Telekom Austria AG

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
  distribution. The issuer is solely responsible for the content of this
  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
 

 


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