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August 24, 2005

Telekom Austria: CEE focus to underpin continued growth

Telekom Austria, the largest telecoms carrier in Austria that narrowly escaped being acquired by neighboring incumbent Swisscom last year, has more than doubled its quarterly profit and raised its outlook for 2005. However the hopelessly saturated nature of the Austrian mobile market means the carrier must focus on its central European operations to fuel future growth.

By CBR Staff Writer

Telekom Austria has posted strong Q2 results.

In the second quarter, net profit rose 118.8% to E75.7 million from E34.6 million a year earlier. Analysts had forecast net income of about E72 million. The carrier said gains in its mobile operation, as well as falling interest charges and lower depreciation all helped earnings. Sales rose 1.5% in the second quarter to E1.01 billion.

For the six months ending June 30, the carrier posted an 81.8% rise in profits to E191.4 million from E105.3 million. Sales for the six months rose 1.5% to E2.01 billion.

Unlike some European carriers that are saddled with massive debt burdens, Telekom Austria has a relatively modest net debt of E1.87 billion, down from E1.97 billion in 2004.

Looking forward, the Vienna-based carrier raised its 2005 earnings forecast, saying net profit would rise 50% from E227 million in 2004. It had predicted growth of 25%, though analysts had expected an upgrade to guidance because Telekom Austria completed its purchase of Bulgaria’s leading mobile operator MobilTel for E1.6 billion earlier than planned. The carrier already has mobile interests in Croatia, Slovenia, and Liechtenstein.

It is these central and eastern European units that continue to fuel Telekom Austria’a mobile growth. This is fortunate as its small domestic market is hopelessly overcrowded with five competing mobile operations. However, Deutsche Telekom’s purchase of Tele.ring Telekom Services in early August will help reduce this number down to four because Tele.ring will be merged into the Austrian operation of T-Mobile International.

That said, Austria is a country with only 8 million inhabitants, so Telekom Austria must look to its foreign units for the vital growth push. Yet the carrier’s domestic mobile business did post gains thanks to an increase in its subscriber numbers and a pick-up in data revenues. Sales were up 3.6%, while earnings before interest, tax, depreciation and amortization rose 8.3% to E149.8 million.

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