Telekom Austria Ag · VIE:TKA
Telekom Austria — Q4 2010 Earnings Presentation
37 slides from Telekom Austria's earnings presentation, Feb 23, 2011
Slide 1: Results for the Fourth Quarter 2010
Results for the Fourth Quarter 2010 Vienna, February 23, 2011
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 statements. Forward-looking information involves risks and uncertainties that could significantly affect expected results.
Slide 3: Agenda
Agenda > Operational and Financial Highlights of the Full Year 2010 > Key Financial Developments of the Fourth Quarter 2010 > Markets & Operations > Outlook FY 2011 > Appendix Results for the Fourth Quarter 2010 3
Slide 4: Operational and Financial Highlights of the Full Year 2010
Operational and Financial Highlights of the Full Year 2010 4
Slide 5: Operational Highlights of the Full Year 2010
Operational Highlights of the Full Year 2010 > First full year access line growth of 1,400 lines in more than 10 years driven by increased demand for fixed line broadband, IPTV and product bundles > 11,900 11 900 fixed line net additions in Q4 2010 > Mobile subscriber base increases by 5.0% to more
Slide 6: Financial Highlights of the Full Year 2010
Financial Highlights of the Full Year 2010 Guidance 2010 Actuals 2010 Revenues Approx. EUR 4.7 bn EUR 4.651 bn 9 EBITDA comparable bl EUR 1 1.60 60 – 1.65 1 65 bn b EUR 1 1.646 646 bn b 9 CAPEX EUR 0.75 - 0.80 bn EUR 0.764 bn 9 Operating Free Cash Flow* At least EUR 0.8 bn EUR 0.881 bn 9 Dividend 65
Slide 7: Key Financial Developments of the Fourth Quarter 2010
Key Financial Developments of the Fourth Quarter 2010 7
Slide 8: Strong Operational Performance Limits Group Revenue Decline to 0.9%
Strong g Operational p Performance Limits Group p Revenue Decline to 0.9% (EUR million) Q4 2010 Q4 2009 % change Revenues 1,170.8 1,181.5 -0.9% > Improved operational performance stabilizes Group revenues in Q4 2011 EBITDA comparable* 353.4 416.9 -15.2% EBITDA comparable margin* 30.2% 35.3% > Season
Slide 9: Smartphones as Well as Fixed and Mobile Data Growth Drive Group Revenue Development
Smartphones p as Well as Fixed and Mobile Data Growth Drive Group Revenue Development Austria: A i Croatia: C i > Access line growth of 11,900 lines and mobile > Subscriber base increases by 5.6% with contract subscriber growth of 5.6% limit revenue decline to subscribers growth of 7.1% 3.1% > Reven
Slide 10: Revenue Related OPEX Drive EBITDA Comparable Decline
Revenue Related OPEX Drive EBITDA Comparable p Decline Austria: A i Bulgaria: B l i Belarus: B l > OPEX increase driven by seasonally higher > Cost reductions of 2.8% > EBITDA impacted by higher inventory material and marketing costs (e.g. > EBITDA comparable margin remains write-offs and employee e
Slide 11: Free Cash Flow Impacted by Lower Cash Flow from Operations and Higher CAPEX
Free Cash Flow Impacted p byy Lower Cash Flow from Operations and Higher CAPEX (EUR million) Q4 2010 Q4 2009 % change FY 2010 FY 2009 % change Cash Flow from operations before working 320.4 354.0 -9.5% 1,478.6 1,569.8 -5.8% capital adjustments Change in working capital 42.7 68.5 -37.6% -81.0 -184.4
Slide 12: Markets & Operations
Markets & Operations 12
Slide 13: Fixed Broadband Drives Return to Access Line Growth in Austria
Fixed Broadband Drives Return to Access Line Growth in Austria Fixed Broadband Market Shares Fixed Access Line Growth 1009 860 912 15.0 788 818 664 723 591 626 11.910.0 47% 53% 56% 509 09 5.0 25% 4.4 23% 22% 9 0.0 19% 16% Q1 09 Q2 09 Q3 09 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 15% ‐1.2 ‐5.0 9% 8% 7% ‐3.2 ‐4
Slide 14: Successful iPhone Launch Complements Smartphone Strategy
Successful iPhone Launch Complements p Smartphone Strategy Country Split of iPhones Sold > Strong trend towards smartphones across Telekom Austria Group 16% 7% > Smartphones represent on average 77% 30.0% of new handsets sold in the Group in Q4 2010 > Successful launch of iPhone in Austria Bulgaria
Slide 15: Continued Focus on Cost Control – New Initiatives for Civil Servants in 2011
Continued Focus on Cost Control – New Initiatives for Civil Servants in 2011 Estimated Restructuring Charge 2011 Approx. 200 mn* Estimated Acceptance Approx. 500 FTE Transfer to government: Social plans: 15% – 25% 75% – 85% > Restructuring charge distributed throughout 2011, biggest impact in Q1 exp
Slide 16: Outlook
Outlook Results for the Fourth Quarter 2010 16
Slide 17: Outlook Full Year 2011
Outlook Full Year 2011 Telekom Austria Group – Full Year 2011 On a constant currency basis As of February 23, 2011 Revenues up to EUR 4.6 bn EBITDA comparable bl up to EUR 1.60 bn CAPEX up to EUR 0 0.80 80 bn Operating p g Free Cash Flow** approximately pp y EUR 0.8 bn 55% of free cash flow, Dividen
Slide 18: Appendix
Appendix 1 18
Slide 19: Telekom Austria Group – Revenue Breakdown
Telekom Austria Group – Revenue Breakdown Revenue Split - Segment Austria (EUR million) Q4 2010 Q4 2009 % change Monthly fee and traffic 514.6 533.7 -3.6% Data and ICT Solutions 60.9 49.5 22.9% Wholesale ((incl. Roaming) g) 42.6 57.9 -26.5% Interconnection 95.8 106.1 -9.7% Equipment 39.7 25.8 54.1%
Slide 20: Telekom Austria Group – Expense Breakdown
Telekom Austria Group – Expense Breakdown Operating Expense - Segment Austria (EUR million) Q4 2010 Q4 2009 % change Material expense 83.1 61.5 35.2% Employee costs 167.1 170.3 -1.8% Interconnection 88.5 93.1 -5.0% Maintenance and repairs 40.2 40.5 -0.6% Services received 34.3 52.1 -34.1% Other supp
Slide 21: Telekom Austria Group – Mobile Communication Subscriber Base
Telekom Austria Group p - Mobile Communication Subscriber Base Mobile Subscribers (in 000) Q4 2010 Q4 2009 % change Austria 5,105 4,834 5.6% Market share 41.4% 42.6% Bulgaria 5,249 5,353 -1.9% Market share 49.6% 49.8% Croatia 2,750 2,603 5.6% Market share 43.1% 42.6% Belarus 4,354 4,102 6.1% Market
Slide 22: Telekom Austria Group – Headcount Development
Telekom Austria Group – Headcount Development FTE (Average period) Q4 2010 Q4 2009 % change Austria 9,808 10,172 -3.6% International 6,611 6,499 1.7% Telekom Austria Group 16 566 16,566 16 680 16,680 -0.7% 0 7% FTE (End of period) Q4 2010 Q4 2009 % change Austria 9,717 10,045 -3.3% International 6,6
Slide 23: Telekom Austria Group – Capital Expenditures Split
Telekom Austria Group – Capital Expenditures Split Capital Expenditures (EUR million) Q4 2010 Q4 2009 % change Segment Austria 225.4 184.8 22.0% Segment Bulgaria 24.5 15.1 62.5% Segment Croatia 11.1 14.2 -21.9% Segment Belarus 32.1 38.9 -17.6% Segment Additional Markets 27.2 38.7 -29.7% Sl Slovenia
Slide 24: Telekom Austria Group – Net Debt
Telekom Austria Group – Net Debt Net debt ((EUR million)) Dec.. 31,, 2010 Dec.. 31,, 2009 % change g Long-term debt 3,146.4 3,234.8 -2.7% Short-term borrowings 522.6 1,501.6 -65.2% Cash and cash equivalents, short-term and long term investments, finance lease receivables -355.0 -1,099.0 -67.7% Deriv
Slide 25: Telekom Austria Group – Debt Maturity Profile
Telekom Austria Group – Debt Maturity Profile Debt Maturity Profile (EUR million) 1,292 Ratings > S&P: BBB (stable outlook) 823 * 942 > Moody’s: A3 (negative 523* outlook)** 75 2011 2012 2013 2014 thereafter Lines of Credit > Undrawn committed lines of credit amounting g to EUR 1.0 bn > Average term
Slide 26: Segment Austria - Fixed Line Key Performance Indicators
Segment g Austria - Fixed Line Keyy Performance Indicators ARPL* Fixed d Line Broadband db d Net Add Adds incl. l (in EUR) Wholesale (in EUR) 34 0 34.0 34 0 34.0 42 4 42.4 41.6 40.0 33.3 29.5 33.2 24.7 32.8 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 * Adjusted to new reporting struc
Slide 27: Segment Austria – Broadband Market Split
Segment Austria – Broadband Market Split M k Sh Market Share B Broadband db d Li Lines Market Share Voice Minutes (in %) (in %) Mobile 27.1% Broadband 28.2% other th operators t 8.3% Unbundled lines 7.0% 16.6% Cable 15.4% Mobile 78.3% 80.4% A1 TA 15.9% Mobile broadband 17.8% 1.6% A1 TA 1.2% fixed wh
Slide 28: Segment Austria – Mobile Key Performance Indicators
Segment g Austria – Mobile Keyy Performance Indicators ARPU* MoU per Subscriber (in EUR) (in min) 23.3 165.3 159.8 22.4 160.0 159.7 22.3 21.9 155.0 21.6 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 * Adjusted to new reporting structure as of Q3 2009 Mobile Broadband Customers* Mobile
Slide 29: Segment Bulgaria – Mobile Key Performance Indicators
Segment g Bulgaria g – Mobile Keyy Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 111.8 9 0 9.0 102.6 8.7 101.5 8.5 98.6 8.2 95.5 8.0 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 126 142 0% 142.0% 98 140.8
Slide 30: Segment Croatia – Mobile Key Performance Indicators
Segment g Croatia – Mobile Keyy Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 12.0 12.0 74.7 74 7 11.4 71.6 71.3 11.0 68.5 10.7 67.9 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 179 179 144.5% 156 137 146
Slide 31: Segment Belarus – Mobile Key Performance Indicators
Segment g Belarus – Mobile Keyy Performance Indicators ARPU MoU per Subscriber (in EUR) (in min) 6.4 6.7 6 2 6.2 174 1 174.1 176 3 176.3 5.5 5.5 169.2 156.4 149.4 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Mobile Broadband Customers Mobile Penetration (in 000) (in %) 109.6% 144 108.
Slide 32: Segment Additional Markets – Mobile Key Performance Indicators
Segment g Additional Markets – Mobile Keyy Performance Indicators Slovenia - ARPU Slovenia - MoU per Subcriber (in EUR) (in min) 163.9 21.7 20.8 158.2 20.6 20.4 153.4 154.1 150.9 19.4 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Q4 09 Q1 10 Q2 10 Q3 10 Q4 10 Serbia - ARPU Macedonia - ARPU (in EUR) (in EUR) 6.5 7.5
Slide 33: Appendix – Regulatory Topics
Appendix 2 – Regulatory Topics 33
Slide 34: 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* K Points Key P i t Impact EBITDA comp. Interconnection 2010 - 2013: EUR -75 mn Impact EBITDA comp. 2011 -2013: Impact EBITDA comp. EUR -175 mn Roaming 2010 - 2013: EUR -100 mn > EU commission: before January 1, Digital D
Slide 35: Glide Path of Mobile Termination Rates
Glide Path of Mobile Termination Rates July Jannuary July August January June July August January July August in Eurocent 2009 2010 2010 2010 2011 2011 2011 2011 2012 2012 2012 k t analysis market l i d during i Austria 4.00 3.50 3.01 2.51 2.01 2011 6.65 (until market analysis expected Bulgaria 11.7
Slide 36: Appendix – Details to One-Off Effects and Accounting Adjustments in Q4 2010
Appendix 3 – Details to One-Off Effects and Accounting Adjustments in Q4 2010 36
Slide 37: One-Off Effects and Accounting Adjustments in Segment Austria in Q4 2010
One-Off Effects and Accounting g Adjustments j in Segment Austria in Q4 2010 in EUR mn Reclassifications One offs Reported Impact FY Q4 2010 FY 2010 Revenue split Segment Austria Q4 2010 Adjustments Clean 2010 Monthly fee and traffic 514 6 514.6 13 9 13.9 528 5 528.5 from Other OPEX 13 9 13.9 Data a