Telekom Austria Group: Strict Cost Management Softens the Impact of the Tough Economic Environment on Full-Year 2009 Results

VIENNA, Austria, February 24, 2010 -

    - 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
www.telekomaustria.com/interim_reports

    Contacts:

    Elisabeth Mattes
    Group Spokeswoman
    Telekom Austria Group
    Tel.: +43-664-331-2730
    E-Mail: elisabeth.mattes@telekom.at

    Barbara Plossnig
    Investor Relations
    Telekom Austria Group
    Tel.: +43-(0)590591-19003
    E-Mail: barbara.ploessnig@telekom.at

Contacts: Elisabeth Mattes, Group Spokeswoman, Telekom Austria Group, Tel.: +43-664-331-2730, E-Mail: elisabeth.mattes at telekom.at. Barbara Plossnig, Investor Relations, Telekom Austria Group, Tel.: +43-(0)590591-19003, E-Mail: barbara.ploessnig at telekom.at