Telekom Austria Quarterly Profit Drops by a Third

Telekom Austria Group has seen a five percent drop in first-quarter revenues to EUR 1.2 billion (US$1.6 billion) primarily due to lower revenues in the landline division. Net profits dropped by 34% to EUR 85.3 million (US$116.2 million) compared to EUR 129.7 million a year ago. EBITDA decreased by 6.4% to EUR 454.8 million (US$620 million) due to weaker contribution from mobile phones division while landlines grows slightly.

Hannes Ametsreiter, CEO Telekom Austria Group said: "The decline in revenues in the first quarter 2009 is mainly to be attributed to lower revenue generation in the Fixed Net segment which was due to lower wholesale revenues and the disposal of subsidiaries. EBITDA was impacted by a weaker Mobile Communication business, which was influenced by an economic slow down and one-off effects whereas the Fixed Net EBITDA increased slightly. The Mobile Communication segment showed favorable customer development with a 13% increase in subscriber numbers."

Total capital expenditures decreased from EUR 159.6 million to EUR 116.0 million driven by a reduction of capital expenditures in both segments. Net debt decreased by 2.9% to EUR 3,877.8 million at the end of March 2009 compared to year-end 2008 due to free cash flow generation. Net debt to EBITDA (last 12 months) excluding the impact of the provision in 4Q 2008 for the restructuring program was 2.1x.

Market Environment

The Mobile Communication segment continued to show subscriber growth both in Austria and in its international markets. Austria is regarded as a highly developed mobile communications market characterized by fierce competition. Bulgaria, Croatia and Slovenia still offer untapped potential in terms of contract customers and innovative data products, however, fierce competition and the economic slowdown in these markets led to price cuts and declining ARPUs.

Velcom in Belarus was impacted by the devaluation of the Belarusian Ruble at the beginning of 2009. The counter-measures adopted to mitigate this negative impact include a tariff increase effective as of mid-February 2009 as well as a rebalancing of costs based on the local currency. A segment-wide risk monitoring system has been put in place to identify risk factors such as currency fluctuations or long-term macro-economic trends and therefore to react in due time. Regulation remains an important external disrupting factor in all markets primarily due to the impact on roaming tariffs and termination charges.

Outlook 2009

For the year 2009 the Telekom Austria Group anticipates slightly weaker revenues than originally expected due to lower Fixed Net wholesale revenues as well as lower Mobile Communication interconnection and equipment revenues, which will be accompanied by a proportionate reduction in costs. Therefore, EBITDA guidance remains unchanged at about EUR 1.9 billion in 2009. Capital expenditures for the year 2009 are expected to amount to approximately EUR 800 million, which translates into an operating Free Cash Flow (EBITDA less capital expenditures) of around EUR 1.1 billion.

Posted to the site on 13th May 2009