TelecomFinance met with Telekom Austria CFO Hans Tschuden, who was on the London leg of a road show, to discuss the company’s annual results and strategy for the year ahead.
One highlight of the announcement was the fact that Telekom Austria was one of…
TelecomFinance met with Telekom Austria CFO Hans Tschuden, who was on the London leg of a road show, to discuss the company’s annual results and strategy for the year ahead.
One highlight of the announcement was the fact that Telekom Austria was one of two European telcos to stop domestic fixed-line losses – added a net 1,400 new fixed-line connections, to finish the year with 2.315 million – thanks both to its convergent offerings and heavy data usage. According to CEO Hannes Ametsreiter, the turnaround was achieved without cannibalizing the company’s mobile base.
Total revenue fell by 3.1% from E4.8bn in 2009 to E4.65bn in 2010 due to competition-driven price reductions and the effects of regulation.
Excluding restructuring and impairment charges, group EBITDA was down 9% from E1.8bn in 2009 to E1.645bn in 2010. Net income nearly doubled from E94.9m in 2009 to E195.2m. Despite an increase in capex, net debt was reduced by E310m to E3.3bn.
During the 2011 financial year, TA management expects revenues to reach some E4.6bn and EBITDA to be about E1.6bn.
TelecomFinance: In its full-year results, Telekom Austria highlighted its integration of fixed-line and mobile into a single entity. What does this mean for the company?
Hans Tschuden: The process has been quick on the organisational side, which is good for employees since it reduces uncertainty. The technical side will take longer – probably another two years – because we are not only combining two platforms but creating a new one.
TF: What does this mean for staff? Is Telekom Austria still unable to make job cuts due to employees’ civil service status?
HT: There are likely to be less employees but this is more to do with the market and less integration driven. Civil servants still represent 60-70% of the company, so their jobs cannot be cut. However, we are able to make payments to them to encourage them to seek voluntary redundancy or early retirement, and some are choosing to move into other public sectors such as the government or police force.
TF: Why did you decide to merge the two entities?
HT: Austria was one of the few European countries that hadn’t already integrated, so we had to catch up. Secondly, our customers wanted a one-stop shop. And thirdly, there are benefits on the revenue side – the combination allows us to make the most of our customer databases and achieve cost savings.
TF: Europe is seeing a renewed interest in fixed-line as the demand for data skyrockets. Telekom Austria’s Bulgarian business Mobitel last year bought the fibre optic operators SpectrumNet and Megalan. Do you expect the company to make further acquisitions in the fixed-line space?
HT: Yes, the need for fixed-line is due entirely to the demand for data, rather than voice. We bought those two businesses in order to be able to offer bundled products, and expect this to occur in other markets, which we will examine on a case-by-case basis. We could add fixed-line via acquisitions, as we did in Bulgaria, or through cooperation agreements with altnets.
TF: It’s been said that Telekom Austria, advised by BoA Merrill Lynch and Raiffeisen, will be the de facto winner of the expected sale of a 51% stake in Telekom Srbija. Is this the case? What do you think of the E1.4bn valuation?
HT: I hadn’t heard that! We are evaluating the opportunity, and examining what the benefits would be for Telekom Austria.
TF: Would you have been interested in Ukrtelecom, had operators with state ownership not been banned from the process?
HT: No, Telekom Austria is not present in the Ukraine, and it was fixed-line only.
TF: What about the PTK privatisation process in Kosovo, which has been valued at some E300-350m?
HT: That process is not active right now since the government is not yet in place.
TF: Were you not tempted to look at Polkomtel?
HT: No, we were not, because we are not in Poland?
TF: What is your current M&A strategy?
HT: We are concentrating on the countries where we are already present. The focus is on in-country consolidation and convergence – geographic expansion is not a priority.
TF: Will you be going to the debt markets this year?
HT: We have no refinancing requirements for this year. We have three bonds outstanding. The next one matures in 2013, so we could go to the capital markets in 2012.
TF: What is Telekom Austria’s current leverage?
HT: With a leverage corridor of 2.0x net debt/EBITDA comparable, we are within the planned bandwidth. With this reduction, we were able to strengthen our competitiveness, while improving our financial flexibility.
TF: Why do you think we have been seeing so much bond activity among European incumbents?
HT: The markets reopened at the beginning of last year, and the telcos have strong cash flows so can get good terms from the banks. They have also been looking to take advantage of low interest rates while they last.
