Global Insight Perspective | |
Significance | Telekom Austria posts 3.3% revenue rise in 2007, boosted by overseas operations. However, network roll-out costs forced earnings before interest, tax, depreciation and amortisation (EBITDA) and profits down. |
Implications | Faced with continued competition in its domestic environment, Telekom Austria will likely continue to push for further acquisitions across Eastern and Central Europe. |
Outlook | Given the growth potential of some of its international operations, Telekom Austria will continue to rely on them for revenue growth. |
Austria's leading telecoms group, Telekom Austria, has posted a 3.3% year-on-year (y/y) rise in 2007 revenue, although the company's push into Eastern Europe forced profits down 12.3%. Full-year revenues rose to 4.92 billion euro (US$7.41 billion) in 2007, from 4.76 billion euro in 2006, boosted by the contribution of new acquisition, Mobile Digital Communications, in Belarus. Stiff competition in its domestic market led to a 3% fall in full-year earnings before interest, tax, depreciation and amortisation (EBITDA) to 1.85 billion euro, from 1.91 billion euro a year ago. Telekom Austria said EBITDA growth in its international mobile operations helped it to offset the cost associated with the launch of operations in Serbia and the Former Yugoslav Republic (FYR) of Macedonia. But the investment in Belarus also pushed the company closer into debt, with Telekom Austria finishing 2007 with 4.41 billion euro in the red. Fourth-quarter 2007 revenue and EBITDA were up 7.4% and 4.1%, respectively.
Outlook and Implications
Tough Domestic Market Lingers: As with all Western European telcos, Telekom Austria faces a tough competitive terrain in its domestic Austrian market. Fixed-line customer numbers continued to decline, falling to 2.4 million at the end of the year from 2.6 million a year ago; the company plans to cut up to 1,000 jobs in the division. However, despite the presence of some of the industry's leading mobile players (Deutsche Telekom's T-Mobile, France Telecom's One and Hutchison Whampoa's 3 Austria) the company has done well, growing its mobile subscriber base by 9% in 2007 and boosting its market share by 1.6 percentage points to just over 40%. Attempts by the company to buy Tele2's Austrian MVNO have also hit the rocks as the Austrian Federal Competition Authority, the BWB, ruled the takeover could affect competition in the market (see Austria: 17 January 2008: Telekom Austria Mobile Subscriber Base Up 45% in 2007, 11 January 2008: Tele2’s Sale of Austrian Unit Hits the Rocks and 26 November 2007: Telekom Austria to Cut 1,000 Jobs).
Expansion Brings Hope: Faced with continued competition at home, Telekom Austria is pushing to expand into faster growing markets outside Western Europe in line with its peers. In 2007, the company won the battle to buy Belarusian mobile operator MDC and has since outlined plans to add 3G to the operator's portfolio. Telekom Austria also offers mobile services in Bulgaria, Slovenia, Croatia, FYR Macedonia, Serbia and Liechtenstein and is seeking to buy an operator in Bosnia-Herzegovina. The company has also signalled its intention to seek further acquisitions in South-East Europe, focusing mainly on companies with over 20% local market share (see Europe: 29 November 2007: Telekom Austria Eyes Acquisitions in Eastern, South-Eastern Europe, Belarus: 21 November 2007: Telekom Austria Eyes 3G Entry for Belarusian Unit MDC, Belarus: 3 October 2007: Telekom Austria Beats Russian Rival in US$1-bil. Race for Belarus's MDC and FYR Macedonia: 20 September 2007: Telekom Austria Launches Mobile Services in FYR Macedonia).