VIENNA, Austria, February 24, 2010 /PRNewswire-FirstCall/ -- - Mobile Communication customer base increases by 6.4% to 18.9 million customers despite a difficult economic environment - Increase in access lines in the Fixed Net segment during 4Q 09 for the first time in more than a decade - Revenues decline of 7.1% to EUR 4.8 billion driven by lower Fixed Net revenues, FX movements and lower prices in Mobile Communication - Successful cost reduction in both segments reduces operating expenses and softens impact of lower revenues on EBITDA - 2009 target for operating free cash flow of EUR 1.1 billion achieved as Capex reduction compensates lower EBITDA on like-for-like basis - Based on full year results 2009, Management Board proposes dividend of EUR 0.75 per share - Reiteration of outlook for 2010 excluding the impact of the merger of domestic operations - Merger of domestic operations creates considerable customer advantage and meets increasing demand for convergent products % % in EUR million 4Q 09 4Q 08 change FY 2009 FY 2008 change Revenues 1,181.5 1,306.5 -9.6% 4,802.0 5,170.3 -7.1% EBITDA 399.4 -211.6 n.a. 1,794.0 1,280.8 40.1% Operating income 120.0 -515.7 n.a. 343.9 120.7 184.9% Net income 63.6 -437.7 n.a. 94.9 -48.8 n.a. Earnings per share (in EUR) 0.14 -0.99 n.a. 0.22 -0.11 n.a. Free cash flow per share (in EUR) 0.30 0.42 -29.2% 1.52 1.71 -10.9% Capital expenditures 291.6 273.3 6.7% 711.4 807.6 -11.9% Dec. Dec. % in EUR million 31, 09 31, 08 change Net debt 3,614.8 3,993.3 -9.5% Net debt/EBITDA (12 months) excluding restructuring program in 2008 2.0x 2.1x Reported financial figures include impairment charges of EUR 352.0 million for FY 2009 and restructuring charges of EUR 632.1 million for 4Q 08 and FY 2008. All financial figures are based on IFRS; if not stated otherwise, all comparisons are given year-on-year. EBITDA is defined as net income excluding interest, income taxes, depreciation and amortization, impairment charges, equity in earnings of affiliates, other financial results and foreign exchange differences. This equals operating income before depreciation, amortization and impairment charges. Group Review Telekom Austria Group (VSE: TKA, OTC US: TKAGY) today announced its results for the full year 2009 and the fourth quarter ending December 31, 2009. "Against a tough economic backdrop, the Group showed a commendable performance in 2009. Throughout the year we focussed on effective cost management in both segments and reduced operative expenses. This enabled us to soften the impact of lower revenues on EBITDA. In addition we managed to reduce net debt by over 9%. In 2009, we achieved a number of improvements: In Fixed Net, following the introduction of attractive product bundles, line-loss decelerated significantly in recent quarters, and we even posted positive quarterly net additions in 4Q 09 for the first time in more than ten years. Elsewhere, the Mobile Communication segment proved once again successful at growing its subscriber base and now serves over 18.9 million customers. Given that we expect a sustained difficult environment in the markets we operate in during 2010, we will continue to improve our offering in order to strengthen our competitive advantage. We further confirm a minimum dividend floor of EUR 0.75 per share", said Hannes Ametsreiter, CEO Telekom Austria Group. Summary Year-to-date comparison: During the full year of 2009 revenues decreased by 7.1% to EUR 4,802.0 million driven by lower revenues in both segments. Fixed Net revenues declined due to a drop in voice volumes. Moreover, revenues from subsidiaries in the Czech Republic, in Slovakia and in Poland, which were sold during 2008 were included in full year revenues for that year. Mobile Communication revenues decreased mainly due to foreign currency translation. Furthermore, revenues were impacted by lower prices due to fierce competition as well as lower interconnection and roaming tariffs. Operating results of both financial years were impacted by non-recurring items. In 3Q 09, operating income and net income included the impact of impairment charges of EUR 352.0 million resulting from the goodwill related to the acquisitions of Velcom in Belarus and the license of Vip mobile in the Republic of Serbia. While in 4Q 08, reported EBITDA, operating income and net income included the impact of expenses for the restructuring program in the amount of EUR 632.1 million. To facilitate year-to-date comparison the following analysis also shows the comparison on a like-for-like basis. Strict cost management in both segments reduced operating expenses by EUR 228.9 million, excluding the restructuring charges in 2008. This led to an EBITDA of EUR 1,794.0 million in 2009 and a decline of 6.2% compared to the EBITDA in 2008 on a like-for-like basis. The reported EBITDA amounted to EUR 1,280.8 million in 2008. Operating income declined by 7.6% to EUR 695.9 million in 2009 compared to the previous year on a like-for-like basis. Reported operating income amounted to EUR 343.9 million in 2009 compared to EUR 120.7 million in 2008. Net income decreased from EUR 442.8 million in 2008 to EUR 350.1 million in 2009 on a like-for-like basis. Reported net income was EUR 94.9 million in 2009 compared to a loss of EUR 48.8 million in 2008. Capital expenditures decreased by 11.9% to EUR 711.4 million mainly driven by lower investments in the Mobile Communication segment. Free cash flow declined by 10.9% in line with the development of free cash flow per share which decreased to EUR 1.52. Deleveraging continued with net debt decreasing by 9.5% to EUR 3,614.8 million by the end of December 2009 compared to year-end 2008. Net debt to EBITDA (last 12 months) was 2.0x at year-end 2009. Quarterly comparison: In 4Q 09 revenues declined by 9.6% to EUR 1,181.5 million primarily as a result of lower contributions from the Mobile Communication segment. In 4Q 08, reported EBITDA, operating income and net income included the impact of restructuring charges in the amount of EUR 632.1 million. To facilitate quarterly comparison, following analysis also shows like-for-like comparison. Reductions in like-for-like operating expenses by 9.5% mitigated the impact of lower revenues and resulted in an EBITDA of EUR 399.4 million in 4Q 09 compared to an EBITDA of EUR 420.5 million in 4Q 08. Reported EBITDA was negative in the amount of EUR 211.6 million in 4Q 08. On a like-for-like basis, operating income improved from EUR 116.4 million in 4Q 08 to EUR 120.0 million in 4Q 09 due to lower depreciation and amortization charges. Reported results showed an operating loss of EUR 515.7 million in 4Q 08. While net income was EUR 63.6 million in 4Q 09 compared to a net income of EUR 53.9 million in 4Q 08 on a like-for-like comparison, a reported net loss of EUR 437.7 million was shown in 4Q 08. Capital expenditures increased by 6.7% to EUR 291.6 million in 4Q 09 compared to EUR 273.3 million in 4Q 08 as a result of an increase in capital expenditures for tangible assets in the Fixed Net segment, which was partly offset by a decline in capital expenditures in the Mobile Communication segment. The increase in capital expenditures resulted in a free cash flow of EUR 130.9 million in 4Q 09 compared to a free cash flow of EUR 184.8 million in 4Q 08. Free cash flow per share was EUR 0.30 in 4Q 09 compared to EUR 0.42 in 4Q 08. Market Environment 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. Moreover, it resulted in positive quarterly net additions for the first time in more than a decade in 4Q 09. Against this background the Fixed Net segment continues to focus on the protection of cash flows by offering a market-oriented product portfolio and attractive pricing schemes as well as a comprehensive cost-cutting program. The Mobile Communication segment continued to show growing numbers of subscribers 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. However, due to the economic downturn the growth previously expected has not yet fully materialized. Furthermore, strong competition and the continued difficult economic situation in these markets have led to price cuts and declining average revenues per user (ARPU). Regulation remains an important external factor impacting the conditions in nearly all markets primarily affecting roaming tariffs and termination charges. On July 1, 2009, the second round of roaming regulation took effect causing a significant reduction of roaming prices. Furthermore, lower usage due to the current economic environment also impacts roaming revenues. In addition, the introduction of taxes levied on selected mobile communication services in Croatia and the Republic of Serbia affected the results. Velcom based in Belarus was impacted by a devaluation of the Belarus Ruble. During 2009 the Belarus Ruble has devalued by 33% against the Euro. The counter-measures adopted to mitigate the negative effect include a tariff increase, effective as of mid-February 2009, as well as rebalancing of costs based in the local currency. The Management does not expect recovery of the economic environment in Eastern and South-Eastern Europe in the near term and consequently anticipates the difficult market environment to prevail in 2010. Outlook 2010: 75 Cents DPS Floor Reiterated until 2012 Telekom Austria Group expects the challenging environment to persist in 2010. This environment is characterized by the concurrence of several negative external effects with the impact of weak economies. The negative external effects mainly encompass ongoing fixed-to-mobile substitution in Austria, continued price pressure in Telekom Austria Group's major markets and the effect from regulatory-induced lower roaming prices as well as reduced mobile termination rates in Austria, Bulgaria, Croatia and Slovenia. Furthermore, the introduction of taxes levied on selected mobile communication services in Croatia and the Republic of Serbia poses an additional burden. For the financial year 2010, revenues are expected to amount to roughly EUR 4.7 billion. The company has already initiated significant cost reduction programs in both segments addressing both staff and non-staff related expenses to mitigate the impact from lower revenues. Including the expected cost savings, EBITDA should reach about EUR 1.6 billion. Depending on investments for the migration to an All-IP based voice network in the Fixed Net segment, capital expenditures of the Telekom Austria Group are forecasted to reach approximately EUR 800 million. This amount does not reflect a material roll-out of glass fiber which is not expected to start in 2010. Operating Free Cash Flow remains the primary focus of the management and is expected to come out at about EUR 800 million. The Telekom Austria Group reiterates its intention to distribute the higher of 65% of the annual net income or at least 75 cents per share as dividend until 2012. The management board remains committed to its capital allocation policy including returning excess cash to shareholders via share buy-backs within the 1.8x-2.0x net debt/EBITDA target balance sheet structure and provided stability in its main foreign currencies and operations. Hence, in light of the ongoing challenging operating environment share buyback is not expected to start in 2010. This outlook is based on constant currencies and does not yet include the impact of the announced integration of Fixed Net and Mobile Communication activities in Austria. Outlook 2010 as of Feb 24, 2010* Telekom Austria Group on constant currency basis Revenues ~ EUR 4.7 bn EBITDA ~ EUR 1.6 bn Capital expenditures up to EUR 800 mn Operating Free Cash Flow ~ EUR 800 mn Dividend 65% of net income, DPS of 75 cents minimum * excluding the impact of the merger of domestic operations Telekom Austria Group Creates New Structure for its Austrian Operations On February 23, 2010, the Supervisory Board of Telekom Austria AG approved the Management Board's proposals to merge the two domestic subsidiaries. This merger of the Fixed Net and Mobile Communication business activities within one single operating company should first and foremost provide the basis to meet increasing customer demand for integrated telecommunications solutions and convergent products in Austria. Moreover, the joint steering of sales activities will generate additional revenue potential through cross-selling opportunities. This merger will also enhance the Group's innovative strength, enabling the effective rollout of joint future-proof network infrastructure and the full leverage of synergies across all internal processes. The organizational merger will take place in 2010. However, optimization of processes and the convergence of technological systems will require more time. Based on preliminary forecasts, the Telekom Austria Group expects this merger to generate a positive contribution to earnings by 2012 and subsequently an annual increase in cash flow of approximately EUR 100 million after further 2-3 years. This growth will result from additional revenues and lower expenses. In addition, cash flow will also benefit from lower capital expenditures. Initial costs will impact results over the next few years and a negative cash flow effect of approximately EUR 80 million is expected for the 2010 financial year. Further Information For more detailed information about the full-year 2009 please refer to the corresponding report on Telekom Austria Group's website at http://www.telekomaustria.com/interim_reports Contacts: Elisabeth Mattes Group Spokeswoman Telekom Austria Group Tel.: +43-664-331-2730 E-Mail: Barbara Plossnig Investor Relations Telekom Austria Group Tel.: +43-(0)590591-19003 E-Mail: DATASOURCE: Telekom Austria Group CONTACT: Contacts: Elisabeth Mattes, Group Spokeswoman, Telekom Austria Group, Tel.: +43-664-331-2730, E-Mail: . Barbara Plossnig, Investor Relations, Telekom Austria Group, Tel.: +43-(0)590591-19003, E-Mail:

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