Telekom Austria has posted a 3% drop in second-quarter core earnings, roughly in line with market expectations, as start-up costs in the Balkans and a fierce domestic competition weighed it down.
Earnings before interest, tax, depreciation and amortisation (EBITDA) were 465 million euros ($626.5 million) in the quarter to June. This compares with an average forecast of 461 million euros in a Reuters poll of 12 analysts.
Revenue expanded by 3%, more than any of the analysts had forecast. This reverses a drop in the first quarter, as an acquisition and high-speed Internet access sales more than offset a drop of revenue from regular voice calls.
"Telekom Austria's domestic businesses continued to operate in an environment characterised by fierce competition in both segments," the company said in a statement.
On top of a trend for customers to replace fixed-line with mobile calls, new high-speed mobile data technologies are also beginning to compete with fixed-line broadband access, it said.
"High penetration of mobile voice communication services and the advancement of 3G technology have pushed mobile operators in Austria to compete with mobile broadband products, which are an alternative to conventional broadband access," it said.
The partly state-owned operator is investing in the Balkans - former Yugoslavia and Bulgaria - to offset those trends. Its Bulgarian operator raised EBITDA by 8% in the quarter. Its Serbian unit began operations in July.
The company confirmed its full-year outlook of stable revenue and a drop in its EBITDA margin of 1.5% from last year's 40.1%.
Telekom Austria shares have dropped 11% this year, under-performing the DJ Stoxx European telecoms index which is 2.6% higher. They change hands at 14 times next year's estimated earnings, in line with the European telecoms sector.
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