Moody's affirms Telekom Austria

Moody's Investors Service said it affirmed the Baa2 senior unsecured, as well as the prime-2 short-term ratings for Telekom Austria AG and its fully guaranteed subsidiaries. The outlook remains positive.

The ratings affirmation follows Telekom Austria's announcement that it has agreed a memorandum of understanding and exclusivity with the shareholders of Mobiltel AD.

Following today's announcement of the Memorandum of Understanding, Telekom Austria is expected to shortly acquire a call option giving it the right to purchase at its discretion 100% of the shares in Mobiltel. The exercise of such call right would enable TA to acquire 100% of Mobiltel during 2005 for a total enterprise value of €1.6 billion.

Moody's said its affirmation incorporates expectations that Telekom Austria would cash fund such acquisition leading to an increase in debt, but that it, through internal free cash flow generation, would reverse the initial negative impact on credit metrics.

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