Digital Transformation We Are Driving the Change Towards More Economic Efficiency, Equal Social Opportunities, and Resource Preservation
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Combined Annual Report 2018 Digital Transformation We are driving the change towards more economic efficiency, equal social opportunities, and resource preservation. Key figures of the A1 Telekom Austria Group 2018 2017 Change in % Customer indicators (in '000) RGUs 1) 6,260.9 6,036.5 3.7 of which broadband RGUs 2,589.2 2,529.0 2.4 of which TV RGUs 1,646.9 1,421.4 15.9 Mobile communication customers 20,999.6 20,657.7 1.7 Key financial data (in EUR mn) Total revenues 4,466.4 4,382.5 1.9 EBITDA 2) 1,380.6 1,397.3 –1.2 EBITDA margin (in %) 30.9 31.9 – EBITDA adjusted 3) 1,408.2 1,359.4 3.6 EBITDA adjusted margin (in %) 31.5 31.0 – Operating income 424.1 443.9 –4.5 Net result 242.7 345.5 –29.7 Free cash flow 4) 384.2 384.7 – 0.1 Net cash flow from operating activities 1,232.3 1,174.8 4.9 Capital expenditures5) 771.0 736.9 4.6 Net debt 2,718.4 2,331.8 16.6 Equity 2,406.0 2,937.4 –18.1 Equity ratio (in %) 32.6 38.5 – Net debt to EBITDA 2.0× 1.7× – Net gearing ratio 1.13 0.79 – Return on invested capital – ROIC 6) (in %) 6.7 6.9 – Return on equity – ROE 7) (in %) 9.1 12.1 – Key share figures (in EUR) Earnings per share 0.36 0.48 –24.8 Free cash flow per share 0.58 0.58 – 0.1 Market capitalisation as of December 31 (in EUR bn) 4.4 5.1 –14.1 Share price as of December 31 6.64 7.72 –14.1 Share price high 8.42 8.28 – Share price low 6.18 5.50 – Dividend per dividend-bearing share 0.218) 0.20 5.0 Employee indicators Full-time equivalents, as of December 31 18,705 18,957 –1.3 Share of female employees (in %) 40 38 – Share of female executives (in %) 35 36 – Environmental indicators/Sustainability indicators Total energy consumption (in MWh) 9) 810,942 780,742 3.9 Energy efficiency indicator (in MWh/terabyte) 0.18 0.24 –23.9 Direct scope 1 CO₂-emissions (in t) 10) 27,0 0 3 27, 8 67 –3.1 Indirect scope 2 CO₂-emissions market-based (in t) 11) 217, 310 189,599 14.6 Share of renewable energy in electricity (in %) 62 63 – Recycling rate (in %) 69 72 – Media literacy training Free media literacy trainings 1,984 1,947 1.9 Participations in free media literacy training 30,084 28,817 4.4 Financial figures according to IAS 18. Key figures were impacted by brand value amortization in the years 2017 (EUR 121.8 mn) and 2018 (EUR 197.9 mn). 1) Revenue generating units 2) EBITDA is defined as the net result excluding financial result, income tax, depreciation and amortisation and, if applicable, impairment losses or reversal of impairments. 3) Adjusted for the one-off and FX effects, restructuring charges and M&A effects. 4) Cash flow from operating activities less capital expenditures paid and interest paid, plus proceeds from the sale of property, plant and equipment. 5) Excluding asset retirement obligations. 6) Total return on invested capital, calculated by net operating profit after tax (NOPAT) divided by the average capital invested. 7) Ratio of net result to the average equity employed. 8) Proposal to the Annual General Meeting, which will take place on May 29, 2019. 9) Due to improved data quality, the key figure “Total energy consumption” was adjusted for the year 2017. 10) Direct emissions from combustion of fossil fuels without cooling agents. CO₂ in CO₂ equivalents excluding compensation. 11) Indirect emissions from electric energy and district heating. CO₂ in CO₂ equivalents excluding compensation. A1 TELEKOM AUSTRIA GROUP — COMBINED ANNUAL REPORT 2018 2 A1 Telekom Austria Group Total revenues EBITDA by by segment segment in EUR mn / in 2018 in EUR mn / in 2018 Republic of Serbia Republic of Macedonia Republic of Serbia Republic of Macedonia 249.2 119.2 47.0 35.4 Slovenia Slovenia 214.1 38.1 Belarus Belarus 389.3 163.8 Croatia Croatia Revenues EBITDA 444.5 2018 114.1 2018 4,466.4 1,380.6 Bulgaria Austria Bulgaria Austria 446.2 2,658.0 138.0 905.7 Corporate & Other, eliminations: –53.9 Corporate & Other, eliminations –61.6 Mobile communication customers Total energy consumption and RGUs by segment in MWh / in 2018 in '000 / as of December 31, 2018 Fuels3) 5,363.7 Austria District heating 74,213 3,327.7 39,238 Heating fuels2) 3,934.3 18,216 Bulgaria 1,029.0 1,833.3 Electricity1) Croatia 681.8 679,275 4,873.0 Belarus 657.3 697.1 Slovenia 182.1 Total energy consumption Republic 2,195.2 810,942 of Serbia n. a. Republic of 1,056.5 1) Purchased and in-house production as well as diesel Macedonia 383.1 for emergency generators 2) Includes oil and gas 3) Includes diesel, petrol, CNG, LPG and natural gas without Mobile RGUs diesel for emergency generators As of mid-February 2019, the Republic of Macedonia officially changed its name to the Republic of North Macedonia. For the purposes of comparability (consolidated Corporate Governance Report, Group Management Report, Consolidated Financial Statements, Consolidated Non Financial Report, which were signed before the name change), this has not been taken into account in this report. A1 TELEKOM AUSTRIA GROUP — COMBINED ANNUAL REPORT 2018 3 A1 Telekom Austria Group overview As a leading telecommunications provider in the CEE region, the A1 Telekom Austria Group provides its approximately 25 million customers in its seven core markets with products and services in areas including voice telephony, broadband Internet, multimedia services, data and IT solutions, wholesale, payment solutions and digital services. In the Group’s six convergent markets, customers also benefit from tailor-made product combinations comprising fixed-line and mobile services. The group company A1 Digital advises companies in the core markets of A1 Telekom Austria Group as well as in Germany and Switzerland in questions of digital transformation with a focus on industry-specific applications in the field of Internet of Things (IoT), cloud-based products for the modern workplace as well as security solutions. Republic Republic of Austria Bulgaria Croatia Belarus Slovenia of Serbia Macedonia Mobile communication 5,363.7 3,934.3 1,833.3 4,873.0 697,1 2,195.2 1,056.5 subscribers (in '000) Market share mobile (in %) 37.8 39.4 36.5 42.5 28.1 23.8 48.9 Mobile market position #1 #1 #2 #2 #2 #3 #1 RGUs (in '000) 3,327.7 1,029.0 681.8 657.3 182.1 – 383.1 Market share fixed-line 55.6 22.8 25.5 7.6 12.1 – 29.5 broadband (in %) Convergent since 2007 2011 2011 2016 2015 – 2014 Products Mobile Fixed-line Convergent products Internet TV (IPTV, Sat, DVBT) OTT TV OTT Music Smart Home Gaming Data and IT solutions Value-added services Wholesale offerings Handsets Mobile payment services 4 Contents A1 Telekom Austria Group overview 4 Preface of the Management Board 6 Reasons to invest 8 Editorial 9 Vision and Strategy 12 Value Chain 17 Sustainable Development Goals 18 A1 Telekom Austria Group: Part of América Móvil 19 Technology and Innovation 20 Data Protection 26 Investor Relations 27 Employees 30 Social and Ecological Responsibility 34 Compliance 38 Report by the Supervisory Board 40 Consolidated Corporate Governance Report 42 Group Management Report 52 Consolidated Financial Statements 82 Consolidated Statements of Comprehensive Income 83 Consolidated Statements of Financial Position 84 Consolidated Statements of Cash Flows 85 Consolidated Statements of Changes in Stockholders’ Equity 86 Notes to the Consolidated Financial Statements 88 Auditor’s Report 146 Consolidated Non Financial Report 150 GRI Content Index 164 Sustainability KPIs 169 Company Contacts 176 Imprint Ownership and publisher: Telekom Austria AG | Corporate Communication: Livia Dandrea-Böhm ([email protected]) | Investor Relations: Susanne Aglas-Reindl ([email protected]) | Group Sustainability: Irene Jakobi ([email protected]) | Project team: Investor Relations: Barbara Jeitler, Martin Stenitzer | Group Communications & Sustainability: Irene Jakobi, Maximilian Rabl, Anna Schwarzbauer | Consolidated Financial Statements: Christa Bachner-Fastl, Anita Gari (Group Accounting and Taxes) with the technical support of FIRE.sys GmbH | Concept, text and project management: A1 Telekom Austria Group | Art direction and design: HammerAlbrecht (Jolanda Buck, Daniel Hammer) | Digital publishing: pagestrip, alice interactive GmbH | Photos (page 9 and 11): iStock | Editorial deadline: February 8, 2019 PREFACE OF THE MANAGEMENT BOARD Actively tapping the potential of digital transformation In the ever-present discussion of the arguments for and and country borders. The promotion and enhancement of against digitalization that has been in progress for some time digital skills (in the spirit of a digital mindset) and internal pro- now in the media, corporations, and in the society, it is impor- cesses enjoy central importance as a result (see “Employees” tant to consider the following: digital transformation has long and “Vision and Strategy”). become an economic and social reality that is rapidly pro- gressing in almost all areas of business and life. Game-chang- ing technologies such as big data & analytics, artificial intel- Value added in the ligence, robotics, augmented reality, and blockchain are increasingly playing a significant role in many sectors and digital customer experience business models (see “Editorial”). As such, the question as a factor for success is far less about the pros and cons, and far more about creating the best possible conditions for digitalization and The A1 Telekom Austria Group presents itself to customers as generating the greatest possible benefit.