ESOP 2004+ - The New Stock Option Program from Telekom Austria

Vienna, April 22, 2004: (VSE:TKA; NYSE:TKA) Following approval of the new Stock Option Program 2004+ by the Supervisory Board of Telekom Austria, the first tranche of ESOP 2004+ (Employee Stock Option Program) was issued on April 19, 2004 to those entitled to receive options. The second and third tranche will be issued according to the same procedure following separate approval by the Supervisory Board in the first quarter of 2005 and 2006.

Vienna, April 22, 2004: (VSE:TKA; NYSE:TKA) Following approval of the new Stock Option Program 2004+ by the Supervisory Board of Telekom Austria, the first tranche of ESOP 2004+ (Employee Stock Option Program) was issued on April 19, 2004 to those entitled to receive options. The second and third tranche will be issued according to the same procedure following separate approval by the Supervisory Board in the first quarter of 2005 and 2006.

The ESOP 2004+ is oriented towards the Management Board and other key managers with a strong impact on the success of the company. It thus comprises roughly 200 employees within the Telekom Austria Group. In order to allocate and exercise the options of the first tranche, those entitled to participate are required to hold an investment in company shares throughout the entire period: for every Telekom Austria share held they receive 15 options.

Members of the Management Board of Telekom Austria AG receive 96,000 options with a maximum individual investment of 6,400 shares. Members of the Management Boards of subsidiaries receive 50,000 options with a maximum individual investment of 3,334 shares; the remaining participating managers, according to their classification group, receive a maximum of 20,000 options with a maximum individual investment of 1,334 shares.

Altogether up to 3 million options will be issued under the first tranche, whereby an option entitles purchase of a share at the exercise price of EUR 11.92.

EPS Target Value as an Exercise Hurdle

The ESOP 2004+ is oriented on the profitability of the company. Exercising the options that are allocated in 2004 requires that the EPS (earnings per share) target value determined by the Supervisory Board for the 2004 business year has been reached. If the EPS target value is not reached for the 2004 business year, the options can still be exercised, provided that a certain EPS target value for the 2005 or 2006 business years determined by the Supervisory Board - which must at least be in line with the EPS target value for 2004 - is met.

Exercise Price, Objectives Reached and Share Performance

The exercise price of EUR 11.92 is determined as the average closing price of Telekom Austria shares at the Vienna Stock Exchange during a period of 20 trading days ending two trading days before the allocation of options (April 19, 2004). Thus, in the first tranche 2004, those eligible to participate receive options that entitle them to acquire company shares at an exercise price of EUR 11.92; however, these may only be exercised provided that the EPS target value has been reached.

If options are exercised, those entitled to the options can make a profit – before income tax - from the difference between the share price on the day the options are exercised and the exercise price of EUR 11.92, multiplied by the number of allocated option notes. Thus, the future share performance of Telekom Austria stock will have an important impact on the profit gained.

Option Life, Vesting Period and Settlement

The first tranche of ESOP 2004+ was allocated on April 19, 2004 and the last exercise date for the options is May 30, 2008 (option life), provided the EPS target value has been reached. The options are subject to a 12-month blackout period from the time they were first allocated (vesting period), therefore they cannot be exercised prior to April 20, 2005. After expiration of the vesting period, the options can be exercised until the end of the option life, whereby the general blackout periods for trading stocks shall be observed according to the Compliance Code of Telekom Austria AG.

According to the authorization by the Annual General Meeting, the company can choose to serve options by new shares or by repurchased own shares; instead of delivering stocks the company can also provide cash compensation.

To issue the first tranche of ESOP 2004+, on March 23, 2004 the Management Board decided to increase the company's share capital by up to EUR 6,543,000 (equal to 3 million shares or 0.6% of current share capital), on the condition that options issued in 2004 are served. This conditional capital increase will only take place to the extent that the exercise of options– which is possible as of April 20, 2005 if the EPS target is reached – is served by new stocks or by an increase in share capital. If the options exercised are served by means of repurchased own stocks, the decided increase in share capital will not be carried out.

Stock Options Facts (33.8 KB)




Contact:

Hans Fruhmann
Telekom Austria AG
Investor Relations,
Tel.: +43 (0) 590591-20918
E-mail: hans.fruhmann@telekom.at

Vienna, April 22, 2004: (VSE:TKA; NYSE:TKA) Following approval of the new Stock Option Program 2004+ by the Supervisory Board of Telekom Austria, the first tranche of ESOP 2004+ (Employee Stock Option Program) was issued on April 19, 2004 to those entitled to receive options. The second and third tranche will be issued according to the same procedure following separate approval by the Supervisory Board in the first quarter of 2005 and 2006.

The ESOP 2004+ is oriented towards the Management Board and other key managers with a strong impact on the success of the company. It thus comprises roughly 200 employees within the Telekom Austria Group. In order to allocate and exercise the options of the first tranche, those entitled to participate are required to hold an investment in company shares throughout the entire period: for every Telekom Austria share held they receive 15 options.

Members of the Management Board of Telekom Austria AG receive 96,000 options with a maximum individual investment of 6,400 shares. Members of the Management Boards of subsidiaries receive 50,000 options with a maximum individual investment of 3,334 shares; the remaining participating managers, according to their classification group, receive a maximum of 20,000 options with a maximum individual investment of 1,334 shares.

Altogether up to 3 million options will be issued under the first tranche, whereby an option entitles purchase of a share at the exercise price of EUR 11.92.

EPS Target Value as an Exercise Hurdle

The ESOP 2004+ is oriented on the profitability of the company. Exercising the options that are allocated in 2004 requires that the EPS (earnings per share) target value determined by the Supervisory Board for the 2004 business year has been reached. If the EPS target value is not reached for the 2004 business year, the options can still be exercised, provided that a certain EPS target value for the 2005 or 2006 business years determined by the Supervisory Board - which must at least be in line with the EPS target value for 2004 - is met.

Exercise Price, Objectives Reached and Share Performance

The exercise price of EUR 11.92 is determined as the average closing price of Telekom Austria shares at the Vienna Stock Exchange during a period of 20 trading days ending two trading days before the allocation of options (April 19, 2004). Thus, in the first tranche 2004, those eligible to participate receive options that entitle them to acquire company shares at an exercise price of EUR 11.92; however, these may only be exercised provided that the EPS target value has been reached.

If options are exercised, those entitled to the options can make a profit – before income tax - from the difference between the share price on the day the options are exercised and the exercise price of EUR 11.92, multiplied by the number of allocated option notes. Thus, the future share performance of Telekom Austria stock will have an important impact on the profit gained.

Option Life, Vesting Period and Settlement

The first tranche of ESOP 2004+ was allocated on April 19, 2004 and the last exercise date for the options is May 30, 2008 (option life), provided the EPS target value has been reached. The options are subject to a 12-month blackout period from the time they were first allocated (vesting period), therefore they cannot be exercised prior to April 20, 2005. After expiration of the vesting period, the options can be exercised until the end of the option life, whereby the general blackout periods for trading stocks shall be observed according to the Compliance Code of Telekom Austria AG.

According to the authorization by the Annual General Meeting, the company can choose to serve options by new shares or by repurchased own shares; instead of delivering stocks the company can also provide cash compensation.

To issue the first tranche of ESOP 2004+, on March 23, 2004 the Management Board decided to increase the company's share capital by up to EUR 6,543,000 (equal to 3 million shares or 0.6% of current share capital), on the condition that options issued in 2004 are served. This conditional capital increase will only take place to the extent that the exercise of options– which is possible as of April 20, 2005 if the EPS target is reached – is served by new stocks or by an increase in share capital. If the options exercised are served by means of repurchased own stocks, the decided increase in share capital will not be carried out.

Stock Options Facts (33.8 KB)




Contact:

Hans Fruhmann
Telekom Austria AG
Investor Relations,
Tel.: +43 (0) 590591-20918
E-mail: hans.fruhmann@telekom.at