Telekom Austria Group: Solid Earnings Development in the First Half 2006 as Opposed to Industry Trend

Telekom Austria AG (VSE: TKA; NYSE: TKA) today announced its results for the first half year 2006 and the second quarter ending June 30, 2006.

Year-to-date comparison:

During the first half year 2006, total group revenues increased by 15.9% to EUR 2,328.0 million. Wireline revenues decreased slightly by 0.5% to EUR 1,054.2 million. In the wireless business, revenues increased by 32.0% to EUR 1,399.1 million primarily due to the consolidation of Mobiltel. On a comparable basis, excluding Mobiltel, wireless revenues increased by 6.7% to EUR 1,130.9 million.

Group operating income increased by 39.9% to EUR 414.1 million, benefiting from a substantial increase of 42.5% to EUR 334.4 million in the wireless segment following the acquisition of Mobiltel and from an increase of 28.8% in the wireline segment to EUR 77.8 million due to lower depreciation and amortization charges. Excluding Mobiltel, operating income in the wireless segment increased by 2.3% to EUR 239.9 million.

Group operating income before depreciation, amortization and impairment charges (adjusted EBITDA) rose by 18.2% to EUR 981.8 million during 1H 06, with a 40.5% increase in the wireless segment to EUR 579.3 million more than offsetting a 4.1% decline to EUR 400.8 million in the wireline segment. Excluding Mobiltel, adjusted EBITDA in the wireless segment rose by 1.3% to EUR 417.6 million.

Consolidated net income of the Telekom Austria Group for the first half year 2006 rose by 53.2% to EUR 284.9 million, driven by higher operating income in the wireline and wireless segments. Earnings per share grew by 57.7% to EUR 0.60 during the same period.

Group capital expenditure for tangible and intangible assets increased by 9.4% to EUR 272.9 million during 1H 06 compared to the same period last year primarily as a consequence of the consolidation of Mobiltel.

Net debt decreased slightly by 0.6% to EUR 3,096.1 million at the end of June 2006 compared to EUR 3,113.7 million at the end of December 2005 as cash generated from operations only slightly exceeded cash used in investing and in financing activities.

The net debt to equity ratio (net gearing) increased to 111.6% at the end of June 2006, compared to 106.7% at the end of December 2005 as a result of increased acquisition of treasury shares resulting in lower equity.

Quarterly comparison:

Group revenues increased by 16.0% to EUR 1,169.4 million during 2Q 06. Wireline revenues decreased by 1.9% to EUR 519.3 million as higher revenues from Internet access & media and wholesale voice telephony & Internet could not fully offset the decline in switched voice base traffic and switched voice monthly rental & other revenues.

Wireless revenues increased by 33.1% to EUR 710.9 million in 2Q 06, primarily attributable to the consolidation of Mobiltel. On a comparable basis, excluding Mobiltel, wireless revenues increased by 6.4% to EUR 568.5 million due to higher monthly rental revenues as well as higher roaming revenues.

Group operating income rose by 52.3% to EUR 192.5 million during 2Q 06, reflecting significant increases in both segments. Operating income in the wireline segment increased by 80.1% to EUR 28.1 million due to lower depreciation, amortization and impairment charges as well as cost savings in other operating expenses. Operating income in the wireless segment grew by 47.8% to EUR 163.0 million. On a comparable basis, excluding Mobiltel, wireless operating income increased by 1.5% to EUR 112.0 million due to a significant increase of operating income of 21.1% at Vipnet.

Group operating income before depreciation, amortization and impairment charges (adjusted EBITDA) rose by 19.9% to EUR 477.5 million in 2Q 06. Wireless adjusted EBITDA increased by 42.8% to EUR 285.7 million in 2Q 06 which more than offset the 3.8% decline in wireline adjusted EBITDA to EUR 190.4 million. Excluding Mobiltel, adjusted EBITDA in the wireless segment rose slightly by 0.4% to EUR 201.0 million.

Quarterly net income rose by 73.6% to EUR 130.9 million in 2Q 06 driven by higher operating income. Earnings per share increased by 74.8% from EUR 0.16 in 2Q 05 to EUR 0.28 in 2Q 06.

Group capital expenditure for tangible and intangible assets increased by 16.0% to EUR 151.1 million during 2Q 06 due to the consolidation of Mobiltel and higher investments by mobilkom austria.