Telekom Austria Ag

Good morning, everybody, and thank you, operator. Thanks for joining our call on the Q4 and full year results 2024. I'm here with our management. I'm here with our CEO, Alejandro Platzer, our deputy CEO, Thomas Arnoldner, and our CFO, Sonja Weimer. And as usual, they will lead you through the presentation now, and we are happy to take your questions afterwards in the Q&A sessions. Thank you.

Thank you very much. Good morning to everyone. Let us drive you through some of our Q4 and fall year results, as you can see in the slide. We had a strong end of the year, showing 4% service revenue growth, driven primarily by our international OCEE operations. Also, you have seen strong total revenues. As we were anticipating in different calls, we were working in several big ICT business. Some of them we managed to close in 24. Some we hoped that we would close in 25. EBITDA also show a strong performance with a growth of 7.1%, as well as free cash flow coming up to 575 million euros for the full year, plus 62% versus 2023. Despite the increase of leases, as you know, we had a spin-off of our towers in 2023, which reflects an increase of leases in the year, of course, But nevertheless, we managed to grow free cash flow by 62%. On the market, we see a very strong equipment sales in Bulgaria, Belarus, and Austria. That's something that we were working on, especially in Austria. We were very active in the Christmas campaigns with more hardware offers. We adjusted our subsidies in several parts of the portfolio since we saw an opportunity to push hardware sales and also to have a better platform on the subscriber base, as you will see later, and also Bulgaria primarily driven by large ICT deals that were reported in the quarter. We managed also to revert the penalty that we got in Belarus in Q2, if I remember correctly, So we had this negative one-off in Q2 due to this administrative penalty in Belarus that we managed to negotiate out and revert the provision in Q4. And this is basically the penalty was removed and we have committed to do certain investments as a way of compensating. We have been working in 24 to make the last of our markets fully convergent. So now we're ready in Serbia to launch fixed services in a combination of wholesale or MTS network as building our own private network. And so we expect very much to see that, especially after today's news that looks like SBB is finally being sold to PPS. So we will have two strong convergent competitors in Serbia So it's even more important that we also build a strong convergent proposition in the market. And yeah, still very high rated in EST, as you know, it's a very important and focus areas that we follow. So still very highly rated. It's very important for us, not only what we do, but how we do it. So this is critical for us. For the outlook, we see a guidance of total revenues between 2% to 3%. Lower inflation, of course, we see all over the place. So I think that is going to be reflected in a lower indexation and therefore slightly lower revenue growth that we were anticipating before. And also we are adjusting CAPEX to 850 million, basically following the same logic. lower inflation has lower indexation, which is slightly lower revenue guidance, but also we see the same impact on CapEx with less indexation in CapEx costs. We see clearly in CPEs that two years ago, CPE prices went crazy, especially with all the issues that probably you remember with the lack of chipsets, and it was crazy. Now we see exactly the opposite, very competitive in CPE markets, prices going down dramatically. And CPEC investment is a very significant part of our capex. So to give you an example, but also in other capex positions, we see that the price pressure is coming down and we are managing to negotiate much better conditions than we were planning to due to lower inflation. And now with dividend proposal from the management board to the board and then the board probably to ACM, is to increase dividends from 36 cents to 40 cents, as we have been doing the last couple of years. Moving to customer development, we are pretty satisfied with the development. I'm very satisfied with what the Austrian team is doing, especially at the end of the year, seeing opportunities to tactically invest in in subsidies in certain segments where we think that we can be very competitive and so i'm very proud of what the ocean team has managed to do especially the last quarter was very very well executed especially you know there is a little bit of pressure on the low value segment so differentiating ourselves in the high value is very important for us and we have seen very good customer development especially in residential postage which was focus area that the team had in Q4. Overall, you saw our mobile subscriber base going up 4.7%, 7.4%. And also you can see our broadband base also increasing with a special focus in what we call advanced broadband, which is higher speeds. That's what is driven basically RPL and revenues, especially in Austria. When you look at the results in Austria, this Still, it's a strategy that, even though we have been doing this for many, many years, we still manage to monetize pretty well upselling the base. Not only now on speed, we are managing to upsell the base, as you will see a little bit later, with other products. We were focusing in speed first, then we started to focus on OTT content, and now we are focusing more and more in other things like cybersecurity for the residential segment or insurance. You will see more links. Moving to the next one, you see the full year numbers here. Your total service revenues going up 3.5% on an annual basis. Equipment revenue slump year over year. And despite this big push that we did in Q4, as you can see, with close to 24% increase in equipment revenues driven by both phones, but also ICT. As you know, ICT is becoming more and more important business. And we're focusing more and more on that because we see a great potential moving forward on ICT business. And so total revenues were 7.8 in the quarter and 3.1% in the reported view. Of course, in performance, a little bit higher, but it's neglected about the difference. The components you see, all segments are growing. Mobile cores is growing. Qs or FMAs is growing. Broadband and TV is growing. We have only two areas that are not growing. One is fixed voice driven primarily by Austria, where we have most of the revenues as well. And interconnection that is mostly regulated tariffs coming from the EU. That was a big cut, if I remember correctly, close to 50% this year versus 2023. And when you look on the segments geographical segments, you see still a very strong growth in our international or CEE business with a growth of 7% in cost and currency and flattish in Austria. But nevertheless, I think that due to the situation of the economy in Austria, I think the team did a very good job in 2024 where we focused more in having a growing and stable customer base, especially in the mobile segment. With that, I will deep dive slightly more in Austria. As I said before, you see 10,000 NetApps in mobile, very important for us. We see a little bit decline in B2B, so basically some companies are struggling, but a very good performance in residential postpaid. Also, the strategy that we are pursuing on fixed is working pretty well. We lose a little bit of RGUs. But we fully compensate those RGUs on revenues by upselling the base, as I said before, in speed, but not only, more and more focusing on cyber solutions for the residential segment as well as some financial services. If we go to the next one and focus on CEE, you see the international segment, strong growth in all markets. You see Bulgaria with... Revenues up 20%, driven again by ICT. Evita also very strong. You see Croatia, very good results. We were focusing a lot in 24 in stabilizing the fixed platform where we did a lot of fiber investments and we were not very happy with the uptake, but at the end of the year, we saw a much better performance there. Belarus, of course, we look at constant currency numbers, very solid. Q4 is a bit affected by the reversal of the penalty. That's why you see 67%. You need to actually remove the reversal of the penalty to see the true operational performance, which is very solid nevertheless. Serbia, also very good performance in the markets, as you see. And the challenging market is Slovenia. You see revenues decline in Q4. And Evita, you see a 24%, but that is affected by a one-off of 2023. North Macedonia, our smallest market, but nevertheless, very solid performance in the quarter and throughout the year. We are the leaders in mobile and doing a very good job in CRIF. Having said this, I will hand over to Sonia, who will drive us a little bit more details on the P&L.

Hello, also from my side to our conference call. I'll focus on the Q4. Alejandro already mentioned Q4 was a very strong quarter in regards of revenue delivery. Coming to the OPEX, you see a strong increase, but also mentioned already by Alejandro, we had one-offs. And the equipment sales that we did, or the ICT sales that we did, are reported in the OPEX, and this OPEX increased by 63 million. Coming now to the EBITDA, I think I mentioned also that we had a couple of one-offs in 23 and 24. You see a strong EBITDA, including one-off performance of nearly 10%, 9.6% increase in the last quarter. Also, EBITS reported a strong growth despite the depreciation amortization, the increase that we were facing, and all these increases shows a 5% increase in the EBITS, and also net results in the Q4 was very strong with an increase of 27.5%. Coming for the full year, that I would like to mention, especially below the EBIT, there are effects. You see the development of the EBIT that's heavily driven by increase due to the dollar spin-off, the depreciation monetization of the dollar spin-off. And the same is true also for the net results where we added the pro forma version. That means that we show the net result of 23 as if the dollar spun off. had already happened before 2023. And here we show also a very strong net result of 12.5% increase year over year for the entire year. Let's switch to the free cash flow performance. I will focus here especially on the full year, where you see a development or a free cash flow of 575 million for the full year. That's a strong increase in regards to 2023. And the most important drivers were, on one hand side, a challenging working capital development, but heavily driven by the good revenue performance of the last quarter. As mentioned, goods and big customer projects that were able to close within December and therefore high receivables. And one development that comes out of 2023, whereas in Austria the subsidy for the broadband fallout was accounted for and therefore this negative impact because of that. Positive impacts that we were able to manage is that despite to the lease payments due to this power spin-off in Q3 2023, we had a better version of results that we were able to transform into the free cash flow, had lower topics, especially for frequencies, and were able to pay lower interest in income tax in comparison to 2023. And then, with that, I'm handing over for the focus topics to Thomas.

Thank you, Sonja and Alejandro. As you can see, this time we have prepared a little bit of focus, especially in Austria, as you're probably used to in the Q4, a deeper dive on our infrastructure plans for Austria, but especially also this time we want to highlight what we do in order to free up more resources for investments, but especially also for the markets in order to do what is most important for us, which is staying relevant for our customers. If we come on the next slide first to the infrastructure side, and especially here on the fiber market, let me remind you about how we see the market. I don't think this is extremely new to you. But still, I think it's important to have in mind, because we see quite a differentiated picture how the market is evolving, and this has to be managed very carefully. Three main challenges. Number one, the market in the fiber segment is extremely fragmented today. We see more than 300 players. Some of them, to be honest, we believe being under quite some pressure, but a very fragmented market. Secondly, rollout costs driven by inflation, but also by, from our point of view, an excessive subsidy scheme, have increased tremendously. And overall, we now see rollout costs are way too high. Take rates are too low, especially in the market. We're doing better than the market, but overall in the market, it's unsatisfying. which obviously also drives the payback periods too high, which is very differentiated, however, throughout the different regions or areas or rollout scenarios in the markets where we try to adapt with our overall strategy. And certainly, and I think this has been in the market for almost forever, the market is still very much fixed wireless access-driven. We have very strong mobile offerings. The mobile Wi-Fi routers remain very popular. They offer very high quality combined with ease of use. As a result, our strategy in this fragmented market, we are reinforcing partnering. We're doing it very consciously. We are not partnering with everyone. but only with selective networks, typically those which are state-owned, where we have attractive conditions. We really prioritize our rollouts dynamically according to those areas I mentioned before, where we see lower rollout costs or higher take rates. And of course, and this is what I think really differentiates us ourselves from the competition, we can use also our strong mobile network to offer fixed wireless access and to provide a fixed-like mobile substitution for customers in areas where our fixed network is not offering the required needs or where we believe that the mobile deployment is more cost efficient. So if you move to the next slide, providing you with a little bit more numbers and flavors, at the end of 24, we had around about 850,000 FTDP, so FTD to the building and to the home, passed. which is an increase of more than 100,000 last year, which is, by the way, still by far the biggest deployment which you see in Austria. And we are running at a speed which we believe fits the market conditions I just mentioned. And on the mobile side, as we have more tools in our toolbox than the Fiverr-only players, we now cover around about 86% of the population with 5G and in 24 was the year where we started shifting investment from covering more coverage or territory to increasing the capacity in their network. We address our customers in a technology-agnostic way, always providing the best options available. And so both our fixed and our mobile offerings are contributing to our broadband service revenue growth. which resulted in a 3.5% CAGR in our total broadband revenues, which we call the internet-at-home revenues, which you see here in the box. And as Sonja mentioned also, our ARPL has increased and fixed it now at 38 euros, which is a 5% gross year-over-year, which is mainly driven by the shift in the subscriber figures from basic to advanced speed, but also especially by speed upsells and by the progress in cross and upselling of additional services, which Alejandro mentioned in the beginning where, for example, we're offering security services or insurance services to our residential customers as well. At the same time, looking at the cost side, we want to give you a bit more insight on our restructuring efforts, which we do in order to take down the cost in the organization and to free up capital for the market, both for the infrastructure investment, but also for the investment in our customers, as you have seen previously also what's happened in the previously in the financial results which were described earlier. As you know, we are running a restructuring program since many, many years where we mainly address civil servants and mainly with social plans where we grant a specific amount of the salary being paid until the retirement age, which allowed us to reduce our numbers of FTEs by 21% since 2019, so in the last five years, and to reduce the share of civil servants in Austria now down to 25%. Additionally, we are also addressing a lot the external workforce, which is not on our payroll, but generating a cost. Within that reduction, what you don't see here, but what I really want to mention is that we have a significant shift also in structure of the workforce. especially adapting to the new skills which are required to run our operations. And overall, and most importantly, when we look at the total workforce cost, you see here a comparison between 2019, 23, and 24, you can see that basically we managed to keep our total workforce costs flat in an environment, especially in the last two years, where we had very high inflation and, as you know, especially in Austria, salary increases are highly linked to the inflation, but with the restructuring programs, we managed to keep that more or less flat. On the provisioning side, we are provisioning these restructurings. The current restructuring provision amounts to 340 million euros. At the moment, they're grossing around about 1,700 employees and there's more and more of these people are retiring and at the same time we're meeting the number of addressed new civil servants. We expect some effects starting 2026 with a lower social plan funding in the free cash flow with a lower restructuring cost reflected in the P&L and also the restructuring provision I've shown you is expected to decrease over time. And why are we doing this? Again, we want to free resources for the market, and we want to focus what is most important for us, which is our customers. We have talked about the concept of CDC's competence delivery centers before, where the idea basically is that those functions which are not customer-facing, where we can create synergies across the groups, across the seven markets we're operating in. We try to harmonize. We try to build one delivery center. You see this on the bottom of the slide. This encompasses functions like the network, service delivery operations, the back office. But where it matters most for our customers, which is our biggest asset, which is our local uh safe for us and our local products and services we keep that local and we develop that along our customer journeys allowing us at the same time to to build on those local assets on the one hand side and at the same time on the delivery side to gain scale to be able to create economies of scale and scale savings also when working with our partners, because we reduce the number of tools or solutions or vendors which we need. And of course, it allows us also to drive automation in the delivery engine. So in summary, again, on the infrastructure side, following up a multi-technology strategy in Austria, with, I think, a very pragmatic approach in the fiber deployment in Austria, as well as building on the strong 5G network, which we have, and using cross and upselling beyond the core to keep our service revenues growing. And at the same time, continuing with the restructuring, which is a long-term transformation, but which provides mid-term free cash flow upside which will also allow us to invest more in the market and into our customers. With that, finally, moving to the outlook, where, as Alexander said on the first slide already, for 2025, on the revenue side, we expect 2% to 3% revenue growth. On the CAPEX side, excluding spectrum, 850 million euros. On both sides, this is basically a reflection of the lower inflation, which we see now in our markets. On the revenue side, of course, less opportunity to do inflation increases. We see, we expect the majority of the revenue growth of those 2-3% to come from higher service revenues, both from Austria, but especially as in the past from the international markets. Again, the key growth drivers include upselling in the mobile consumer, business, the high demand for connectivity and ICT solutions in the business segment, and the growth in the fixed-line business, especially in the international market. In contrast, we expect again declining voice revenues and lower interconnection revenues driven by regulation, and we anticipate growth primarily in the mobile consumer business and in the solutions and connectivity business. On the capping side, as I described earlier, the investments in fiber are still at a high level, but a bit lower than in 2024. This is also reflecting low inflation, and as I said on the previous slide, is reflecting also the market development. Dividend, as Alejandro said, very consistent with the policy which we have been following in the past year. Our proposal to the board and to the AGM for the dividend for the financial year 2024 is going to be 40 cents per share. With that, I'm closing the presentation.