INVESTOR RELATIONS

Share price performance and sector comparison

Telekom Austria’s shares had a strong start to the new year and reached their high for the year of EUR 8.42 on January 5, 2018. However, this was followed by profit-taking and, in February, higher-than-expected inflation and therefore growing fears of further interest rate hikes in the US caused a difficult situation on European stock markets. Nonetheless, the price of Telekom Austria shares recov- ered and outperformed the European market and the sector until the beginning of May. After the first half of the year, geopolitical tension between the US and North Korea and the start of a trade war between the US and China sparked negative market sentiment that also spread to Telekom Austria’s shares.

The second half of the year began with a recovery in the share price, which con- tinued to rise following the publication of the half-year figures. Telekom Austria’s shares maintained their price level in August despite negative stock market stimu- lus stemming from the intensifying US/China trade war and the Turkish currency crisis. However, in contrast to general market and sector developments, the shares suffered considerable price losses in September and shed much of their previous outperformance over the sector by the beginning of October. As the year progressed, uncertainty in connection with the Italian national budget and the unresolved Brexit settlement were among the factors that led to clouded sen- timent on European stock markets. The telecom sector performed well in this dif- ficult environment and also benefited from positive regulatory decisions such as the approval of the merger of T-Mobile and Tele2 in the Netherlands. The Telekom Austria share price stabilized and the share closed the year at EUR 6.64. With a negative performance of –14.1 % in 2018 the share almost reflected the develop- ment of the sector (Stoxx Telekom: –13.0 %), after having considerably outper- formed the latter in 2017. The Austrian lead index ATX lost 19.7 % in 2018.

Dividend

Based on the improved operational and financial performance of the Group, a new expected dividend level was agreed by América Móvil and Österreichische Bundes und Industriebeteiligungen GmbH (ÖBIB) in 2016. Starting from fiscal 2016, this dividend expectation entails the payment of EUR 0.20 per share to be maintained or increased on a sustainable basis in line with the operational and financial development of the Group. The Management Board of Telekom Austria AG plans to propose a dividend of EUR 0.21 per share for financial year 2018 at the 2019 Annual General Meeting.

Financial debt and ratings

The A1 Telekom Austria Group actively uses the local and international debt capi- tal markets to ensure that its financing is broadly diversified, both geographically and in terms of its investor base.

Since its first bond in 2003, the A1 Telekom Austria Group has issued nine bench- mark bonds in total. It placed the first hybrid bond with a volume of EUR 600 mn in the European telecommunications sector in 2013. This bond was repaid on its first call date on February 1, 2018.

Credit ratings

Telekom Austria AG is regularly rated by Moody’s Investors Service and Standard & Poor’s Ratings Services. On June 28, 2018, the strong cash flow generation and solid financing ratios prompted Moody’s to raise its rating from Baa2 to Baa1. Standard & Poor’s confirmed its rating for Telekom Austria AG on June 28, 2018.

Spread development

The liquidity of corporate bonds usually declines significantly a certain time after being issued. As credit default swaps (CDS) are not affected by this liquidity re- duction, it is standard international practice to use five-year CDS when analyzing spread development.

Telekom Austria AG’s five-year CDS spread remained at a low level in the report- ing year. Telekom Austria AG’s risk premium tracked sideways at around 30 basis points in the opening months of 2018, reaching a historic low of 26 basis points on February 1. The formation of the Italian government in June led to rising risk premiums and the Markit iTraxx Europe Index climbed above the 70-point mark. As a result, Telekom Austria AG’s CDS spread also rose to its high for the year of 42 basis points on June 8. The credit spreads for both the market and Telekom Austria AG subsequently narrowed again. From October, interest rate hikes in the US and the expiry of the ECB’s bond-buying program led to rising risk premiums in the market, while Telekom Austria AG maintained its low spread level. Its five- year CDS spread was 36 basis points at the end of the year while the Markit iTraxx Europe Index closed at 87 basis points. ▬