(29) Stockholders' Equity

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Capital management

The capital structure of Telekom Austria Group consists of financial liabilities and equity attributable to the equity holders of the parent company, comprising common stock, treasury shares, additional paid-in capital, hybrid capital, retained earnings, available-for-sale reserve, hedging reserve and translation reserve.

Telekom Austria Group actively manages its capital structure to ensure going concern of all its subsidiaries while maximising the return to shareholders through the optimisation of the equity and liability structures of its entities.

Maintaining its investment grade rating of Baa2 (outlook stable) by Moody’s and BBB (outlook stable) by Standard & Poor’s is the number one priority of Telekom Austria Group’s finance strategy. This will allow Telekom Austria Group to obtain the financial flexibility required for strategically important projects. A transparent dividend policy ensures the balance between shareholder remuneration and the utilisation of cash to redeem outstanding debt.

Safeguarding its strong capital base is key to Telekom Austria Group in order to maintain investor, creditor and market confidence as well as to provide sustainable support to the future operational development of the business.

Share capital

As of 31 December 2014 and 2013, the common stock of Telekom Austria AG amounts to TEUR 1,449,275 and TEUR 966,183, respectively, and is divided into 664.5 million and 443 million bearer shares with no par value. As of 31 December 2014, América Móvil directly and indirectly holds 59.70%, ÖIAG holds a stake of 28.42%, and the free floated shares including treasury shares amount to 11.88%. As of 31 December 2013, ÖIAG held a stake of 28.42%, América Móvil directly and indirectly held 23.67%, and the free floated shares including treasury shares amounted to 47.91%.

With resolution of the Extraordinary General Meeting of Telekom Austria AG on 14 August 2014 pursuant to section 169 of the Austrian Stock Corporation Act, the Management Board is authorised within five years of registration of the relevant amendment to the Articles of Association in the commercial register, with the consent by the Supervisory Board, to increase Telekom Austria AG’s share capital by a nominal maximum amount of up to TEUR 483,092 by issuing up to 221.5 million bearer shares against cash contribution. The net issue proceeds (the total proceeds from the issue less any external costs resulting from the issue which are to be borne by Telekom Austria AG) for Telekom Austria AG must not exceed TEUR 1,000,000. On 27 November 2014, the capital increase was completed to the full extent of 221.5 million shares at a price of Euro 4.57 per new share, which resulted in proceeds of the transaction of TEUR 1,012,778. The share capital was increased by TEUR 483,092 and the additional paid-in capital by TEUR 529,686. Transaction cost, accounted for as a deduction from additional paid-in capital, amount to TEUR 16,208, the respective tax benefit of TEUR 4,052 was recorded in additional paid-in capital as well.

On 23 April 2014, ÖIAG entered into a shareholders' agreement, effective since 27 June 2014, with Carso Telecom B.V., Netherlands ("Carso Telecom") and América Móvil, by which the parties have contractually undertaken to jointly pursue a long-term policy with regard to the management of Telekom Austria Group, by exercising voting rights on a concerted basis ("Syndicate Agreement"). Furthermore, the Syndicate Agreement contains rules on the uniform exercise of voting rights in the corporate bodies of Telekom Austria, nomination rights for members of the Supervisory and Management Boards and share transfer restrictions. The Supervisory Board of Telekom Austria will consist of ten shareholder representatives, eight of which will be nominated by Carso Telecom and two will be nominated by ÖIAG. ÖIAG will have the right to nominate the chairman of the Supervisory Board. Carso Telecom will nominate the deputy chairman. The Management Board will consist of three members, two of which will be nominated by Carso Telecom while one Management Board member, namely the Chief Executive Officer (CEO) will be nominated by ÖIAG. In the extraordinary shareholders’ meeting of 14 August 2014 the Articles of Association of Telekom Austria were amended: As long as the Republic of Austria directly or indirectly holds at least 25% plus one share in the registered share capital, resolutions on capital increases and on the issuance of instruments which contain a conversion right or a conversion obligation into shares of Telekom Austria Group as well as changes to this provision of the Articles of Association shall require a majority of at least three quarters of the share capital present at the vote.

On 15 May 2014, Carso Telecom, which is controlled by América Móvil, published a voluntary public takeover offer for all shares of Telekom Austria AG ("Offer"). On 17 July 2014, at the end of the Offer period, América Móvil held in total 50.81% of the share capital of Telekom Austria Group, while ÖIAG continued to hold 28.42%. The Syndicate Agreement currently covers 351.0 million shares of Telekom Austria, which equates to a shareholding of 79.23%. During the three months’ additional acceptance (“sell-out”) period, which ended on 16 October, shareholders were able to tender their shares to Carso Telecom under the Offer conditions. During this extended period, Carso Telecom acquired another 38.4 million shares of Telekom Austria AG, which equates to a shareholding of approximately 8.68%.

The numbers of authorised, issued and outstanding shares and shares in treasury are presented below:

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At 31 December

2014

2013

The shares issued are fully paid.

Shares authorised

664,500,000

443,000,000

Shares issued

664,500,000

443,000,000

Shares in treasury

−415,159

−415,159

Shares outstanding

664,084,841

442,584,841

The following table provides the development of shares outstanding:

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2014

2013

In 2013, treasury shares were transferred to a board member.

Outstanding as of 1 January

442,584,841

442,563,969

Capital increase

221,500,000

0

Transfer of treasury shares

20,872

Outstanding as of 31 December

664,084,841

442,584,841

Dividend payment

The following dividends were approved by the shareholders at the Annual General Meeting and paid by Telekom Austria AG:

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2014

2013

Date of Annual General Meeting

28 May 2014

29 May 2013

Dividend per share in Euro

0.05

0.05

Total dividend paid in TEUR

22,129

22,128

Date of payment

6 June 2014

5 June 2013

In 2014, the net loss of Telekom Austria AG according to Austrian GAAP amounts to TEUR 1,147,123, while in 2013, the net income of Telekom Austria AG according to Austrian GAAP amounted to TEUR 64,618. In 2014, an amount of TEUR 1,180,210 was released from reserves reported in retained earnings for the year ended 31 December 2014, and in 2013, an amount of TEUR 42,500 was allocated to reserves reported in retained earnings. These transfers resulted in unappropriated retained earnings of TEUR 33,205 and TEUR 22,247 as of 31 December 2014 and 2013, respectively. The Management Board and Supervisory Board plan to propose to the shareholders at the Annual General Meeting to distribute a dividend of Euro 0.05 per share from unappropriated retained earnings.

Treasury shares

At the Annual General Meeting of Telekom Austria AG held on 29 May 2013, the Management Board was authorised to acquire treasury shares for a period of 18 months until November 2014 up to the maximum of 5% of the share capital at a minimum price of Euro 5 and at a maximum price of Euro 15 per share. Additionally, the Management Board was empowered to:
(a) use these treasury shares to settle obligations under the share-based compensation plans described in Note (31) and/or to transfer them for or without a consideration to employees, managers and members of the Management Board/management of Telekom Austria AG and of its affiliated companies;
(b) use them as consideration for acquisitions, or
(c) sell treasury shares at any time via the stock exchange or by public offer for a period of five years from the day of the resolution in any manner permitted by law, also other than via the stock exchange, whereby the Management Board is entitled to exclude the general purchase opportunity.

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Shares held in treasury as of 31 December

2014

2013

Number of treasury shares

415,159

415,159

Average price per share in Euro

18.80

18.80

Deduction in equity (in TEUR)

7,803

7,803

Additional paid-in capital

The additional paid-in capital results from the incorporation of Telekom Austria Group as well as subsequent reorganisation of the group. Furthermore, effects relating to the employee participation plan and the retirement of treasury shares are reported in additional paid-in capital. In 2014, the increase of TEUR 517,530 is due to the capital increase described above.

Hybrid capital

On 24 January 2013, Telekom Austria Group issued a hybrid bond with a volume of TEUR 600,000. The hybrid bond is a subordinated bond with indefinite maturity which is, based on its conditions, classified as stockholders’ equity according to IFRS. Accordingly, related discount and issue cost in the amount of TEUR 11,752 were recorded net of a tax benefit of TEUR 2,938 in stockholders’ equity. Therefore stockholders’ equity was increased by TEUR 591,186. The bond can be redeemed at par at the earliest after a period of five years. Additionally, Telekom Austria AG has an early termination right subject to certain conditions. The annual coupon amounts to 5.625% until the first reset date, 1 February 2018. Subsequently there will be a reset date every five years. The coupon is established two days prior to the respective reset dates. Coupon payments of TEUR 33,750 effected in February 2014 is recognised as distribution of dividends in stockholders’ equity.

In the local financial statements, coupon payments are recognised as interest expense in profit or loss according to Austrian GAAP. While the tax benefit resulting from the accrued interest is recognised in profit or loss according to local GAAP, it is recognised in stockholders’ equity as “distribution of dividend” in the Consolidated Financial Statements according to IAS 12. The net result attributable to hybrid capital holders is presented in the consolidated statements of profit or loss in the allocation of the net result and equals interest recognised in profit or loss according to local GAAP in 2014 and 2013 amounting to TEUR 33,750 and TEUR 30,971, respectively, net of the relating tax benefit of TEUR 8,438 and TEUR 7,698, which is recognised in stockholders’ equity in 2014 and 2013.

Earnings per share

Basic and diluted earnings per share for the years ended 31 December 2014 and 2013 are calculated as follows:

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2014

2013

Net result attributable to owners of the parent (in TEUR)

−210,900

28,977

Weighted average number of common shares outstanding

461,296,913

442,570,851

Basic and diluted earnings per share (in Euro)

−0.46

0.07

According to IAS 33.12, the after-tax dividend on the hybrid capital is deducted from the net result attributable to owners of the parent, since the hybrid capital represents equity but does not constitute net result attributable to owners of the parent.

Due to Management’s decision to settle all share-based compensation plans in cash, no related dilutive effect occurred as of 31 December 2014 and 2013.

Reserve for available-for-sale marketable securities, hedging reserve and translation adjustment

The development of the reserve for available-for-sale marketable securities and the hedging reserve as well as the translation adjustment are presented in the consolidated statements of comprehensive income and consolidated statements of changes in stockholders’ equity. The foreign currency translation adjustment mainly relates to the consolidation of velcom in Belarus and Vip mobile in Serbia. The translation adjustment as of 31 December 2014 and 2013 relating to the consolidation of Vip mobile amounts to TEUR 147,821 and TEUR 132,739, respectively. Due to the application of IAS 29 “Financial Reporting in Hyperinflationary Economies” to the subsidiaries in Belarus since 2011, the relating translation adjustment of TEUR 302,063 as of 1 January 2011 remains unchanged.

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