EANS-Adhoc: Telekom Austria AG / Telekom Austria Group announces EUR 400 million impairment of its Bulgarian subsidiary Mobiltel (Ad-hoc)

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ad-hoc disclosure transmitted by euro adhoc with the aim of a Europe-wide
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announcement.
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other
25.06.2014

Dear Sir or Madam,

Today the Telekom Austria Group (VSE: TKA, OTC US: TKAGY) announces
that it will book an impairment of approx. EUR 400 mn for its
Bulgarian asset Mobiltel as a result of the company's ongoing regular
sensitivity analyses. This impairment is primarily due to an increase
in the cost of capital of the Bulgarian segment and changed
expectations with regard to medium-term macroeconomic developments in
Bulgaria, as well as related market effects which affect the
valuation of Telekom Austria Group's business plan for the Bulgarian
segment.

Approximately half of the total impairment is due to a change in the
weighted average cost of capital (WACC) of the Bulgarian segment as
well as changed medium-term expectations as regards macroeconomic
risks for Bulgaria, inter alia due to the crisis in the Ukraine.

As of May 2014 Mobiltel's WACC increased by over 20% versus the last
impairment test in the fourth quarter of 2013. This is mainly the
result of an increase in the volatility of the Telekom Austria
Group's share price in the first half of 2014. This volatility caused
a rise in the beta* used for discounted cash flow valuation of
Telekom Austria Group's business plan. The Bulgarian segment was the
only Group segment where the increase in WACC resulted in the need
for an impairment as according to IFRS rules.

In addition, changed medium-term macroeconomic expectations also
result in changed expectations for the entire Bulgarian telecoms
market and the development of the Bulgarian subsidiary Mobiltel. On
13 June 2014 rating agency Standard & Poor's cut its sovereign credit
rating for Bulgaria from BBB to BBB-, expecting economic growth to
remain mediocre unless there are meaningful political and structural
reforms. While the management expected a mid-term recovery of the
region, this expectation appears no longer sustainable. The resulting
effects on the valuation of the business plan for the Bulgarian
segment drive the remainder of the impairment.

The impairment will be reflected in the consolidated financial
statements of Telekom Austria Group for the first half of 2014 and
will negatively impact net income and equity. As changes to the
business plan primarily impact medium-term expectations for the
Bulgarian segment, the management of Telekom Austria Group reiterates
its outlook for 2014 despite the impairment: Group revenue decline of
approx. 3%, CAPEX of approx. EUR 700 mn and a proposed dividend of
EUR 0.05.

* Measure of correlation between the performance of a security and
the market

For further information please see the following link:
www.telekomaustria.com/en/ir/ir-news

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Disclaimer for forward-looking statements: This document contains
forward-looking statements. These forward-looking statements are
usually accompanied by words such as "believe", "intend",
"anticipate", "plan", "expect" and similar expressions. Actual events
may differ materially from those anticipated in these forward-looking
statements as a result of a number of factors. Forward-looking
statements involve inherent risks and uncertainties. A number of
important factors could cause actual results or outcomes to differ
materially from those expressed in any forward-looking statement.
Neither Telekom Austria nor any other person accepts any liability
for any such forward-looking statements. Telekom Austria will not
update these forward-looking statements, whether due to changed
factual circumstances, changes in assumptions or expectations. This
report does not constitute a recommendation or invitation to purchase
or sell securities of Telekom Austria.

Further inquiry note:
Matthias Stieber
Director Investor Relations
Tel.: +43 (0) 50 664 39126
mailto: matthias.stieber@telekomaustria.com

end of announcement euro adhoc
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issuer: Telekom Austria AG
Lassallestrasse 9
A-1020 Wien
mail: investor.relations@telekomaustria.com
WWW: www.telekomaustria.com/ir
sector: Telecommunications
ISIN: AT0000720008
indexes: WBI, ATX Prime, ATX
stockmarkets: official market: Wien
language: English