Telekom Austria AG Value Stock - Dividend - Research Selection

Information on the Company

Telekom Austria AG is a stock corporation (“Aktiengesellschaft”) organized under the laws of the Republic of Austria. It is the parent company of the consolidated Telekom Austria Group providing a wide range of advanced wireline and wireless communications services.

The corporate headquarters and the principal executive offices of Telekom Austria are at Lassallestrasse 9, 1020 Vienna, Austria. The telephone number is +43 (0)590591 0 and our website address is www.telekom.at Reference to our website does not incorporate the information contained on the website into this annual report.

Our agent for service of process in the United States is CT Corporation System, 111 Eighth Avenue New York, New York, 10011.

HISTORY AND DEVELOPMENT OF THE COMPANY

Before the liberalization of the Austrian telecommunications market in 1998, the Post- und Telegraphenverwaltung, or PTV, and its successor Post und Telekom Austria AG, or PTA, had the exclusive right to provide telecommunications services in Austria. PTV was an integrated part of the federal property administration of the Republic of Austria and a department of the Federal Ministry of Science and Transportation. As a consequence of the liberalization of the telecommunications sector, PTV was transformed into a private stock corporation. The Austrian Post Restructuring Act (“Poststrukturgesetz”) of 1996 created Post und Telekom Austria AG as the successor to PTV to continue its activities in telecommunications, postal services, and public transportation. PTA was created on May 1, 1996 as a wholly-owned subsidiary of Post- und Telekom Beteiligungsgesellschaft mbH, or PTBG, a holding company wholly-owned by the Republic of Austria, which exercised its ownership through the Federal Minister of Finance.

In October 1996, Post und Telekom Austria AG transferred its mobile communications business to its wholly-owned subsidiary mobilkom austria AG. In April 1997, Post und Telekom Austria AG sold 25% plus one share of mobilkom austria AG to STET Mobile Holding N.V., at the time a joint subsidiary of STET International S.p.A., Telecom Italia Mobile S.p.A. and Telecom Italia. In July 1998, Post und Telekom Austria AG’s telecommunications business became Telekom Austria AG owned by Post und Telekom Austria AG. Only a few months later in October 1998, Post und Telekom Austria AG sold 25.00007% of Telekom Austria to STET International Netherlands N.V., a joint subsidiary of STET International and Telecom Italia.

In May 2000, the Austrian parliament passed the ÖIAG Act 2000 (“ÖIAG-Gesetz 2000”), under which PTBG and Post and Telekom Austria AG, the latter owning 74.99993% of Telekom Austria, merged with Österreichische Industrieholding AG (ÖIAG), an industrial holding company wholly owned by the Republic of Austria. As a result, ÖIAG held 74.99993% of the share capital of Telekom Austria, and Telecom Italia indirectly held the remainder.

In November 2000, ÖIAG sold a portion of its shareholding in Telekom Austria as part of the initial public offering (IPO) in Austria and the United States of America and as a private placement elsewhere. As a result, 22.4% of our share capital was held by widely dispersed retail and institutional investors. Telecom Italia S.p.A., through a subsidiary, owned the remaining 29.8% and disposed of its entire stake in Telekom Austria in two transactions. On November 4, 2002 Telecom Italia sold 75 million shares in a private placement, reducing its level of ownership to 14.8%. In 2003, the Austria Government issued a privatization mandate to ÖIAG according to which the Austrian Government intended to privatize up to 100% of its shareholding in us by 2006. As a result ÖIAG issued in July 2003 an exchangeable bond of EUR 325 million which was payable in August 2006 and exchangeable into 25 million of our shares, corresponding to 5% of our share capital. This led to a decrease in ÖIAG’s stake in Telekom Austria to approximately 25.2% as of December 31, 2006. Austria’s new Government started its legislative period in October 2006 and has not yet decided if it wants to reduce ÖIAG’s stake further.

On January 21, 2004 Telecom Italia sold its residual shareholding, corresponding to 73.9 million shares or 14.8% of Telekom Austria’s share capital, in a private placement to institutional investors. In December 2004, ÖIAG reduced the share capital held in Telekom Austria through a private placement to institutional investors by 17%, from 47.2% to 30.2% of our share capital. In 2006, ÖIAG’s stake in Telekom Austria dropped from 30.2% of shares as of the end of December 2005 to approximately 25.2% of shares due to delivery of shares to investors holding exchangeable notes and sales of shares at the Vienna Stock Exchange.

In 2002, we decided to reintegrate some of our main subsidiaries into Telekom Austria and merged with our wholly-owned subsidiaries Datakom Austria GmbH, Jet2Web Internet Services GmbH and Jet2Web Network Services GmbH and the wholly-owned subsidiary of Datakom Austria GmbH, Datakom International Solutions GmbH, effective as of December 31, 2001.

Prior to June 28, 2002, Telekom Austria held 75% minus one share of common stock interest in mobilkom austria AG and a 74.999% interest in mobilkom austria AG & Co KG. On June 28, 2002, we acquired 100% of Autel Beteiligungs GmbH, which held 25% plus one share of common stock interest in mobilkom austria AG and 25.001% stake in mobilkom austria AG & Co KG, from Telecom Italia Mobile International N.V. (the successor of STET Mobile Holding N.V.), bringing our total interest in mobilkom austria AG & Co KG to 100%.

In July 2005, we acquired 100% of the share capital of MobilTel AD (now Mobiltel EAD), the leading Bulgarian wireless operator, and started to consolidate it on July 12, 2005. In order to concentrate the wireless segment in mobilkom austria and to align the legal structure with operative responsibility and segment reporting we transferred the indirect shareholding in Mobiltel EAD from Telekom Austria AG to mobilkom austria AG in October 2006. In November 2006 we were successful with our bid for an UMTS/GSM license in Serbia. Therefore we founded a new subsidiary, TopNet d.o.o., in Serbia. For further information concerning the structure of Telekom Austria see “Item 19. Exhibits — Structure of Telekom Austria ”.

In its meeting of December 13, 2005 the Supervisory Board of Telekom Austria confirmed the corporate structure proposed by the Management Board of Telekom Austria under the condition that two strong operating units shall be developed under a lean management structure. The implementation of the new corporate structure shall be presented for the Annual General Meeting (AGM) 2007.

In August 2006, mobilkom austria AG & Co KG was, under the terms of § 142 HGB (Austria Commercial Code), converted to a stock corporation — mobilkom austria AG (“Aktiengesellschaft”), whereby mobilkom austria AG & Co KG was merged without liquidation.

On December 20, 2006 Telekom Austria agreed to acquire 100% of the share capital of the operating companies of eTel, subject to prior merger control approval, for a purchase price of approximately EUR 90 million. eTel provides voice, Internet and data services and operates a virtual mobile network in Austria and a wholesale business in Central-Eastern Europe.