Telekom Austria Ag

Yeah, thank you, operator. Good morning, everybody. Thanks for joining our results call for the first quarter in the first nine months, 2024. As usual, I'm here with our management board. So, I'm here with our CEO, Alejandro Blasser, and our deputy CEO, Thomas Arnoldner. I'm afraid Sonja Wallener couldn't join today. So, yeah, as usual, we'll start with the presentation. And we are happy to take your questions afterwards in the Q&A session. Thank you.

Thank you, Susanna, and good morning to everyone. I will do Sonia's part. Unfortunately, she got sick, so she cannot participate in the call today. And so as a summary of the Q3 results, you can see that total revenues went up 2.1% with a good performance in service revenues and a little bit of lower performance in equipment revenues. We can elaborate a little bit later what do we see in terms of total revenues for the rest of the year. Service revenues up 3.1, a combination of good performance in mobile and fixed. Especially 16CE is growing very nicely. And also we see connectivity or B2B digital services also going up. Subscribers development was pretty good with a 6% growth in mobile customers. Good performance in Austria, especially at the end of the quarter. And broadband and TV are used going up 2.1% and 4.9%. EBITDA went up 5.1%, EBITDA margin now above 40%, which was an unspoken target that we had internally to reach more than 40% EBITDA margin. So we have been working on that for a couple of years now. Core OPEX going up primarily due to higher workforce cost, primarily from Austria. Free cash flow up almost 30% in the first nine months of the year. And then some special events of the quarter. We finalized acquisition of a company called Conexio. Thomas will tell us more detail about it in the focus points. We also got awarded by the Ecovalley sustainability rating, the gold medal. I think Thomas will also comment on that briefly later. And then we would like to confirm our outlook, even though we think that we will be on revenues closer to the three. So on the lower range of the guidance, we still have a way to go, as you probably saw in our results in Q4. that we have some way to go on hardware revenues and CapEx as guided around 800 million euros excluding Spectrum and M&A. If I move to the next slide, you will see customer development. Mobile subscribers, as I said, up 6%, driven a lot by M2M. M2M is running a lot of SIM cards every month. We see this very strong growth, actually growth accelerating even more, so we are happy with that performance. And RGU is close to 1% up, broke by 2%. What we call advanced broadband, which is customers with fiber speeds going 13%. Let me remind you that a lot of our strategy is to upsell the base, so we don't report those as new customers, but we report them as advanced customers as the customers are migrated from lower speeds into higher speeds. Both RPL and ARPU up almost 4% in the fixed business and 2.4% in the mobile business, all in constant currency. To give you more color on the distribution of service revenues, where service revenue It's coming, you see a lot of greens, so good development in mobile core. Mobile core, what we call it, excluding the cubes, or fixed-wire substitution business, which is also growing, as you can see, and broadband and TV also growing, so you see the three greens. What is declining is the fixed voice, primarily driven by OSCA, a combination of less minutes and a combination of less lines. And interconnection, which is part regulated. We got a big haircut of rates from 24 to 23, interconnection rates, and also a decline in our transit business where we sell transit minutes in the international markets. That is also a declining business. Then you see ICT or solution and connectivity going up, visitor roaming also going up. So, all in all, a very solid service revenue growth with all business lines growing very nicely. If you move to talk about a little bit Austria, of course, as we put in our report, Austria has become a very challenging market, very competitive, and the combination of a Competitive market with a slightly weak economy as well. So we see that in the business segment, we see that in the residential segment, how much customers are optimizing tariffs. And despite of the price increase that we did at the beginning of the year, we see how customers are optimizing tariffs. Therefore, we only reported 1% service revenue growth, 0.8% to be precise. And a decline on EBITDA of 3.3%, driven primarily by workforce costs and maintenance costs going up. If you look at truly clean, EBITDA is a decline of 1%, as you can see in the notes. So, also challenging markets. And Q4, I guess that it's going to be as challenging as using Q3. But this is fully compensated by our international business. Our international business still remains very solid. As you can see, all markets with very good EBITDA and revenue growth. Bulgaria, I mean, from very high levels already. We have to remember that Bulgaria has been growing tremendously the last couple of years. So it's natural that the growth rates are a little bit lower than what used to be, but still very solid with 4% revenue growth and 3% EBITDA. And also another market that we are very proud is Croatia and Serbia. You can see with very good In all markets, we see that hardware sales are a bit lower than we expected. You know, customers changing phones less often as we thought it would be. So that we saw, and you see also in our results. Going to the P&L, I mean, a lot of numbers, of course, in this slide. What I would like to comment is that You can see that net results went down 10% in the quarter, driven primarily by more DNA. When you look at EBITDA underlying, you see close to 5%, so very solid EBITDA developments. Talking to cash flow. And we are happy with the results that we have seen. So you see cash flow, the first nine months of the year went up close to 30%. So 348 million euros. And also in the quarter, cash flow went up close to 18%. So good performance in free cash flow. So we are converting the EBITDA into free cash flow. A little bit less garbage than last year, and that is helping as well. But also we have some negative effects on free cash flow, like advance payment in subsidies. So all in all, I think we are happy that free cash flow has a solid growth. With that, I would like to hand over to Thomas to drive us through focus points and guidance. Thank you.

Thank you very much, Raleigh Hanbo. We have three focus points. First of it being survey and our move into conversions in survey. You know, survey has been the last market where we have not yet been convergent, but we are executing our convergent growth strategy also there. We have recently announced Another acquisition in server, which will now allow us to offer conversion products for our customers. As of next year, our conversion strategy in service basically building on the three pillars, which you see on the left-hand side of the chart. Number one, the acquisition, the recent acquisition of Connexio Metro, which is a seven-fiber company. We have already acquired parts of Conexus infrastructure in 2023. Now we acquired more. We added another 300 kilometers of fiber, which takes us to 1,500 kilometers of fiber, which we have now in Serbia. We added 42,000 homes past in Belgrade. Secondly, we are pursuing and pushing our own fiber rollout in Serbia. And thirdly, we have a wholesale contract for fiber lines with the incumbent, which is offering for us a quite attractive opportunity to increase our reach with our new fixed platform in Serbia. Having said this, for the record, the acquisition of Conexo Serbia is still subject to measure control clearance, but we don't expect any major surprises here. Second topic is on a little bit of focus on what we're doing in the B2B digital service segment in SMEs. So you remember we've been talking a lot about our needs and growth ambition. We have mentioned, I think it was two or three quarters ago, we have shown you the, I think, quite extraordinary growth which we managed to have in the ICT segment or the B2B digital services. segment, as we call it. And we have made quite some advancements here. I remind you, in 23, we posted 26% of growth in the ICT solutions area. So as of today, much of that business is coming out of Austria and of Bulgaria, where we have also become number one, not only in the tech segment, but also in the ICT segment. But we don't see why we shouldn't be able to replicate this in the other markets. And especially, we don't see why we shouldn't be able to replicate what we achieved with large enterprises also in this segment of small and medium enterprises. So far, we had mostly large businesses in this area based on our strong capabilities, strong customer relationships, strong and big sales teams, powerful brands, quite a broad product portfolio. However, the large enterprise segment is very much project-driven. It's very much one-to-one driven. And now what we want to do is to scale up and to standardize our portfolio in order to be able also to tap into the SME segments, and we are very optimistic about that. And the SME segment will prove to be a very significant source of growth for us in the future. So what we are working on at the moment is about setting up a dedicated SME product portfolio, which allows us to streamline our offerings to reach economies of scale. We are looking at smart bundlings of our offerings with a core business and we're also looking at having the right landscape of partners in order to be able to address the market according to its needs. And of course we're doing this for the entire group because in line with our strategy we want to create synergies across all the markets by building on our large connectivity business our sales force in our strong brand. Thirdly, again, a little bit of focus on Austria. We addressed this also in the Q2 results call, and Alejandro already talked about that. I think if you look back in the past years, we did very well in Austria, but today we are faced with a situation of high inflation, slowing economic growth, and the entire market becoming more competitive and more challenging, both on the mobile side as well as the fixed side. And as we explained in the last quarter, we really aim at protecting that market with a very balanced approach, protecting our base on the one hand side, but also increasing our share of new customers with taking smart investments in the market in order Again, to protect our high market shares, which we have been able to sustain in the past years, both on the mobile as well on the fixed side. So we're taking these investments. Partly, you see it also in the Q3 results. Just think about the higher subsidies, where the equipment margin was negative and was waiting on the EBT in Australia Q3. A little bit, this is a tactical measure, but we think it's the right investment to take in the market and also renders already positive results in the mobile core business. We are positive in that it's, again, since June 6th, it's tougher. Again, here we're coming from really high market shares. We have challenges, especially areas where we are not able to provide high bandwidth, where we are only able to provide lower bandwidth. Hence also our accelerated fiber push in the past years, but also we use all other available technologies like the cubes to address the low-speed fixed areas, and we take a very regional approach to the local market requirements. So in general and overall, we continue to see a market where We have to invest more. Again, we are trying to shift from indirect to direct costs in order to be able to take the right investments. We are, I think, taking a smart, balanced approach. We see results already kicking in with revenue market shares up. But again, as Alejandro said earlier, the market is expected to remain competitive also in the near future. With that, finally, a word on guidance 2024. As Alejandro said already in the intro slide, we reconfirm our guidance of 3% to 4% revenue growth and then around 800 million of CapEx, the spectrum as you could imagine from the first three quarters don't expect it to be on the upper end but rather on the lower end of the range but we still believe we are on track to achieve that range the bit softer revenue development in the first three quarters was to a large extent due to the lack of equipment sales. And the lack of equipment sales are very volatile, as you know. So we believe we are able to catch up here. If you look at the mix of the countries, as Alejandro explained earlier, Yes, we see a tough environment in Austria, but on a positive note, CEE is performing very well overall. Most importantly, we believe we are well on track with our service revenue development. With that, thank you very much for listening, and we are handing over to Susanne to moderate further questions.

Thanks a lot, Sander and Omer. So, yeah, we are now ready to take your questions. Thank you.