Austria

A1 Austria

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In Austria the dynamics compared to the previous year remained mostly unchanged despite the
first time launch of convergent offerings by the competition in autumn 2018. In the mobile business A1 continued to follow its multi-brand strategy and aimed for high granularity in market segmentation. In the high-value segment A1 pursued differentiation with attractive services such as Free Stream and the A1 Xplore Music app. Competition in the no-frills segment and the youth segment remained consist­ently intense in the year under review, which A1 countered by means of targeted offers. In terms of regulation, official photo identification will have to be shown when purchasing a SIM card from January 1, 2019. Existing anonymous SIM cards must be registered by September 1, 2019.

Demand for broadband products with higher speeds and TV options remained strong, especially among
existing customers. Next to the traditional fiber infrastructure, the hybrid modem as a combination of the fixed-line and mobile networks re­mains important to providing fixed-line products with higher bandwidths. Beyond that, the Austrian broadband market continued to be shaped by the ongoing high demand for
mo­bile WiFi routers with unlimited data offerings.

Additionally, results profited from the price adjustments for the fixed-line products in the previous year as well as an indexation for existing customers in the mobile business and in the fixed-line business in the year under review.

The total number of mobile subscribers increased in 2018, as the ongoing strong demand for mobile WiFi
routers in the con­tract segment and higher-value tariffs more than outweighed the decline in the prepaid segment.

In the fixed-line business, total revenue generating units (RGUs) decreased in 2018 due mainly to losses of voice RGUs. While demand for fiber upgrades remained continuously strong and TV RGUs also continued to exhibit solid growth, the number of fixed-line broadband RGUs declined slightly year-on-year. This was attributable mainly to substitution by mobile WiFi routers. Overall, this resulted in an increase in the Internet@Home business (pure fixed-line broadband, hybrid modem, and mobile WiFi router) of 3.0 %.

In the Austria segment, total revenues increased by 1.4 % year-on-year despite positive one-off effects in the previous year. These one-off effects in 2017 amounted to positive EUR 10.6 mn in fixed-line service revenues and EUR 3.6 mn in other operating income. Excluding the one-off effects in 2017, total revenues rose by
2.1 % and service reve­nues increased by 1.7 %. Fixed-line service revenues increased on the back of the price increases and indexation measures. Solid demand for higher bandwidths and TV options likewise drove the fixed-line service revenue increase while fixed-line interconnection revenues declined due to lower volumes. Solutions and connectivity revenues increased due to the completion of several large projects among other reasons. In the mobile business, the negative effects of the stepwise abolition of retail roaming in the EU were outweighed by high demand for mobile WiFi routers and higher-value tariffs as well as the above mentioned indexation measure. Equipment revenues increased due to a higher-value handset portfolio.

Costs and expenses in the Austrian segment rose by 2.6 % year-on-year. In 2018, restructuring expenses amounted to EUR 22.1 mn whereas an income in the amount of EUR 18.2 mn was posted in the comparative period. Excluding restructuring expenses, costs and expenses were stable (+0.2 %). Content and leased lines costs, both driven by more Solutions & Connectivity projects rose. Advertising costs increased due to more campaigns and the brand refreshment compared to previous year. Costs of equipment were higher than in the previous year due to higher average handset costs due to a higher-value portfolio. Inter-connection costs decreased due to lower volumes, and roaming costs declined due mainly to lower inter-operator tariffs while higher own work capitalized due to the subsidized broadband rollout had a positive effect on the costs.

EBITDA excluding one-off effects and restructuring expenses thus increased by 5.4 % (reported: –0.9 %) amid higher service revenues, a better equipment margin, and stable total costs and expenses. Depreciation and amortization decreased by 8.6 % in the period under review compared to the same period last year. This decline resulted from the end of amortization of software investments and the YESSS! customer base in 2017. All in all, operating income in Austria increased by 7.2 % year-on-year.

As there have been no M&A transactions in Austria between the beginning of the comparison period and the end of the period under review, the previous analysis is based on reported figures.