October 17, 2012 / 1:00 PM / 5 years ago

T-Mobile Austria aims to reverse sales decline by 2015

4 Min Read

* D.Telekom unit plans price rises, cost cuts

* New CEO Bierwirth says market is broken

* Top execs to spend 2 days a week developing new strategy

* Strategy to include new tariffs giving away less free data

By Georgina Prodhan

VIENNA, Oct 17 (Reuters) - T-Mobile Austria plans a strategy of rising prices and cost cuts, the unit's new chief executive said on Wednesday, as the group tackles the tough competition and price pressures which are endemic in the sector.

The company, a Deutsche Telekom AG unit which ranks as Austria's second-biggest mobile provider after Telekom Austria AG, saw its sales fall 6 percent and core profit drop 11 percent last year despite an 8 percent increase in customer numbers to 4.1 million.

"I see only that the market here is broken," said T-Mobile Austria CEO Andreas Bierwirth, a former CEO of Austrian Airlines, which has been bought by Lufthansa. "We must turn the negative spiral we are in into a positive spiral."

The trend of rising mobile data consumption coupled with falling prices is particularly acute in Austria, where four operators compete in a population of just 8.4 million, but is afflicting the whole telecoms sector.

T-Mobile Austria's parent Deutsche Telekom, which is merging its U.S. unit with MetroPCS in a bid to win scale without massive new investments, has said it will have to cut more jobs to halt a broader slide in European revenue.

And Sweden-based TeliaSonera said earlier it would shed thousands of jobs as part of a cost-cutting plan and warned of stagnation until companies find a way to profit from surging smartphone and tablet data traffic.

Bierwirth said most of the company's top management, up to two dozen people, would spend two days a week until the end of January developing a new strategy, which would include new tariffs that would give away less data usage for free.

"We will naturally continue to take part in price competition because we have to keep our market share, but what we want to do in the field of data is to match the prices more closely to the volumes," he said.

He said the company would cut annual costs by 15 percent, or close to 100 million euros, by 2015, with the savings reinvested in the company.

Greater Efficiency

Bierwirth added that most cuts would be achieved by greater efficiency and infrastructure cooperation with rivals, and would involve only "selective" job losses.

He said his company aimed to reduce its sales decline in 2013, reach stability in 2014 and rebound in 2015. Profits should stop falling from next year.

T-Mobile Austria made adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) of 253 million euros last year on sales of 924 million.

To combat the downward trend in which all-inclusive packages are on offer for as little at 7.50 euros ($9.77) per month in Austria, the country's two smallest mobile companies - France Telecom SA's Orange and Hutchison's H3G - are trying to merge.

European competition regulators are examining H3G's agreed 1.3 billion euro acquisition of its larger rival and are due to approve or reject it by the end of November.

Orange Austria said on Wednesday it had won 100,000 new customers in the first nine months of the year and improved its core profit by 8 percent, thanks largely to SIM card-only deals in which it does not subsidise handsets for customers.

Sales fell 4 percent to 362 million euros but EBITDA rose to 124 million euros and the number of customers rose to 2.4 million. Orange Austria said a drive for better customer service had helped it retain subscribers. ($1 = 0.7679 euros) (Editing by David Holmes)

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