Telekom Austria Group: Operational Success in a Challenging Environment (1)

VIENNA, August 17, 2011 /PRNewswire/ --

        
        - Group-wide growth in mobile communication and data traffic
        - Further increase in customer numbers in the Austrian fixed net
          business
        - Strong earnings performance in Slovenia and the Republics of
          Serbia and of Macedonia
        - Austrian subsidiary A1 records market success with convergent
          offerings
        - Acquisition of cable network provider B.net in Croatia
        - Decline in Group revenues by 2.9% and in Group EBITDA comparable
          by 7.8% mainly attributable to currency translation, competition and
          regulation
        - Net income still negative in the first half of 2011 due to
          restructuring charges totaling EUR 218.6 million
        - Revised outlook due to foreign exchange developments

Overview of Key Financials: Telekom Austria Group in the First Half of 2011

        
        Key Financial Figures
        in EUR million                     1-6 M 2011   1-6 M 2010   +/- in %
      
        Group revenues                        2,227.3      2,294.7      -2.9%
        EBITDA comparable                       777.6        843.4      -7.8%
        Net income                              -59.2        159.9         -
        Capital expenditures                    277.1        296.5      -6.5%
        Employees (as of end of June 2011)     17,032       16,530       3.0%

In the first half of 2011, the Telekom Austria Group reported considerable operational success despite challenging economic conditions and a market environment marked by intense competition and strong regulation. Against this backdrop, the Group succeeded in increasing its mobile customer base as well as total data traffic. In Austria, following the turnaround in the fixed net business, there was a further increase in fixed net access lines. The rebranding of the new domestic subsidiary, A1, in June 2011 following the merger of the Austrian fixed net and mobile communication operations showed significant market success: in July 2011, the company's convergent product bundles exceeded the one-million customer mark.

In addition, the Group's convergence strategy has proved successful beyond Austrian borders: in Bulgaria, the Telekom Austria Group has been the dynamic provider of innovative converged services since the acquisition of two fiber optic operators. In Croatia, a total of 120,000 fixed net customers were acquired in the period under review following the acquisition of B.net (closing in August 2011, customers not yet reported in the first half year). The Group's subsidiaries in Slovenia and in the Republics of Serbia and of Macedonia also recorded significant growth rates, with both customer numbers and ARPU showing a favorable upward trend. The Belarus segment also reported customer growth.

"We are proud of our operational success, which we have achieved against a backdrop of intensive competition and strong economic headwinds. These results demonstrate once again that our convergence strategy provides a solid base for our future business," said Hannes Ametsreiter, CEO Telekom Austria Group.

Telekom Austria Group's Performance in Figures

The Group's operational success could not fully compensate for the negative impact of the macroeconomic environment and, more specifically, for the negative effects of intensive competition and persistently intrusive regulatory measures. Group revenues amounted to EUR 2,227.3 million in the first half of 2011, a decline of 2.9% or EUR 67.3 million compared to the same period of the previous year. In the first half of 2011, the negative impact on revenues of the 54% devaluation of the Belarusian ruble against the euro as of May 24, 2011 amounted to EUR 43.3 million.

EBITDA comparable fell by 7.8% to EUR 777.6 million in the first half of 2011. This decline of EUR 65.8 million year-on-year is due to regulatory effects, which account for a drop of EUR 15.6 million, as well as to the devaluation of the currencies, which accounts for a decline in EBITDA comparable of EUR 19.0 million. The remaining decrease of EUR 31.3 million is mainly attributable to a competition-related decline in earnings, which could only be partly offset by strict cost management.

Personnel expenses to be sustainably disburdened

In the first half of 2011, EBIT declined from EUR 300.5 million to EUR 42.7 million. This drop is mainly attributable to personnel expenses associated with the restructuring program in Austria of EUR 218.6 million in the period under review. This cost will ease the burden of personnel costs over the long term with a positive effect for the consolidated statements of operations.

Due to the restructuring cost and the negative impact of the devaluation of the Belarusian ruble, net income turned from EUR 159.9 million in the first half of 2010 to a net loss of EUR 59.2 million in the first half of 2011.

"The decline in revenues and earnings is in line with expectations. All in all, we were able to cope quite well with the devaluation of the Belarusian ruble thanks to the early adoption of effective countermeasures," said Hans Tschuden, CFO and Deputy Chairman of the Telekom Austria Group.

Outlook for the Full Year 2011

Against the backdrop of a furthermore challenging economic environment in all operating markets of the Telekom Austria Group, persisting competitive pressure and the currency devaluation in Belarus, the Management Board has adjusted the outlook for the full year 2011. However, this refined outlook for 2011 reflects the Group's confidence in mitigating the negative effects mentioned above through clear customer focus, intensified marketing of innovative products and strict cost management.

For the full year 2011, revenues are expected to amount to approximately EUR 4.50 billion. EBITDA comparable is anticipated to reach up to EUR 1.55 billion. Operating free cash flow is expected to total up to EUR 800 million and capital expenditures for the Group as a whole are forecasted to reach EUR 750 to EUR 800 million. Furthermore, the management confirms a minimum dividend floor of 76 eurocents per share for the 2011 financial year.

The Telekom Austria Group's Markets in Detail

Austria:

In the period under review, the most outstanding milestone in Austria was the rebranding of the new domestic operating company A1 Telekom Austria AG resulting from the merger of mobilkom austria and Telekom Austria the previous year. Since June 2011, the company's products and services have been provided from one source under the umbrella brand A1. This rebranding campaign in connection with the marketing of innovative offerings led to customer growth and market success: in July 2011, the company's product bundles exceeded the one-million customer mark. The number of fixed access lines continued to grow from 2.304 million lines in the first half of 2010 to 2.324 million lines as of June 30, 2011, with fixed net broadband accounting for 1.216 lines, an increase of 11.6% compared to the same period of the previous year. The number of A1TV (formerly aonTV) subscribers increased by 41.1% to more than 174,800. Customer up-take of high-value broadband offerings counteracted the loss of fixed net voice minutes and resulted in a slower decline of average revenues per line (ARPL), which dropped to EUR 32.4 in the period under review compared to EUR 33.1 in the previous year.

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