One-Off Special Effects Aimed at Saving Personnel Costs Over the Long Term Cause Reported Operating Loss

By Telekom Austria Group, PRNE
Tuesday, May 10, 2011

VIENNA, May 11, 2011 - Telekom Austria Group Within Expectation of International Analysts,
Reiteration of Its Outlook for Full-Year 2011

- In Q1 2011, revenue decline was further slowed down to 0.7%

- Broadband drives growth of Austrian fixed net access lines - rapid
rollout of GigaNet: by year-end 2011, ultra-high-speed broadband coverage
will reach roughly 2.1 million Austrian households

- Persistently strong demand for smartphones, mobile broadband customer
base increased by 51.1% in Q1 2011

- The number of mobile subscribers rose by 5.7% exceeding the 20-million
customer mark for the first time

- Regulatory measures and higher operating expenses - especially for the
marketing of smartphones - led to a decline in EBITDA comparable (-7.1%)

- High acceptance of new social plans resulted in one-off restructuring
costs of EUR 184.1 million leading to an operating loss in the first quarter
of 2011

- Negative effects on earnings through social plans will bring operating
loss on the accounting side, but personnel-related cost savings for the

- Development of Q1 2011 within expectation of 24 international Telco

- Outlook for the full-year 2011 was confirmed

Telekom Austria Group's Key Financial Figures for the First Quarter of

    Financial Figures in EUR million          Q1-2011  Q1-2010  +/-

    Fixed access lines (in Million)              2.32     2.31   0.5%
    Mobile subscribers (in Million)             20.08    19.00   5.7%
    Mobile broadband customers (in Million)      1.23     0.81  51.1%
    Group revenues                           1,118.0  1,126.0   -0.7%
    EBITDA comparable                          396.7    426.8   -7.1%
    EBIT                                       -42.3    166.3      -
    Net result                                 -79.2     91.2      -
    Capital expenditures                       120.4    136.4  -11.7%
    Employees (end of the period)               17,162   16,637  3.2%

In the first quarter of 2011, the Telekom Austria Group was able to
further slow down the decline in revenues of the previous year; Group
revenues decreased by 0.7% to EUR 1,118 million. While Belarus and the
segment "Additional Markets" reported revenue growth, the Austrian and the
Croatian segments showed a decrease in revenues, with the Bulgarian business
remaining almost stable. Against the backdrop of a persistently challenging
economic environment which is and will continue to be characterized by
intensive competition and regulatory pressure, demand for broadband offerings
and smartphones continued to pick-up.

As a result, the total number of mobile broadband customers at the group
level rose by 51.1% to 1.23 million. In Austria, fixed net access lines
continued to show a favorable development in the first quarter of 2011,
continuing the upward trend seen in Q4 2010. In the period under review,
fixed access lines increased by 7,300 lines compared to a loss of 3,200
access lines in the first quarter of the previous year despite declining
fixed net voice minutes. Thus, this increase in lines is mainly attributable
to stronger usage of broadband offerings.

"User revenues remained almost stable in the first quarter of 2011 thanks
to the strong demand for fixed net and mobile broadband products - thus, our
group-wide strategic orientation towards convergence and our high investments
in broadband infrastructure paid off. Recently A1 Telekom Austria was granted
for its mobile broadband network, which ranks second Europe-wide among a
total of 94 European network operators. This further demonstrates that we are
on the right track," said Hannes Ametsreiter, CEO Telekom Austria Group,
underpinning the company's clear strategic success.

EBITDA comparable declined by 7.1% to EUR 396.7 million due to regulatory
measures, higher operating costs (mainly related to the marketing activities
and subsidies for smartphones) as well as to revenue declines in Austria,
Bulgaria and Croatia. The favorable earnings development in Belarus and in
the segment "Additional Markets" - especially in the Republic of Serbia -
could only partly compensate for margin pressure.

As announced in February 2011, a new social plan was presented by A1
Telekom Austria following successful negotiations with personnel
representatives. This was immediately accepted by some 514 employees, the
majority of whom have civil servant status. The high acceptance of social
plans will reduce personnel-related costs over the long term but has resulted
in one-off special effects for the period under review. All personnel costs
related to the acceptance of this new social plan, which will also be
incurred in the years to come, would have to be recorded at the time of the
acceptance of the social plan and consequently resulted in one-off
restructuring expenses of EUR 184.1 million in the period under review
leading to an operating loss for the first quarter of 2011.

"Therefore, this quarterly loss is not due to operative reasons but
rather to accounting principles. Over the next years, personnel-related costs
will be reduced accordingly, easing the burden on the company's profit and
loss account," said Hans Tschuden, CFO and Deputy Chairman of the Telekom
Austria Group, explaining the above-mentioned development of the results.

"Our strict cost management and our investments in broadband
infrastructure provide the basis for our good competitive position" added
Ametsreiter, whilst Tschuden commented on the development of the first three
months: "We are confident that we will close the 2011 business year as
anticipated in our outlook."

Outlook for the Full-Year 2011

Against a backdrop of persisting price competition and a gradual economic
recovery in almost all operating markets of the Telekom Austria Group,
revenues are expected to amount to up to EUR 4.6 billion for the financial
year 2011 and EBITDA comparable to up to EUR 1.6 billion. Capital
expenditures of the Telekom Austria Group are forecasted to reach up to EUR
800 million
and operating free cash flow is expected to amount to
approximately EUR 800 million. This outlook is given on a constant currency

The Markets of the Telekom Austria Group in Detail:


The main growth driver for the fixed net business is broadband, with the
number of domestic broadband access lines rising by 12.7% to roughly 1.2
million in the first quarter of 2011. Thus, almost every second fixed net
access line has been up-graded for future-proof data communication. The
number of aonTV subscribers increased by 50% to more than 165,000 customers
compared to the same period of the previous year.

In March 2011, A1 Telekom Austria was able to finalize fiber-optic
network rollout in the 15th and 19th Vienna districts. For the first time an
entire district could be connected to the company's GigaNet via fiber-optic
technology. A total of 90,000 households and commercial businesses in the
15th and 19th Vienna districts have now access to the high-performance
Internet and multimedia services of A1 Telekom Austria. Within the GigaNet
coverage area customers are provided with bandwidths of up to 30 Mbit/s based
on the company's Giga-speed products, which enable multimedia services such
as high-resolution TV. By year-end 2011, the total number of households and
commercial businesses covered by the company's GigaNet will reach roughly 2.1
million countrywide. This corresponds to a network coverage of roughly 50% of
all domestic households and commercial businesses. In addition to other
Vienna districts, further provincial Capitals and regional centers will
benefit from this infrastructure initiative and will be connected to the
company's GigaNet. Along with the 1,000 mobile base stations that are
currently connected to the company's GigaNet, additional base stations will
soon follow suit contributing to enlarging the company's "hybrid" GigaNet.

A1 Telekom Austria's mobile broadband network has recently received an
important award. "Arcchart" - the International Association of Network
Operators - carried out a network test among 94 European providers. The test
report showed that A1 is by far the best mobile broadband network in Austria.
With download speeds of roughly 2.5 Mbit/s on average, A1 customers can surf
the net twice as fast as the customers of company's main domestic competitor,
which won the second place. Furthermore, A1 was the only Austrian network
operator to win the best mark "high". In a European benchmark, A1 Telekom
Austria ranks second among 94 European network operators. The superiority of
the network is mainly attributable to the network blanket coverage and the
well-developed HSPA+ infrastructure, which A1 Telekom Austria started to
rollout as early as 2009. In a country benchmark, Austria ranks fifth among
28 other European countries, which is mainly attributable to the excellent
network quality of A1.

The number of Austrian mobile customers rose by 5.2% to roughly 5.1
million, with the number of mobile broadband contract subscribers increasing
by even 23.8%. This favorable development also reflects the successful
marketing of smartphones, which account for more than 13% of all mobile
handsets. Since November 2010, A1 Telekom Austria has also included the Apple
iPhone into its portfolio. By mid March 2011, a total of 100,000 iPhone users
had joined the A1 Telekom Austria network.

The intensity of competition on the domestic market is also reflected by
the company's declining average revenue per user. In the fixed net business
ARPL declined by 2.4% and in mobile communication by 8% (ARPU). The
regulation-induced reduction of roaming and interconnection tariffs had an
additional negative impact on earnings. Revenues in the Austrian segment
dropped by 3.3% to EUR 738.3 million and EBITDA comparable decreased by 11.3%
to EUR 259.2 million.


In Bulgaria, mobile customer base remained stable with 5.3 million
subscribers. Due to focused marketing activities, contract customer share
increased from 61% to roughly 66%. Mobile broadband subscriber base more than
doubled to 141,000 customers compared to same period of the previous year. At
the end of the first quarter of 2011 following the finalization of the
acquisition of two fiber-optic operators Megalan AD and SpektrumNet AD in
2010, total fixed access lines amounted to 99,100 lines, with fixed net
broadband lines accounting for more than 93,000 lines.

Revenues of the Telekom Austria Group's Bulgarian subsidiary Mobiltel
amounted to EUR 133.4 million in the first quarter of 2011, a decline of 1.5%
compared to the previous year's level mainly attributable to price pressure.
EBITDA comparable declined by 10.7% due to higher personnel costs and
increased material expenses as a result of the acquisitions.


In Belarus, velcom showed a favorable development, with mobile customers
rising by 7.3% to 4.4 million. Mobile broadband recorded a particularly
strong growth of 463.9% to roughly 197,500 subscribers. ARPU increased by

As a result, revenues grew by 22.2% to EUR 89.9 million and EBITDA
comparable by 20.8% to EUR 42.1 million. The negative effect of foreign
exchange translations on revenues which amounted to EUR 1.0 million in the
first quarter of 2011 has already been taken into account.


Despite a persistently challenging macro-economic environment, Vipnet in
Croatia was able to increase its mobile subscriber base by almost 2% to 2.7
million customers in the first quarter of 2011. Customer growth was primarily
driven by the contract segment and the demand for mobile broadband, with the
mobile broadband subscriber base growing by 22.9% to more than 179,000
customers. However, ARPU declined by 16.2% due to lower usage and regulatory

Vipnet's revenues declined by 10% to EUR 90.3 million and EBITDA
comparable by 13.6% to EUR 24.9 million.

Additional Markets

In Slovenia, mobile customer base was increased by 6.5% to 629,900
despite a highly competitive landscape, with mobile broadband showing a
considerable growth of 21.8%. ARPU declined by 1.4%. Si.mobil's revenues rose
by 8.0% to EUR 42.6 million, whereas EBITDA comparable dropped by 4.9% to EUR
10.9 million
due to higher expenses.

In the Republic of Serbia, mobile subscribers increased by 22.7% to 1.4
million. Vip mobile's revenues rose by almost 30% to EUR 30.2 million. ARPU
increased by 14.8% and EBITDA comparable amounted to EUR 4.3 million in the
first quarter of 2011.

In the Republic of Macedonia, the mobile customer base grew by 47.2% to
more than 490,000 subscribers. Vip operator was able to increase revenues by
60% to EUR 11.1 million and substantially improve EBITDA comparable to -0.4

Details about the Annual General Meeting 2011

The Annual General Meeting of the Telekom Austria Group will take place
on May 19, 2011 at 10 am in the Vienna Stadthalle, Halle F, A-1150 Vienna,
Vogelweidplatz 14.

Please visit where
you find the Financial Report on the First Quarter of 2011.

About Telekom Austria Group

The Telekom Austria Group, listed on the Vienna Stock Exchange
since November 2000, is the leading telecommunications provider in Central
and Eastern Europe with more than 22 million customers across its markets of
operations. The Group is currently operating in eight countries: in Austria
(A1TA), Slovenia (Si.mobil), Croatia (Vipnet), the Republics of Serbia (Vip
mobile) and Macedonia (Vip operator), Bulgaria (Mobiltel), Belarus (Velcom)
and Liechtenstein (mobilkom liechtenstein). The total market of the eight
countries covers about 41 million inhabitants. The Group has more than 17,000
employees, revenues were EUR 4.7 billion as of year-end 2010. Telekom Austria
Group's portfolio encompasses products and services of voice telephony,
broadband Internet, multimedia services, data and IT solutions, wholesale as
well as m-payment solutions. More detailed information is available at


Elisabeth Mattes, Director Corporate Communications and Spokeswoman,

Austria Group email:
mobile: +43-664-6639187


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