Telekom Austria AG has posted better than expected financial results for the first half of the year, scarcely one week after merger talks with Swisscom AG broke down.
For the second quarter ending June 30, the carrier reported net income of 35.7 million euros ($43.2 million), up from 28.3 million euros ($34.3 million) in the year-ago quarter. The profit was greater than the profit of 15 million euros ($18.1 million) most analysts had forecast.
Sales meanwhile rose three percent to 995.6 million euros ($1.2 billionn) from 965 million euros ($1.16 billion) a year ago. The sales rise was mostly driven by its fixed-line unit, which accounts for more than half of total sales.
For the six month period, the carrier saw a 61.7% rise in net income to 106.4 million euros ($129.3 million). This included a one-time charge of 18.8 million euros ($22.7 million) during the period. Sales increased a modest 2.7% to 1.98 billion euros ($2.40 billion).
The market reacted positively to the news, sending its shares up nearly five percent to $27.54 on the New York Stock Exchange, as of 4pm GMT.
There has been much speculation over the past few years regarding the future of Telekom Austria, as merger talks between it and Swisscom have long been mooted. Last year, informal talks between the two broke down due to differences over prices, as well as political hurdles.
Yet on August 18 Swisscom public confirmed for the first time that it was in merger talks with Telekom Austria, and finally there was hope a deal could be reached. Yet just days later, both sides issued terse statements announcing that merger talks had broken down.
At a press conference in Vienna, Alfred Heinzel, the supervisory board president of the Austrian state assets agency (OIAG) told reporters that we didn’t have 100% political backing from the Swiss and from our side.
The OIAG is instead pressing ahead with plans to sell a 17% stake of the Austrian carrier on the stock market.
It was a pity, as a merger would have made strategic sense. Both carriers’ fixed-line operations are currently too entrenched in their domestic markets, which are highly saturated. Both are also seeking foreign growth opportunities.
That said, the idea of a merger was deeply unpopular with the Austrian public, who were not keen to see their national phone company fall into the hands of their Swiss neighbor, especially given the fact that Swisscom is still controlled by the Swiss government with its 62.7% stake.