Telekom Austria rounded off a busy week with a set of results that produced approving nods from analysts and showed continued signs of improvement on Austria's highly competitive mobile market.
Hannes Ametsreiter, Telekom Austria CEO
"Telekom Austria has delivered exactly what was needed after a few days of aggressive share price declines (albeit for valid reasons): strong revenue and EBITDA beats to consensus; reiterated guidance; and multiple points of validation around mobile market repair in domestic mobile," said Jefferies analysts in a research note.
Telekom Austria, which is now almost 60 per cent owned by Mexico's América Móvil, also confirmed that it would carry out its planned €1 billion ($1.26 billion) capital raising exercise in 2014, subject to no significant further deterioration in market conditions. Details on the timing will be provided in due course.
Despite the positive progress made in the third quarter, when EBITDA grew by 14.2 per cent in Austria due to massive cost savings, the news was not all good: "We are still facing considerable difficulties on certain markets and the general economic trend is not growth-supportive either," stressed Hannes Ametsreiter, CEO of Telekom Austria Group and A1.
Nonetheless, Ametsreiter said the third-quarter results indicated that the company's strategy was starting to pay off.
"After a turbulent first half-year…the third quarter ushered in an upward trend, with the partially strong performance of our subsidiaries in the CEE area and massive cost savings in Austria also showing positive effects," he commented.
In the third quarter, group revenue increased by 1.2 per cent year-on-year to €1.04 billion, reversing a downward trend in the first two quarters of the year. While group revenue declined by 7.3 per cent in the first half of 2014, this downward trend was reduced to 4.5 per cent in the first nine months of the year, with total revenues amounting to €2.98 billion.
Comparable group EBITDA in the third quarter increased by 15.8 per cent to €414.6 million, although on a "clean basis"--that is, excluding currency exchange fluctuations and one-off items--comparable group EBITDA growth was 7.2 per cent in the quarter. The quarterly net profit was €127.8 million, but the net result for the first nine months of 2014 was negatively impacted by an impairment charge of €400 million for Bulgaria in the first half of 2014, and a negative economic environment, resulting in a net loss of €190 million.
While conditions improved in some of the company's markets, Bulgaria, Croatia and the Republic of Macedonia continued to be adversely affected by macroeconomic effects, fierce competition and regulation.
Nevertheless, Telekom Austria still plans to add another Macedonian operator to its portfolio after it bought fixed-line provider blizoo Macedonia in June 2014: the company reached agreement with Telekom Slovenije to merge the two mobile operators Vip Operator and One in order to create a new entity on the Macedonian market. Telekom Austria Group will hold 55 per cent and have sole control of the new entity, whereas Telekom Slovenije will hold 45 per cent.
For the full year, the company maintained its outlook at around 3.5 per cent decline in revenues, capex from €650 million to €700 million, and a proposed dividend of €0.05 per share.
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