Telekom Austria Group Annual General Meeting 2007 Vienna, May 30, 2007 1
Agenda Item 1: Report of the Management Board for the Financial Year 2006 2
Financial Year 2006: Successful Expansion Yields Fruits � Revenue growth from international subsidiaries � Profitability remains on a high level � Increase in net profit allows for higher dividends � Mobile Communication customer base rises to over 10 million � Broadband market share in Fixed Net expanded to 51.2 % 3
Expansion: Serbia and Macedonia Further Expand Footprint in Southeast Europe Czech Rpublic Slovakia Austria PL Hungary Slovenia Rom ania Croatia Bosnia Serbia Montenegro Bulgaria Kosovo Macedonia Albania Greece 4
Results 2006: Growth of Key Financials (in EUR million) EBI TDA Revenues + 9 .0 % + 8 .4 % 4,759.6 4,365.2 1,906.8 1,758.5 FY2005 FY 2006 FY 2005 FY 2006 Net Profit Earnings per Share in EUR + 3 7 .4 % + 4 1 .7 % 561.8 1.19 408.9 0.84 FY 2005 FY 2006 FY 2005 FY 2006 5
Market 2006: Challenging Environment due to Competition � Intensive competition in all markets impacts business development � Mobile communication is the main competitor of fixed line � Austrian communication market characterised by high concentration of providers � International mobile communication markets allow for growth 6
7 Fixed Net
Fixed Net: Broadband Provides the Basis for Change � Fixed line business is undergoing transformation � Decline in voice telephony – substitution by mobile communication � Only 1/ 3 of all voice minutes in Austria are fixed line � Real broadband registers strong growth � Broadband and wholesale business compensate for decline in voice revenues 8
Voice Telephony: Increase in Market Share While Total Market Declines Market Share in Minutes (Telekom Austria estimates) � Telecommunication 5 6 .9 % market grows by 12.3% 2 4 .9 % � Fixed line market 1 1 .7 % 4 .2 % 2 .3 % declines by 18.7% 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 � Focus on customer Telekom Aust ria Tele 2 / UTA ETEL UPC Others retention Total Market in Minutes (in million) � Telekom Austria 5 ,9 9 8 increases market share 3 ,7 5 5 to 56.9% 2 ,2 4 3 2001 2002 2003 2004 2005 2006 Total Market Fixed Net Mobile Comm. 9
Broadband Market: Market Share Increased to 51% Broadband Market Share � Market share grows to 4 2 .2 % 3 5 .5 % 51.2 % 1 3 .3 % 9 .0 % � Real broadband with 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 4Q 05 1Q 06 2Q 06 3Q 06 4Q 06 high-value product Telekom Austria retail Telekom Austria wholesale portfolio Unbundled lines Cable � ADSL lines increase by I ncrease in ADSL lines 21% (in 000) + 2 1 % 694 � Broadband penetration 574 increases from 35.0% to 40.5% FY 2005 FY 2006 10
Service Leadership: Active Contribution to Customer Retention Perform ance Enhancem ent Faster and cheaper processes through Service Sells! TKD autom ation and Spezialisten 2 0 0 6 : Custom er Service resource optim isation Service safeguards revenues Service Beratung 2 0 0 7 : stronger focus on sales activities Custom er Retention via Custom er Satisfaction � “Best-in-Class”: custom er satisfaction enhances retention 7 4 % of our custom ers recom m ends us � 11
Safeguarding Access Lines: Fixed Net More Attractive through Innovative Products Subsidized Term inals New Business Areas Differentiation Voice Broadband Telephony Market aonAlarm aonDigital TV Services Bonus Packages EDV – Telephony Applications Custom er Retention Product Launch Loyality Bonus Broadband Aon Speed for Business 12
aonDigital TV: The Better Cable TV � aonDigital TV currently offers 44 standard channels and 10 premium channels � Information about horoscope, weather and news on demand � Video on demand � Thanks to set top box no satellite receiver or digital box are required � Basis package at € 19.90 per month � Premium package at € 7.90 per month 13
Results 2006: Stable Revenues and Increase in Operating Income (in EUR million) � Broadband and wholesale Revenues -0 .2 % business compensate for 2,123.9 2,119.5 decline in voice revenues � Reduction of asset base FY 2005 FY 2006 � Significant increase in Operating I ncom e operating income through + 3 6 .3 % - 92.8 lower amortisation and 68.1 depreciation charges FY 2005 FY 2006 14
Fixed Net Revenues: Innovative Products Counteract Decline in Voice Telephony Grow th in new business areas (in EUR million) 2,124 - 69 2,120 32 27 5 Internet Access and Media Voice Telephony FY 2005 FY 2006 Wholesale, Voice Telephony, Other Data and IT Solutions 15
16 Mobile Communication
Mobile Communication: Profitable Growth through Expansion � Austrian market is characterised by strong competition and regulatory intervention � Mobile data business delivers attractive growth potential � Expansion to East and Southeast Europe is a growth driver � Financial discipline and value-oriented expansion continued in 2006 17
mobilkom austria: Strong Subscriber Growth and Rising Revenues Custom er Net Adds (in 000) 238.3 + 1 0 1 % � Strong customer net 118.6 adds � Gap to the main competitor expanded FY 2005 FY 2006 Data Share � Mobile broadband (in % of traffic-related revenues) delivers growth + 4 % points 21.8% 17.4% � Increase in the data share of traffic-related revenues FY 2006 FY 2005 18
Data Products: 140,000 Data Cards and USB Modems Sold in Austria Mobile Data Cards � Mobile data business counteracts declining voice + 1 8 0 % prices 140,000 50,000 � Mobile data business creates new revenue sources and stimulate customer growth Up to Dec. 2005 Up to Dec. 2006 � 3G services introduced in all big markets � HSDPA 7.2 data turbo available in Austria, Croatia and Bulgaria 19
“No-Frills Brand”: mobilkom austria Successfully Positions “bob” � Growing discount segment in Austria � Successful positioning of the no-frills brand “bob” � “bob” two-brand strategy enables growth and protects the established A1 brand � “bob” successfully contributes to customer growth 20
International Markets: Good Positioning in Southeast Europe Custom er Num bers � Clear brand positioning in all (in 000) 2 0 0 6 countries 3 ,6 3 0 .5 � Strong customer growth 4 ,2 6 7 .9 despite high penetration rates 1 ,9 1 2 .3 � Good development of 4 2 0 .9 international subsidiaries 4 .8 � Data services show growth potential Total 1 0 ,2 3 6 .4 21
International Markets: Expansion in East and Southeast Europe Pillar of our Strategy � Expansion in countries Czech Rpublic 2 0 0 0 with lower penetration Slovakia creates growth potential Austria PL Hungary � Foundation for Slovenia Rom ania Croatia expansion in Serbia & Bosnia Serbia Macedonia laid down 2 0 0 1 Montenegro Bulgaria Kosovo 1 9 9 8 � Withdrawal from Mobi63 Macedonia Albania auction safeguards Greece 2 0 0 6 2 0 0 5 value creation 2 0 0 7 22
Results 2006: Significant Increase in Results in Mobile Communication Revenues (EUR million) + 1 6 .8 % � Increase in total customer 2,902.6 2,484.8 base by 14.2 % to roughly 10.2 million customers � Revenue growth driven by FY 2005 FY 2006 international subsidiaries Operating I ncom e (EUR million) � Increase in operating + 2 3 .2 % 677.1 income by 23.2 % 549.8 FY 2005 FY 2006 23
24 Financials
Results 2006: Growth Trend Continued Revenues EBI TDA 2006 : EUR 4 ,7 5 9 .6 m illion 2006: EUR 1 ,9 0 6 .8 m illion (2005 : EUR 4,365.2 million + 9.0 % ) (2005: EUR 1,758.5 million + 8.4 % ) Earnings per Share Net Profit 2006 : EUR 5 6 1 .8 m illion 2006 : EUR 1 .1 9 (2005 : EUR 408.9 million + 37.4 % ) (2005 : EUR 0.84 + 41.7 % ) 25
Profit & Loss: Sustained High Profitability % FY 0 6 FY 0 5 (in EUR million) + 9% 4,365.2 4,759.6 Revenues 1,758.5 + 8% Adjusted EBITDA 1,906.8 + 25% 772.4 619.7 Operating income -106.5 + 8% Financial result -114.5 Income taxes -96.1 -104.3 -8% Net profit 561.8 408.9 + 37% 26
Balance Sheet: Reduction of Asset Base % % FY 0 6 FY 0 5 (in EUR million) 85% 86% 6,399.5 6,600.2 Assets Current assets 1,160.2 15% 1,096.5 14% Total assets 100% 7,696.7 100% 7,559.7 Current liabilities 1,657.3 1,855.5 22% 24% Long-term 3,078.9 41% 2,922.5 38% liabilities Stockholders‘ 2,823.5 2,918.7 37% 38% equity Liabilities and 100% 100% 7,696.7 stockholders‘equity 7,559.7 Net debt 3,169.0 3,113.7 27
Investments: Increase due to Steady Growth in Mobile Communication % FY 0 6 FY 0 5 (in EUR million) Norm al I nvestm ents -10% 283.9 314.1 Fixed Net + 25% 313.5 Mobile Communication 393.1 Total Normal Investments 627.6 + 8% 677.0 Grow th I nvestm ents n.a. 0.0 0.0 Fixed Net 320.0 Mobile Communications 1,620.2 -80% Total Growth Investments 320.0 1,620.2 -80% Total Investments 997.0 2,247.8 -56% 28
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