While the sustained migration of Fixed Net voice customers to the Mobile Communication segment has been the main challenge for several years, mobile broadband continues to make steady inroads into the market for internet access. However, following the introduction of attractive product bundles, line loss decelerated significantly during recent quarters while the decline of minutes from the Fixed net continues to lead to a loss of revenues. Against this background the Fixed Net segment continues to focus on the protection of cash flows by means of a market-oriented product portfolio and attractive pricing schemes as well as a comprehensive cost-cutting program.
The Mobile Communication segment continued to show subscriber growth both in Austria and in its international markets. Austria is regarded as a highly developed mobile communications market characterized by fierce competition and persistent price pressure. The international operations of the Telekom Austria Group still offer untapped potential in terms of contract customers and innovative data products but due to the economic downturn the growth initially expected has not materialized. Furthermore fierce competition and the current difficult climate in these markets led to price cuts and declining average revenues per user (ARPU).
Regulation remains an important external factor affecting the conditions in nearly all markets primarily impacting roaming tariffs and termination charges. On July 1, 2009, the second round of roaming regulation took effect mandating a significant reduction of roaming prices. Furthermore lower usage due to the current economic environment also impacts roaming revenues.
Velcom in Belarus continues to be impacted by an ongoing devaluation of the Belarusian Ruble. Since the beginning of the year the Belarusian Ruble has devaluated by 31% against the Euro. The counter-measures adopted to mitigate the negative impact include a tariff increase effective as of mid-February 2009 as well as rebalancing of costs based on the local currency.
The Management does not expect a near term recovery of the macro-economic environment in Eastern and South-Eastern Europe and consequently expects the difficult market environment to prevail also in 2010.