Investor Relations

Main focus of Investor Relations’ transparent and timely communication in the reporting year was systematic implementation of the Group strategy ensuring solid results despite regulatory intervention, strong share price performance and a successful increase of the ninth benchmark bond.

Share price performance and sector comparison

The Telekom Austria shares traded sideways at the start of the reporting year and reached their low for the year of EUR 5.50 on 13 January 2017. The price of Telekom Austria shares then increased steadily, and exhibited a particularly strong performance after their inclusion in the MSCI Global Small Cap Index in May. Following the publication of the results for the first half of the year 2017, the shares rose further before losing ground after profit-taking at the end of Sep- tember 2017. The shares then recovered and reached their high for the year of EUR 8.28 on 27 October 2017, their highest level in five reporting years. After further profit-taking, the share price then took a downturn, closing the year at EUR 7.72 as at 31 December 2017, up 37.8 % on the start of the year.

While the ATX, the benchmark index of the Vienna Stock Exchange, was trading sideways at the start of the year, the Stoxx Telecom industry index posted minor gains before falling away heavily at the end of January 2017. Both indices rose again by the middle of April 2017, but then began to decline as geopolitical ten- sions mounted. Following some increases in May 2017, this development contin- ued for the sector and the ATX in June, owing in part to the weak oil price. The sector lost some ground again after a recovery in July and August 2017, and moved sideways until the end of the year. By contrast, the ATX rose again by the end of the year, closing 30.6 % higher year-on-year, while the Stoxx Telecom in- dustry index fell by 3.6 % in 2017.

Dividend

Based on the improved operational and financial performance of the Group, a new expected dividend level was agreed upon by América Móvil and Österreichis- che Bundes- und Industriebeteiligungen GmbH (ÖBIB) in 2016. Starting with the financial year 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 developments of the Group. For the financial year 2017, the Management of Telekom Austria AG again intends to propose a dividend of EUR 0.20 per share to the Annual General Meeting in 2018.

Financial debt and ratings

Telekom Austria AG actively uses the local and international debt capital markets in order to ensure that its financing is broadly diversified, both geographically and in terms of its investor base.

Since its first bond transaction in 2003, Telekom Austria AG has issued a total of nine benchmark bonds. In 2013, it placed the first hybrid bond in the European telecommunications sector.

A bond of EUR 500 mn that matured in January 2017 was repaid as scheduled from the issuing proceeds of a ten-year bond, with a coupon of 1.5 %, placed on 30 November 2016. On 10 July 2017, guaranteed by Telekom Austria AG, Telekom Finanzmanagement GmbH successfully increased this bond by a volume of EUR 250 mn. Telekom Austria AG announced on 3 January 2018 that it will repay the hybrid bond of EUR 600 mn issued in 2013 as at 1 February 2018 (first call date).

Credit ratings

Telekom Austria AG is regularly rated by Moody’s Investors Service and Standard & Poor’s Ratings Services. Standard & Poor’s confirmed its BBB rating for Telekom Austria AG on 23 May 2017 and raised its outlook to positive. Similarly, Moody’s upgraded its outlook to positive while keeping its rating unchanged at Baa2, which was last confirmed on 5 July 2017.

Spread development

The liquidity of corporate bonds generally declines significantly within a certain period following their issuance. As credit default swaps (CDS) are not affected by this liquidity reduction, it is standard international practice to use five-year CDS when analysing spread development.

Telekom Austria AG’s five-year CDS spread moved sideways above the 50 bp line in the opening months of 2017, reaching its high for the year at around 55 bp on 28 March. The Markit iTraxx Europe Index also moved sideways during these months, hitting its highest point for the year at around 77 bp on 18 April. Devel- opments until then were mainly influenced by the presidential election in France, Brexit negotiations and the uncertainty over the European Central Bank’s mone- tary policy. Both the company’s spread and that of the index continued to decline as the year progressed. The Telekom Austria CDS spread and the Markit iTraxx Europe Index then fell to their lows for the year of around 28 bp and 44 bp respectively towards the end of the year. ▬