Telekom Austria approves €1B rights issue

Telekom Austria shareholders approved plans to raise the operator's share capital by €1 billion ($1.34 billion), with 98.1 per cent of the votes cast in favour of the move.

The Austrian operator, which is now majority-owned by America Movil, plans to use the additional capital to reduce debt and boost funds for future acquisitions. It said up to up to 221,500,000 bearer shares would be issued.

The shareholder approval came days after the company reported a net loss of €317.8 million ($425 million) for the first half of 2014 due to an earlier €400 million impairment charge on its Bulgarian business.

Despite falling into the red in the second quarter of 2014, analysts have nonetheless been making more favourable noises about the operator's progress on its domestic market, which has endured cutthroat mobile pricing for a number of years.

Jefferies said in a research note that mobile spend per capita in Austria as a percentage of GDP "was still amongst the lowest in Europe", but indicated that the "new market structure" was starting to bear fruit.

Indeed, the reduction in the number of Austrian operators from four to three following 3 Austria's acquisition of Orange Austria certainly brought an end to some extremely low prices. At one point, for example, Orange Austria was offering 1 GB of data plus 1000 minutes and 1000 SMS for €7.50: "That's clearly a price where you cannot invest any longer," Telekom Austria spokesman Peter Schiefer said at the time.

According to Jefferies, Telekom Austria and rival operators T-Mobile Austria and 3 Austria are now in a position to "credibly re-calibrate the 'value' of mobile in the eyes of consumers and enterprises" as prices are showing more inflationary trends.

"For the 'quality' end of the market (a key focus area), TKA's tariffs are structured well to monetise data, while its superior network credentials are well entrenched (assuming an 800 MHz spectrum status quo) and underpin its high-end ambitions," Jefferies commented.

Nevertheless, while mobile is showing some positive developments, Jefferies warned of weaknesses in the fixed-line and converged segments, in which Telekom Austria plays a leading role.

"We have less optimism in fixed than mobile," the analysts said. "Austria is set for steady low single-digit growth and sustained margin expansion."

For more:
- see this Telekom Austria statement

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