The Austrian telecommunications market continues to present the Telekom Austria Group with numerous challenges. Due to the ongoing, intense competition, it has one of the lowest price levels in Europe in terms of purchasing power with average monthly revenue per mobile customer of EUR 16.2. Regulatory requirements are another burden, especially with regard to roaming tariffs and termination rates, which have been drastically reduced by 60% between January 2013 and January 2015. In order to mitigate the continuous revenue and earnings declines caused by these factors, the Telekom Austria Group has been pursuing a ‘turnaround strategy’ since 2012.
The key element of this strategy is the focus on premium customers. These are mainly A1 contract customers1), who are offered subsidies as well as a comprehensive service when buying new handsets: At 52% of the total customer base of the Telekom Austria Group, they are responsible for 80% of the customer value2) in Austria, thus offering a significantly higher value contribution. The focus on these premium customers — as well as the concept ‘more for more’ with a more extensive performance and service offering — is intended to reverse the trend of revenue and earnings development. In addition to the consistent continuation of the convergence strategy, highest network quality standards and strict cost discipline present other important cornerstones of the strategy.
In the case of EBITDA comparable the targeted turnaround is not only within reach but has already been achieved at an operational level: The EBITDA comparable rose by 1.4% in Austria year-on-year in 2014, and adjusted for one-off effects, EBITDA comparable even increased by 9.2% year on year. The one-off effects relate to a change in revenue accounting estimates in the context of the introduction of a new fixed-line billing system interface in Austria, which had a negative impact amounting to EUR 28.2 mn in the second quarter. In addition, a verdict by the ECJ in Q4 2014 required the recognition of additional personnel provisions for civil servants of EUR 30.1 mn. These non-recurring effects may have prevented the turnaround already achieved in operational terms from making a visible impact on Group EBITDA comparable, but the Telekom Austria Group has clearly been successful in halting the declining trend.
1) Premium customers are A1 classic contract customers and Red Bull Mobile customers.
2) Customer value = average revenue per mobile user – direct costs – subsidies