Telekom Austria Group outlook for full year 2011: Operations on track, adjustments for FX developments

The operating environment of Telekom Austria Group remains affected by several negative external factors, such as the unabated fixed-to-mobile substitution and the ongoing price pressure. In addition, regulatory induced lower roaming prices as well as fixed and mobile termination rates will continue to impact the Group’s results in 2011. Taxes levied on mobile communication services in Croatia pose an additional burden.

While in the medium term the macro-economic environment is expected to recover, in the short run economic headwinds are anticipated to remain strong in Telekom Austria Group’s major markets in the CEE region. The Telekom Austria Group continues to anticipate a delayed positive impact of such improvements on its results by approximately three to four quarters. In addition, structurally challenged markets, such as Belarus, may continue to exhibit increased foreign exchange volatility.

Nevertheless, the refined outlook for the full year 2011 reflects the Group’s confidence of its ability to mitigate these challenges through clear customer focus, intensified marketing of innovative products and strict cost management. This outlook includes the anticipated negative effects of the devaluation of the Belarus Ruble on full year 2011 results.

Minimum DPS of EUR 0.76 until 2012

For the financial year 2011, revenues are expected to amount to approximately EUR 4.50 billion. Focus on cost control will mitigate the impact from lower revenues and is anticipated to result in an EBITDA comparable, which does not include impairment and restructuring charges of up to 1.55 billion. Capital expenditures of the Telekom Austria Group are forecasted to reach EUR 0.75 – 0.80 billion and do not include investments for license or spectrum acquisitions. Operating free cash flow* remains the primary focus of management and is expected to amount to up to EUR 0.80 billion.

The Telekom Austria Group intends to distribute 55% of free cash flow** to its shareholders as dividends. For the years 2011 and 2012, management confirms the intended minimum dividend of EUR 0.76 per share. Maintaining a stable investment grade rating of at least BBB (stable outlook) remains central to the Group’s financial profile.

A leverage corridor of 2.0x – 2.5x Net debt/EBITDA comparable provides increased flexibility to balance share buybacks with growth projects. Hence, the start of share buybacks depends on the volume of potential growth projects. However, cash will always be returned to shareholders via share buybacks if leverage falls below 2.0x Net debt/EBITDA comparable. A stable business and currency environment remains a prerequisite for share buybacks.

This outlook reflects market expectations*** for the development of the Belarus currency until year end and a constant currency basis for all other markets.

Telekom Austria GroupOutlook 2011
as of 30 June 2011		Outlook 2011
as of 11 May 2011
Revenuesapproximately EUR 4.50 bnup to EUR 4.60 bn
EBITDA comparableup to EUR 1.55 bnup to EUR 1.60 bn
Capital ExpendituresEUR 0.75 - 0.80 bnup to EUR 0.80 bn
Operating Free Cash Flow*up to EUR 0.80 bnappoximately EUR 0.80 bn
Dividend55% of free cash flow**, DPS
of EUR 0.76 minimum		55% of free cash flow**, DPS
of EUR 0.76 minimum
   

*   Operating Free cash flow = EBITDA comparable minus capital expenditures in existing business
**  Free cash flow = Cash flow from operating activities minus capital expenditures in existing business
*** Expected EUR/BYR exchange rate for year end 2011 of 8,700, source: RCB