Results for the First Quarter 2011 Vienna, 11 May 2011
Cautionary S tatement “ This presentation contains certain forward-looking statements. Actual results may differ materially from those proj ected or implied in such forward-looking statements. Forward-looking information involves risks g g and uncertainties that could significantly affect expected results.” Results for the First Quarter 2011 2
Agenda > Operational and Financial Highlights of the First Quarter 2011 Quarter 2011 > Key Financial Developments of the First Quarter 2011 First Quarter 2011 > S pecial Topics > Outlook FY 2011 > Appendix pp Results for the First Quarter 2011 3
Operational and Financial Highlights of the Operational and Financial Highlights of the First Quarter 2011 4
Operational and Financial Highlights of the First Quarter 2011 > Continued strong demand for fixed and mobile broadband solutions as well as g for smartphones > Groupwide mobile broadband subscriber growth of 51.1% > Fixed access line growth of 7,300 lines in Austria > Fi d li g th f 7 300 li i A t i > Mobile subscriber base increases by 5.7% to more than 20 million customers > Despite a challenging macro-economic environment and fierce competition, p g g p , continued slowdown of Group revenue decline to 0.7% to EUR 1,118.0 mn > Decline of Group EBITDA comparable by 7.1% to EUR 396.7 mn > Restructuring charges amount to a total of EUR 184.1 mn in the first quarter > Restructuring charges amount to a total of EUR 184 1 mn in the first quarter of 2011 > 11.7% reduction in CAPEX to EUR 120.4 mn due to lower investments in C Croatia and Belarus i d B l Results for the First Quarter 2011 5
6 Key Financial Developments of the f th t l First Quarter 2011 i l D Fi K
S trong Operational Performance Limits Revenue Decline (EUR million) Q1 2011 Q1 2010 % change > Growth in Belarusian and Additional Revenues 1,118.0 1,126.0 -0.7% Markets segments almost offsets EBITDA comparable* 396.7 426.8 -7.1% revenue declines in the Austrian and EBITDA comparable margin* 35.5% 37.9% Croatian segments Restructuring -184.1 -0.9 n.a. Impairment 0.0 0.0 n.a. > Increase in material expenses in EBITDA (incl. Restructuring and almost all segments driven by Impairment charges) Impairment charges) 212 7 212.7 425 9 425.9 -50.1% 50 1% smartphones EBITDA (incl. Restructuring and Impairment charges) margin 19.0% 37.8% > Termination and roaming regulation Depreciation & amortization -255.0 -259.6 -1.8% impacts EBITDA comparable with EUR p p 9.5 mn negatively Operating income -42.3 166.3 n.a. > EUR 79.2 mn net loss due to EUR 184.1 Financial result -53.5 -49.1 8.9% mn restructuring charges in Austria mn restructuring charges in Austria Income before income taxes Income before income taxes -95.8 95 8 117.2 117 2 n.a. n a Income tax expense 16.6 -26.0 n.a. Net income / Net loss -79.2 91.2 n.a. * Excluding Rest r uct ur ing and Impair ment Char ges Results for the First Quarter 2011 7
Demand for Broadband S olutions and S martphones Characterizes the Group’ s Revenue Development Austria: Belarus: > Fixed broadband demand drives access line growth, > Revenue growth driven by higher customer but cannot offset loss of fixed voice minutes base, higher usage and increased ARPU > 5.2% increase in mobile subscriber base limits price > Continued strong demand for mobile pressure and regulation driven revenue decline broadband and smartphones - 0.7% Additional Markets: > Increase of mobile subscriber base drives revenue growth in all markets 1,126.0 1 126 0 -25.6 25 6 -1.0 4.1 1,118.0 6.9 3.2 16.4 -2.0 -10.0 Bulgaria: Croatia: > Fixed line revenues of EUR 3.3 mn > Revenues decline by 10.0% y due to continued mitigate impact of price pressure and challenging macro-economic environment regulation on total revenues > Increase in post-paid subscriber by 9.3% > S trong growth of post-paid and mobile broadband costumers s f f s Belarus s s Eliminations Revenues Revenues a Austria a Bulgaria Croatia a Slovenia a Republic of Republic of a Macedonia Q1 2010 Q1 2011 Corporate, Others & Serbia 8 Results for the First Quarter 2011
Revenue Related OPEX Drive EBITDA Comparable Decline Bulgaria: Austria: Belarus: > EUR 5.9 mn increase in OPEX mainly due to y > EBITDA decline driven by lower revenues > S trong operating performance drives higher material expenses driven by > Operating expenses remain stable as increase of personnel and material smartphones as well as the consolidation of lower interconnection and employee expenses fixed line operations costs balance increase in material > Negative impact on EBITDA comparable > Higher provision for bad debt due to billing expenses of EUR 1.0 mn from foreign currency and collection delay* translation translation - 7.1% Additional Markets: > S erbia and Macedonia drive EBITDA in Additional Markets 426.8 -33.1 -2.4 1.1 396.7 9.2 -7.7 -0.6 7.2 -3.9 Croatia: > S trict focus on cost control leads to savings of EUR 5.5 mn and mitigates pressure on EBITDA comparable f f s Belarus s Eliminations Austria a Bulgaria a Croatia a Slovenia a Republic of Republic of EBITDA comp. . a Macedonia . EBITDA comp. Corporate, Others & Serbia Q1 2010 Q1 2011 E E * Based on the change of the Billing and Customer– Relationship-Management system Results for the First Quarter 2011 9
Free Cash Flow Impacted by Lower Cash Flow from Operations and Change in Working Capital (EUR million) Q1 2011 Q1 2010 % change Cash Flow from operations before working capital adj ustments 335.8 385.9 -13.0% Change in working capital -185.2 -83.8 121.1% Ordinary capital expenditures -120.4 -136.4 -11.7% 1.3 9.1 -85.7% Proceeds from sale of equipment Free cash flow Free cash flow 31.5 31 5 174 8 174.8 -82 0% 82.0% Free cash flow per share 0.07 0.40 -82.0% > Lower cash flow from operations due to lower net income > Change in working capital driven by payments of accounts payable due to higher investments at end of Q4 2010 hi h i t t t d f Q4 2010 Results for the First Quarter 2011 10
11 Special Topics
2011 Headcount Reduction Targets More than Fulfilled in Q1 2011 FTEs Addressed & Resulting Restructuring g g Charge > High acceptance of offered social plans > Transfers of civil servants to government Initial guidance as FTEs addressed Q1 2011 of Feb. 23, 2011 bodies on track Transfer to government bodies Transfer to government bodies 24 24 > Cash flow impact Q1 2011: EUR 21.5 mn for Social plans 514 old and new programs Total 538 approx. 500 > S trong acceptance and high cost efficiency approx. may lead to increase of program in 2011: Restructuring charge EUR 184.1 mn EUR 200 mn > Total headcount targeted: approx. 700 FTEs Total Expected Cash Flow Impact 2011 > Total restructuring charge up to EUR 250 mn in FY 2011 EUR 40 – 50 mn Planned program for 2011 > Cash flow impact FY 2011: EUR 100 – 110 Total 2011: mn expected for old and new programs t d f ld d EUR 100 EUR 100 – 110 mn 110 EUR 60 mn Programs started before 2011 Results for the First Quarter 2011 12
Targeted New Long Term S olution for Idle Workforce to Provide Positive Cash Flow Effect > Idle civil servants will be integrated into servicekom S ocial plans > S ervicekom will provide economic solutions Internal & Internal & & transfers external t l external t l > Reintegration of idle workforce into work to govern- leasing services ment process > Existing provisions are re-charged to One corporation to guide restructuring process One corporation to guide restructuring process employee cost if civil servant is re- activated Resulting cost saving example per civil > Revenues generated exceed additional cost servant resulting from servicekom and contribute resulting from servicekom and contribute positively to cash flow Resulting cost saving Existing cost Additional Revenues generated through for civil cost for service/ leasing servant servant servicekom servicekom Results for the First Quarter 2011 13
Telekom Austria Group Launches “ A1” as S ingle Brand in Austria Next S tep in the Integration Process p g > “ A1” single brand for fixed and mobile services in Austria + > Truly integrated and harmonized product portfolio out of one hand > S trengthens Telekom Austria Group‘ s position as only true convergent operator i in Austria A t i > Long term cost savings via more efficient marketing activities Bundle > Allows to fully integrate key functions, All f ll i k f i such as customer service & costumer A1 management > The financial impact of the launch of the > The financial impact of the launch of the Mobile M bil Fixed Fi d single brand has already been included in the Group’s financial outlook for 2011 Results for the First Quarter 2011 14
Telekom Austria Group Brand Portfolio A1 A1 Austria Bulgaria S erbia Croatia Macedonia Belarus S lovenia Liechtenstein Results for the First Quarter 2011 15
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