Outlook revised

A1 Telekom Austria Group outlook for the full year 2017

In the first nine months of 2017, A1 Telekom Austria Group managed to increase revenues and EBITDA with a focus on high-value customers and attractive fixed-line propositions. Nevertheless, most of the Group's mobile markets continued to be characterised by intense competition, partly resulting from ongoing macroeconomic headwinds, which however, continued to flatten out a bit in some segments. Also, results in the first nine months of 2017 were supported by a 5.1% appreciation of the Belarusian Rouble versus the EUR (period average), and cost efficiencies which enabled the translation of the solid service revenue growth into an EBITDA increase. Results were negatively affected by regulatory headwinds, especially from the stepwise abolition of retail roaming in the EU as of 30 April 2016 and 15 June 2017. Nevertheless, the roaming impact came in lower than previously expected, mostly due to high usage elasticity and higher-than-expected positive impacts from visitor roaming. EBITDA growth was also supported by project-driven revenue contributions in Austria as well as higher-than-usual noncash relevant items in Q2 2017.

For the remaining months of 2017, most of these business conditions are expected to remain intact. In Austria, strong competition in the mobile market is anticipated to persist. The project-driven revenue contribution in the second quarter of the year cannot be extrapolated to the rest of the financial year. In the CEE region, a mixed economic forecast is expected to lend only weak support. While competition in the mobile markets remains high, operational results in CEE increasingly reflect the successful measures taken. The negative roaming impact is expected to amount to approximately 1.5% to 2.0% of Group EBITDA for the full year 2017 (previous estimate: max. EUR 35 mn) due to lower-than-expected negative impacts in the first nine months of 2017.

On a positive note, demand for fixed-line services is expected to remain supportive across A1 Telekom Austria Group's convergent markets with additional support from acquisitions of fixed-service providers in Croatia in February 2017 and in Belarus in December 2016 and August 2017.

In this business environment, the Management of A1 Telekom Austria Group remains committed to its growth strategy by concentrating on the following focus areas: exceling in the core business, expansion of products and services as well as value-accretive mergers and acquisitions.

These activities will be coupled with ongoing efforts to continuously increase operating efficiency.
For the year 2017, the Management of A1 Telekom Austria Group is confident to more than offset the negative roaming impact given the solid operative performance in the first nine months. Management's expectation of growth in Group revenues is increased to approximately 3% (on a reported basis), partly also helped by equipment revenues.

In order to monetise the strong data growth, A1 Telekom Austria Group will further invest in the LTE rollout across its markets as well as the accelerated fibre deployment in Austria. On top of the initial guidance of EUR 725 mn, CAPEX in the first nine months included EUR 20 mn additional non-cash relevant investments which are not likely to be offset by other CAPEX decreases. Therefore, capital expenditures before spectrum investments and acquisitions are expected to come in slightly higher than previously forecasted, at approximately EUR 745 mn in 2017.

On 22 July 2016, América Móvil and Österreichische Bundes- und Industriebeteiligungen GmbH (ÖBIB) agreed on a new expected dividend level starting with the financial year 2016. This decision was based on the improved operational and financial performance of the Group. This new 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. For the financial year 2017, Management intends to propose again a dividend of EUR 0.20 per share to the Annual General Meeting in 2018.
In order to ensure its financial flexibility, A1 Telekom Austria Group remains committed to maintaining its Baa2/BBB ratings from Moody's and Standard & Poor's.

The outlook is based on constant exchange rates, with the exception of the Belarusian Rouble. Whilst the Management of A1 Telekom Austria Group acknowledges the limited predictability of the Belarusian Rouble, it expects the currency to devalue by approximately 0-5% versus the EUR (period average) in 2017.

With regards to frequencies, in the Republic of Macedonia NRA announced that tenders for 2X10MHz on 900 MHz band and 2X10MHz on 1800 MHz band will be published in 2017, but the procedure has not yet started.

Please note that this a list of expected spectrum awards procedures. Whether A1 Telekom Austria Group is planning and sees a need to participate and acquire spectrum in the abovementioned procedures, the Group is not permitted to comment on.

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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