Telekom Austria pushes ahead on LTE and convergence, as effect of Bulgaria writedown lingers

Telekom Austria unveiled new advancements within its portfolio of companies this week with the launch of LTE services in Macedonia and the creation of a converged player in Liechtenstein, although the Austrian operator is clearly not yet out of the woods over a recent whopping €400 million ($544 million) writedown in Bulgaria.

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Günther Ottendorfer, Telekom Austria CTO

In Macedonia, where Telekom Austria recently agreed to acquire cable operator blizoo to further its convergence strategy, mobile unit Vip operator launched what the company described as the largest 4G/LTE network on the market, with 40 per cent population coverage in seven cities.

"The introduction of 4G/LTE services marks another important milestone in the company's race for innovation and superior customer experience. At the same, it helps us further improve our competitiveness in the market," said Nikola Ljushev, CEO of Vip operator.

For the time being, Vip operator's LTE network will be available only to postpaid customers and only for mobile data: voice traffic will be automatically transferred to the 3G/2G networks.

The move also means that Telekom Austria has now launched LTE in four markets: as well as Macedonia, these include Austria, Slovenia and Croatia.

"The rollout of 4G/LTE technology marks an important step for the further development of our markets, enabling our customers to access the latest technologies and meet all of their multimedia requirements," said Günther Ottendorfer, CTO of Telekom Austria Group.

Convergence is also an important pillar of the operator's growth strategy, as marked by the plan to buy blizoo. The momentum continued this week when Telekom Austria said its unit mobilkom Liechtenstein is merging with Telecom Liechtenstein "to create a comprehensive provider of fixed line, mobile communications services, Internet and TV in Liechtenstein" that will offer bundled products from one single source.

Telekom Austria will in future hold a 24.9 per cent stake of the new Telecom Liechtenstein, while the Principality of Liechtenstein will hold a 75.1 per cent share. The new company will have total annual revenue of €41 million, around 49,000 customers and 91 employees. The new CEO of the company will be Mathias Maierhofer.

Yet despite these positive developments, the fallout continues following a surprise €400 million ($544 million) writedown that Telekom Austria was recently forced to make on its Bulgarian Mobiltel unit.

At the time the impairment charge was announced, Telekom Austria CEO Hannes Ametsreiter said he had so far received no negative comments from shareholder América Móvil that would suggest it was on the verge of abandoning its Austrian investment.

However, the new chairman of state-owned ÖIAG, which has just agreed a pact to pool its shareholding with that of América Móvil, has reportedly commented that Telekom Austria "needs to explain" the writedown, which puts the company in "an extremely precarious situation".

In an interview with Austria's News Magazin, Siegfried Wolf said: "Neither the capital market nor a shareholder likes this kind of bad surprise. This kind of thing cannot be allowed to happen again."

The impairment charge is almost certain to push Telekom Austria to a 2014 loss.

For more:
- see this News Magazin article (in German, sub. req.)
- see this release on Vip operator
- see this release on Telecom Liechtenstein

Related Articles:
América Móvil's offer for Telekom Austria shares becomes mandatory
Telekom Austria CEO 'unhappy' about €400M Bulgaria writedown; sees no Slim exit
Telekom Austria CTO hails convergence milestone with Macedonia buy
Connectivity a key asset for telecoms operators, says analyst
Report: Telekom Austria on brink of 'expansion wave'

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