Telekom Austria outlook hit by fixed-line migration (Austria)Operator still eyeing Bosnian mobile market in 2008, but insists there are ‘no concrete plans’ for expansion.
The biggest threat to Telekom Austria’s financial performance is fixed-line migration in its home market, which is impacting the growth it is enjoying at its Eastern European mobile subsidiaries, said the operator’s CEO Boris Nemsic Thursday.
Reporting its 2007 financial results yesterday, the operator said fierce competition in the Austrian mobile sector had led to declines in prices and accelerated fixed-mobile substitution.
“It’s a very simple calculation. If we lose 200,000 fixed-line connections, that’s 200,000 multiplied by the fee multiplied by 12 months,” Nemsic.
“These declines, plus the interest on its acquisition costs for Belarus-based MDC, mean that Telekom Austria said it expects a 12% decline in net income for 2008, with modest revenue and EBITDA increases of 5% and 3% respectively, helped by growth in its international operations.
Still, Nemsic said he was encouraged by the financial performance of the company over the course of 2007, given the number of subsidiaries and greenfield deployments it has undertaken.
“2007 was the biggest year of expansion in the history of the company… We’ve raised our customer base by over 50%, doubled the number of addressable markets to eight, and increased the number of addressable consumers to 44 million,” he said.
According to the telco’s full-year results, it now has a total of 15.4 million subscribers across its entire base of operations.
In 2007 Telekom Austria began operating mobile services in Serbia and Macedonia, and in Belarus following its October acquisition of local operator MDC, all of which Nemsic said have performed in line with expectations.
“After six months of operations in Serbia we had over 500,000 subscribers, we launched a post-pay tariff and began selling BlackBerrys… With MDC we managed to consolidate the company in one quarter,” he added.
However, in a report from Dow Jones Newswires, Citigroup Wednesday warned that Telekom Austria’s dependency on emerging markets leaves it more exposed to investor changes in risk appetite than most peers.
“I don’t see it as a risk I see it as an opportunity,” said Nemsic Thursday.
“We have higher operating margins in emerging markets than we do in Austria where the competition is more fierce,” he commented.
Still, for 2008 Telekom Austria has no solid plans to expand into other countries, but at the same time Nemsic reiterated he is keeping a close watch on the Bosnian mobile market.
“We’re not excluding anything but it needs to be a profit and a growth opportunity for us to consider it,” he said.
In November the company’s CFO Hans Tschuden said Telekom Austria was closely monitoring the proposed privatisation of one of Bosnia’s three mobile operators BH Telekom.
“Two of Bosnia’s three mobile operators have been almost wholly privatised, the third one, BH Telekom, is starting to be privatised and we are watching that closely,” said Nemsic on Thursday.
“It’s a difficult one because Bosnia has a complex decision-making process, so we’re watching to see how it pans out,” he said.
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