Outlook 2015


The past financial year saw the implementation of a number of important strategic measures for the future development of the Telekom Austria Group. The support provided by the new majority shareholder América Móvil and the additional flexibility following the successful conclusion of the capital increase in November 2014 serve to strengthen the management’s confidence in reinforcing the stabilisation that was initiated in the past financial year and returning to growth.

Challenges such as macroeconomic headwind, regulatory intervention and severe price pressure are expected to remain in place in all markets for the time being. In 2014, however, the increasingly positive impact of the strategic measures initiated by the management in response to these challenges has been confirmed.

In order to further support these developments an extensive transformation programme has been initiated. A range of measures relating to market activities, costs and technology is intended to generate growth in revenues as well as in EBITDA comparable. This will be accompanied by an increase in free cash flow.

Particularly, in the Group’s home market Austria, the expansion of LTE coverage and its fibre network will allow the growing monetisation of demand for data, and hence the more intensive marketing of new products and services. However, the introduction of new services from mobile virtual network operators (MVNOs) entails additional risks in Austria.

The return to growth will depend to a large extent on the recovery of the strained economic situation in the CEE region. Operationally, the Telekom Austria Group will pursue continued growth in the mobile-only markets of Belarus, Slovenia and the Republic of Serbia and the successful continuation of its convergence strategy in Bulgaria, Croatia and the Republic of Macedonia. Regulatory cuts will have a negative impact also in the coming year. Furthermore, management expects the Belarusian Rouble to decline against the Euro (approximately 20% for 2015). As the devaluation which took place in early 2015 fully reflected the assumptions for the full year 2015, a potential further decline of the Belarusian Rouble presents an additional risk factor.

In order to continue to grow margins, management targets extensive cost-cutting activities in 2015, with the aim of achieving total gross savings of around EUR 90 mn. In order to achieve this, planned activities include measures to further optimise market-related costs as well as structural efficiency improvements in areas such as procurement and technology in particular. Restructuring costs for civil servants in Austria are expected to amount to approximately EUR 40 mn.

Following the completion of the capital increase, the Telekom Austria Group is planning to invest approximately EUR 400 mn in the accelerated expansion of the fibre network between 2015 and 2018, in addition to its regular CAPEX investments. The investment volume is expected to increase throughout the ramp-up phase in 2015 and 2016, with the majority of investment taking place in 2017 and 2018. This plan is subject to the announced government broadband subsidy programme as well as annual budget approvals by the Supervisory Board. Accordingly, the accelerated expansion of the fibre network in Austria will lead to a higher level of investment despite further CAPEX efficiency improvements.

Frequency purchases are expected for Bulgaria, Slovenia and the Republic of Serbia in 2015. Frequencies in the 1800 MHz spectrum are expected to be sold in Bulgaria, while the sale of the 700, 1400, 1800, 2100, 2300, 3500 and 3700 MHz bands is scheduled in Slovenia. In the Republic of Serbia the sale of the 1800 MHz band is planned for mid-March 2015; sales of the 800 and 900 MHz band (digital dividend frequencies) are also expected in 2015.

The Telekom Austria Group is committed to maintaining its ratings of Baa2 (stable outlook) with Moody’s and BBB (stable outlook) with Standard & Poor’s in line with its conservative financial profile, in order to secure the Group’s financial flexibility. The Telekom Austria Group still intends to pay a dividend of EUR 0.05 per share for each of the 2014 and 2015 financial years.

Vienna, 22 January 2015

The Management Board

Hannes Ametsreiter, Chairman of the Management Board (signature)

Hannes Ametsreiter
Chairman of the Management Board
Telekom Austria Group

Siegfried Mayrhofer, Chief Financial Officer (signature)

Siegfried Mayrhofer
Chief Financial Officer
Telekom Austria Group

Günther Ottendorfer, Chief Technology Officer (signature)

Günther Ottendorfer
Chief Technology Officer
Telekom Austria Group