Outlook

A1 Telekom Austria Group outlook for the full year 2018

(Based on IAS 18 reporting)

In the first half of 2018, A1 Telekom Austria Group continued to grow total revenues and EBITDA (adjusted for FX and one-off effects as well as restructuring charges) via a clear focus on high-value customers and attractive fixed-line propositions. This was achieved despite the fact that most of the Group's mobile markets continued to be characterised by intense competition and regulatory burdens. The Belarusian Rouble mostly followed the movement of the Russian Rouble and depreciated by 14.8% year-on-year (period average). Stable costs and a stable equipment margin enabled the translation of the solid revenue growth into an EBITDA increase. Results in the first half of 2018 were again negatively impacted by the stepwise abolition of retail roaming in the EU. This effect has now annualised.

In 2017, the A1 Telekom Austria Group decided to harmonise its brands throughout the Group and to roll out the 'A1' brand in a gradual manner, depending on local circumstances. This triggered the amortisation of local brand values, which had reached a total of around EUR 350 mn by the end of 2016. The respective companies will amortise the brand values until the phase-out of the old brands. As of 30 June 2018, EUR 297.4 mn have already been amoritised, thereof EUR 173.5 mn so far in 2018. The brand value amortisation negatively affects the net result.

For the full year 2018, most of the market dynamics mentioned above are expected to remain. Both in Austria and in the CEE markets, the competitive environment in mobile markets is anticipated to continue, while demand for fixed-line services is expected to remain a positive driver across most markets. In the CEE segments, operational results are expected to benefit increasingly from measures taken in the past as well as from the macroeconomic improvements, with GDP growth forecasted in all markets.

The negative roaming impact came in at the bottom end of the anticipated 1.0% to 1.5% of Group EBITDA for the full year 2018. Contrary to the supportive FX development in 2017, the operational performance in Belarus is expected to be negatively affected by a devaluation of the Belarusian Rouble.

In this business environment, the Management of A1 Telekom Austria Group remains committed to its growth strategy and is concentrating on the following focus areas: exceling in the core business, the expansion of products and services as well as value-accretive mergers and acquisitions. As in the previous year, results should gain support from ongoing efforts to continuously increase operating efficiency. For the year 2018, the Management of A1 Telekom Austria Group expects to achieve modest growth in total revenues on a reported basis.

A1 Telekom Austria Group remains committed to the LTE rollout across its markets as well as the accelerated fibre deployment in Austria. Capital expenditures before spectrum investments and acquisitions are expected to remain almost stable in 2018 (EUR 750 mn).

Whilst the Management of A1 Telekom Austria Group acknowledges the limited predictability of the Belarusian Rouble, it expects the currency to devalue by approximately 10% versus the EUR (period average) in 2018. The Belarusian Rouble devalued 14.8% in the first half of the year.

Based on the improved operational and financial performance of the Group, a new expected dividend level was agreed upon by América Móvil and Österreichische Bundes- und Industriebeteiligungen GmbH (ÖBIB) in 2016. Starting with the financial year 2016, this dividend expectation entails the payment of EUR 0.20 per share to be maintained or increased on a sustainable basis in line with the operational and financial developments of the Group.

In order to ensure its financial flexibility, A1 Telekom Austria Group remains committed to maintaining its solid investment grade rating. In June 2018, Moody's upgraded the rating for A1 Telekom Austria Group to Baa1 while Standard & Poor's confirmed the BBB rating. With regards to frequencies, in Austria the NRA announced that an auction on the 3.4-3.8 GHz band will be held in 2018.1

 

(1) Please note that this a list of potential spectrum awards procedures. The Group is not permitted to comment on whether A1 Telekom Austria Group is planning and sees a need to participate and acquire spectrum in the abovementioned procedures.

Disclaimer for forward-looking statements:

This document contains forward-looking statements. These forward-looking statements are usually accompanied by words such as “believe”, “intend”, “anticipate”, “plan”, “expect” and similar expressions. Actual events may differ materially from those anticipated in these forward-looking statements as a result of a number of factors. Forward-looking statements involve inherent risks and uncertainties. A number of important factors could cause actual results or outcomes to differ materially from those expressed in any forward-looking statement. Neither Telekom Austria nor any other person accepts any liability for any such forward-looking statements. Telekom Austria will not update these forward-looking statements, whether due to changed factual circumstances, changes in assumptions or expectations. This report does not constitute a recommendation or invitation to purchase or sell securities of Telekom Austria.

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