Segment Croatia

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Key financials (in EUR million)

2014

2013

Change
in %

*

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

Revenues

378.2

389.2

−2.8

EBITDA comparable

84.3

117.6

−28.3

EBITDA comparable margin

22.3%

30.2%

EBITDA incl. effects from restructuring and impairment tests

84.3

117.6

−28.3

Operating income

15.9

51.8

−69.4

Capital expenditure

70.0

82.4

−15.1

 

 

 

 

Mobile communication

 

 

 

ARPU (in EUR)

11.1

11.6

−4.3

Mobile communication subscribers (in ̒000)

1,741.0

1,843.8

−5.6

Share of contract customers

46.8%

45.1%

Market share

36.0%

37.3%

Mobile broadband subscribers (in ̒000)*

144.2

168.8

−14.6

Penetration

112.6%

115.1%

 

 

 

 

Fixed line

 

 

 

ARPL (in EUR)

21.4

22.7

−5.8

Total access lines (in ̒000)

219.9

193.1

13.9

of which fixed broadband lines

136.0

109.2

24.5

 

 

 

 

Employees (full-time equivalents as of 31 Dec)

1,151

1,138

1,1

In Croatia the performance of the mobile business was again negatively affected by the difficult economic environment and intense competition in 2014. Earnings were impacted by regulatory intervention after Croatia’s accession to the EU in July 2013, while the increase in frequency usage fees in July 2014 resulted in additional pressure. Subsequent tariff adjustments by all operators led to increased churn, which Vipnet counteracted in the third quarter of 2014 with higher subsidies. In contrast to the mobile segment, the fixed-line business continued to enjoy positive development, partially offsetting the decline in the mobile business once again in the year under review.

The total number of mobile communications customers declined by 5.6% to approximately 1.7 mn in the year under review. This was due to the reduction in the number of customers with multiple prepaid cards as a result of their migration to contract tariffs, as well as customer migration following tariff adjustments by all operators in June 2014. The proportion of contract customers increased to 46.8% over the course of the year (2013: 45.1%). Market share declined from 37.3% to 36.0% as a result of intense competition and the cleaning of the prepaid customer base for inactive customers. The number of fixed access lines rose by 13.9% to 219,900. The fixed broadband connections included in the total number of access lines climbed by 24.5% to around 136,000 in the year under review as a result of organic growth as well as acquisitions in 2013. The number of TV customers also increased by 6.8% to around 167,700.

Vipnet’s revenues declined by 2.8% to EUR 378.2 mn in the year under review, including a negative foreign exchange rate effect of EUR 2.8 mn. The most significant negative factor by far was regulation, which served to reduce interconnection and roaming revenues by a total of EUR 18.9 mn. Monthly fee and traffic revenues also declined. This was attributable to lower variable mobile revenues due to the smaller number of prepaid customers and year-on-year price reductions, which could not be compensated by the increased revenues from mobile fixed fees and fixed-line services. Increased revenues from the sale of equipment, which were the result of the focus on contract customers, helped to partially offset some of the aforementioned losses.

The reduction in average monthly revenue per mobile user (ARPU) to EUR 11.1 (2013: EUR 11.6) was due to regulatory effects and price pressure in contract and prepaid business, with business ARPU coming under particular competitive pressure. Average monthly revenue per fixed access line (ARPL) also declined to EUR 21.4 (2013: EUR 22.7) as a result of developments in the business segment, as the customers acquired in 2013 generated lower average revenue per fixed access line than the rest of Vipnet’s customer base. However, the reported growth in the number of fixed access lines led to a total increase in fixed service revenues of 8.9%.

Operating expenses rose by 8.7% to EUR 301.4 mn in the year under review. This was primarily due to the increase in frequency usage fees together with higher expenses for bad debt and outsourcing. In addition, material expenses increased as a result of higher demand for high-value equipment after the introduction of instalment sales, while the intensification of marketing activities in the year under review led to a higher level of marketing and sales expenses. These effects were only partially offset by lower interconnection expenses due to the reduction in termination rates.

Vipnet’s EBITDA comparable declined by 28.3% to EUR 84.3 mn in the year under review as a result of the negative revenue and cost developments. The margin also fell from 30.2% in the previous year to 22.3% in the year under review. Together with a slight increase in depreciation and amortisation, this resulted in operating income of EUR 15.9 mn, down 69.4% year-on-year.

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