Annual Financial Report 2019 According to § 124 Para 1 Stock Exchange Act
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Annual Financial Report 2019 according to § 124 Para 1 Stock Exchange Act The following documents are translations from the original German versions, which are solely valid. Table of Contents A1 Telekom Austria Group Group Management Report 3 Consolidated Financial Statements 32 Auditor’s Report 96 Declaration of the Management Board 101 Financial Statements Of Telekom Austria AG Financial Statements 102 Management Report 117 Auditor’s Report 129 Declaration of the Management Board 133 Supervisory Board Report 134 Consolidated Non-Financial Report According to § 267a UGB 136 Consolidated Corporate Governance Report 147 A1 TELEKOM AUSTRIA GROUP — ANNUAL FINANCIAL REPORT 2019 2 GROUP MANAGEMENT REPORT Group Management Report General economic environment Industry trends and competition Economic momentum in the euro zone weakened in 2019, In the year under review, the relevant markets for A1 Telekom while the CEE region as a whole continued to enjoy solid Austria Group were again characterized by a competitive growth. In a forecast published in November of the year under environment in both the fixed-line and mobile communications review, the European Commission estimated that economic markets. One example of this can be seen in the no-frills seg- growth in the European Union would amount to 1.4 % in both ment in Austria, where there was sustained pressure on prices 2019 and 2020. Austria saw a tangible year-on-year slowdown due to the aggressive pricing policy of mobile virtual network in economic growth in the 2019 year under review. In the CEE operators (MVNOs). Furthermore, regulatory provisions countries that are relevant for the A1 Telekom Group, Bulgaria, continued to have an adverse effect on revenues and earnings. Croatia, Serbia, and North Macedonia continued to report In particular, earnings for the year under review were impacted solid growth rates, while momentum in Belarus and Slovenia by the EU regulation on international calls, which came into slowed significantly. force on May 15, 2019 and requires a reduction in surcharges for international calls. At its interest rate meeting in early September 2019, the ECB adopted a package of measures aimed at loosening monetary A1 Telekom Austria Group is countering this challenging policy. This included cutting the deposit rate from –0.4 % to environment by systematically implementing its convergence –0.5 % and resuming its bond purchase program. While the strategy and adopting a clear focus on high-value customers, ECB kept its key interest rate unchanged at 0.00 % during innovative products and services, as well as through strict the year under review, the US Federal Reserve lowered its key cost management. The harmonization of the brands within interest rate from 2.25–2.50 % to 1.50–1.75 % in three stages A1 Telekom Austria Group that was resolved in 2017 contin- in June, September, and October 2019. ued in 2019 with the successful brand launch in Belarus and North Macedonia, and will be completed in 2020 with the rebranding in Serbia. In Austria, A1 Telekom Austria Group offers a comprehensive and convergent product portfolio comprising both fixed-line and mobile communications solutions. The latest market Development of real GDP in the markets report issued by the regulatory authority, which tracked the of A1 Telekom Austria Group (in %) 1) most recent market data in Austria up to the end of the second quarter of 2019, describes the following average trends 2018 2019e 2020e across all operators: 2) Austria 2.4 1.5 1.4 Bulgaria 3.1 3.6 3.0 ▸ The number of SIM cards (incl. M2M) increased by 11.0 % Croatia 2.6 2.9 2.6 year-on-year, from 15.7 million in the second quarter of Belarus 3.0 1.5 0.3 2018 to 17.4 million in the second quarter of 2019. As Slovenia 4.1 2.6 2.7 previously, this trend was driven in particular by smartphone Serbia 4.4 3.2 3.8 users, which saw growth of 6.6 % to more than 5.8 million, North Macedonia 2.7 3.2 3.2 while the number of mobile broadband connections also rose by 1.9 %. Total mobile retail revenues increased by Sources: IMF for Belarus; European Commission for all 1.9 % in the same period. other countries ▸ The chart below shows the 2018 price basket for 5 GB of data, 100 minutes of free calls and 140 SMS messages in mobile broadband for selected industrialized nations in euro, adjusted for purchasing power. These data show that mobile broadband prices in Austria, adjusted for purchasing power, are among the lowest in Europe and significantly below the EU average. 3) 1) Sources: European Union, Austria, Bulgaria, Croatia, Slovenia, Serbia, and North Macedonia: European Commission https://ec.europa.eu/info/sites/info/ files/economy-finance/ip115_en_0.pdf, page 197; Belarus: IMF https://www.imf.org/en/Publications/WEO/Issues/2019/10/01/world-economic-outlook- october-2019, page 151 2) https://www.rtr.at/de/inf/internet-monitor-q22019-daten 3) https://www.rtr.at/de/inf/StudieTKWirtschaft2019/20190628_Die_ökonomische_Bedeutung_der_Telekommunikationswirtschaft_in_Österreich_Studie_ Endbericht.pdf A1 TELEKOM AUSTRIA GROUP — ANNUAL FINANCIAL REPORT 2019 3 GROUP MANAGEMENT REPORT Development of mobile broadband price basket 54.5 53.5 in international comparison, 2018 53.3 in Euro PPP 50.1 44.7 44.2 40.2 40.0 37.5 31.7 29.2 29.1 27.1 27.1 25.5 24.1 23.1 21.6 20.6 20.3 19.9 19.3 17.3 15.8 15.1 12.6 12.5 12.2 11.2 10.4 10.3 9.4 8.9 7.1 3.6 TR IT SI FR IS PL AT EE LU RO DK UK LT FI HR SE NL LV DE BE EU28 PT IE NO USA KR ES JP UK CZ MT HU BG CY SK Note: Price basket for 5 GB data volume, 100 free minutes and 140 SMS; PPP (purchasing power parity) Source: RTR ▸ In the second quarter of 2019, the broadband market had ▸ While NGA (next generation access) coverage in Austria has 10.5 million mobile and fixed-line broadband connections. increased steadily over recent years and is now in excess This represented an increase of 3.9 % on the previous year of 80 %, only around 40 % of customers were using products and was driven by smartphone tariffs and mobile broad- with a speed of more than 30 Mbit/s at the end of 2018, band, whereas the fixed-line market remained stable. although there was a clear trend towards higher bandwidths ▸ Rapid growth in the data volume in mobile telecommunica- (2017: 30 %). 4) tions as a whole, which consists of pure mobile broadband as well as smartphone users according to the definition According to Statistics Austria, the proportion of Austrian of the regulatory authority, also continued in the second households with broadband connections was 89 % in 2019 quarter of 2019 with a year-on-year increase of 33.5 %. The (2018: 88 %), while the figure for companies was 98 % (2018: data volume transferred via fixed-line broadband also rose 99 %). 5) by 22.6 %, with a ratio of mobile to fixed-line data of around 1:2. The average monthly data volume per user saw a clear In Bulgaria, the trend seen in recent years continued, with growth trend in the same period, amounting to 122.9 GB for the Internet penetration rate across all households increasing fixed-line broadband (Q2 2018: 99.9 GB) and 67.9 GB for to 75.1 % in 2019 compared to 72.1 % in the previous year. mobile data tariffs (Q2 2018: 51.0 GB). While fixed-line penetration remained stable at 57.8 % (2018: 57.9 %), mobile penetration continued to rise significantly to 64.0 % (2018: 58.8 %). 6) 4) Broadband strategy 2030, https://www.bmvit.gv.at/themen/telekommunikation/breitband/strategie.html; pages 9 and 12 5) https://www.statistik.at/web_de/statistiken/energie_umwelt_innovation_mobilitaet/informationsgesellschaft/index.html 6) https://www.nsi.bg/sites/default/files/files/pressreleases/ICT_hh2019_en_LDOBNRL.pdf A1 TELEKOM AUSTRIA GROUP — ANNUAL FINANCIAL REPORT 2019 4 GROUP MANAGEMENT REPORT The number of broadband connections in Croatia increased by 3.1 % year-on-year to 4.8 million in the third quarter of 2019 Upload and download volumes on the back of both mobile and fixed-line broadband. There in Austria was particularly strong growth in fiber connections (+30.8 %) Volume in Terabytes 7) and mobile Wi-Fi routers (+29.6 %). 947,500 905,600 The ICT market in Belarus has developed strongly in recent years, leading to a steady rise in the number of Internet 855,600 customers, while the number of mobile network users also 788,400 returned to growth of 1.8 % in 2018 after having stagnated 788,500 in the previous years. At the end of 2018, the proportion of 738,600 households with Internet access was 79.1 % (2017: 74.4%). 8) 713,900 In Slovenia, the Internet penetration rate increased from 86.7 % in the previous year to 89.0 % in the year under review. While the number of mobile broadband connections (including smartphone tariffs) rose by a further 2.0 % year-on-year, the number of fixed-line broadband connections declined by 9) 459,500 1.8 %. 458,900 433,600 In Serbia, the increase in the number of Internet connections 369,700 346,200 346,200 continued, with 80.1 % of households having Internet access 344.300 in 2019 (2018: 72.9 %). 93.7 % of all Serbian households 310,400 now also own mobile telephones (2018: 93.0 %) and 73.1 % have a computer (2018: 72. 1%). 10) According to the Statistical Office of North Macedonia, 81.8 % of all households in the country had Internet access in the first quarter of 2019 (Q1 2018: 79.3 %).