Slide 1: Results for the Second Quarter 2012
Results for the Second Quarter 2012 Vienna, 16 August 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-looking forward looking statements statements. Forward-looking Forward looking information involves risks and uncertainties that c
Slide 3: Agenda
Agenda > Operational and Financial Highlights for the Second Quarter 2012 > Key Financial Developments in the Second Quarter 2012 > Key Challenges and Countermeasures > Outlook for Full Year 2012 > Appendix Results for the Second Quarter 2012 3
Slide 4: Operational and Financial Highlights for the Second Quarter 2012
Operational and Financial Highlights for the Second Quarter 2012 Results for the Second Quarter 2012 4
Slide 5: Disruptive Competition Drives Decline in Results
Disruptive Competition Drives Decline in Results > Second quarter 2012 results markedly impacted by heavy competition in major markets and macro-economic headwinds in CEE > Stable Group EBITDA comparable margin reflects effective countermeasures taken in all segments g > Group Revenues decline by 4.
Slide 6: Key Operational Drivers
Key Operational Drivers > Revenue growth in three segments > Disruptive competition drives mitigates declines in Austria and ARPU decline in major markets Bulgaria > Regulation impedes fixed line > Successful convergence strategy price increases in Austria balances mobile pressure in > 59.4% 59 4% M
Slide 7: Key Financial Developments in the Second Quarter 2012
Key Financial Developments in the Second Quarter 2012 Results for the Second Quarter 2012 7
Slide 8: Continued Focus on Cost Control Protects EBITDA Comparable Margin
Continued Focus on Cost Control Protects EBITDA Comparable Margin ((in EUR million)) Q2 2012 Q Q2 2011 % change Q g Revenues 1,063.2 1,109.3 -4.2% > Revenue increase in Croatia, Belarus EBITDA comparable* 364.8 380.8 -4.2% and Additional Markets limits impact EBITDA comparable margin* 34.3% 34.3% of
Slide 9: Growth in Three Segments Dampens Revenue Decline in Austria and Bulgaria
Growth in Three Segments Dampens Revenue Decline in Austria and Bulgaria Austria Q2 2012: EUR 673.6 mn | -7 7.9% 9% yoy Belarus: Q2 2012: EUR 76.7 mn | +5.2% yoy > Price decline and increased churn driven by intensified > 5.2% growth despite net negative impact of hyperinflation competition accounti
Slide 10: EUR 39.5 mn Group OPEX Savings Protect Profitability
EUR 39.5 mn Group OPEX Savings Protect Profitability Austria 218 2 mn | -8 Q2 2012: EUR 218.2 8.6% 6% yoy 31 8 mn | -4 Belarus: Q2 2012: EUR 31.8 4.6% 6% yoy > EUR 38.0 mn OPEX savings | Bulgaria Q2 2012: EUR 60.9 mn -14.0% yoy > EUR 21.8 mn net negative impact of > Lower marketing expenses > OPEX s
Slide 11: Stable BYR Development Whilst Serbian Dinar Loses 10.9% Year-to-Date
Stable BYR Development Whilst Serbian Dinar Loses 10.9% Year-to-Date Belarus Republic of Serbia EUR-BYR Development EUR-RSD Development 13,000 130 1-6 M 2012: +4.1% YTD: +6.6% 1-6 M 2012: -9.7% YTD: -10.9% 120 11,000 110 9,000 100 Jan 12 Feb 12 Mar 12 Apr 12 May 12 Jun 12 Jul 12 Aug 12 Jan 12 Feb 12
Slide 12: Working Capital Savings Offset Lower Gross Cash Flow and CAPEX Increase
Working Capital Savings Offset Lower Gross Cash Flow and CAPEX Increase ((in EUR million)) Q2 2012 Q Q2 2011 Q % change g 1-6 M 2012 1-6 M 2011 % change g Gross cash flow 304.1 350.6 -13.3% 631.0 686.4 -8.1% Change in working capital -21.3 -38.0 -43.9% -155.7 -223.3 -30.2% Ordinary capital expenditu
Slide 13: Key Challenges and Countermeasures
Key y Challenges g and Countermeasures Results for the Second Quarter 2012 13
Slide 14: Rebalancing of New Ambition Program Ensures EUR 40 mn opFCF Target
Rebalancing of New Ambition Program Ensures that EUR 40 mn opFCF* Target for 2012 is Met Initial NAP Rebalanced NAP CAPEX** - 10pp Revenues Revenues CAPEX** 15% 20% Revenues 15% 30% + 10pp 0pp O OPEX OPEX OPEX 55% 65% CAPEX** stable Further OPEX savings to offset pressure on revenue initiatives * Op
Slide 15: Austrian Segment: Convergence and Cost Countermeasures to Meet Aggressive Competition
Austrian Segment: Convergence and Cost Countermeasures to Meet Aggressive Competition Challenges > Accelerated ARPU decline due to price decline and migration to mobile package tariffs > Bundle price increases impeded due to competition law > Fierce competition prohibits mobile price increases > Com
Slide 16: Central and Eastern Europe: Competition and Macro-Economy Remain Key Challenges
Central and Eastern Europe: Competition and Macro-Economy Remain Key Challenges Bulgaria Croatia Additional Markets > ARPU pressure > Accelerated ARPU decrease > FX pressure on Serbian > Price aggression from aggressive All All-In In tariffs results > Migration to lower tariffs > Fierce price compet
Slide 17: Outlook
Outlook Results for the Second Quarter 2012 17
Slide 18: Telekom Austria Group Outlook for Full Year 2012 Adapted to Second Quarter 2012 Results
Telekom Austria Group Outlook for Full Year 2012 Adapted to Second Quarter 2012 Results Telekom Austria Group – Full Year 2012 On a constant currency basis for all markets as well as before any effects of hyperinflation accounting for the Belarusian segment. As of 10 May 2012 As of 16 August 2012 Re
Slide 19: Intensified Cost Control Mitigates Effects from Revenue Pressure on EBITDA Comparable
Intensified Cost Control Mitigates Effects from Revenue Pressure on EBITDA Comparable Revised EBITDA Comparable Outlook Δ: approx. EUR 50 mn approx. Mainly EUR 1.5 bn driven by Republic on track of Serbia EUR 1.40 bn – EUR 1.45 1 45 bn Addittional oatia Outlo ok as ugust Bullgaria ustria elarus of 1
Slide 20: Appendix
Appendix pp 1 Results for the Second Quarter 2012 20
Slide 21: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split p - Segment g Austria ((in EUR million)) Q2 2012 Q Q2 2011 Q % change g Monthly fee and traffic 476.5 511.5 -6.8% Data and ICT Solutions 50.9 49.5 2.8% Wholesale (incl. Roaming) 38.0 44.3 -14.3% Interconnection 81.4 86.7 -6.1% Equipment 23.2 24
Slide 22: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating p g Expense p - Segment g Austria ((in EUR million)) Q2 2012 Q Q2 2011 Q % change g Material expense 55.0 62.3 -11.6% Employee costs 167.6 169.2 -0.9% Interconnection 75.4 81.3 -7.2% Maintenance and repairs 28.3 29.6 -4.1% Services received 28.9 40
Slide 23: Telekom Austria Group - Mobile Communication Subscriber Base
Telekom Austria Group - Mobile Communication Subscriber Base Mobile Subscribers ((in 000)) Q2 2012 Q Q2 2011 Q % change g Austria 5,288 5,176 2.2% Market share 39.3% 40.8% Bulgaria 5,532 5,295 4.5% Market share 47 7% 47.7% 49 3% 49.3% Croatia 1,977 2,039 -3.0% Market share 38.6% 38.8% Belarus 4,679
Slide 24: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE ((Average g pperiod)) Q2 2012 Q Q2 2011 Q % change g Austria 9,308 9,506 -2.1% International 7,443 7,439 0.1% Telekom Austria Group* 16,908 17,106 -1.2% FTE (End of period) Q2 2012 Q2 2011 % change Austria 9 300 9,300 9 372 9,372 -0.8% 0 8% Internati
Slide 25: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital p Expenditures p ((in EUR million)) Q2 2012 Q Q2 2011 Q % change g Segment Austria 121.2 114.6 5.8% Segment Bulgaria 16.2 16.7 -3.1% Segment Croatia 16.8 8.8 91.0% Segment Belarus 7.4 4.4 68.1% Segment Additional Markets 23.5 12.3 91.4% Slov
Slide 26: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt ((in EUR million)) Jun. 30,, 2012 Dez. 31,, 2011 % change g Long-term debt 3,668.2 2,960.4 23.9% Short-term borrowings 718.7 1,052.4 -31.7% Cash and cash equivalents, short-term and long term investments, finance lease receivables -1,008.4 -657.7 53.3% Deriv
Slide 27: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturityy Profile (in EUR million) 992 804 739 665 553 253 205 129 47 - - * 2012* 2013** 2014 2015 2016 2017 2018 2019 2020 2021 2022 * Includes EUR 1.8 mn related to fixed line acquisitions in Bulgaria, which is reported in Other liabilities ** Inc
Slide 28: Telekom Austria Group – Debt Profile
Telekom Austria Group – Debt Profile Overview Debt Instruments Fixed-Floating g Mix 25% 64% 36% 75% Bonds Loans Floating Fixed Lines of Credit Ratings > Undrawn committed lines of credit > S&P: BBB (stable outlook) amounting to EUR 935.0 mn* > Moody’s: Baa1 (stable outlook) g term to maturityy of >
Slide 29: Belarus: Impact of Hyperinflation Accounting and FX Translations in Second Quarter 2012
Belarus: Impact of Hyperinflation Accounting and FX Translations in Second Quarter 2012 Belarus Profit and Loss Statement for the Second Quarter 2012 Excluding Hyperinflation Hyperinflation and FX Effects in Impairment Reported and FX in Belarus Belarus (in EUR million) Revenues 125.1 -48.4 0.0 76.7
Slide 30: 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 39.5 250.0 39.0 38.5 38.0 37.5 245.0 37.0 36.5 36.0 35.5 35.0 34.5 32.2 32.5 240.0 34.0 33.5 33.0 31.8 31.9 31.5 32.5 32.0 235.0 2,323 2,327 2,336 2,320 2,
Slide 31: Segment Austria – Mobile Key Performance Indicators
Segment Austria – Mobile Key Performance Indicators ARPU & ARPU Relevant Revenues MoU p per Subscriber (in EUR) (in min) 21.0 335.0 20.5 152.7 20.0 20.5 151.9 325.0 20.0 19.2 19.5 149.5 149 5 149.1 149 1 315.0 19.0 317.4 18.5 18.3 146.4 305.0 18.5 311.9 290.7 18.0 295.0 300.9 293.6 17.5 285.0 17.0 Q
Slide 32: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split Market Share Broadband Lines Market Share Voice Minutes (in %) (in %) M bil Mobile 28.7% Broadband 30.8% other operators 6.6% Unbundled lines 5.8% 14.9% Cable 14.9% 81.9% Mobile 84.9% A1 18.2% Mobile broadband 18.2% A1 1.1% fixed wholesale 1.0% A1 fixed retai
Slide 33: Segment Bulgaria – Mobile Key Performance Indicators
Segment Bulgaria – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 7.3 104.1 7.0 7.0 6 6 6.6 98.6 6.1 97.5 97.8 96.7 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 278.8 242.4 155.4% 192.0 151.4%
Slide 34: Segment Croatia – Mobile Key Performance Indicators
Segment Croatia – Mobile Key Performance Indicators ARPU* MoU p per Subscriber* (in EUR) (in min) 13.4 13.4 104.3 12.4 12.6 97.1 96.5 95.8 11.7 92.6 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Mobile Broadband Customers* Mobile Penetration* (in 000) (in %) 192.9 127.0% 180.8 170 6 17
Slide 35: Segment Belarus – Mobile Key Performance Indicators
Segment Belarus – Mobile Key Performance Indicators ARPU MoU p per Subscriber (in EUR) (in min) 4.9 4.9 189.8 186.0 . 183 4 183.4 3.5 3.5 3.7 179.8 174.1 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 575.3 118.8% 119.4% 518.
Slide 36: 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) 22.7 178.3 177 0 177.0 179.1 21 6 21.6 21.4 168.7 20.7 20.4 155.4 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Q2 11 Q3 11 Q4 11 Q1 12 Q2 12 Republic of Serbia - ARPU Republic of Macedon
Slide 37: Appendix – Regulatory Topics
Appendix 2 – Regulatory g y Topics p Results for the Second Quarter 2012 37
Slide 38: 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 39: 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 2.70 2.30* Croatia 9.10 7
Slide 40: 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 Second Quarter 2012 40
Slide 41: Appendix – Personnel Restructuring in Austria
Appendix 3 – Personnel Restructuring in Austria Results for the Second Quarter 2012 41
Slide 42: 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 2011 Q1 2012 Q2 2012 2008 2009 2010 2011 Q1 2012 Q2 2012 Transfer to government g 0 0 158 106 9 18 FTE Effect 632.1 -10.0 76.9 233.7 4.4 6.6 Social plans 256 451 2
Slide 43: 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 2012 of approximately pp y 2011 89.0 EUR 100 mn Q1 2012
Slide 44: 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