Internet, Lithuania, Markets and Companies, Technology, Telecomunications

Due to redundancy charge of 7.6 million litas EBITDA for the first three months of 2014 went down by 11.7% and amounted to 66 million litas. EBITDA for the first quarter of 2013 amounted to 74 million litas. EBITDA margin for the first quarter of 2014 amounted to 38.8%, while a year ago it was 40.8%. Over the year EBITDA excluding non-recurring items declined by just 1.6% while EBITDA margin excluding non-recurring items stood at 43.2%.

Profit before income tax in the first three months of 2014 went down by 16.5% and amounted to 35 million litas. A year ago it was 42 million litas. The profit before income tax excluding non-recurring items was by 1.5% higher that during the first quarter of 2013. Profit for the period amounted to 32 million litas, a decrease by 17.1% over the profit of 38 million litas for the same period a year ago. The profit margin was 18.7%, while a year ago it was 20.9%. Profit for the period excluding non-recurring items was by 2.6% higher than in January-March 2013 and profit margin excluding non-recurring items was 23.2%.

The management's comment on financial results for the three months period of 2014: "The year 2014 the company started with the number of changes: revision of its organizational structure, simplifying brand portfolio, upgrading of existing and launch of new services. This year it was decided to consolidate the company's brands into one TEO brand and, at the same time, offer new generation services, which are more integrated as well as easier and more intuitive to use. With a single name, the company intends to market its services more clearly to its private and business customers. In March television GALA became TEO television and from April Internet ZEBRA is called TEO Internet. (..) Over the year, in terms of revenue residential customers' segment remained almost stable, while business customers’ segment declined by 6.3 per cent. Major negative impact on revenue was from operators’ business (decrease by 22.6%) due to lower volume of low margin international transit.

In 2014, TEO started its efficiency improvement program and revision of its organizational structure. Up to 130 employees of TEO Group terminated their employment contracts during the first quarter of 2014. The company incurred a non-recurring redundancy cost of 7.6 million litas, which had a negative impact on the company's results for this quarter. Nevertheless, the company will save up to eight million litas annually due to reduced number of employees. In March, the Board approved a new organizational structure of the company which will come into force in June 2014. We believe that new organization will make it possible to understand better and respond faster to the customers' needs and to create solutions and services that are easier to use. In the new Company structure the service development and sales units will be replaced by two new units: Business-to-Consumer (B2C) and Business-to-Business (B2B). The new organization will reduce the number of layers and will increase the span of control."