* Chunk of 100 mln euro savings to go on handset subsidies
* Potential KPN synergies could strain Vodafone relationship
* Shares fall 0.5 percent
VIENNA, Jan 15 (Reuters) - Telekom Austria plans to save 100 million euros ($134 million) in operating costs this year, said analysts who attended a company meeting with investors on Tuesday.
A large part of the savings are likely to be spent on more generous handset subsidies for customers as the group seeks to attract and keep subscribers in its highly competitive domestic market, the analysts told Reuters.
Despite a recently completed 1.3 billion euro takeover of Orange Austria by Hutchison Whampoa that reduced the number of mobile operators in Austria to three from four, Telekom Austria is expecting little let-up in competition.
Austria’s biggest telecoms company, now 26 percent owned by Carlos Slim’s America Movil, warned last week of a further fall in revenue this year and said that tough conditions would continue to weigh on margins.
In a change of policy, it gave no forecast for earnings before interest, tax, depreciation and amortisation (EBITDA).
Espirito Santo telecoms analyst Andrew Hogley, who attended Tuesday’s capital markets day - which was closed to journalists - said that all of the cost savings are likely to be used for higher handset subsidies.
“At the group level the company remains unwilling to give any targets on EBITDA, which is concerning. They say that they do not want to be limited by being held to a target,” Hogley said.
Telekom Austria shares slipped 0.5 percent to 5.60 euros by 1327 GMT, outperforming the European telecoms index, which fell 1.2 percent.
Austria’s telecoms market remains relatively crowded, with three mobile operators competing for a population of only 8.4 million. All-inclusive deals are available for as little at 7 euros a month.
A major institutional shareholder who attended the meeting, but did not want to be named because he is not authorised to speak to the press, confirmed the 100 million euro savings target and said that half of that figure might remain after higher spending.
Telekom Austria was not immediately reachable for comment.
Analysts said that a search for synergies between Telekom Austria and Dutch KPN, in which Slim also built up a major stake last year, was complicated by an existing relationship with Vodafone that could be jeopardised.
Telekom Austria has a roaming agreement with Vodafone, allowing the operators to connect to each other’s networks at reduced cost, which might be worth more than any synergies with KPN, analysts reported Telekom Austria as saying.