Telekom Austria Group Increases net Income Significantly and Generates EBITDA Increase of More Than 20%

By Telekom Austria Group, PRNE
Tuesday, November 9, 2010

Mobile Communication Customers Increased by 5.4% to 19.5 Million on Group Level, Loss of Fixed Lines in Austria Almost Stopped

VIENNA, November 10, 2010 - Commenting on the results Hannes Ametsreiter, CEO Telekom
Austria Group, said, "I am satisfied with the development of our business
over the first nine months of 2010. In line with expectations both revenues
and results have held up well against a challenging economic and regulatory
environment. Through our rapid implementation of the merger of mobilkom
austria AG and Telekom Austria TA AG we are managing our business to meet
these challenges head on and safeguard the Group's competitiveness in Austria
for years to come."

The first nine months of the current financial year were
marked by a very challenging environment in many respects: Almost all markets
of the Telekom Austria Group showed weak economic development, with Croatia
and Bulgaria hitting a downward trend. Against the background of persisting
competitive pressure, the challenge was to tackle intrusive regulatory
measures such as the reduction of both roaming tariffs and interconnection
fees. The impact of these revenue-affecting measures on the Telekom Austria
Group was more detrimental to the Group than peers given the Group's dominant
market leading position in Austria.

Against this background, the subscriber base in Austria showed
a particularly favorable development, with mobile customers increasing by
6.3% to over 5 million in the period under review. Due to attractive product
bundles and innovative products, the reduction in the loss of fixed lines
during the first nine months was almost halted, with only 1,200 lines lost in
the third quarter 2010. The digital cable TV aonTV subscriber numbers rose by
55.3% totaling about 134,000 customers as of end of September 2010 compared
to the same period of the previous year.

Milestones of the First Nine Months

The main highlights of the reporting period under review
encompassed the finalization of the acquisition of Velcom in Belarus, the
acquisition of two fiber-optic operators in Bulgaria as well as the rapid
implementation of the merger of mobilkom austria AG and Telekom Austria TA
AG. The 100%-acquisition of Velcom had already been agreed upon in 2007, when
the company acquired a first controlling stake in the Belarusian provider.
With 4.2 million subscribers and a market share of 42.0%, Velcom is
performing well, with revenues increasing by 20.8% in Q3 2010 alone. The
acquisition of two fiber-optic operators in Bulgaria via the Group's local
subsidiary Mobiltel reflected the strong market demand for convergent
products also in this country. The two newly acquired companies and Mobiltel
have complementary product offerings and have already launched first product
bundles mid of October, including mobile and fixed line communications under
the M-Tel brand.

Concerted efforts were also devoted to safeguarding the
Group's future positioning in Austria, with the two domestic operations
mobilkom austria AG and Telekom Austria TA AG being legally merged into a new
single company under the corporate name A1 Telekom Austria AG as of July 8,
. With this merger, the Telekom Austria Group is the first operator in
Austria to respond to the global trend towards convergence of fixed line and
mobile communication. Furthermore, the Group's organizational structure was
completely reengineered. At Group level, Telekom Austria AG was turned into a
management holding based in Vienna. As a result, the eight markets of the
Group in Central Eastern Europe with more than 16,500 employees and roughly
22 million customers addressing a total population of about 41 million people
are now directly managed from the Vienna headquarters. To reflect this
organizational change, segment reporting is now based on geographical
markets, instead of the segmentation in fixed line and mobile communication
business. From now on, the Telekom Austria Group will report separately on
the five operating segments, Austria, Bulgaria, Croatia, Belarus and
Additional Markets.

The merger of the domestic fixed line and mobile operations
will also have significant financial effects going forwards and is expected
to result in a positive cash flow effect of roughly EUR 100 million starting

Business Development in Figures

In the first nine months of 2010, group revenues declined by
3.9% to EUR 3.48 billion in line with expectations due to lower revenues in
Austria, Bulgaria and Croatia. Revenue growth came from the segments of
Belarus as well as the Republics of Serbia and Macedonia. Declining prices
due to increasing competition and intrusive regulatory measures were the main
reasons behind this drop in Group revenues and also led to a reduction of
roaming tariffs and traffic fees. Group EBITDA comparable declined by 7.3% to
EUR 1.29 billion in the first nine months of 2010 mostly because of
regulatory measures. Group EBITDA (including impairment and restructuring
charges) increased by 21.5% to EUR 1.27 billion because of impairment charges
recorded in 2009. Cost-cutting and efficiency-enhancing measures were able to
only partly compensate for the decline in earnings in the period under
review. The operating result (EBIT) of the first nine months was EUR 476.4
. This considerable increase of 112.8% compared to the same period of
the previous year is to be attributed to impairment charges recorded in
Belarus and in the Republic of Serbia in 2009. Net income significantly
increased to EUR 256.5 million. Free cash flow rose by 8.8% to EUR 591.1

Despite a very challenging and competitive market landscape,
Group capital expenditures increased by 5.6% to EUR 443.3 million. Through
the rollout of broadband Internet in rural areas (VDSL@CO - FTTCO) and the
acquisition of 2.6 GHz frequencies for the fourth mobile generation (LTE),
both network quality and performance have been considerably enhanced. In
Austria the Telekom Austria Group pushed ahead with the rollout of the
fiber-optic network in the cities of Villach and Klagenfurt within the
framework of the company's GigaNet City pilot projects. In Vienna,
preparation work is currently underway to connect the 15th and 19th districts
to the corporate fiber-optic network. Until 2010, a total of 1.7 million
households and commercial businesses in the major urban centers of the
country will be able to surf the net with high-speed Internet, more than
doubling the original target.

Outlook for the Full Year 2010

Based on the overall performance in the first nine months of
2010, the Telekom Austria Group reiterates its outlook for the full year:
revenues are expected to amount to approximately EUR 4.70 billion and EBITDA
comparable, which excludes impairment and restructuring charges, to EUR 1.60
- 1.65 billion
. The capital expenditures are expected to range between EUR
750 and 800 million
. Operating free cash flow (EBITDA comparable minus Capex)
is expected to amount to at least EUR 800 million. Furthermore, the Telekom
Austria Group confirms its intention to distribute at least 75 Eurocents per
share as dividend. This corresponds to a dividend yield of roughly 6.8% based
on the closing share price of EUR 11.04 as of September 30, 2010. In the
first nine months of the year under review, the Telekom Austria Group's share
recorded an increase of 12.4%, whereas the ATX and the sector index DJTelco
Stoxx showed only a plus of 0.2 % and 0.8% respectively.

Please find detailed information concerning the results of the first nine
months and the third quarter of 2010 of the Telekom Austria Group at

Comparison of Key Financial Figures TAG in the First 9 Months 2010 (EUR

                                     1-9 2010    1-9 2009 % change
    Mobile Subscribers (mn.)         19,5        18,5     + 5.4%
    Total Access Lines (mn.)          2,3         2,3     - 0.3%
    Personnel EOP (full-time
    equivalents)                   16,559      16,802     - 1.4%
    Revenues                        3,480       3,621     - 3.9%
    EBITDA comparable*)             1,293       1,395     - 7.3%
    EBITDA**                        1,266       1,042     +21.5%
    EBIT                              476         224    +112.8%
    Net income                        257          31    +718.6%
    Capital expenditures              443         420      +5.6%
    Free Cash Flow                    591         543      +8.8%

*) excluding impairment and restructuring charges

**) including impairment and restructuring charges

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 roughly 22 million customers across its markets of
operations. The Group is currently operating in eight countries: in Austria
(with the newly merged A1 Telekom Austria), 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 16,500 employees, revenues were EUR 4.8
as of year-end 2009. 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, Spokeswoman & Director Corporate Communications,
Telekom Austria Group mobile: +43-664-6639187, email:

Contact: Elisabeth Mattes, Spokeswoman & Director Corporate Communications, Telekom Austria Group mobile: +43-664-6639187, email: elisabeth.mattes at

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