Telekom Austria profits slide 26% on fixed line losses

Austrian carrier Telekom Austria reported Wednesday that second quarter profits slipped 26 per cent to Eur96.3m, compared to Eur130.6m in the same period last year.

The firm said it was hit by higher interest expenses following the acquisition of Belarusian mobile operation Velcom in October of last year, as well as the effects of mobile roaming regulation and the decline of fixed line revenues.

Group revenues were up 5.6 per cent however reaching Eur1.28bn during the period, up from Eur1.2bn in 2007, with Velcom helping to compensate for lower revenues from the fixed line segment and roaming.

Telekom Austria, which owns the mobilkom mobile brand, said it expects the regulation of voice roaming traffic, introduced in the second half of 2007, to impact group results for the first three quarters of 2008.

The fixed line operation also continues to be problematic, with operating income falling 49 per cent year on year to Eur22.9m in the second quarter, amid fierce competition and fixed-to-mobile substitution. Telekom has however revised its fixed broadband product portfolio in an attempt to turn its fortunes around.

The group’s mobile operations were looking in better shape, although operating income for the quarter was down 5.8 per cent to Eur158m, hit by higher depreciation and amortization charges for the start up operations in Serbia and Macedonia.

Nevertheless, Telekom’s subscriber base at its mobile communication segment grew 52.5 per cent year on year to 16.5 million customers.

Boris Nemsic, CEO of Telekom Austria, said: “With revenues and EBITDA up in both the second quarter and first half 2008, our performance was solid and in line with our 2008 full-year forecasts, which we are confirming. We continue to make good progress in our international business, which remains the main growth driver and together with the consolidation of Velcom in Belarus more than compensates for the lower contributions from our domestic operations. In our Fixed Net segment, our customer-retention strategy, based on product bundles, faster Internet speeds and aonTV, proved effective in slowing down access line loss.

“Our Mobile Communication activities benefited from the strong performance of our international operations, driven by a 52.5% subscriber growth. Our priority for the rest of this year remains the alignment of our cost base, and particularly our headcount, to the technological and financial imperatives of our domestic fixed net business,” Nemsic said.