Telekom Austria sees home profits stabilising after price war

Reuters

* Austrian EBITDA could stabilise next year

* Handset subsidies could be cut

* Capital increase would be needed for acquisitions

BARCELONA, Spain, Nov 20 (Reuters) - Telekom Austria hopes to have stabilised core profits in its fiercelycompetitive domestic market next year through cost cuts and lessgenerous handset discounts, its finance chief said on Wednesday.

Hans Tschuden told the annual Morgan Stanley Technology,Media and Telecoms conference in Barcelona that an end to pricewars between Austria's three mobile operators was now in sightfollowing an unexpectedly expensive frequency auction that hurtall three, and that Telekom Austria might stop subsidisingphones so heavily.

"With measures of cost-cutting, reviews of subsidy policy,we should be able - maybe, if everything turns out fine - to seea stabilisation of EBITDA (earnings before interest, tax,depreciation and amortisation) in Austria," Tschuden said.

"There is now a more rational approach to the market thanthere was before," he said.

Austria, where the price of the cheapest all-inclusivemonthly packages available recently rose to 10 euros ($13.46)from 7.50 euros, accounted for 59 percent of group EBITDA in thefirst nine months of 2013, down 14 percent from a year earlier.

Tschuden's comments echoed those made by Deutsche Telekom unit T-Mobile Austria's chief executive to Reuters inan interview earlier this month, as the Austrian operatorsreconsider their strategies after the 2 billion-euro auction.

The country's smallest operator, Hutchison Whampoa's Hutchison 3G Austria, came off worst last month,securing none of the most valuable 800 megahertz spectrum.

However, early this year H3G completed its 1.3 billion-eurodeal to acquire the country's third-largest operator, OrangeAustria from its French owner.

"Maybe the worst is over in the Austrian market," Tschudensaid, adding that tariff increases Telekom Austria had imposedjust before the Christmas season should send "a strong signal tothe market".

Telekom Austria is expected to issue a bond soon to helpcover the cost of the auction, but will have no headroom leftshould it want to make a major acquisition.

It was forced to pull out of the bidding process for cableoperator SBB Serbia in October because of the then-unknownauction costs.

"Clearly, M&A would require a capital increase," Tschudensaid. "Currently, we have no projects ongoing."

A future capital increase is seen as a potential opportunityfor Carlos Slim's America Movil to increase its 23percent stake in Telekom Austria without angering thegovernment, which holds 28 percent.

America Movil, reeling from a rejection of its takeoveroffer for Dutch group KPN, where it is already thesingle biggest shareholder, said last week it did not plan tomake a hostile bid for Telekom Austria.

Tschuden said: "America Movil will do any more only alignedwith the government and not against the government."

He added: "The government wants to have influence on thecompany but doesn't need to be the biggest shareholder,necessarily."

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