Segment Bulgaria

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Key financials (in EUR million)

2014

2013

Change
in %

*

The methodology for counting mobile and fixed-line subscribers has been changed with effect from the fourth quarter of 2013.
The figures for the previous quarters of 2013 were adjusted retrospectively.

**

The methodology for counting mobile broadband customers has been changed to exclusively include data-only tariffs with effect from the first quarter of 2013.

Revenues

371.3

399.4

−7.1

EBITDA comparable

143.1

158.6

−9.8

EBITDA comparable margin

38.5%

39.7%

EBITDA incl. effects from restructuring and impairment tests

−197.5

99.2

n.m.

Operating income

−284.9

4.6

n.m.

Capital expenditure

102.9

60.2

71.0

 

 

 

 

Mobile communication*

 

 

 

ARPU (in EUR)

6.1

6.3

−4.2

Mobile communication subscribers (in ̒000)

4,221.0

4,181.5

0.9

Share of contract customers

78.7%

78.7%

Market share

37.6%

39.0%

Mobile broadband subscribers (in ̒000)**

248.9

192.9

29.0

Penetration

152.7%

144.8%

 

 

 

 

Fixed line

 

 

 

ARPL (in EUR)

14.4

13.5

6.9

Total access lines (in ̒000)

153.6

159.9

−3.9

of which fixed broadband lines

145.1

155.0

−6.4

 

 

 

 

Employees (full-time equivalents as of 31 Dec)

2,527

2,647

−4,6

The market environment in Bulgaria was dominated by the weak economy and the uncertain political situation in 2014, with the associated negative impact on demand and the purchasing power of customers. The worsening of long-term macroeconomic expectations, which were the result of structural impediments and negatively affected economic development, resulted in a downgrade of Bulgaria’s long-term sovereign credit rating by S&P to BBB- in June 2014 and to BB+ in December 2014. Furthermore, business performance was adversely affected by the intense competitive environment and harsh regulatory effects. Operationally, Mobiltel counteracted these challenges by focusing on value creation through up- and cross-selling, convergent product bundles and the retention of premium customers. Management also aimed to mitigate revenue pressure on profitability by way of strict cost management.

Despite massive price pressure, Mobiltel succeeded in slightly increasing its mobile customer base in the year under review, largely on the back of growth in the no-frills and business segments. Mobiltel’s market share, however, declined further from 39.0% to 37.6%. The ongoing increase in the use of data led to a further increase in mobile broadband customers by 29.0% to over 248,900. Moreover, the year-on-year number of smartphone customers using voice and data packages nearly doubled due to successful upselling. The number of fixed-line customers declined by 3.9% to around 153,600, largely as a result of the loss of business broadband customers. The number of broadband customers fell by 6.4% year-on-year. After the launch of a DTH offering the TV business saw substantial growth in its customer base of 8.2%.

Revenues in the year under review were impacted by negative effects in the form of a further reduction in prices and termination rates, declining by 7.1% year-on-year to EUR 371.3 mn despite positive momentum from the growing importance of mobile data traffic. Monthly fee and traffic revenues fell considerably as a result of price pressure in the retail and business segments. Higher fixed service revenues could not compensate for the weak trend in the mobile business. In addition, the reduction in termination rates with effect from 1 July 2013 and 1 January 2014 and roaming charges with effect from 1 July 2013 and 1 July 2014 had a negative impact on interconnection and roaming revenues.

The developments described above were reflected in a reduction in average monthly revenue per mobile user (ARPU) to EUR 6.1 (2013: EUR 6.3). By contrast, average monthly revenue per access line (ARPL) increased to EUR 14.4 (2013: EUR 13.5) as a result of the higher ARPL for business customers. Fixed service revenues also rose by 1.4% to EUR 26.6 mn.

To counteract the difficult operating environment, Mobiltel’s management team continued to focus on effective cost management in the year under review. Increased material expenses from the sale of higher-quality equipment due to increased subsidies for customer retention, among other things, were balanced by the reduction in expenses for fines and penalties. Interconnection and roaming expenses also declined as a result of the aforementioned regulatory effects. Employee costs were also reduced by means of restructuring, the optimisation of FTEs and outsourcing. As a result total operating expenses fell by 4.4% to EUR 241.7 mn.

The improved cost base helped to partly mitigate the negative impact of lower revenues on EBITDA comparable, which fell by 9.8% to EUR 143.1 mn in the year under review.

Depreciation and amortisation decreased by 7.7% year-on-year in 2014 as a result of lower monthly amortisation for mobile network infrastructure as well as for the prolonged GSM licence. In addition, a change in the weighted average cost of capital (WACC) of the Bulgarian segment and changed macroeconomic expectations for Bulgaria in the medium term as well as the resulting revised outlook for the development of the Bulgarian subsidiary led to an impairment charge. All in all, the impairment resulted in negative operating income of EUR 284.9 mn in the year under review compared with a positive figure of EUR 4.6 mn in 2013.

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