VISION AND STRATEGY

Clear focus on digital transformation

At the heart of the A1 Telekom Austria Group’s corporate strategy is the common purpose of “Empowering digital life” – both at work and at home – with best-in-class connectivity and innovative digital solutions.

Digitalization opens up enormous opportunities for economic growth, social and individual development and for a more sustainable way of life in the interests of people and the environment. It therefore plays a major role in the A1 Telekom Austria Group’s vision and strategic focus.

Vision: Empowering digital life

The fact that the A1 Telekom Austria Group has far more to offer than “traditional” telecommunications services is also reflected in its vision and common purpose of “Empowering digital life”. Its self-conception has long since gone beyond just providing infrastructure, connectivity, and bandwidth. It sees itself as a driver and partner in the course of digitalization, with the expertise to create and foster digi- tal business models and solutions from initial concept through to operation. The A1 Telekom Austria Group is convinced that a winning end-to-end customer ex- perience is the foundation for successfully pursuing its corporate strategy. This offering extends from attractive tariffs and product bundles to content, entertain- ment, and smart home solutions through to state-of-the-art ICT, cloud, security, IoT, and productivity solutions.

In the course of its transformation into an ideal digitalization partner, the A1 Telekom Austria Group has dedicated itself to greater efficiency, agility, flexibility, security, and sustainability. Sustainability is seen as a long-term value driver that, in addition to active ecological and social responsibility (see “Social and Ecological Responsibility”), also entails economic benefits – for instance with enhanced energy efficiency reducing both environmental impact and costs.

Corporate strategy

Under its growth strategy, the Group does not only rely on its lead- ing role in the CEE region. As part of América Móvil, it can also count on the strength of one of the biggest telecommunications providers in the world with around 276 million customers in

mobile communications and 84 million fixed-line RGUs

(see “A1 Telekom Austria Group: Part of América Móvil”).

In pursuing its vision of “Empowering digital life”, the A1 Telekom Austria Group applies a corporate strategy based on two pillars: revenue growth and excellence in execution.

Revenue growth

In striving for revenue growth, corporate strategy is focused on three core ele- ments: excel in the core, expand the portfolio, and targeted M&A.

Excel in the core

The A1 Telekom Austria Group is focusing on the intensification of sales and tar- geted cross- and upselling to optimize its core business. A key goal of this is to gain households that have already been covered technically as customers, and thereby to optimize the ratio of households reached to those connected. Conver- gence is another central link in ensuring a premium customer experience, with the Group already offering fixed-line and mobile services in six of its seven core markets. Excellent infrastructure remains a key feature that sets the Group apart and gives it an edge over the competition.

A convincing example of how to excel in the core, but also offacilitating synergy effects and best possible group-wide leverage of existing assets and capabilities (“One to all”) is the stepwise roll-out of the A1 brand across all of the Group’s op- erations depending on local circumstances. Following the rebranding in Slovenia and at the level of the international Group brand A1 Telekom Austria Group in the previous year, 2018 followed up with the implementation of A1 at the Bulgarian and Croatian subsidiaries and an A1 brand refresh in Austria.

Expand the portfolio

Diversification and differentiation from competitors are of crucial significance. This demands the courage to innovate and to be creative. In keeping with its vi- sion of “Empowering digital life”, A1 Telekom Austria Group aims to be the first point of contact and key partner for the digital transformation of companies, and to tap new potential in digital services, such as cloud, security and ICT solutions and in the field of the Internet of Things (IoT). Founded in 2017, the goal of the affiliate A1 Digital (see “Technology and Innovation”) is to foster the growth po- tential this entails beyond the existing footprint.

In its residential business, the Group is increasingly focusing on innovations relat- ing to its core business with solutions for entire households, such as convergent product bundles that combine TV and music streaming services and that can be expanded to include smart home and cloud solutions. The content offering is also playing an ever more important role, which is why the A1 Telekom Austria Group selectively invests in content rights, platforms and its own production in line with the respective market circumstances and customer requirements. Solu- tions tailored to the respective market allow the Group to augment the customer experience, promote customer loyalty and keep investments and costs at an effi- cient level at the same time.

Targeted M&A

Alongside measures for achieving organic growth, the A1 Telekom Austria Group will continue to expand its sphere of activity with targeted, value-accretive acqui- sitions. The focus of its core business remains on existing markets, pursuing its convergence strategy and subsequently opening up new markets.

In addition, A1 Digital is opening up new potential in the field of digital services, for instance, with its 2017 acquisition of the Swiss company Exoscale, which pro- vides infrastructure and services for cloud applications in Europe.

Excellence in execution

To ensure the availability of financial flexibility for investment, operational excel- lence in the execution of corporate strategy is essential. The central tenets of this are continuous improvements, digital transformation and “One to all”.

Continuous improvements

All structures, processes and investment decisions are continuously evaluated, questioned and improved. The A1 Telekom Austria Group’s goal is to improve its efficiency every single day.

Investments of any kind require that either revenues can be generated or costs can be reduced. In line with this, the Group deliberately invests in technologies that enhance efficiency and preserve resources.

Digital transformation

Digital transformation is a central precondition for the future success of the A1 Telekom Austria Group, and therefore a key strategic concern, which is why a Digital Transformation Center of Excellence (CoE) was created in 2018. Its goal is to advance digitalization both internally (“Digitalizing Ourselves”) and externally (“Digitalizing the Customer Journey”) in order to successfully help shape business trends and to identify and satisfy market requirements early on.

One to all

Across all markets, the goal of the A1 Telekom Austria Group is not to develop new products and solutions again and again, but rather to develop them once and roll out successful solutions on all markets. This is applied to both internal processes as well as to product developments. A good example of “One to all” is the group- wide development of the music streaming service “A1 Xplore Music”.

A good example of “One to all” is not least the group-wide roll-out of the A1 brand (see “Excel in the core”).

Finance strategy and cash use policy

The A1 Telekom Austria Group pursues a conservative finance strategy with a sol- id investment grade rating of Baa2 from Moody’s and BBB from Standard & Poor’s at its core. This orientation ensures a solid balance sheet structure with moderate leverage (net debt to EBITDA) and financial flexibility for investments in order to make use of growth opportunities. The dividend policy aims for a sus- tainable dividend distribution with the potential to grow in line with the opera- tional and financial performance of the Group. For the financial year 2018, the Management Board intends to propose a dividend of EUR 0.21 per share to the Annual General Meeting on May 29, 2019.

Sustainability strategy

The sustainability strategy of the A1 Telekom Austria Group is geared towards ac- tive ecological and social responsibility, promoting more efficient, resource- friendly and thus more sustainable ways of working and living (see “Social and Ecological Responsibility”). Furthermore, sustainability is seen as a long-term val- ue driver in an economic sense since greater efficiency and reduced use of re- sources also entail positive cost effects.

The A1 Telekom Austria Group’s responsibility concept is built on the three-pillar model of sustainable development, the triple bottom line of “people, planet, prof- it”, and therefore also incorporates social, ecological, and economic aspects. The A1 Telekom Austria Group also engages in targeted activities in support of the United Nations’ Sustainable Development Goals (SDGs; see “The A1 Telekom Austria Group’s contribution to the Sustainable Development Goals”) that were issued in 2015. The Group’s sustainability strategy is focused on four action ar- eas derived from a materiality analysis last updated in early 2017 (see graphic “Materiality matrix”). Each action area is backed by clear targets and specific per- formance indicators.

Stakeholder dialog

The A1 Telekom Austria Group’s continuous dialog with its stakeholders occurs at three levels: through systematic information via various channels, through talks and surveys, and through membership in associations and cooperations. Differ- ent formats are used depending on the issue and the group, such as information events, idea contests, customer and employee surveys or in-person talks at meet- ings, conferences, or roadshows. ▬

Initiatives A1 Telekom Austria Group (excerpt)

▸Diversity Charter (since 2014)

▸Next Generation Mobile Networks Alliance (since 2014)

▸UN Global Compact (since 2012)

▸ETNO (since 1996)

▸GSM Memorandum of Understanding

(since 1988)

Bubble size represents business relevance for A1 Telekom Austria Group.

A topic’s importance is based on its impact on the environment, society and the economy as well as how relevant it is to A1 Telekom Austria Group’s stakeholders. Thus, the topics most important to A1 Telekom Austria Group are those that have the biggest impact and those that are most relevant to the stakeholders. As an additional dimension, the topics were assessed with regard to their business relevance for A1 Telekom Austria Group. This allows a perspective that takes into account the topics’ sustainability context and their economical significance for the company.