Telekom Austria, the largest telecoms carrier in Austria, has posted strong growth driven by in part by the acquisition last year of a neighboring mobile operator. However, the company still faces some significant challenges.
Telekom Austria has announced a significant increase in profit for FY2005.
For the fourth quarter, the carrier posted net income up 66.4% at E41.6 million ($49.9 million) from E25 million ($30 million) in the year-ago period. Sales were up 14.3% at E1.17 billion ($1.40 billion) from E1.02 billion ($1.23 billion) a year earlier.
For the full year ending December 31, 2005, net income rose 83.5% to E417 million ($500.5 million) from E227.3 million ($273 million) in 2004. Sales, meanwhile, were up 7.9% at E4.37 billion ($5.25 billion) from E4.05 billion ($4.86 billion) in 2004.
The strong growth levels were mostly due to the acquisition of Bulgaria’s largest mobile operator, Mobiltel, in July 2005.
Telekom Austria’s wireless revenue grew 30%, mostly down to the Mobiltel buy, although, excluding this acquisition, revenue still rose 5%. This strong performance helped offset a 2.6% decline in fixed-line revenue. Higher revenue from internet access and media also partially offset the lower revenue from wholesale voice.
Looking forward, Telekom Austria predicted 2006 net income will rise 20% while sales will climb about 5%. The carrier warned, however, that growth in broadband in 2006 won’t be enough to completely offset a decline in traditional phone revenue.
While the results were good, Telekom Austria does face some significant challenges. It continues to rely on the growth offered by its central and eastern European assets. This is because its small domestic market is hopelessly overcrowded with four competing mobile operations.
As Austria has only eight million inhabitants, Telekom Austria must look to its foreign units for the vital growth push. A potential acquisition of the Serbian mobile operator Mobtel, which is still 70% owned by the Serbian government, is being mooted. Another potential buy could be Bosnia’s Telekom Srpska. If these privatizations go ahead, Telekom Austria will have to be aware that other far bigger players are looking at acquiring assets in eastern Europe, where saturation levels are far lower than in western European markets.