Mexican billionaire Carlos Slim may well have mixed feelings about Telekom Austria’s Q1 results. While no doubt pleased operating expenses are being wrestled down, a sharp drop in sales – particularly at the Austrian incumbent’s domestic mobile business – remains a worry ahead of the group’s expected takeover by Slim’s America Movil.

Mainly through lower handset subsidies and falling interconnection expenses in its domestic market, Telekom Austria managed to cut group operating expenses by 7.8 per cent, year-on-year, to €672.2 million. Savings in Austria topped €56 million.

EBITDA, a measure of operational efficiency, fell 5 per cent – at a group level – to €320 million, but this was a gentler drop than the 11 per cent fall during Q4.

“The numerous remedial measures which we put in place in the first quarter 2014 to improve our earnings power will bear fruit in the further course of the year,” said CEO Hannes Ametsreiter.

Despite the savings, it was not enough to prevent a hefty 26.5 per cent drop in group net income, to €40.8 million, over the same period.

Falling ARPU and the effects of regulation continue to put a squeeze on mobile service revenue in Telekom Austria’s hyper-competitive home market.

Mobile service revenue there slumped 8.8 per cent, to €259.2 million. This was a significant fall given that Telekom Austria’s domestic mobile business accounts for over a quarter of group revenue.

ARPU was down 5.7 per cent, to €15.2.

Market observers note, however, that last year’s merger of smaller rivals T-Mobile and 3 Austria is easing competition and allowing operators to raise prices.

Another encouragement is that mobile churn – while still relatively high at a monthly average of 4.8 per cent through the quarter – was down slightly from the 5.1 per cent registered in Q1 2013.

At a group level, Q1 turnover shrank 7 per cent, year-on-year, to €975.9 million. Telekom Austria re-iterated its full-year guidance of a 3 per cent drop in sales.

Group capital expenditure during 2014 is expected to remain stable at around €700 million.