A1 Telekom Austria Group

Belarus

A1 Belarus

Velcom Dualbrand

Economic activity in Belarus slowed down in 2019, with GDP expected to have grown by 1.5 % (IMF estimate; 2018: 3.0 %). The Belarusian ruble appreciated against the euro by 2.8 % in the year under review (period average). The government continued to pursue policies to stabilize inflation that came in at 4.7 % in December 2019.

In April 2019, the launch of the “A1” brand started with the temporary incorporation into the “A1 Velcom” brand. The transition to the single brand “A1” was subsequently completed successfully in August 2019.

In March 2019, A1 entered into an agreement with beCloud regarding LTE capacity and officially launched its LTE services in Minsk and other relevant cities, allowing the company to remain competitive despite lacking its own LTE license. The agreement was further amended in December 2019 and now allows A1 Belarus the exclusive use of network capacity enabling nationwide LTE coverage.

The mobile market remained highly competitive in 2019, with telecom operators focusing more on retaining and upselling existing customers. A1 Belarus concluded its redesign of service plans in the second quarter of 2019, especially with the improvement of youth and business propositions. The redesigned mobile portfolio includes more data-centric propositions and optional data add-ons for voice-only prepaid propositions. It aims to attract prepaid customers to contract offers. Additionally, A1 started with a voluntary migration of some grandfathered service plans to current tariffs plans with higher monthly fees.

The subscriber base increased slightly year-on-year following the redesign of the service plan portfolio and Christmas promotion campaign. The number of fixed-line RGUs declined in 2019, due mainly to line losses in low-value cable TV and low-bandwidth broadband.

As of July 2019, an inflation-linked price increase for mobile customers of 4.3 % was implemented while fixed-line tariffs for existing customers were increased by 6.0 % in June 2019.

Total revenues increased by 9.0 %, driven by strong growth in service revenues. Excluding FX effects and minor positive one-off effects in the reporting and in the comparison period, total revenues rose by 6.9 %. Mobile service revenues increased, following charging of unlimited data options since February 2019, structural portfolio improvement as well as the abovementioned price increase, which also led to a higher ARPU. Fixed-line service revenues grew on the back of retail fixed-line price increases as well as higher solutions and connectivity revenues.

Total costs and expenses rose primarily as a result of the higher cost of services which was driven mainly by higher interconnection and network engineering costs. The former increased due to more traffic to competitors’ networks after the launch of unlimited voice tariffs. Administrative expenses rose due to selected wage increases and higher bad debt expenses, whereas the increase in roaming expenses came as a result of higher traffic on the beCloud’s network.

Increased service revenues more than offset higher costs and expenses, which led to EBITDA growth of 7.4 %. Excluding FX effects and minor one-offs, EBITDA grew by 6.4 %. Lower brand amortization expenses of EUR 23.0 mn in the year under review (2018: 31.3 mn) were outweighed by higher amortization for technical equipment and licenses, which led overall to higher depreciation and amortization expenses. Nevertheless, operating income increased by 11.4 %.