Vienna, 13 August 2014

  • With stock price gains of 30% in the first half 2014, the Telekom Austria share is the best-performing title in the ATX and in the European telecom sector;
  • Rating-Upgrade from Standard & Poor's from BBB- to BBB with stable outlook
  • Decline in group revenues of 7.3% year-on-year due to weak revenues in Austria, Bulgaria and Croatia;
  • Revenue growth in Belarus and in the "Additional Markets" segment;
  • Considerable cost savings at the Group level contributed to reducing operating expenses by EUR 102.7 million;
  • EBITDA comparable margin slightly increased to 31,94% and 33.20% clean despite declining revenues; successful cost-cutting measures led to an almost stable EBITDA (on a clean basis) in Austria;
  • An impairment charge of EUR 400 million for Mobiltel in Bulgaria resulted in a negative net result of EUR 317.8 million at the Group level;
  • Following the recent acquisition in the Republic of Macedonia and the merger in Liechtenstein, five of the Group's eight operating markets are now convergent;
 Telekom Austria Group's Key Data
Customer Numbers in '000 1HY 2014 1HY 2013 +/- in %
Fixed access lines group-wide 2,636.1 2,617.1 +0.7%
-       Thereof broadband lines 1,694.7 1,603.8 +5.7%
Mobile subscribers 19,877.9 20,032.8 -0.8%
-       Thereof broadband customers 1,504.6 1,514.5 -0.7%
Key Financial Figures in EUR Million Pursuant to IFRS
Group revenues 1,939.0 2,092.3 -7.3%
EBITDA comparable*) 619.4 667.2 -7.2%
EBITDA margin comparable 31.94% 31.89% +0.1%
EBIT -222.6 223.3 n.m.
Net result -317.8 108.0 n.m.
Capital expenditures 329.0 325.4 +1.1%
Employees 16,044 16,352 -1.9%

*) EBITDA excluding effects from restructuring and impairment tests

"The persisting negative effects of the global economic and financial crisis hit the real economy in the CEE markets particularly hard during the first half 2014. The Bulgarian market especially has been heavily overshadowed by poor economic prospects and the consequences of the conflict in Ukraine. As one of the leading communications providers in Eastern Europe, Telekom Austria Group has not been immune to such negative developments. This set of results should not come as a surprise, as the general public was informed about the impairment charge in Bulgaria several weeks ago. At the same time, we are looking towards the future of our company with optimism: thanks to the strong partnership with América Móvil, we will be able to take important steps in the months to come to further develop Telekom Austria Group," said Hannes Ametsreiter, CEO Telekom Austria Group and A1.

Thanks to the strong partnership with América Móvil, we will be able to take important steps in the months to come to further develop Telekom Austria Group.

Hannes Ametsreiter

CEO Telekom Austria Group

In the first half 2014, Telekom Austria Group's revenues dropped by 7.3% to almost EUR 1.94 billion mainly due to declining revenues in Austria, Bulgaria and Croatia. The positive development in Belarus and in the "Additional Markets" segment - and more specifically the increases of 17.1% and 3.8% in the Republic of Serbia and Slovenia respectively - could not compensate for the weak development shown by the other three operating markets.

The decrease in Group revenues of 7.3% to EUR 1.94 billion in the period under review was mainly attributable to regulatory effects totalling EUR 43.7 million at the Group level as well as to an adjustment of the estimation method for unrecognised revenues in the Austrian market (EUR 28.2 million net). However, thanks to effective cost-saving measures, Group EBITDA comparable decreased by only 7.2% to EUR 619.4 million, with the comparable EBITDA margin slightly improving from 31.89% to 31.94% in the period under review compared to the previous year.

According to IFRS, the net loss of EUR 317.8 million is mainly attributable to impairment tests in Bulgaria, which revealed the need of an impairment charge of EUR 400 million. However, this impairment charge has no impact on the Group's cash flow and earnings power as it only reflects the deterioration of future prospects for Bulgaria. Excluding these two one-off effects resulting from the impairment loss in Bulgaria and the adjustment of the estimation method for unrecognised revenues in Austria, Group net profit would have amounted to close to EUR 100 million, almost at the previous year's level of EUR 108 million.

"This set of results for the first half 2014 reflects our success in counteracting revenue declines with effective cost-cutting measures across the Group. Taking into account the outlined one-off effects, we are on the right track to improve our operating business moving forward. This is absolutely necessary to be able to further finance investments in the rollout of our broadband network with a view to guaranteeing a high level of quality for our customers, while contributing to future-proofing our region," said Siegfried Mayrhofer, CFO of the Telekom Austria Group.

The Most Significant Developments in The Single Operating Markets at a Glance

In the first half of the year, the Belarusian market showed strong growth reporting an increase in revenues of 20.6% on a local currency basis or 2.1% to EUR 166.3 million compared to the same period of the previous year. Additionally, the Belarusian subsidiary velcom was able to increase its EBITDA comparable by 1.9% to EUR 81.8 million.

The "Additional Markets" segment also recorded considerable growth in the period under review. In addition to an increase in EBITDA comparable of 6.5% to EUR 66.1 million, operating income rose by 42.4% to EUR 14.2 million. Both the Slovenian subsidiary Si.mobil and the Serbian Vip mobile are therefore on the right path towards a successful 2014 business year.

The favourable performance of this region also contributed to mitigating declines on the Austrian and Croatian markets. Revenues dropped by 11% to EUR 1.197,6 million and by 7.6% to EUR 175.8 million in Austria and Croatia respectively. In both markets, this decline in revenues was mainly attributable to regulatory effects. Despite tariff adjustments, operating income dropped to EUR 99.6 million and EUR 10.8 million in Austria and Croatia respectively. In Bulgaria, Mobiltel's revenues fell by 8.1% to EUR 182.7 million; however the EBITDA margin showed a slight improvement from 41.42% to 41.50% year-on-year.

At the same time, two strategically relevant steps within the framework of the Group's convergence strategy were accomplished in the period under review. The Skopje-based subsidiary Vip operator has recently acquired the domestic fixed-line operator blizoo, which will allow the company to offer its Macedonian customers mobile, broadband and fixed-line products from one single source moving forward. This newly acquired business asset will be included in the Group's balance sheet for the third quarter. The same applies to the merger of the Group's mobile subsidiary mobilkom liechtenstein with Telecom Liechtenstein at the beginning of July. As a result, the Telekom Austria Group is now positioned as a convergent multimedia provider in five of its eight operating markets and is therefore well equipped for the future.

This positive trend is also reflected by the Telekom Austria's share price performance. Since the beginning of the year, the Telekom Austria share has gained 30%, becoming the best-performing stock on the Vienna Stock Exchange. In a European benchmark, the Telekom Austria share also outperformed all other telecom stocks in the first half 2014.

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