Telekom Austria AG (TA1.F) Earnings Call Transcript & Summary

Welcome to the summary of A1 Group's results for the first quarter.

For the first 3 months.

For Q1 2023. Total revenues increased by 8% year-on-year to EUR 1.3 billion, with both service and equipment revenues growing in all segments. In total, service revenues increased by 5% and equipment revenues by 26%.

Total revenues in Austria increased by 2% in the first quarter with growth both on mobile and the fixed line. It's worthwhile to note that in Austria, inflation and tariff adjustments are typically implemented in April. We therefore expect an impact in Q2 as the inflation-linked tariff will be increased by more than 8% on average in Austria.

Growth has been driven by our international operations, most of them growing double digit in revenues, except one, which is North Macedonia growing 7%. This growth is coming primarily by adjustments on tariffs. We have been very careful in how we execute our price increases because the most important thing for us is to grow our customer base. Going country by country, you see Bulgaria growing 20% revenues, Slovenia, 19%; Belarus, 17%; Serbia, 13%; and Croatia, 12%. North Macedonia, I already mentioned 7%.

Looking at the cost side, electricity costs increased by 38% to EUR 43 million. This was mainly due to the fact that throughout 2022, we benefited from electricity supply conditions in Austria from before the Ukraine crisis. In the first quarter of 2023, however, we bought electricity at a higher cost level.

We see workforce costs increasing by 3%, driven primarily by the international business, where for costs grew EUR 8 million during the quarter, reaching EUR 285 million.

In Austria, we were able to reduce our workforce costs by around 3%. The restructuring costs we kept stable.

On the EBITDA side, we see a growth of 1% with a margin of 34.7%, EBIT plus 0.3% with an EBIT margin of 15.5%.

The financial result improved to lower foreign exchange losses. This was mainly due to the Belorussian ruble, which in the first quarter of the last year depreciated massively against the euro due to the conflict in Ukraine. As a result of the better financial result the Q1 2023 net result increased by 3% to EUR 175 million.

Earnings per share were flat at EUR 0.20 despite higher workforce costs, higher electricity costs and the fact that the inflation linked price increases are still to come.

CapEx increased to EUR 247 million, EUR 67 million more than in the first quarter of the previous year.

Spectrum auction in Croatia has been finished successfully. This provides us a very good platform to keep on growing our mobile market in the country. We have acquired several spectrums, renew some of them. This gives us a very strong platform to continue growth in this important market.

The spectrum costs in Croatia amounted to EUR 109 million. They will be paid in the second quarter and will then also be included in the CapEx figure.

Our free cash flow in Q1 was EUR 104 million lower than in the first quarter of the previous year. This was mainly due to the higher CapEx as well as to changes in working capital, reflecting the higher level of CapEx in the fourth quarter of the last year. Still, our free cash flow amounted to EUR 93 million.

Our customer base grew 1% in the mobile segment and 0.3% in the fixed segment. But I have to say that the growth in BBI, RGUs is much greater than the 0.3%.

Finally, we confirm our guidance for 2023. Revenues are forecasted to increase by 4% and CapEx, excluding the investments in spectrum is expected to reach around EUR 950 million.