Telekom Austria Earnings Fall as Sales Drop at Home

Telekom Austria AG (TKA), the phone company part-owned by Carlos Slim’s America Movil SAB (AMXL), said first-quarter earnings fell 5 percent after regulatory cuts and lower traffic revenue reduced sales in its home market.

Earnings before interest, taxes, depreciation and amortization dropped to 319.9 million euros ($445 million), as revenue declined 7 percent percent to 975.9 million euros, the Vienna-based company said in a statement today. That compared with the average analyst estimates of Ebitda at 319.6 million-euros on sales of 999.8 million euros, according to data compiled by Bloomberg.

The results were “weak on revenue but solid on Ebitda,” Giles Thorne, an analyst at Jefferies, wrote in a note to clients. “With the impending public takeover offer from America Movil, this feels largely academic for the shares today.”

Telekom Austria’s stock rose 29 percent this year before today as a pact between its two main owners, the Austrian government and America Movil, triggered a mandatory offer to minority shareholders. Rising prices in Telekom Austria’s home market following years of intense competition with units of Deutsche Telekom AG and Hutchison Whampoa Ltd. (13) also contributed to analysts raising recommendations for the company in the past month.

Telekom Austria shares were little changed at 7.12 euros as of 9:13 a.m. in Vienna.

America Movil offered Telekom Austria’s shareholders 7.15 euros a share after it agreed to pool its 26.8 percent stake in the company with the Austrian state holding company, which owns 28.4 percent. The offer is expected for mid-May, Telekom Austria said.

Sales Forecast

The deal hands the Mexico City-based company the operational leadership of Telekom Austria. A capital increase of 1 billion euros, also part of the pact, may open the door for further acquisitions in eastern Europe and lead rating companies to reverse downgrades that followed Austria’s 2 billion-euro spectrum auction last year.

In Austria, sales dropped 9.7 percent in the quarter from a year earlier, as lower traffic revenue and regulatory effects cut mobile service sales.

Telekom Austria confirmed its outlook for sales to decline for a sixth straight year in 2014 as regulations cut roaming prices and economic headwinds persist.

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

To contact the editors responsible for this story: Mariajose Vera at mvera1@bloomberg.net Robert Valpuesta, Mark Beech

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