A1 Telekom Austria Group

Austria

A1 Austria

Logo A1

In Austria, all mobile network operators are now able to offer convergent products. Following their rebranding in May 2019, Magenta is marketing new mobile tariffs, including 5G-ready unlimited data propositions in the premium voice segment, as well as convergent offers and fixed-line promotions. At the end of September 2019, Drei launched technology-agnostic internet tariffs for mobile Wi-Fi routers, hybrid modems as well as fixed-line accesses, with a shift to higher speeds. In the premium segment, unlimited data volumes and higher speeds dominated propositions as part of newly launched 5G-ready tariffs and as the Christmas promotion for smartphones and mobile Wi-Fi routers. A1 continued to follow its multi-brand strategy and aimed for high granularity in market segmentation. A1 offered its first premium 5G-ready tariff with increased speed for mobile Wi-Fi routers and held promotions during the summer and the Christmas holiday with unlimited mobile tariffs. In the low value and youth segments, competition remained intense in the year under review, also fostered by the entrance of a new MVNO player and promotional activities, which A1 countered by means of targeted offers. Following regulation requirements for SIM card registration imposed by authorities in 2019, A1 Austria managed to register a vast majority of its active prepaid SIM cards.

In the retail fixed-line business, all operators focused on retaining and upselling customers as acquiring new customers had become increasingly challenging. In October 2019, A1 started with a new fixed-line broadband promotion in order to attract new customers and to reduce churn. The promotion offered various benefits to new customers, as well as to existing customers who extend their contracts and upgrade to higher bandwidth products. The promotion campaign was successful and resulted in significantly better net-adds.

The Internet@home market, representing fixed-line broadband, hybrid modems, and mobile Wi-Fi routers, continued to grow steadily in 2019 as well, showing particularly strong demand for mobile WiFi routers. The rising demand for higher bandwidth products and TV options contributed to upselling of these services within the existing customer base.

The total number of mobile contract subscribers saw an increase in 2019, driven by strong demand for mobile Wi-Fi routers and, to a lesser extent, an increase in the high value customer base. The decline in the prepaid segment was caused by the abovementioned SIM card registration regulation. The total number of fixed-lined revenue generating units (RGUs) declined in the year under review as losses in voice and low bandwidth broadband subscribers could not be outweighed by the rising demand for higher bandwidth products and TV
options.

Results were also supported by price adjustments. In February 2019, prices for new customers in the high-value mobile and the youth segment were increased by 2 Euro and 1 Euro, respectively. The activation fee and the annual service fee were also raised. As of April 1, 2019, an indexation of 2.0 % has been effective for existing customers in both the mobile high-value (including mobile Wi-Fi routers) and parts of the fixed-line business. In November 2019, prices for existing fixed-line voice customers were increased.

Total revenues increased slightly by 0.4 % year-on-year including a positive one-off effect of EUR 8.2 mn in other operating income resulting from a real estate sale. Excluding the positive one-off effect, total revenues remained flat, as higher service revenues outweighed the decline in equipment revenues. The latter declined due to lower quantities and slightly higher subsidies per handset. Fixed-line service revenues grew at 1.5 % on the back of higher solutions and connectivity revenues due to strong demand for ICT solutions as well as complementary connectivity, which outweighed lower retail fixed-line service revenues. The latter decreased by 1.9 % as losses in voice and a decline in the number of low bandwidth broadband subscribers could not be offset by the rising demand for higher bandwidth products and TV options as well as the abovementioned indexation measure. ARPL increased further by 2.4 % due to successful up-selling activities and price indexation.

Mobile business saw a slight service revenue increase of 0.3 % year-on-year, driven by strong demand for mobile Wi-Fi routers and increased revenues from the high-value segment, which also benefitted from the price increase and indexation measures mentioned above. The EU international call regulation, which has been in place since May 15, 2019, negatively impacted the mobile segment. Visitor and national roaming revenues were higher due to higher data volumes, while interconnection revenues experienced a decline due to lower volume and pricing for SMS. ARPU rose since increases due to mobile Wi-Fi routers and high-value customers more than outweighed revenue losses due to the abovementioned EU regulation.

Costs and expenses in the Austria segment increased by 3.9 % year-on-year, driven by higher restructuring costs of EUR 84.1 mn in 2019 compared to EUR 22.1 mn in 2018. Excluding restructuring costs, total costs and expenses remained flat since higher cost of equipment due to less marketing support and more ICT customer projects, as well as higher cost of services, were offset by lower workforce costs. Cost of services came in higher due to increased costs for ICT projects, while higher structural costs for IT process automation allowed an FTE reduction and led to lower workforce costs.

EBITDA excluding restructuring charges and one-off effects remained flat (reported: –5.5 %) as higher service revenues and cost savings were able to offset the lower equipment margin. The latter decreased due to higher subsidies and lower ICT equipment margins as well as less marketing support from handset sellers in the year under review. Depreciation and amortization expenses increased by 1.0 % in the period under review compared to the same period last year. As a result, total operating income decreased by 12.4 % year-on-year.