,784.4 3,601.9 - Cash & cash equivalents -63.6 -51.1 -63.6 -51.1  Significant increase in financial Net debt 2,718.4 2,6

  43. Slide 43: Appendix 3 – Regulatory topics

    Appendix 3 – Regulatory topics

  44. Slide 44: Glide Path of Mobile Termination Rates

    Glide Path of Mobile Termination Rates No further reductions expected in 2019 Jul Jan Jul Jan Jul Jan 2015 2016 2016 2017 2017 2018 Austria (EUR) 0.008049 0.008049 0.008049 0.008049 0.008049 0.008049 Bulgaria (BGN) 0.019 0.019 0.019 0.014 0.014 0.014 Croatia (HRK)* 0.063 0.063 0.063 0.063 0.047 0.04

  45. Slide 45: Upcoming spectrum tenders/prolongations/assignments

    Upcoming spectrum tenders/prolongations/ assignments* Expected Comments 2020 (700, 1500, 2100 MHz) Austria 700/1500/2100 MHz auction planned for spring 2020 2020 (2300 MHz) 2020 (2100, 2600, 3400-3800 MHz) Bulgaria 2021 (800 MHz) Croatia 2020 (700, 3500 MHz) 2020 (3500 MHz) Belarus 2021/22 (700 MHz)

  46. Slide 46: EU roaming price regulation

    EU roaming price regulation RETAIL (in EURc) July 2014 April 30, 2016 June 15, 2017 Data (per MB) 20 domestic tariff + 5* domestic tariff Voice-calls made 19 domestic tariff + 5* domestic tariff (per minute) Voice-calls received 5 weighted average MTR 0 (per minute) SMS (per SMS) 6 domestic tariff +

  47. Slide 47: Appendix 4 – Personnel restructuring in Austria

    Appendix 4 – Personnel restructuring in Austria

  48. Slide 48: 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) 2013 2014 2015 2016 2017 2018 Q1 19 Q2 19 Q3 19 2013 2014 2015 2016 2017 2018 Q1 19 Q2 19 Q3 19 FTE reduction 149.0 86.4 69.5 95.0 9.1 70.1 19.6 21.0 29.2 Transfer to gover

  49. Slide 49: Overview – Cash flow impact of restructuring

    Overview – Cash flow impact of restructuring Restructuring cash flow impact Restructuring outlook 2019f Cash flow impact (in EUR million)  Restructuring charges of ~EUR 80 mn p.a. 2012 104.0 2013 108.0 expected for the next few years addressing 2014 107.1 civil servants 2015 101.9 2016 105.5  Targ

  50. Slide 50: Appendix 5 – Corporate sustainability

    Appendix 5 – Corporate sustainability

  51. Slide 51: Alignment with core business and materiality analysis define sustainability strategy

    Alignment with core business and materiality analysis define sustainability strategy Results for the first nine months and third quarter 2019 51

  52. Slide 52: Key figures – Corporate Sustainability

    Key figures – Corporate Sustainability Selected group-wide KPIs Ratings Environment 2018 Total CO2 emissions (Scope 1+2 market-based in tonnes) 244,313 Classification: B Classification: B- Energy efficiency index (in Mwh/terabyte) 0.18 Paper consumption (in kg) 1,301,796 Collected old mobile phones

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