Telekom Austria 3Q 20 - Strong underlying trends outweigh roaming and FX effects

Results wrap-up: 3Q 20 results of Telekom Austria surprised positively beating RCB and consensus estimates by roughly 5% on operating earnings level (EBITDA adj.). We positively highlight that especially higher revenues and cost saving effects compensated lower roaming revenues and negative FX trends in the period under review. That said, Telekom Austria EBITDA adj. unexpectedly grew by 0.5% yoy to EUR 463 mn vs. RCB and consensus expectations of EUR 442 mn. The better than expected performance especially relates to 1) higher Austrian equipment revenues (+7.0% yoy), 2) better Croatian fixed and mobile revenues trends (only -2.7% yoy vs. RCB est. of -11.3% yoy), 3) higher Slovenian fixed line revenues (+13.8%) and 4) higher than modelled cost saving effects (the company mentioned workforce costs, product related costs, marketing expenses, travel and training costs). The negative roaming impact from less holiday travel following Covid-19 restrictions was numbered at approx. 5% of revenues or EUR 60 mn. Negative FX effects, mainly as a consequence of the devaluation of the BYN vs. the EUR (roughly 22% yoy in 3Q 20) and to a lesser extend from weakening HRK vs. EUR (1.7% yoy in 3Q 20) amounted to EUR 30 mn on revenues and EUR 13 mn on EBITDA. Thus, we qualify the underlying operating performance as very robust (Austrian ARPU up 3.7% yoy despite lower roaming revenues, Austrian ARPL +4.4% yoy, Bulgarian ARPU +4.1% yoy, relatively low churn of only 1.0-1.5% in most markets, EBITDA, Austrian cost base -3.4% yoy, flat costs in CEE), . Excluding negative FX effects revenues increased by 1.7% yoy and EBITDA by 4.3% yoy. Restructuring charges for Austrian workforce reductions (civil servants) amounted to EUR 21 mn, in line with our model assumptions.