For A1 Telekom Austria AG, 2014 was again dominated by the turnaround strategy and its focus on the premium customer segment, with the aim of counteracting the continued headwinds of competition and regulation. Following the fundamental changes to the tariff structure for new customers in the previous year, A1 Telekom Austria AG was able to generate important momentum for a sustainable improvement in profitability in the year under review by implementing tariff adjustments for existing customers and significantly reducing handset subsidies for new and existing customers. The tariff adjustments led to increased churn and negative net additions in the second quarter of 2014; however, these trends normalised in the third quarter of 2014. The Austrian mobile communications market was again characterised by intense competition in 2014, which intensified towards the end of the year with the entry or the announcement of the entry of additional mobile virtual network operators (MVNOs). Further reductions in roaming charges in July 2013 and July 2014 and mobile termination rates in November 2013 resulted in further pressure on revenues, which the company attempted to mitigate with extensive cost-cutting measures.
Convergent product packages remained a central element of the operational strategy in 2014, so as to counteract the ongoing substitution of fixed-line voice telephony with mobile communications. In its fixed-line business, the company also focused increasingly on the development of broadband capacities and services in the year under review, with the aim of meeting the rising demand for data volume. Management team has allocated EUR 400.0 mn of the funds generated from the successful capital increase in November 2014 to the expansion of the fibre network in Austria between 2015 and 2018. This plan is subject to the announced government subsidy programme as well as annual budget approvals by the Supervisory Board.
In the year under review, A1 Telekom Austria AG saw a 5.1% decline in the number of mobile communication customers to approximately 5.4 million, with the significant reduction in churn failing to offset lower gross additions as a result of less market rotation compared with the previous year. Accordingly, A1 Telekom Austria AG’s market share fell by 1.5 percentage points to 41.1%. The number of fixed access lines rose slightly by 3,200 lines year-on-year. Broadband and A1 TV enjoyed considerable year-on-year growth of 5.7% and 6.9% to 1,469.1 million and 251,800 customers respectively. The growth in broadband was driven by the increasing demand for 16 and 30 Mbps products. In contrast to the positive developments in broadband and TV, fixed-line voice minutes continued to fall by 12.8% (2013: –10.5%) resulting from the above-mentioned substitution of fixed-line telephony with mobile communications.
On the revenue side, the operational measures described above were not sufficient to offset the negative effects of competition and regulation in the year under review, with the result that the Austrian segment reported a drop in revenues of 7.0% to EUR 2,472.0 mn for 2014. Revenues in Austria included negative extraordinary net effects from the second quarter of 2014 in the amount of EUR 28.2 mn, primarily as a result of changes in revenue accounting estimates relating to the introduction of a new fixed-line billing system interface. This adversely impacted monthly fee and traffic revenues by EUR 39.4 mn and data and ICT solutions by EUR 7.8 mn. Among other things, the reversal of provisions and deferrals had a positive effect on wholesale revenues (incl. roaming) of EUR 17.0 mn and on other revenues of EUR 2.0 mn. Adjusted for these effects, revenues declined by 6.0% year-on-year.