Telekom Austria AG

Telekom Austria Group: 2000 results

Vienna (ots) - - Revenues increased by 3.4%, growth in mobile, data and Internet offset competition-related decline in voice telephony - Rise in customers by almost 40% in mobile communications, positive contribution to profits by VIPNet - 38,500 ADSL customers resulting from a successful marketing campaign of broadband communications - 293,000 Internet customers in Austria; market share grows from 22% to 28% - Transformation and restructuring initiated. Level of personnel within target at year-end - Restructuring expenses and competitive pressure put a strain on EBITDA Summary Financial Figures of Telekom Austria Group According to US-GAAP (in mn EUR) 2000 1999 Change in % Revenues 3,905.3 3,775.9 3.4 EBITDA 1,016.5 1,477.9 -31.2 EBITDA, excl. Restructuring Expenses 1,274.9 1,563.4 -18.5 Operating Results -31.5 493.7 n.m. Operating Results, excl. Restructuring Expenses 226.9 579.2 -60.8 Net Income for the Year/ Net Loss for the Year of Telekom Austria AG with Mobilkom Austria at-equity -285.6 200.2 n.m. * According to US-GAAP, Mobilkom Austria, in which Telekom Austria holds 75%+ 1 share, is reflected in the consolidated accounts of Telekom Austria AG by means of equity consolidation. The summarised figures also take those of Mobilkom Austria into account. Telekom Austria Group AG (NYSE: TKA; VSE: TKA) announced its operating results for business year 2000 today. The summarised revenues of the Telekom Austria Group (including Mobilkom Austria) grew by 3.4% to 3.9 bn EUR. The growth divisions of mobile communications, data communications and Internet more than offset the competition-related decline in fixed-line. To adapt the company to the changed conditions, a comprehensive transformation programme was initiated, which will lead to a reduction in the number of employees in fixed line business by 5,000 by the year 2005. The restructuring measures and the decline in revenues in traditional voice telephony led to a decline in EBITDA of 1,478 million EUR to 1,016.5 mn EUR. Excluding restructuring expenses EBITDA fell by 18.5% to 1,274.9 mn EUR. The consolidated net loss for the year of Telekom Austria AG fell 200 mn EUR to minus 285.6 mn EUR, and comprises concentrated efforts to optimise the tax expenses within the Group. "As mentioned repeatedly within the framework of the IPO, the transformation of Telekom Austria Group, which has been radically embarked upon since the change in the management board, is reflected in the financial statements of 2000," said Heinz Sundt, CEO of Telekom Austria. "We are holding firm to our long-term strategy of transformation from a traditional fixed-line operator to a full-service provider on an All-IP basis. The increased costs of this are necessary to overcome the future decline in the fixed line sector as well as to implement our strategy." The Results in Detail: Highlights of Business Divisions: -- Fixed-line: competitive-related decline in revenues, 258.4 mn EUR restructuring expenses -- Mobile communications: EBITDA grows by 23.3%, market leadership in Austria and Croatia -- Data communications: EBITDA grows 36.5%. New formation as a solution provider for key customers of the Telekom Austria Group -- Other segments: In Austria Internet customer figures almost tripled, doubled in the Czech Republic The fixed-line business division comprises approximately 59% of sales revenues of Telekom Austria Group, mobile communications 33%, data communications 7%. The rest falls on other business segments, which primarily produce sales revenues from Internet business. Mobile and data communications and other segments show revenue growth by 20.7%, 10.5% and 124.8% respectively. Due to competitive pressure on traditional voice telephony, there was a 5.8% decline in fixed-line business. This development is also reflected in EBITDA, reinforced due to restructuring expenses. While a decline of 51.8% to 519.5 mn EUR was shown in fixed line business, in mobile communications it rose by 23.2% to 437.9 mn EUR due to continuing customer growth, and in data communications by 36.5% to 59.5 mn EUR. The other business segments showed a decline of 2.1 mn EUR to minus 0.6 mn EUR. The operating results of Telekom Austria Group fell from 493.7 mn EUR to - 31.5 mn EUR, excluding restructuring expenses of 579.2 mn EUR to 225.1 mn EUR. Decline of Asset Investments Within Target (in mn EUR) 2000 1999 Change in % Additions to property, plant and equipment 917.4 983.2 -6.7 The development of the property, plant and equipment took place according to Group strategy, which foresees a reduction and focus of investments on additions to property, plant and equipment. While a reduction in fixed line business succeeded -- including data communications and Internet -- by 14% to 594.3 mn EUR, there was an increase in mobile communications due to capacity by 12.4% to 323.1 mn EUR. Employee Numbers on Target The measures to lower costs that have already been initiated comprise personnel reduction, consolidation of logistic centres, renegotiating supplier contracts, selling real estate, and improving the procurement system. Personnel reduction went according to plan in the year 2000. The targeted number of personnel at year-end was in fact less by 150 employees. The final reduction of approximately 5,000 employees in fixed line business should be completed in 2005. Employees* 2000 1999 Change in % Fixed line 14,982 15,722 -4.7 Mobile communications 2,520 2,054 22.7 Data communications 956 847 12.9 Other segments 102 27 277.8 Telekom Austria Group 18,560 18,650 -0,48 * Annual average of full time equivalents Operational Highlights and Customer Development The ADSL Network covers Seventy-five per cent of Austria's households and the focus on broadband continues. The first step was successfully completed in October 2000: a powerful backbone with a transmission capacity of 320 Gigabit/s. In addition, the tariff reductions initiated in the year 2000 will be continued this year. In the year 2000 Mobilkom Austria proved its innovative leadership, among other things with the first start worldwide of GPRS, the start of Mobilkom Liechtenstein, development of the Austrian network to 98% coverage, and the start with VIPonline in Croatia. Furthermore, due to the relatively low-price of the UMTS license there are economic advantages and excellent starting chances. The concentrated Internet activities led to the establishment of Jet2Web Internet and the acquisition of Czech On Line, the largest provider in the Czech Republic. The Internet fixed-line activities of the Group are bundled in this company. The ORF holds a 2.5% participating interest in Jet2Web Internet as a strategic partner. Datakom Austria was newly positioned as a solution provider and has a stable number of customers. Through the foundation of Jet2Web Network Services GmbH in November 2000, Telekom Austria will actively market the infrastructure of the Telekom Austria Group to alternative telephone and Internet providers. In the fixed-line area, there was a rise in traffic minutes to 15.2 bn minutes due to increased online traffic, voice traffic showed a decreasing tendency. The development of the access channels shows a decline in the ordinary telephone access lines, these were compensated for by the rapid rise in ISDN offers. The absolute number of transmission channels remained almost the same at 3,833,000 in the year 2000. In 1999, this figure was 3,862,000. The ISDN channels increased by 37% from 660,000 to 904,000. Mobilkom Austria showed an overall increase in customers of almost 40%. In addition, in a European comparison the relationship between contract customers (=47%) and prepaid customers is particularly positive. With a penetration of 22% in Croatia, VIP-Net has a great potential for growth. In Austria, Mobilkom Austria will find potential for growth primarily in the area of mobile data and mobile Internet. Jet2Web Internet was able to make better use of the market growth in the Internet segment than all other competitors in Austria. The customer figure rose by 177% to 293,000. The market share increased in the same time from 22% to 28%. Czech On Line almost doubled its customer base from 95,000 to 188,000 in the past year. Transformation to a Full Service Provider with Broadband Technology The Telekom Austria Group currently provides mobile, Internet and fixed-line networks. In the middle of the year 2000, the new management team set the course technologically and organisationally for new broadband technologies on an IP basis to be used by the customers of the entire Group. The backbone with 320 Gbit/s of transmission capacity for the new broadband technologies xDSL, GPRS and UMTS was put into operation. With wide coverage of broadband the Telekom Austria Group is transforming into a full-service provider for voice, data, image and multimedia communications. To be able to communicate and market the cross-network products and services of the Group efficiently, Jet2Web, the new umbrella brand of the Group, was launched in July 2000. Involvement in Central Europe "The focal point of our strategy is to tighten up our organisation and thus to strengthen our market leadership and competitiveness in Austria, while abroad we are focusing on selective expansion in the growth regions of southern and eastern Europe in the areas of mobile communications and Internet," explains Mr. Sundt with regard to the goals of foreign involvement of the Telekom Austria Group. "Parallel to this Telekom Austria is utilising every opportunity offered by the strategic partnership with Telecom Italia, as well as the resulting synergy effects and advantages." Future Developments - Overview The Austrian telecommunications market is considered to be one of the most liberalised within the EU, with the most competitive market environment. In view of the relatively high number of fixed line and mobile operators, losses in market share are a logical development of liberalisation. The goal at Telekom Austria is to slow down losses in market shares in the traditional areas and to stabilise them on a strategic level. Additionally we aim to win market shares in new fields of business, such as Internet. This year will be decisively marked by the successful implementation of restructuring, which will lead to a clear improvement in results. The focus of this transformation is fixed-line business, where a substantial reduction in the employment figure will take place, and relative to this, to an improvement in the cost structure. These measures should more then balance out the continuing pressure from the competitors. In mobile business the potential for growth in Croatia and -- in view of the latest acquisition -- Slovenia will be brought into play. In Austria, mobile penetration will reach its climax, whereby there will be a reduction in the growth in earnings in this business segment. In data business we are assuming a further growth in revenues. The margins will be reduced due to the new positioning of Datakom Austria and the related higher inter-Group transfer prices. In 2001 for the first time Internet will be shown as an individual business segment. Parallel to being the first full business year of Jet2Web Internet's operative activity as a full Internet service provider, it will also have a substantial growth in revenues. Business Divisions -- Fixed Line Network: Transformation and Focus on Broadband Technology. Decline in Competition Through Competition and Restructuring (in mn EURO) 2000 1999 Change in % Sales Revenues 2,676.9 2,842.2 -5.8 EBITDA 519.5 1,077.1 -51.8 Operating Results -295.4 250.3 n.m. Additions to property, plant and equipment 558.5 646.5 -13.6 Employees* 14,982 15,722 -4.7 * Annual Average of Full-Time Equivalents Operative revenues in fixed-line business declined in the year 2000, compared with the previous year by 5.8% to 2.7 bn EUR. Contributing to the decline were primarily lower traffic tariffs by approximately one third (809 mn EUR). The reasons for this are in the growing competitive environment as well as in tariff cuts, above all those from 1999. Earnings from monthly rentals could be increased by 10% to 655 mn EUR. The unfavourable market development could partly be compensated for by higher interconnection earnings, which rose by 51.3% to 618.8 mn EUR. The greater increase by far resulted from the increase in the volume of transit traffic via the fixed line network of Telekom Austria in mobile and international networks. Excluding restructuring expenses in the amount of 254 mn EUR (1999: 85.5 mn EUR) the EBITDA of fixed line business was reduced by 33.5% to 773.1 mn EUR. Decisive factors for this were mainly competitive-related lower earnings. After consideration of depreciation EBIT was reduced to minus 295 mn EUR. Restructuring expenses contain primarily provisions for the early retirement program. Since 1997, 2,976 employees have accepted Telekom Austria's offer for early retirement. Regulatory measures such as carrier preselection, also locally, assured a rapid increase in competitive pressure. The market share was thus reduced by approximately 85% on the average in 1999 to 63% at year-end 2000. Overall, at year-end Telekom Austria was responsible for 3.3 million lines. While the traditional PSTN lines continued to decline, the number of ISDN channels increased by one third due to new lines or changed registrations. Access lines were reduced by 0.8% to 3.8 million. (in thousands) 2000 1999 PSTN access line 2,929.1 3,201.6 ISDN basic access line 331.9 247.0 ISDN multi access line 8.0 5.6 Total access lines 3,269.0 3,454.2 ADSL access lines 38.5 0.9 Total access channels 3,832.9 3,862.4 Telekom Austria's impressive pioneer role in broadband communications can be seen in the development of the ADSL lines. At the end of the business year 2000, just about 14 months after Telekom Austria offered ADSL services as one of the first operators in Europe, approximately 38,500 ADSL lines were installed, with a transmission rate of 512/64 kibt/s (downstream/upstream). This figure also comprises ADSL customers of other Internet service providers. In the past business year, for the first time Telekom Austria exceeded the 15 billion minute mark in national fixed-line traffic, and reached 15.2 billion minutes, after 14 billion minutes in the year 1999. This rise can be attributed exclusively to the increase in Internet traffic. Traffic in traditional voice telephony continues to decline. The reorganisation of Marketing and Sales strengthened the orientation of product development relative to the specific segments and the focus on IP based services and applications. Numerous tariff measures were initiated in the business year. Among others, the tariffs in national voice traffic were reduced by more than 50% and by up to 60% in some international zones. The prices for national leased lines were reduced by up to 54%. On November 15, Telekom Austria submitted an application to the Telekom Control Commission to introduce tariffs with seconds-based accounting from the 30th second, coupled with another considerable price reduction. Approval was granted at the end of January 2001, implementation took place on March 1, 2001. In October, Telekom Austria established a subsidiary, Jet2Web Network Services, which will make network services available to other operators in the future -- including fixed and mobile operators and Internet service providers. The reduction of the additions to property, plant and equipment in fixed line business is a central part of Telekom Austria's transformation program. This goal could clearly be achieved with a 13.6% decline to 558.8 mn EUR in the year 2000. The simultaneous focus on broadband technologies is reflected impressively in its share of the investments, which rose by 18% to 42%. The well-timed investment in broadband communications will provide Telekom Austria with a quality of uniqueness on the European telecom market and ensure new proceeds for the coming years. -- Mobile Communications: Sales Increase 21%, EBITDA +23% and Customers 38% - VIPNet with Positive Operating Results in the First Full Business Year (in mn EURO) 2000 1999 Change in % Sales Revenues 1,500.1 1,242.4 20.7 EBITDA 437.9 355.3 23.2 Operating Results 261.1 225.8 15.6 Additions to property, plant and equipment 323.1 287.4 12.4 Employees* 2,520 2,054 22.7 * Annual Average of Full-Time Equivalents The business area of mobile communications comprises the activities of Mobilkom Austria in Austria, Croatia, Liechtenstein and -- since February 2001 -- Slovenia. Telekom Austria AG holds 75% - 1 share of Mobilkom Austria, 25% +1 share is held by Telecom Italia Mobile. This business area successfully raised its sales revenues by 20.7% to 1.5 bn EUR. The successful activities of VIP-Net in Croatia played a major role in this with revenues of 148,9 mn EUR (1999: 31.7 mn EUR). Above all, continuing customer growth contributed to this positive development. Traffic revenues grew by more than one third to 721 mn EUR, those from monthly rentals by 15% to 246 mn EUR. The activities of international calls in the Telekom Austria networks in Austria and Croatia led to an increase of roaming revenues by 57% to over 113,7 mn EUR. Sales of equipment at 187.5 mn EUR remained almost at the level of the previous year. The comparatively low rise in expenses of the business segment led to an increase of EBITDA by 23.3% to 438 mn EUR. The rapid customer growth of the last few years led to a rise in depreciation by 44%, operating results increased by 15.6% to 261 mn EUR. Customer Development in mn 31.12.00 31.12.99 Change in % Contract Customers 1,336.6 1,218.4 +9.7% Prepaid Customers 1,468.7 1,041.4 +58.3% Total Customers Mobilkom Austria 2,804.3 2,259.8 +24.1% VIP-Net (Croatia) 531.4 155.1 +342.6% Total Customers Mobile Communications 3,336.7 2,414.9 +38.2% There was also successful customer growth in the business area of almost 40% to a total of over 3.3 million in Austria and Croatia over the past year. In both countries Telekom Austria is the market leader. Following the entry of a fourth network operator in the past year, Mobilkom Austria's market share in Austria at year-end was 44.8%. The share of contract customers at 47% is still at a positive level in an international comparison. In the second half of the year, even 50% more contract customers could be won than in the first half of the year. A major part of the successful development in Austria can be attributed to Mobilkom Austria's leadership in new products and services. Some examples are location-related services (MobilGuide), the development of information services via SMS and WAP, telematic solutions (i.e. remote activation of car heater) and m-commerce solutions such as Cin-e-Ticket and FlowerLine. With the world's first commercial GPRS network, Mobilkom Austria took an important step in successfully opening up the mobile data service market. The number of SMS messages rose in December 2000 to 36.6 million, as opposed to 21 million the previous year. At year-end, Mobilkom Austria listed approximately 140,000 active WAP users. The Croatian mobile subsidiary VIPNet (61% share held by Mobilkom Austria) achieved great success: In its first full year of operative business activity, VIPNet achieved positive operating results. Attractive prepaid products attuned to differing customers needs and low-priced "Friends" tariffs could satisfy the now 530,000 VIP-Net customers. Like Mobkilkom Austria, VIP-Net is also reckoning with the boom on data services: Since November, VIP-Net has offered fixed-line Internet access, which customers can combine with mobile access services. The increase in additions to property, plant and equipment by 12.4% to 323.1 mn EUR should be seen against the background of capacity-oriented network expansion. The number of base stations in Austria increased by 24% to 4,120 stations. On November 3, 2000, Mobilkom Austria successfully bid for two UMTS frequency packages in the paired and two in the unpaired area for 171.5 mn EUR. Thus, in relation to the customers in Austria, the license fee was far below the European average. In the first quarter 2001 Mobilkom AG was transformed into "Mobilkom AG und Co. KG." Therefore, taxation of the results of Mobilkom Austria will be effected with its partners as from June 30, 2000. End of February 2001, Mobilkom Austria acquired a participation in si.mobil in Slovenia. -- Data Communications: EBITDA Grows by 36.5%, New Positioning as a Solution Provider (in mn EUR) 2000 1999 Change in % Sales Revenues 309.0 279.6 10.5 EBITDA 59.5 43.6 36.5 Operating Results 22.8 16.0 42.5 Additions to property, plant and equipment 34.2 48.3 -29.2 Employees* 956 847 12.9 * Annual Average of Full-Time Equivalents The business area data communications, which comprises the activities of the wholly-owned subsidiary Datakom Austria, achieved revenues of 309 million EUR with a plus of over 10%. This growth can almost exclusively be attributed to higher earnings from company networks and to a lesser part to an increase in value-added data services. The price decline in leased lines by 20% contributed considerably to the rise in EBITDA of 36.5% to 59.5 mn EUR. At year-end 2000, Datakom Austria serviced approximately 90% of the Austrian top 100 companies. With the development of branch-oriented network, ASP enabling, e-commerce and security solutions Datakom continued to expand its product offer in the business year. Besides the development and installation of network infrastructure, active network management and security services, Datakom Austria continued to deepen its specialization last year in certain market segments such as in the health and legal areas. Datakom Austria's competency as a provider of corporate networks forms the basis for its new positioning as a solution provider and system integrator of Telekom Austria. In this role Datakom Austria offers individual solutions for key customers, which cover its entire palette of services. The additions to property, plant and equipment were reduced in the business year by 29.2% to 34.2 mn EUR. The investment emphasis was on the expansion of the Datastream network, technical equipment in the area of company networks as well as upgrading the Dataswitch service. -- Other Segments: Plus 177% Internet Customers in Austria, Restructuring of Internet Business Started (in mn EUR) 2000 1999 Change in % Sales Revenues 51.9 23.1 124.7 EBITDA -0.6 2.1 n.m. Operating Results -2.5 -2.8 10,7 Additions to property, plant and equipment 1.9 0.9 111.1 Employees* 102 27 277.8 * Annual Average of Full-Time Equivalents The area other business segments comprises -- besides international data services and other services -- earnings from Internet business, in as far as these are not contained in another business segment. On June 30, 2000, Telekom Austria AG transferred the entire Internet private customer business to Jet2Web Internet Services GmbH. Due to reasons of comparability, effects that result from this transfer were left unconsidered in the annual accounts of 2000. The business area also contains the activities of Czech On Line a.s., of which 100% was acquired by Telekom Austria in the business year 2000. The sales revenues of other business segments rose in the business year 2000 by 125% to 52 mn EUR. This rise is mainly due to the dynamic development of Internet business, which was also reflected in high personnel and marketing costs. In consequence EBITDA was reduced to minus 0.6 mn EUR following 2.1 mn EUR in 1999. The operative results amounted to minus 2.5 mn EUR (1999: minus 2.8 mn EUR). Telekom Austria is Austria's leading Internet service provider, with 293,400 private and business customers. Compared to the previous year this implies a rise of 177%. This also includes the ADSL customers of Jet2Web Internet, a figure which has risen by 900 to 34,600 compared to the previous year. In November 1999 Telekom Austria was one of Europe's first operators to offer this high speed Internet access. With 18.5 million page impressions (following 7.9 million at the end of 1999) is one of the leading Internet portals in Austria. Internet Customers of Jet2Web Internet 2000 1999 Customers via Dial-Up Access 258,800 105,200 ADSL customers 34,600 900 Total 293,400 106,100 Telekom Austria succeeded in implementing ideally the rise of Internet penetration in Austria from 34% at the end of 1999 to 44% at the end of 2000. The market share of Jet2Web Internet in Internet private customer business rose in the same time period from 22% to 28%. Following the successful products A-Online Speed Alpha via PSTN and A-Online Plus via ISDN, Jet2Web Internet brought Austria's first ADSL self-installation product, A-Online Speed SI, to the market before Christmas. For the business customer segment, individual complete Internet solutions were developed and work was started in revising the B2B portal, which is being implemented with SAP and HP. Telekom Austria and the Austrian Broadcasting Company, ORF, have concluded a cooperation contract to jointly open up the potential of broadband technology in Austria. This cooperation contract has a minimum term of four years. The focal point is the development and proliferation of ORF TV and radio programs via Jet2Web Internet. In the business year 2000 Telekom Austria acquired 100% of the leading Internet service provider in the Czech Republic, Czech On Line a.s. The company was founded in 1995 and operates its services under the brand name Video On Line. The number of Czech On Line's active users almost doubled by the end of the business year 2000 with 188,000 as opposed to 95,000 at the end of 1999. Czech On Line additionally offers free email services and as of December 31, 2000 has over 696,000 registered users. With the start of liberalisation of voice telephony on the Czech market, Czech On Line applied for a fixed line license and received it in December 2000. The necessary preparations for offering voice telephony began immediately. The additions to property, plant and equipment of the other business segments -- mainly for switching facilities - doubled in the business year 2000 to 1.9 mn EUR. During the first quarter 2001 Jet2Web Internet increased its market share to 32% through the acquisition of 70,000 customers. The ORF enlarged its cooperation through a 2.5% participation in Jet2Web Internet. ots Original Text Service: Telekom Austria Internet: Contact: Financial Community - Hans Fruhmann, IR, National: +059-059-1-20917, International: +43-59095-1-20917; Communications: Martin Bredl, CM, +059-059-1-11001, National: +059059-1-11001, International: +43-59059-1-11001,both of Telekom Austria Group Internet:

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