Operating expenses and results Austria

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in EUR million

2014

2013

Change
in %

Material expenses

237.2

343.6

−30.9

Employee costs

704.2

683.7

3.0

Other operating expenses

861.7

973.5

11.5

Restructuring charges

89.6

45.2

98.2

Depreciation and amortisation

508.6

516.1

1.4

The reduction in material expenses and termination rates had a positive impact on operating expenses, which fell by 9.9% to around EUR 1,803.1 mn in the year under review. Material expenses fell by 30.9% to EUR 237.2 mn, largely as a result of the reduction in subsidies and reduced gross additions. Lower prices also meant that interconnection expenses declined sharply by 25.0% to EUR 180.0 mn. Further cost savings were generated in marketing and sales, maintenance, consulting, service and energy. By contrast, employee costs rose by 3.0% to EUR 704.2 mn. This was due to a one-off effect of EUR 30.1 mn as a result of a provision for potential subsequent payments to civil servants. This provision was the result of a European Court of Justice decision from 11 November 2014, which ruled that the legal framework for the years of service and consequently the term to promotion for Austrian civil servants was not in line with Union law.

Despite lower revenues, the reduction in operating expenses resulted in an increase in EBITDA comparable by 1.4% to EUR 755.4 mn in the year under review. All in all, regulatory effects had a negative impact of EUR 19.5 mn on EBITDA comparable. Adjusted for the extraordinary effects in fixed-line and employee costs, EBITDA comparable increased by 9.2%. The EBITDA comparable margin also increased from 28.0% in the previous year to 30.6% in 2014.

Restructuring expenses of EUR 89.6 mn were recognised in the Austrian segment in the 2014 reporting year (2013: EUR 45.2 mn). These include social plans for employees whose employment contracts are being terminated in a socially responsible manner, and future expenses for civil servants who no longer provide services to the Telekom Austria Group, but whose employment contracts cannot be terminated due to their civil servant status. The cost savings from the fewer employees accepting social plans were insufficient to offset the negative effects of an interest rate adjustment affecting the valuation of the restructuring provision in the amount of EUR 42.6 mn as well as a provision for payments to civil servants in the amount of EUR 15.0 mn. As a result, EBITDA including the effects of restructuring and impairment testing declined by 4.9% to EUR 665.8 mn.

Depreciation and amortisation declined by 1.4% to EUR 508.6 mn, with lower depreciation for fixed-line infrastructure more than offsetting the increase in amortisation for the mobile spectrum acquired in October 2013. As a result of the developments described above, the operating income of the Austrian segment amounted to EUR 157.2 mn, 14.6% below the figure for the previous year.

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