Telekom Austria reports Q1 slump as consolidation fails to halt price war

Telekom Austria said its earnings fell by 7.1 per cent in the first quarter due to price pressure in its key markets of Austria, Bulgaria and Croatia, and said mobile services competition in the Austrian market will remain fierce despite the recent market consolidation.

According to Reuters, the incumbent operator is still maintaining its sales forecast for the year at around €4.1 billion ($5.4 billion), down from €4.3 billion last year. Quarterly sales were flat at around €1.05 billion, and EBITDA was €337 million.

In the first quarter, the operator was hit by lower prices and cuts in mobile termination and roaming rates, as well as a migration by customers to "all in" tariffs, according to Bloomberg. The price pressure looks set to continue, even despite the fact that fewer operators will now be fighting for customers in a country with a population of just 8.4 million. Telekom Austria, which operates under the main A1 brand in Austria, relaunched its mobile tariffs in April, lowering inclusive data volumes and offering unlimited voice and texts along with value-added services such as cloud storage and security software.

Austria now has three mobile operators following Hutchison Whampoa's acquisition of Orange Austria from France Telecom, but Telekom Austria said it expects pressure on prices to intensify due to competition.

It's not yet clear how the Orange Austria and 3 Austria will be managed in future. Even after the merger, 3 Austria will still be the smallest of the three operators with around 23.3 per cent of the compared, compared with  Telekom Austria's 45.5 per cent and T-Mobile Austria's 31.2 per cent.

Meanwhile the fallout from the merger is still not over. T-Mobile Austria has filed a complaint against the allocation of spectrum frequencies following the merger, and an administrative court in Vienna has now referred the case to the European Court of Justice, according to Reuters.

T-Mobile Austria said it believes it suffered a decisive competitive disadvantage by the spectrum allocation, because the frequencies it will get will not be adjacent. Austria is also scheduled to hold its auction of spectrum for LTE networks in September, and any spectrum squabbles would need to be ironed out by then.

Despite the recent market consolidation and continuing price war, the auction could usher in a fourth operator again. It has been rumoured that Tele2 is interested in bidding for spectrum.

For more:
- see this Reuters article
- see this Bloomberg article
- see this separate Reuters article

Related articles:
Telekom Austria gambles by lifting mobile data pricing, drops flat-rate
Report: Tele2 eyes LTE spectrum as Austria preps auction
Mallinson: Spectrum auctions need to generate investment, not just government revenue
Telekom Austria shies away from giving 2013 profit forecast
Hutchison's €1.3B Orange Austria bid faces T-Mobile challenge
Hutchison set to get green light for Orange Austria buy