Telekom Austria AG · VIE:TKA
Telekom Austria — Q2 2003 Earnings Presentation
52 slides from Telekom Austria's earnings presentation, Aug 26, 2003
Slide 1: Telekom Austria Group Results for the 2nd Quarter 2003
Telekom Austria Group Results for the 2nd Quarter 2003 August 26, 2003 1
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 § Key Developments § Operational Highlights Ÿ Wireline Ÿ Wireless § Financial Overview § Outlook 3
Slide 4: Key Developments
Key Developments 4
Slide 5: Telekom Austria - 2Q 03 Highlights
Telekom Austria - 2Q 03 Highlights § Business Ÿ Wireline revenues impacted by weaker market trends; margins benefit from further cost cutting Ÿ Continuing growth in the wireless segment despite increasing competition § Financial Ÿ Net profit rises by 66.9% Ÿ Net debt reduced by increasing operating
Slide 6: Telekom Austria – 2Q 03 Results
Telekom Austria – 2Q 03 Results Key Financial Indicators (EUR million) Revenues Adj. EBITDA* Net income Net debt CAPEX -7.3% +3.2% 935.3 965.4 3,204.2 +1.3% +66.9% 2,970.4 368.8 373.7 -14.6% 28.2 151.9 129.7 16.9 2Q 2002 2Q 2003 2Q 2002 2Q 2003 2Q 2002 2Q 2003 Dec. 31, June 30, 2Q 2002 2Q 2003 2002
Slide 7: Telekom Austria vs. European Peers
Telekom Austria vs. European Peers § Telekom Austria continues to compare well with its peer group Adj. EBITDA Margin (Adj. EBITDA-Capex)/Revenues Net Debt/Adj. EBITDA* (FY 2Q 2003 Figures) (FY 2Q 2003 Figures) (FY 2Q 2003 Figures) 41.2% 38.7% 34.9% 29.9% 32.9% 2.2x 26.4% 25.3% 30.5% 2.0x 2.0x 23.0%
Slide 8: Wireline
Wireline 8
Slide 9: Wireline Results 2Q 03
Wireline Results 2Q 03 2Q 2003 Results Key Highlights (EUR million) § Revenues impacted by declining market volumes and lower prices Revenues Adj. EBITDA* § Excluding special items, -2.5% wireline EBITDA margin rises +6.9% from 35.8% to 39.2% 541.8 528.3 § Integration of business 207.3 segments redu
Slide 10: Wireline Volumes & Market Position
Wireline Volumes & Market Position § Low-priced mobile packages driving fixed-to-mobile substitution § Dial-up minutes impacted by ADSL growth and good weather in 2Q § Unchanged market position Market Volumes Wireline Voice Market Shares* (million minutes) 2,650 2,667 2,647 6% 2,439 2,454 53% 2,394
Slide 11: Continuing Improvement of ADSL Products
Continuing Improvement of ADSL Products ADSL Net Additions Key Highlights (in 000) § Net adds slow as customers wait for tax deductibility of installation and access fees in 2H 03 24 22 § New product initiatives 19 16 16 17 § Higher bandwith § Increased and variable download volume § Improved wirele
Slide 12: Wireline Revenue Analysis
Wireline Revenue Analysis 2Q 2Q % (EUR million) 2003 2002 Change Comment Switched voice 111.9 119.9 -6.7% Lower market volumes and reduced prices due to base traffic higher number of tiktak customers Switched voice 139.3 131.7 5.8% Increase due to reduced voice revenues discounts monthly rental & ot
Slide 13: Refocused Marketing Initiatives in 2H 03
Refocused Marketing Initiatives in 2H O3 § Repositioning and bundling of retail marketing activities Activities Background Objective Broadband initiative § Bundling content and access to improve § Enlarge broadband subscriber customer value and address untapped base in new customer segments market o
Slide 14: Wireless
Wireless 14
Slide 15: Wireless Results 2Q 03
Wireless Results 2Q 03 2Q 2003 Results Key Highlights (EUR million) § Further growth of domestic Revenues Adj. EBITDA business despite intensive competition § mobilkom austria increases +9.6% +10.0% subscriber, ARPU and MoU 498.5* § UMTS launch in April as first 454.7* 20.2 177.4* 19.0 80.1 European
Slide 16: Market and Subscribers in Austria
Market and Subscribers in Austria § 65,000 net adds in 1H in spite of new competitors, further rising contract share § Tele2 starts as reseller of One; Hutchison launched UMTS services in May Competitive Situation mobilkom Subscriber Base (in 000) (in 000) tele.ring** 3,066.3 2,893.8 3,001.4 mobilko
Slide 17: mobilkom austria - ARPU and Costs
mobilkom austria - ARPU and Costs § Average ARPU rises by 4.2% driven by higher MoU and contract share § Subsidies on higher priced handsets drive increase in SAC and SRC Average Monthly ARPUs SAC and SRC (in EUR) (EUR million) 60.8 61.1 33.5 28.1 Contract 18.5 SAC 15.5 Prepaid SRC 9.9 11.0 12.6 15.
Slide 18: VIPnet & Si.mobil - 2Q 03 Results
VIPnet & Si.mobil - 2Q 03 Results § Further growth and improving margins at VIPnet § In spite of regulatory uncertainty profitability rises at Si.mobil VIPnet - Subscriber Base Si.mobil - Subscriber Base (in 000) (in 000) 1,098 1,148 350 957 350 300 June 30, 02 Dec. 31, 02 June 30, 03 June 30, 02 De
Slide 19: Vodafone Partnership
Vodafone Partnership § GPRS Roaming: Seamless usage of data services in partner networks, 13 partners § Vodafone Eurocall: Launched on March 24, 2003, flat-rate pricing in 32 European countries § Pre-Paid Top Up: Launched on July 4, 2003, recharging of pre-paid accounts with Vodafone vouchers while
Slide 20: Financial Overview
Financial Overview 20
Slide 21: Telekom Austria 2Q 03 Results
Telekom Austria 2Q 03 Results (EUR million) 2Q 2003 2Q 2002 % Change Revenues 965.4 935.3 3.2% Adjusted EBITDA 373.7 368.8 1.3% Adjusted EBITDA excl. certain items* 386.0 356.7 8.2% Margin 40.0% 38.1% Operating income 82.3 90.3 -8.9% Net income 28.2 16.9 66.9% Earnings per share (in EUR) 0.06 0.03 6
Slide 22: Telekom Austria 2Q 03 Results
Telekom Austria 2Q 03 Results (EUR million) 2Q 03 2Q 02 Adjusted EBITDA 373.7 368.8 Increasing wireless Depreciation & depreciation and amortization -291.4 -278.5 (UMTS license) amortization Operating income 82.3 90.3 Non-operating 5.0 1.2 Foreign exchange gains expenses, net Decrease reflects lower
Slide 23: Continuing Focus on Wireline Cost Cuts
Continuing Focus on Wireline Cost Cuts 1H Wireline Operating Costs* Key Highlights (EUR million) -5.1% § Integration of former fixed line, 528.2 data and Internet segments continues to drive cost reductions 501.2 § Total costs declined by around 259.0 EUR 27 million during 1H 03 241.8 § Decrease in
Slide 24: Capex and Free Cash Flow
Capex and Free Cash Flow § Further decline in capex during 2Q 03 allows reduction of full year guidance to EUR 600 million (- 10% compared to 2002) § Increase OpFCF (EBITDA less capex) reflects strong operational cash generation capability Adjusted EBITDA excl. certain items** less Capital Expenditu
Slide 25: Successful Eurobond Placement
Successful Eurobond Placement Net Debt Bond Infos (EUR million) § Operating strength and lower capex contributes to a further net debt reduction § Successful bond placement in 3,433.2 July 03: 3,204.2 • Rating: BBB/Baa2, stable 2,970.4 outlook • EUR 750million have been placed within half a day • 10
Slide 26: Outlook
Outlook 26
Slide 27: Unchanged Outlook for 2003
Unchanged Outlook for 2003 Wireline § Reduction in revenues and lower EBITDA due to decreased market volumes and lower prices Wireless § Increase in revenues and earnings, but at lower growth rates Group § Stable Group revenues and EBITDA § Expected dividend payment for 2003 in 2004 § Further reduct
Slide 28: Ownership Update
Ownership Update Ownership Structure Recent Events § Ö IAG placed convertible for 25million shares; exchangable at EUR 13 by 2006 38.0% § Liquidity agreement remains in 47.2% place § Lock-up prevents any public offerings before Jan. 24, 2004 14.8% § After the expiry of the lock-up each party may ini
Slide 29: Appendix
Appendix 29
Slide 30: International Expansion Strategy
International Expansion Strategy § Consistent with the key objective of enhancing shareholder value, Telekom Austria Group is exploring “ selected” acquisition opportunities § Stringent screening criteria and thorough review procedures requiring § attractive entry price § low penetration markets § s
Slide 31: New Telecom Law Enacted in 3Q 03
New Telecom Law Enacted in 3Q 03 Key Aspects § New market definitions: the original 4 regulated telecom markets are split into 18 with more flexibility for participants with significant market power § So far 7 retail and 11 wholesale submarkets have been defined; the final framework is subject to a
Slide 32: Important Decisions at June 4 AGM
Important Decisions at June 4 AGM § Waiver of 15% discount to the price paid to public minority shareholders in case of a mandatory take-over bid § Authorization for a share buyback of up to 10% of the share capital § Authorization for a capital increase of up to 2% to service a stock option program
Slide 33: Wireline - Access Lines
Wireline - Access Lines (in thousands) June 30, 2003 June 30, 2002 % change PSTN access lines 2,608.7 2,704.1 -3.5% Basic ISDN access lines 442.3 419.5 5.4% Multi ISDN access lines 8.0 8.2 -2.4% Total access lines 3,059.0 3,131.8 -2.3% of these ADSL access lines 214.9 136.0 58.0% thereof wholesale l
Slide 34: Fixed Line - Market Shares
Fixed Line - Market Shares (in %) 55.1 55.3 55.6 55.3 55.2 55.2 53.2 54.0 53.8 52.7 52.8 53.0 51.2 51.7 52.1 52.6 51.2 52.2 52.5 52.6 Total market 51.9 50.4 51.2 share 49.7 National 47.6 47.3 47.6 47.2 Total voice 46.5 45.0 Fixed-to-mobile International Mar. 31, June 30, Sep. 30, Dec. 31, Mar. 31, J
Slide 35: Wireline - Minutes and average tariffs
Wireline - Minutes and average tariffs (in millions of minutes) 2Q 2003 2Q 2002 % change National 1,086 1,111 -2.3% Fixed-to-mobile 215 203 5.9% International 118 109 8.3% Total voice minutes 1,419 1,423 -0.3% Internet dial up 975 1,016 -4.0% Total wireline minutes 2,394 2,439 -1.8% (EUR per minute)
Slide 36: Mobile Subscribers
Mobile Subscribers Customers ('000s) June 30, 2003 June 30, 2002 % change Austria Contract 1,629.6 1,480.4 10.1% Prepaid 1,436.7 1,413.4 1.6% Total 3,066.3 2,893.8 6.0% Croatia Contract 182.1 138.7 31.3% Prepaid 965.8 818.2 18.0% Total 1,147.9 956.9 20.0% Slovenia Contract 161.0 126.3 27.5% Prepaid
Slide 37: mobilkom austria - Churn, MoU
mobilkom austria - Churn, MoU Quarterly GSM Churn Average MoU per Subscriber (in %) (in minutes) 123.3 122.2 117.5 120.5 119.0 113.2 5.5 5.8 4.1 3.7 2.5 2.1 2Q 02 2Q 03 1Q 2Q 3Q 4Q 1Q 2Q 02 02 02 02 03 03 Contract Prepaid Average 37
Slide 38: mobilkom austria - Mobile Data
mobilkom austria - Mobile Data GPRS Customers and MMS Users No. SMS and Data in % of Revenues (in 000) (million) 147 149 459 135 SMS 129 126 GPRS 118 313 223 101 56 38 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 1Q 02 2Q 02 3Q 02 4Q 02 1Q 03 2Q 03 MMS 70 Data in % of airtime revenues 10.8 39 9.3 25 11 3Q 02
Slide 39: Internet Subscribers
Internet Subscribers Austria Czech Republic Customers (in 000) Customers (in 000) 948.8 767.2 174.3 113.9 273.5 252.3 774.5 653.3 June 30, 02 June 30, 03 June 30, 02 June 30, 03 Dial-up ADSL (excl. wholesale) 39
Slide 40: Headcount Development
Headcount* Development (average of period) 2Q 2003 2Q 2002 Change Wireline 11,129 12,483 -1,354 Wireless 3,620 3,504 116 Telekom Austria Group 14,749 15,987 -1,238 (end of period) 2Q 2003 2Q 2002 Change Wireline 11,075 12,244 -1,169 Wireless 3,643 3,518 125 Telekom Austria Group 14,718 15,762 -1,044
Slide 41: Wireline - Revenue Breakdown
Wireline - Revenue Breakdown % % (EUR million) 2Q 2003 2Q 2002 Change 1H 2003 1H 2002 Change Switched voice base traffic 111.9 119.9 -6.7% 233.1 252.4 -7.6% Switched voice monthly & other voice revenues 139.3 131.7 5.8% 277.2 269.2 3.0% Payphones & VAS 17.6 22.0 -20.0% 35.8 39.2 -8.7% Data & IT-solu
Slide 42: Wireline - Expense Breakdown
Wireline - Expense Breakdown (EUR million) 1H 2003 1H 2002 % Change Material expense 27.8 28.6 -2.8% Employee costs* 267.7 265.0 1.0% Depreciation and amortization 417.0 418.3 -0.3% Interconnection 156.0 159.0 -1.9% Maintenance and repairs 52.2 52.2 0.1% Services received 55.0 43.4 26.8% Other 114.2
Slide 43: Wireless - Revenue Breakdown
Wireless - Revenue Breakdown % % (EUR million) 2Q 2003 2Q 2002 Change 1H 2003 1H 2002 Change Traffic revenues 277.5 248.7 11.6% 526.7 475.0 10.9% Monthly rental 73.7 68.5 7.6% 147.2 136.2 8.1% Equipment 39.7 36.3 9.3% 73.0 71.3 2.3% Roaming 31.9 29.5 8.2% 72.7 74.9 -2.9% Interconnection 73.9 66.4 11
Slide 44: Wireless - Expense Breakdown
Wireless - Expense Breakdown (EUR million) 1H 2003 1H 2002 % Change Material expense 108.6 103.7 4.7% Employee costs 80.2 77.3* 3.8% Depreciation and amortization 158.6 133.2 19.1% Interconnection 106.1 88.4 20.0% Repairs 28.3 21.1 34.1% Services received 132.7 117.2 13.2% Other 150.1 150.1 0.0% Tot
Slide 45: Operating Revenues by Segment
Operating Revenues by Segment (EUR million) 2Q 2003 2Q 2002 % Change Wireline 528.3 541.8 -2.5% Wireless 498.5 454.7 9.6% Intersegmental eliminations & other -61.4 -61.2 -0.3% Total managed operating revenues 965.4 935.3 3.2% Wireless 0.0 -454.7 - Intersegmental eliminations & other 0.0 61.2 - Conso
Slide 46: Adjusted EBITDA by Segment
Adjusted EBITDA by Segment* (EUR million) 2Q 2003 2Q 2002 % Change Wireline 195.6 207.9 -5.9% Wireless 177.4 161.2 10.0% Intersegmental eliminations & other 0.7 -0.3 - Total managed adjusted EBITDA* 373.7 368.8 1.3% Wireless 0.0 -161.2 - Intersegmental eliminations & other 0.0 0.3 - Consolidated adj
Slide 47: Operating Income by Segment
Operating Income by Segment (EUR million) 2Q 2003 2Q 2002 % Change Wireline -16.1 -3.6 -347.2% Wireless 97.7 94.0 3.9% Intersegmental eliminations & other 0.7 -0.1 - Total managed operating income 82.3 90.3 -8.9% Wireless 0.0 -94.0 - Intersegmental eliminations & other 0.0 0.1 - Consolidated operati
Slide 48: Capital Expenditures
Capital Expenditures (EUR million) 2Q 03 2Q 02 % change Wireline 68.6 63.3 8.3% Wireless 61.1 88.6 -31.0% Telekom Austria Group 129.7 151.9 -14.6% mobilkom austria 34.4 58.8 -41.5% VIPnet 25.7 22.4 14.7% Si.mobil 0.8 7.2 -88.5% 48
Slide 49: Net Debt - Telekom Austria Group
Net Debt - Telekom Austria Group (EUR million) June 30, 03 Dec. 31, 02 Long-term debt 1,860.2 2,079.9 Short-term debt 1,280.0 1,309.9 - Cross border lease, included in short-term debt -98.2 -107.9 + Capital lease obligations 3.8 7.3 + Related parties 0.7 0.3 Cash and cash equivalents, short-term and
Slide 50: Adjustments during 2Q 03
Adjustments during 2Q 03 EBITDA excluding adjustments 2Q 2003 2Q 2002 % Change Adjusted wireline EBITDA 195.6 207.9 -5.9% Idle workforce 5.7 9.2 -38.0% Net loss of retirement of long-lived assets 6.9 0.8 762.5% Voluntary retirement provision -0.9 -24.0 96.3% Adjusted wireline EBITDA excl. certain it
Slide 51: Reconciliation from (total managed) EBITDA to consolidated cash flow
Reconciliation from (total managed) EBITDA to consolidated cash flow (EUR million) 2Q 03 2Q 02 Adj EBITDA (excluding impairment charges; total managed for 2002) 373.8 368.8 Adjusted Wireless EBITDA 2Q 2002 0.0 -161.2 Intersegmental eliminations for 2002 0.0 0.3 Consolidated adjusted EBITDA (includin
Slide 52: Reconciliation of Total Managed to U.S. GAAP Consolidated Statements of Operations
Reconciliation of Total Managed to U.S. GAAP Consolidated Statements of Operations Total managed Reconciliation June 30, 2003 and June 30, 2002 results in 2003 Total managed Elimination of the Consolidated (EUR million) equals consolidated results results of mobilkom Elimination * results results au
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