Capital increase

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The Extraordinary General Meeting on 14 August 2014 approved authorised capital as the basis for a capital increase. The issue of new shares corresponding to 50% of the existing share capital, i. e. up to 221,500,000 no-par value shares with voting rights, was authorised with the aim of generating net proceeds of up to EUR 1 bn. The new controlling majority shareholder América Móvil, as well as ÖIAG, pledged their full support for the transaction.

A discounted fixed-price transaction was chosen as the transaction structure. As well as being the international standard for capital increases, this structure allowed the optimal implementation of the various objectives: The aim was to realise the full potential volume of up to EUR 1 bn while at the same time minimising the impact on the Group’s share price. In addition, a structure was required that would guarantee the full participation of both América Móvil and ÖIAG within their respective framework conditions. A further objective was to minimise the execution risk and to conduct a successful transaction from the perspective of all stakeholders.

Following intense preparations and the publication of the Telekom Austria Group’s excellent results for the third quarter of 2014, the market situation on the morning of 7 November 2014 was regarded as positive and the transaction launched before market opening. The subscription price was set at EUR 4.57 per share, representing a discount of just 15.7% to the theoretical ex-rights price (TERP). This discount, which was very low by international standards, served to confirm that the aim of minimising the impact on the Group’s share price had been achieved. The subscription ratio was set at 2:1 (stock : subscription right), making it easy and transparent for both institutional and retail investors to exercise their subscription rights.

Within the two-week subscription period the management of Telekom Austria Group successfully marketed the transaction with investors in Europe and North America as part of an intensive roadshow. The aim was to familiarise existing investors with the transaction and address new investors in order to further diversify the free float, which was highly concentrated following the takeover offer.

The use of proceeds was defined as securing the capital structure as expressed in the form of credit ratings of at least Baa2 from Moody’s and BBB from Standard & Poor’s. Other objectives included the accelerated expansion of the fibre network in Austria between 2015 and 2018 on the basis of the latest available technologies and financial flexibility for value-enhancing M&A transactions.

The transaction met with extremely strong interest which was not only reflected in the excess demand in subscription rights trading. In particular the fact that 99.7% of the transaction was subscribed for within the subscription period also stood testimony to the great success of the capital increase. This meant that the original plan to place shares not sold within the subscription period via an order book process was not required. The remaining 758,286 shares were placed via Deutsche Bank. The Telekom Austria Group succeeded in offering the shares placed by Deutsche Bank at a price of EUR 5.26 per share, representing a premium of 15.1% to the subscription price.

The transaction was supported by the banks Citigroup, Deutsche Bank, Erste Group, Raiffeisen Centrobank and UniCredit Bank Austria and the law firms White & Case LLP, Eisenberger & Herzog Rechtsanwalts GmbH, Clifford Chance Deutschland LLP and DORDA BRUGGER JORDIS Rechtsanwälte GmbH, as well as Deloitte Audit Wirtschaftsprüfungs GmbH.

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