Telekom Austria Reports Q1

VIENNA --

Table 1: Telekom Austria Group�s Key Financial Figures Q1 2011

In the first quarter of 2011, the Telekom Austria Group was able to further slow down the decline in revenues of the previous year; Group revenues decreased by 0.7% to EUR 1,118 million. While Belarus and the segment “Additional Markets” reported revenue growth, the Austrian and the Croatian segments showed a decrease in revenues, with the Bulgarian business remaining almost stable. Against the backdrop of a persistently challenging economic environment which is and will continue to be characterized by intensive competition and regulatory pressure, demand for broadband offerings and smartphones continued to pick-up.

As a result, the total number of mobile broadband customers at the group level rose by 51.1% to 1.23 million. In Austria, fixed net access lines continued to show a favorable development in the first quarter of 2011, continuing the upward trend seen in Q4 2010. In the period under review, fixed access lines increased by 7,300 lines compared to a loss of 3,200 access lines in the first quarter of the previous year despite declining fixed net voice minutes. Thus, this increase in lines is mainly attributable to stronger usage of broadband offerings.

“User revenues remained almost stable in the first quarter of 2011 thanks to the strong demand for fixed net and mobile broadband products – thus, our group-wide strategic orientation towards convergence and our high investments in broadband infrastructure paid off. Recently A1 Telekom Austria was granted for its mobile broadband network, which ranks second Europe-wide among a total of 94 European network operators. This further demonstrates that we are on the right track,” said Hannes Ametsreiter, CEO Telekom Austria Group, underpinning the company’s clear strategic success.

EBITDA comparable declined by 7.1% to EUR 396.7 million due to regulatory measures, higher operating costs (mainly related to the marketing activities and subsidies for smartphones) as well as to revenue declines in Austria, Bulgaria and Croatia. The favorable earnings development in Belarus and in the segment “Additional Markets” – especially in the Republic of Serbia - could only partly compensate for margin pressure.

As announced in February 2011, a new social plan was presented by A1 Telekom Austria following successful negotiations with personnel representatives. This was immediately accepted by some 514 employees, the majority of whom have civil servant status. The high acceptance of social plans will reduce personnel-related costs over the long term but has resulted in one-off special effects for the period under review. All personnel costs related to the acceptance of this new social plan, which will also be incurred in the years to come, would have to be recorded at the time of the acceptance of the social plan and consequently resulted in one-off restructuring expenses of EUR 184.1 million in the period under review leading to an operating loss for the first quarter of 2011.

Telekom Austria AG (NYSE: TKA; Vienna: TKA)