Original Source: FD (FAIR DISCLOSURE) WIRE
OPERATOR: Good afternoon ladies and gentlemen, and welcome to this afternoon's conference call hosted by Peter Zydek. My name is Rebecca, and I will be your call coordinator for today's conference. For the duration of the call, you will be on listen-only, and at the end of the call there will an opportunity to ask questions. [OPERATOR INSTRUCTIONS].
This presentation contains certain forward-looking statements. Actual results may differ materially from those projected or implied in such forward-looking statements. Forward-looking information involves risk and uncertainties that could significantly affect expected results. These risks and uncertainties are discussed in Telekom Austria's SEC filings, including but not limited to, Telekom Austria's Form 6-K, containing the relative earnings release and certain sections of the Company's annual report on Form 20-F.
I will now hand it over to your host, Peter Zydek, Head of Investor relations.
PETER ZYDEK, HEAD OF IR, TELEKOM AUSTRIA AG: Good afternoon, ladies and gentlemen. I would like to thank you for attending today's conference call for the Telekom Austria's results for the second quarter of 2007. The management Board of Telekom Austria has joined me as always, is for this call, and Boris Nemsic will start with the summary of the key financial figures for the second quarter of 2007.
And Boris together with Rudolf Fischer will walk through the development of -- in the Fixed Net and Mobile Communications segment. Afterwards, Hans Tschuden will discuss the financials and of course we will end the presentation with our outlook followed by the Q&A.
I would like to hand over to Boris for the highlights. Thank you.
BORIS NEMSIC, CHAIRMAN AND CEO OF MOBILKOM AUSTRIA, TELEKOM AUSTRIA AG: Good morning and good afternoon ladies and gentlemen. Telekom Austria, of course, not the Telekom Australia. Let us start with an overview of the second quarter 2007. The second quarter was characterized by the tough environment on our domestic markets. Nevertheless, we could increase revenues and grow the earnings per share by 7.1%.
EBITDA declined as an increase of EBITDA from Mobile Communication partly compensated a lower contribution from the Fixed Net. In addition to that, we also incurred startup costs for operations in Serbia and Macedonia.
Due to our continued growth across all our mobile operations, we could increase our subscriber base in the Mobile Communication segment by 14.2%. Our xDSL subscriber base grew by 13.6% over the same period. And lastly, I am especially proud to announce that we have taken up commercial operations in Serbia in July 2007, and therefore it proved that we can launch an entire operation within just six months.
HANS TSCHUDEN, CFO, TELEKOM AUSTRIA AG: Good afternoon ladies and gentlemen, this is Hans Tschuden speaking. On the following slide, I want to highlight some of the key financial figures of Telekom Austria for the second quarter.
Our revenues increased by 3.3% to EUR1.208 billion due to revenue growth in the Fixed Net and Mobile Communication segment.
The preparations for the launch of operations in Serbia and Macedonia, and the lower contribution from the Fixed Net, led to a decline in our EBITDA by 2.7% to EUR465 million. Despite these startup costs, we were able to keep net income stable at EUR130.6 million compared to the second quarter of 2006, and even grow our earnings per share to EUR0.30 as we intensified our share buyback in line with our commitment to return unutilized cash.
Now I will pass on to Rudolf Fischer, who will walk you through the results of the Fixed Net segment.
RUDOLF FISCHER, VICE CHAIRMAN AND CEO OF WIRELINE, TELEKOM AUSTRIA AG: Thank you, Hans. Good afternoon ladies and gentlemen. The Fixed Net segment performed in line with our expectations during the second quarter of 2007. In the second quarter, our Fixed Net revenues increased slightly to EUR533.4 million, partly as a result of the acquisition of eTel, but also the organic business performed better than in Q1 2007.
However, higher revenues mainly from Internet Access, Media and Wholesale Voice Telephony & Internet partly offset lower revenues from [position in] Switched Voice, which suffered from ongoing fixed-to-mobile substitution.
EBITDA was impacted by higher operating expenses, driven by higher employee costs and a change in the business mix. As a consequence, EBITDA declined by 4.5%. Operating income showed a more favorable development due to lower depreciation and amortization, and increased by almost a third to EUR43.5 million.
Let's turn to the development of our Voice business. In the second quarter, better retention than our competitors helped us to improve our position in the fixed line market once again. Our combined market share was 63.3% at the end of the second quarter. The decline of the total voice market minutes measured by minutes reached approximately 17% on a year-on-year basis, however Telekom Austria could control its decline of voice minutes and limit the decline to only 8.5%. This reflects loyalty of our customers and the success of our retention measures. Fixed-to-mobile substitution is also reflected in there by 8% lower number of access lines, compared to the second quarter of 2006.
Let's take a look on the development of the Austrian broadband market and the area where we have been successful in finding growth. Slide number 10 highlights the development of the Austrian broadband market. At the end of the second quarter of 2007, our retail broadband market share was 42.5%. This corresponds to an increase of 2.1% points compared to second quarter of 2006.
Over the last quarters, we saw the number of unbundled lines increasing at a slower [pulse]. We attribute this to a shift in the strategy of alternative operators, and view this as a normalization in the growth and distribution between unbundling operators in our retail offer, after a period during which Telekom Austria has managed to have an over-proportionate growth each year.
Quarter-on-quarter growth rate of unbundling lines slows from 18.1% in the first quarter '07 to 8.4% in the second quarter. Mobile broadband accounts for a large portion of incremental growth. The main influence, in fact, that shapes the development of the Fixed Net segment is not unbundling, but competition from mobile operators.
Historically, the number of Telekom Austria access lines has been relatively resilient to competitors from alternative operators. Beginning in the second half of last year, access line loss started to pickup. We attribute this to the rise of mobile broadband via 3G technology. Mobile broadband has become a real alternative to xDSL lines. This is especially true for entry level packages. This has also caused an increase of lines disconnected in recent quarters.
As you can see on slide 12, we understand this development as an evolution of the communication business. The key for us at Telekom Austria is to manage the substitution in the best possible way. The strong position that we have in both segments helps us, and we can recoup a large portion of the customers that switch from one technology to the other.
Innovative products such as aonDigitalTV and aonAlarmServices create an additional proposition; helps us to enhance the value of the access lines in line with our strategic focus of access line retention.
And now I will hand over to Boris for a summary of the Mobile Communication segment. Thank you.
BORIS NEMSIC: Thank you, Rudi. After summarizing the key highlights of the Telekom Austria Group, I would like to give you some details on the developments in the Mobile Communication segment. The …