Telekom Austria Ag

Thank you very much. Good morning, everybody. Thanks for joining our Q1 results call. I'm here on the line with our management board. I'm here with our CEO, Alejandro Plata, our Deputy CEO, Thomas Arnoldner, and our CFO, Sonja Weiler. And as usual, they will lead you through the presentation now, and we are happy to take your questions afterwards. Thank you.

Thank you very much, everyone, to join our call. I would like to start giving you the highlights for the Q1 2024. As you can see in the slides, our total revenues grew 0.7%, driven primarily by service revenue, which grew 3.1%. And we also saw a decline of equipment revenues of close to 10% in all markets. When you see the quality of the service revenue growth was basically driven by mobile revenues and solution and connectivities, and as always, negatively impacted by two business that we have been seeing a decline. One is the fixed voice, where we lose revenues every quarter, primarily in Austria, and also by the interconnections revenue, which also is declining business every quarter. In euros, our EBITDA went up 4.2% versus last quarter, 2023. In constant currency, EBITDA grew 5.7%. EBITDA is driven primarily by service revenue growth and compensated negatively by OPEX increases. When you look at our OPEX increases are primarily a consequence of total workforce cost increases due to Salary increases, usually we have a timing issue between when the salaries are increased and when we index our base. Usually we index our base one quarter later than when we start increasing salaries on our employees. In Q1, we acquired Spectrum in Austria. the 26 gigahertz spectrum and some remaining parts of the 3.5 gigahertz spectrum. We would like to confirm our outlook of 3% to 4% revenue growth with an approximate capex of 800 million euro, excluding M&A and spectrum acquisitions. So that's the highlights for the Q1 of this year. If I move to the next slide, you can see Our customer-related information, where we see increases in both, fixed RGUs, especially broadband RGUs, growing 1.8%, out of which advanced RGUs, which we call any customer connected with more than 75 megabits, grew by 15.7%, as we have been sharing in the calls. We continue with our strategy to upsell our base with more speeds, and that has been working quite successfully. Also, our mobile subscriber base grew, this time 5.5%. Bear in mind that without machine-to-machine, our customer base decreased slightly. Both RPL and ARPU grew in cost and currency. close 2% the fixed business and close to 3% the mobile business. If I move to the next slide, you can see our group revenues. As I said before, service revenues up 3%, 3.1 equipment revenues close to 10% down in all markets. You can see it basically a similar trend where customers are choosing more SIM-only tariffs instead of hardware tariffs. We see that across the whole footprint and also negative development in other operating income. In the chart below on your left, you can see that all business lines, as I mentioned before, are growing. Mobile, our Qs or fixed wireless substitution business is growing. Broadband and TV, all our B2B businesses are also growing. And you have two reds that I mentioned in the highlights. One is the fixed voice where we see the decline in Austria. both in customers and in minutes of use and also interconnection which had a big impact in this quarter. This is regulated and unregulated transit business. If I move to the next slide, you can see a little bit more color on the segment Austria. Service revenues grew 1.7% in Austria, 2.6% if we remove this transit business that is reported in Austria. Service revenue growth would have been 2.6%. They are part of a transit business that is not related actually to the Austrian business that is reported in Austria. We will give you more transparency moving forward on that so you can see how much of these revenues are not related to Austria, but reported in Austria. Like we do transit minutes between, I don't know, Germany and Turkey, for example. So we will give you more transparency so you can see how much the actual Austrian business is growing. We have acquired in the quarter another IT, ICT company called NTT Austria. We see a great opportunity to cross an upsell that customer base. This acquisition was announced a couple of weeks ago. We are planning and we are in the middle of the execution of our indexation policy for Austria, what we call this value protecting measurements. So we're planning to increase our prices by 7.8% as actually at the beginning of this month. So all customers affected has been informed already, and we are in the process of sending the first invoices with the new prices. with a 7.8% increase. This is not affecting the whole base, just a part of the customer base. We are working in trying to optimize certain market segments where we are not yet happy with our performance. These are more sub-segments of the market. For example, I think we have a good opportunity to increase the penetration in our fixed network when we have more than 300 megabits available in the network. I mean, we still have a low utilization of that network. So we are putting a lot of focus to increase the penetration on that segment. And of course, a lot of focus on efficiencies and OPEX due to primarily a higher workforce. We need to keep on optimizing our workforce. EBITDA in Austria in the quarter grew close to 2%, 1.8%. Keep in mind, as I said on the highlights, that we have usually salary increases start at the beginning of the year, where indexation starts in April. So we have one quarter where we have higher costs with lower revenues. If I move to the next slide, in our international segment, the performance remains very solid in all markets. You see very good performance in Croatia, for example, with 7% revenue growth and 22% EBITDA growth. We will index again the base this year. So we are quite happy with the performance in primarily all the CEE markets. Challenging market is Slovenia, where it is the most competitive market where we operate. You can see that our revenues and EBITDA has been declining in Q1, driven primarily by competition, where we have to keep aggressive pricing in the market in order to keep our base stable. Having said that, I would like to hand over now to Sonia, who is going to drive us a little bit more in details and give us more color on the performance on Q1. Thank you, Sonia.

Thank you, Alejandro. As Alejandro elaborated a little bit more on the GP and DL, above the ABT, I will focus on the P&L below EBITDA, where we see the major effects on tower spin-off compared to last year. One of the biggest effects that we see is the increase of depreciation and amortization that's affected by the rights of use of assets increased due to the spin-off last year in September. Therefore, the EBITDA, the EBIT is lower compared to the previous year. by 17 million, resulting in 178 million for the first quarter. On a pro forma basis, that's important, we increased the depreciation and amortization by 8 million, mainly driven by the effects in Bulgaria in the depreciation and amortization. Coming to the financial results, we show a negative effect of 26 million this quarter compared to 21 million last year's quarter. That affects two major effects we show here. One is the higher interest expense due to the leases also related to the Star spin-off. And secondly, a positive effect due to our lower financial debt, we show lower interest rate expenses, interest expenses. Another effect that's positively impacting the net income is the lower taxes due to a lower taxable income that we show on the first quarter. Therefore, we show on a reported basis a reduction of the net income, the net result of 117 million, whereas on a performer basis, we would show a higher net result due to the effects of the tower that increases by nearly 11% on the quarter-on-quarter comparison. Going to the next page on the cash flow, We show for the first quarter a lower Q1 cash flow at the amount of €52 million. There are primarily two major effects. One effect is directly related to a higher payment of leases due to the tower spin-off. And the second effect, coming from the working capital, there are two major effects. one resulting from an unfavorable time shift in the accounts receivable, as the Good Friday is a banking holiday and therefore an increase in receivables. And last year we received Fiverr subsidies in Q1, that we did not receive this year, but we are building the fiber rollout and therefore showing a negative impact on the free cash flow that is at a level of 52 million in comparison to last year quarter in 93 million euro. And therefore, thank you, and I will hand over to Thomas for the focus points.

Thank you, Sonja. We have chosen three focus points this time, first one being our ICT business, which has been quite a success in the past and which we also consider quite a significant source of future growth. As you can see on the left part of the slide, our ICT business is based on quite a broad portfolio, and it has recorded significant growth over the past years. Last year, our solution and connectivity segment grew by a strong 10 percent, and within this segment, the ICT solutions posted an average 26 percent growth rate in 2023, and this is in line with development over the time period of 2019 to 2023, as you can see on the slide, of 16%. Now, when we look at the ICT business, it really makes sense to zoom into Bulgaria, which is We call it our best practice example within the group on the ICT side because the performance has been here particularly strong. We have become the biggest ICT provider in the country by now, both based on very strong organic growth, but additionally profiting from the acquisition of an ICT company in 2022. and also driven by a number of larger ICTs, which especially affected our Q4 results. You can see the growth rate here, plus 73% in ICT revenues or CAGR over the past years, excluding which also comes on top. We think what we can do in Bulgaria, why shouldn't we be able to do this in other markets in our international footprint, and this is one of the growth trajectories in the ICT segment. The other one is the SME business, our ICT business. As of today, primarily driven by larger companies, but more than 99% of the companies In Austria, our SMEs, and the picture is quite similar in the other international markets, and we don't see why we shouldn't be able to replicate this success in large enterprises only also to SMEs where we have high market shares on the connectivity, but we have potential for growth on the ICT services side. Now, moving to the next slide, we wanted to give you a little bit of an update on where we stand on 5G and specifically where we stand on spectrum investments, as we have just had another auction in Austria, as Alejandro explained a little earlier. On the right-hand side, you see that we currently offer 5G to our customers in five of our core markets. You can see that we have achieved a 5G population coverage of more than 80% in all of those markets and some of those significantly more. And, of course, it's still growing. On the left-hand side on the table, you can see that we have already the majority of the spectrum investments. You see the relevant spectrum bands and the investments taken in the various countries and in the various bands here. Overall, this was an investment of less than 200 million euros, and all in all, I think we can be quite happy with those results. Of course, in the past, also, what came on top were extensions of the existing spectrums for 2G to 4G. And again, just recently, we closed the latest spectrum auction in Austria in March, where we acquired frequencies in 26 gigahertz. and remaining frequencies and frequency size gigahertz for around 7 million euros. And now that the majority of the investments have been completed on the spectrum acquisition side, we are gradually shifting from extending coverage to increasing capacity in the network. focus point and ESG update, as you know, we have significantly increased our efforts in the area of sustainability over the past year, and we see that these efforts are starting to pay off. On the left part of the slide, you see some of the key ambition areas and KPIs we're looking at. I'm not going to go through all of them one by one, but you see the entire area of ESG being covered. Significant reduction of global emissions, for example. Significant increase of efforts in digital education, which is very important to take care of being a telco provider. Or the topic of diversity, equity, inclusion also being reflected in these KPIs, where We are on track or even exceeding quite a few of our main KPIs in this vision here. And this is also being recognized externally. We have just been reconfirmed to be part of the A-list in GDP, which is the gold standard in climate ratings. There's only 184 companies in Europe who are on this list, and only four in Austria, and we're quite proud of that achievement. We are teaming up with industry peers to take care more about our supply chain in Chuck, and we have been given the peak strength in sustainability out of more than 200 telcos globally. For this year and beyond, we are focusing on becoming more concrete and getting into more detail on the remaining focus of where we still have emissions and where we still need to decarbonize our operations. We are taking a special focus on scope three emissions. We have new reporting requirements under CSRD and so on and so forth. We are in a bit of a journey here. Still quite some challenges and setbacks here and there, but we really want to show here we remain committed to the topic of ESG and we'll continue driving that forward. And with that, I hand over to Sonja for the outlook for the rest of the year.

Thank you, Thomas. For the guidance 2024, we want to reconfirm our outlook for the financial year of 2024. On the revenue side, we want to achieve a revenue growth of 3% to 4%. which is in line with our ambitious targets for 2024 to 2026, and which is composed of growth international markets and in Austria, and the drivers are for sure this value-obtaining measures with indexation, cross and upselling, and a very strong ICT development that we expect. On the CAPEX side, we also confirmed the guidance around 800 million euros investments in this year with a continuous focus on electric rollout, especially focus on the fiber rollouts in Austria at the same pace that we like to, and with a small reduction of non-correlated projects that we re-evaluate to give them a more structured process afterwards. With that, I want to hand back to Susanne to open the questions afterwards.