Telekom Austria : With a Net Profit of over EUR 170 Million in the First Half of 2015

**) Due to higher investments in 2014 for the acquisition of frequency spectrum

"With a net profit of more than EUR 170 million for the first half of 2015, we were able to achieve the best set of results of the past six years. This was only possible thanks to the outstanding performance of Telekom Austria Group's employees. Particularly worthy of mention in this context is the great performance of the Austrian business," pointed out Hannes Ametsreiter, CEO Telekom Austria Group and A1.

In the first half of 2015, Telekom Austria Group' revenues remained stable at EUR 1,938.8 million compared to the same period of the previous year. The main growth drivers were the Austrian markets, while all other CEE markets reported declines in revenues.

In the period under review, EBITDA comparable increased by 7.4% to EUR 665.3 million due to intensive cost savings and the positive development in Austria, Belarus and the "Additional Markets" segment. Despite double-digit declines in EBITDA comparable in Bulgaria and Croatia respectively, Group earnings combined with revenue stability led to an increase in the EBITDA margin comparable by 2.4 percentage points to 34.3%. The decline in the overall investment volume across the Group by 16.7% in the period under review is mainly attributable to higher expenses in connection with the acquisition of frequency spectrum in single operating countries in the previous year.

The trend towards the renaissance of the fixed line business continued unabated also in the first half of the year and led to an increase in fixed access lines of 5.9% to approximately 2.8 million lines. The growth in bandwidth demand resulted in an increase in broadband lines of 10.1% to approximately 1.9 million lines. In the mobile communication area, SIM-card penetration rate is well above the 100% mark across all markets and mobile demand almost reached the point of saturation, thus reducing the likelihood of recording high net customer additions. Nevertheless, a total of more than 120,000 new customers were acquired in the period under review, which corresponds to an increase of 0.6%.

Even if the single operating markets reported both negative and positive earnings and the overall market environment continued to be very challenging, Telekom Austria Group posted a net profit of EUR 171.4 million in the first half of 2015, delivering the best set of results of the past six years.

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

In the Austrian domestic market, A1 was on a growth path in the first half of 2015, with revenues increasing by 2.5% to EUR 1,228.0 million and EBITDA comparable growing by 14.4% to EUR 419.8 million. While the entry of new mobile players led to a further intensification of competition, A1 succeeded in achieving customer growth in the mobile premium segment as well as in the fixed line and TV business. A considerable reduction in expenditure also contributed to improving earnings performance. In the period under review, domestic infrastructure investments rose by 17.5% to EUR 166.1 million in connection with the largest broadband rollout plan in the company's history ever carried out in Austria.

In Belarus, velcom continued to show a strong performance. On a local currency basis, revenues and EBITDA comparable increased by 20.6% and 27.0% respectively. However, Euro-denominated revenues dropped by 2.8% to EUR 161.5 million due to currency exchange effects, while EBITDA comparable further increased by 4.4% to EUR 85.4 million. This positive development was mainly driven by up-selling programs, with customers switching to high-end smartphone contracts, as well as by an increase in data traffic.

In Bulgaria, challenging market conditions remained unabated also in the first half of 2015, with the market being persistently characterized by intensive competition and a weak economic environment. Although Mobiltel recorded a plus of 4.8% in the mobile communication business and the fixed line segment reported growth of 19.9%, revenues dropped by 5.0% to EUR 173.6 million, with EBITDA comparable declining by 11.8% compared to the same period of the previous year.

In Croatia, high regulatory effects led to a decrease in revenues by 0.6% to EUR 174.7 million. Higher spectrum usage fees had a negative impact on Vipnet's EBITDA comparable, leading to a decline of 15.2% to EUR 38.1 million along with high price pressure.

The "Additional Markets" segment reported a mixed set of results for the first half of 2015. Revenues dropped by 6.9% to EUR 219.3 million across the entire region. Both Si.mobil in Slovenia and Vip mobile in the Republic of Serbia recorded year-on-year declines in revenues amounting to 13.0% and 5.1% respectively. In the Republic of Macedonia, revenues increased by 17.8% mainly due to the acquisition of the cable operator blizoo. In the "Additional Markets" segment, EBITDA comparable rose by 6.2% to EUR 70.2 million. However, excluding a positive one-off effect in Slovenia in the amount of EUR 20 million, EBITDA comparable would have declined by 24.1%. While in the Republic of Macedonia, EBITDA comparable grew by a hefty 45.2% thanks to the acquisition of blizoo, EBITDA comparable in both Slovenia and the Republic of Serbia dropped by over 28% respectively. Against this backdrop, the acquisition of the cable operator AMIS will offer considerable growth prospects for Slovenia moving forward, with six of the eight operating markets of the Group thus becoming convergent. Besides, a merger with the mobile provider One is planned in the Republic of Macedonia by year-end, which - however - still requires further approval by the competent authorities.

Despite this company-wide good set of results, Telekom Austria Group's outlook for the full-year 2015 had to be slightly revised due to the below-plan performance in South-Eastern Europe. As a result, revenue guidance for the full-year was reduced from plus 2% to approximately stable. Nevertheless, the proposed dividend has remained unchanged at EUR 0.05, while the total investment volume is expected to continue to range between EUR 700 and 750 million.

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