Telekom Austria AG

Overview Key strengths Key risks Leading telecommunications operator in Austria, with a fixed-line broadband revenue market share of around 58%. Fierce competition in the domestic mobile business from Hutchison Drei, T-Mobile, and mobile virtual network operators (MVNOs), as well as in several Central and Eastern Europe (CEE) markets. Favorable domestic frequency holdings, with about half of the total spectrum available in Austria. Substantial capital expenditure (capex) needed to scale up the fixed-network rollout in Austria, given the relatively low coverage for high-speed broadband. Supportive and prudent financial policy which we expect will lead to S&P Global Ratings-adjusted leverage comfortably below 2.0x. Limited scale compared with peers that have greater diversification, such as Deutsche Telekom, Orange, and Vodafone. Diversification and growth

...We expect mobile service revenues, ICT solutions, and upgrades to fiber for fixed customers will be key growth drivers for Telekom Austria. Following several years of investing in its 5G network, we expect it will be able to monetize this by raising its average revenue per user (ARPU) for most of its mobile markets (apart from in Slovenia where market conditions are difficult). We also expect the company will focus on selling new value-added solutions to its B2B customers through its Solution segments--likely a mix of in-house developed solutions and on- selling partnerships with technology companies. We foresee further growth coming from the ongoing fiber rollout, particularly in Austria, leading to a gradual shift toward higher speed offerings, for which the company should be able to charge a premium. Capital expenditure (capex) is being directed toward improving capacity and fixed rollout as 5G coverage approaches 100% in Telekom Austria's main markets. We expect capex to shift from...

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