Telekom Austria Sees Further Sales Declines as Earnings Miss

Telekom Austria AG (TKA), one of two European phone companies part-owned by Carlos Slim’s America Movil SAB (AMXL), posted fourth-quarter earnings that missed analysts’ estimates and forecast further revenue declines.

Earnings before interest, taxes, depreciation and amortization fell 18 percent from a year earlier to 262.3 million euros ($360.5 million), the Vienna-based company said today in a statement. The average analyst estimate was 271.8 million euros, according to data compiled by Bloomberg. Sales fell 5.6 percent to 1.06 billion euros and will decline 3 percent this year, Telekom Austria said.

Investors will probably stay focused on a possible shareholder agreement between America Movil and the Austrian government in spite of a “weak set of numbers and guidance,” Citigroup Inc. analysts said in a note. Mexico City-based America Movil said this week it’s discussing combining its Telekom Austria shares with those held by Austria to form a syndicate, a move that would lead to a bid for full control.

Telekom Austria shares rose 2.8 percent to 7.39 euros at 1:30 p.m. in Vienna, gaining for a second day after America Movil disclosed the discussions. The stock has climbed 34 percent this year, making it the best-performing member of the 24-company Stoxx 600 Telecommunications Index.

Turnaround Focus

Telekom Austria’s earnings have fallen for four straight years as intensifying competition at home added to regulatory burdens and sluggish economies in eastern Europe. An auction of next-generation airwaves that left Austria’s operators with a total bill of 2 billion euros is putting more pressure on Telekom Austria and local units of Deutsche Telekom AG and Hutchison Whampoa Ltd. (13) to reverse revenue declines.

“Some countries are struggling and we have to focus on achieving a turnaround,” Telekom Austria Chief Executive Officer Hannes Ametsreiter said at a press briefing. “That’s not easy if you have headwinds from regulation and competition.”

Prices for mobile-phone services rose for the first time in three years in the fourth quarter, according to the Austrian regulator, RTR. It is too early to say how sustainable these price increases are as several so-called mobile virtual network operators are expected to start operations later this year, Johannes Gungl, the head of RTR, said last week.

Best Performer

An agreement between the Austrian government and America Movil, which owns 26.8 percent of Telekom Austria, would trigger a mandatory offer for all the carrier’s outstanding shares. Austria owns 28.4 percent of the company, according to data compiled by Bloomberg.

America Movil is betting on a recovery in Europe as growth slows in Mexico and Brazil. A pact with the Austrian government would let America Movil take a friendlier takeover approach than it did last year, when opposition from Royal KPN NV executives led it to drop a bid for the Dutch carrier’s shares.

Telekom Austria’s management is not involved in any talks about a shareholder syndicate, Ametsreiter said.

The company said it will keep the dividend for this year at 5 cents a share.

To contact the reporter on this story: Alexander Weber in Vienna at aweber45@bloomberg.net

To contact the editor responsible for this story: Mariajose Vera at mvera1@bloomberg.net

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