Telekom Austria posts earnings decline in “challenging” conditions

Telekom Austria has blamed a fall in earnings for the three months ending June on a mixture of competition, challenging economic conditions and unfavorable regulation.

The Austrian telecoms incumbent saw earnings before interest, tax, depreciation and amortization (EBITDA) fall by 9.5%, compared with the same period of 2012, to €330.3 million ($439 million), while revenues slipped by 1.9%, to €1.04 billion.

Thanks to a fall in depreciation and amortization charges, plus lower interest payments, the operator was able to report a 54.2% rise in net income, to €52.5 million.

Telekom Austria has blamed a fall in earnings for the three months ending June on a mixture of competition, challenging economic conditions and unfavorable regulation.

The Austrian telecoms incumbent saw earnings before interest, tax, depreciation and amortization (EBITDA) fall by 9.5%, compared with the same period of 2012, to €330.3 million ($439 million), while revenues slipped by 1.9%, to €1.04 billion.

Thanks to a fall in depreciation and amortization charges, plus lower interest payments, the operator was able to report a 54.2% rise in net income, to €52.5 million.

It also held firm to full-year revenue guidance, reiterating a target of generating €4.1bn in sales, but slightly reduced its capital expenditure forecast to between €650 million and €700 million, from a previous estimate of €700 million.

Telekom Austria (Vienna) is being hurt in particular by fierce competition and adverse regulation in both its domestic market and Bulgaria, where economic difficulties are also partly to blame.

The operator says it is responding by focusing on the sale of products that combine fixed-line, mobile-phone and internet services, and by chasing higher-value consumers.

It is also in the midst of a savings program aimed at reducing costs by some €100 million this year, and said it had already managed to save €75 million over the first six months of the year.

As noted in its earnings report, Telekom Austria has seen its share price sink by more than 15% since the start of the year, with investors concerned about Austria’s upcoming spectrum auction and the possibility that a new entrant will acquire frequencies.

On the plus side, the operator has made progress on reducing its net debt, which fell from €3.25 billion at the end of December to €2.84 billion at the end of June – just twice the company’s EBITDA over a 12-month period.

During the operator’s earnings call with analysts, chief executive Hannes Ametsreiter was quizzed about the likelihood of an America Movil (Mexico City, Mexico) bid for remaining shares in Telekom Austria.

The Latin American telecoms giant, owned by Mexican billionaire Carlos Slim, bought a 23% stake in Telekom Austria last year, as well as 30% of Dutch incumbent KPN, and last week unveiled plans to acquire a majority stake in KPN (The Hague, Netherlands), fuelling speculation about its intentions in Austria.

Ametsreiter refused to comment on the speculation.