Telekom Austria AG and its subsidiaries (‘Telekom Austria Group’ with headquarters inVienna) are leading providers of fixed-line and mobile communication services serving some24 million fixed-line and mobile communication customers in seven Middle and EasternEuropean countries.
Through its majority owner América Móvil, Telekom Austria Group has been part of aworld-leading, multi-national telecommunications corporation since 2014. As a member ofthis group of companies operating globally, Telekom Austria Group capitalises on effects ofscale and synergies, among others in the areas of product development, technology andpurchasing.
Following its guiding principle of Empowering Digital Life, Telekom Austria Group presentsitself as the perfect partner for the economy and society in the age of digital transforma-tion. Its self-image as a driver of digitalisation therefore represents an important elementin Telekom Austria Group’s strategic direction. Its strategic direction (see graphic) aims atoptimising its core business, expanding its product portfolio and launching targeted M&Aactivities. Cost and investment efficiency is the crucial premise dominating all strategictargets and decisions.
In its growth strategy, the Group not only builds on its leading role in the CEE region but —as part of América Móvil — also relies on the strength of one of the largest telecommuni-cations providers in the world, serving 280 million customers in the mobile communica-tions sector alone. Operational excellence is paramount when it comes to the corporatestrategy’s implementation, in order to have the right financial leeway for investments atone’s disposal. All structures and processes as well as investment decisions are thereforeconstantly reviewed and questioned. The Group routinely pursues improvements to waysof thinking and work methods to become more efficient every day. Telekom AustriaGroup’s cross-market target is to not keep redeveloping products over and over again butto swiftly roll out proven products on other markets (‘one to many’). Internally, the strate-gy’s implementation builds upon the Guiding Principles within the corporate culture: Team,Trust and Agility (see Employees).
In all its strategic initiatives, Telekom Austria Group’s conservative financial strategyalways presupposes maintaining the investment grade ratings Baa2 from Moody’s andBBB from Standard & Poor’s. This central priority, in turn, also applies to the corporatestrategy’s core elements.
In terms of increasing efficiency, optimising the core business and expanding the productportfolio, the sustainability strategy is tied to the corporate strategy. In this context, sus-tainability is regarded as a long-term value driver which — besides actively embodied eco-logical and societal responsibility — also yields economic benefits, for instance throughincreased energy efficiency which reduces environmental impacts as well as costs.
The telecommunication market offers a wide range of attractive opportunities. High-quality and high-performance communications solutions make both professional andprivate life easier and more efficient. At the same time, a massive increase in data traffic,rapid technological progress and strong customer demand for first-class network andservice quality pose corresponding challenges. These require ongoing and massive invest-ments and place high demands on performance capabilities and therefore, also on theinfrastructure’s energy requirements. Thus, Telekom Austria Group not only faces marketrisks such as intense competition, unstable economic momentum and regulatory marketintervention, putting pressure on prices and profitability. Progressing climate and environ-mental change as well as societal framework conditions can also influence corporatedevelopment. To prepare for such risks in a timely manner, a central risk managementconstantly monitors respective developments and implements appropriate countermeasures when and if required. More information on the risk management at:www.telekomaustria.com/en/ir/annual-reports
-102-1, 102-2, 102-3, 102-4, 102-7, 102-10
Widespread shareholdings including employee shares and own shares
TELEKOM AUSTRIA AG SHAREHOLDER STRUCTURE
AS PER 31 DECEMBER 2016
ÖBIB (Republic of Austria)2
1) As per notice in accordance with §§ 91 ff Austrian Stock Exchange Act dated 29 July 2016 as well as AméricaMóvil press release dated 22 August 2016. 2) As per registration for annual meeting on 25 May 2016.
4) The key figure EBITDA is defined as the annual result not including financial result, profits taxes,write-offs and — if applicable — impairments / reversals.
5) As of 31 December 2016
Digitalisation brings about immense opportunitiesfor economic growth as well as varied ways ofsocietal and individual development. At the sametime, it furthers efficient, resource-conservationand thus more sustainable way of working andliving that benefits mankind and its environment.Telekom Austria Group’s sustainability strategyaimsat consistently tapping said potentials.
A standardised system is needed to display sustainability initiativesand progress in a transparent way and on a comparable basis (peri-odic, business and industry comparisons). Such a system also pro-vides a valid basis for certification and audit certificates. The follow-ing definitions of terms and processes therefore reference to the rec-ommendations and requirements of the Global Reporting Initiative(GRI; sustainability reporting standard) as well as the annualprogress report as laid down in the UN Global Compact.
The starting point of Telekom Austria Group’s systematic approach to sustainability manage-ment is the three-pillar model of sustainable development, the triple bottom line of People,Planet and Profit. Its understanding of responsibility thus includes social, ecological and eco-nomic factors. Telekom Austria Group furthermore supports the development goals ratified in2015 by the United Nations (Sustainable Development Goals, SDG) by means of targeted activi-ties (see Sustainable Development Goals). The Group’s sustainability strategy focusses on fourstrategic action areas derived from a comprehensive materiality analysis (see graphic). Bymeans of a stakeholder survey, topics relevant to the company were thereby analysed and priori-tised in accordance with social, economic and ecological aspects. Every action area is supportedby clear targets and specific key figures. In 2015, new goals for 2018 were worked out and codified.
As a result of another materiality analysis in the spring of 2017, the topics of data securityand protection as well as communication infrastructure emerged as the most importantones. Compared to the materiality analysis conducted in 2015, the topic of data security andprotection has gained in importance. Both customers and suppliers rank this topic as themost significant one. Employees, on the other hand, regard fair and flexible working as themost important topic. Overall, stakeholders give topics such as waste and employee healthless priority. When compared to 2015’s, the methods of 2017’s survey have changed in thatone can now better differentiate between individual topics. 2017’s materiality analysis fur-thermore put greater emphasis on impacts when compared with 2015’s. A complete com-parison is not entirely possible since the results of 2017’s materiality analysis have beenillustrated in a different way.
Telekom Austria Group engages in continuous dialogue with its stakeholders. This ex-change takes place on three levels: Through systematic information via various informa-tion channels, through talks and surveys as well as by giving them the chance to activelyparticipate through memberships and partnerships. Depending on topic and group, differ-ent formats such as informational events, idea competitions or surveys conducted withcustomers or employees are used. However, personal talks with suppliers, customers orNGOs are also employed in the framework of meetings, conferences or road shows.
-102-43, 102-44, 102-49
-1st place in the category SociallyResponsible Brand (velcom)
IDENTIFYING TOPICS IN THE CONTEXT OF SUSTAINABILITY
-102-40, 102-43, 102-46, 102-47, 103-1
1. TOPIC IDENTIFICATION
-Identifying 68 relevant topics considering the requirements of the GRIReporting Standard (top-ics, indicators, sector supplement). Topics determinedin the course of the ongoing stakeholderdialogue as well as sector-specifictopics were also covered in the process.
-Two-stage evaluation process resulting in 21 summarised topic groups
-Topic validation by external and internal experts
Internal experts, external
experts from the fields
of science, research and
2. IMPACT EVALUATION
-Evaluation of potential impact of selected topics in the course of a workshop andin talks
with external and internal experts (on a scale of 1 to 4 depending on impact magnitude)
-Assessment of the 21 selected topic groups by internal and external stakeholders
in the course of an online survey (response: 700 participants)
-Selection and rating of top 10 topics in order of importance
Employees, customers, suppliers, theeconomy, politicians & special interestgroups, media, the scientific, research &education communities
Ball size represents business relevance for Telekom Austria Group.
A topic’s importance is based on its impacts on the environment, society,economy as well as how interesting it is to Telekom Austria Group’sstakeholders. Thus, the topics most important to Telekom Austria Groupare those that have the biggest impact and those that are most relevantto the stakeholders.
As an additional dimension, the topics were assessed with regards totheir business relevance for Telekom Austria Group. This allows for aperspective that takes into account the topics’ sustainability contextand their economical significance for the company.
TELEKOM AUSTRIA GROUP‘S VALUE CHAIN
The diagram depicting Telekom Austria Group‘s value chain below gives an overview of the processes involved in its business operations.
The necessary resources are also shown as input factors and the results as outputs. The issues identified along the value chain have beentaken into account in the process of the materiality analysis.
TELEKOM AUSTRIA GROUP
Fair & flexibleworking
Competence development& talent promotion
THE FOUR STRATEGIC ACTION AREAS
Involvement of residents
NETWORK & CUSTOMERS
-LTE coverage of 80 % in Telekom Austria Group
-Fibre coverage in Austria exceeding 70 % with at least 30 Mbit/s
-Identification and promotion of marketable innovations, for example via start-up initiatives
With a high-performing and secure infrastructure as well as product range providing real added valueto its customers,
society and the environment, Telekom Austria Group is positioned as a responsiblepartner on its market.
Digitalisation & promoting innovation
ASSIGNMENT OF TOPICS AND MATERIAL TOPICS
To continuously reduce its ecological footprint, Telekom Austria Group relies on energy efficiency, increased use ofrenewable energy, resource conservation and promoting climate-friendly mobility.
ICT products providing ecological value
-Reducing power demand by 30 % per terabyte of
transferred data volume
-Reaching a constant recycling rate of 70 %
-Reducing in-house paper consumption by 10 %
-Reducing CO2 emissions by 25 %
Ecological network design
ASSIGNMENT OF TOPICS AND MATERIAL TOPICS
Fair & flexible working
Diversity & anti-discrimination
Competence development & talent promotion
ASSIGNMENT OF TOPICS AND MATERIAL TOPICS
-38 % women in management positions
-Anchoring of flexible work arrangements
-Create a general framework to promote constant learning3)
Telekom Austria Group taps its employees’ valuable potential by means of continuous furtherdevelopment in aninternational, modern working environment. Its corporate culture is characterised by team, trust and agility.Diversity and flexibility are the key to our success.
ICT products providing social value
-150,000 participants in media literacy trainings
-Promotion of social projects acoording to local needs
ASSIGNMENT OF TOPICS AND MATERIAL TOPICS
Digital media provide equal opportunities to all people in the knowledge-based society. That is why, apart from local andsocial projects, Telekom Austria Group supports competent and safe media use ina targeted manner.
1) Baseline for targets is 2015. 2) Baseline for target is 2012. 3) Due to a new strategic direction, theGroup-wide goal of implementing a health pass was replaced bythe goal to promote continuouslearning. Health promotion initiatives are implemented locally by the respective subsidiary.
The material topics of compliance, responsible purchasing and data security & protection areassigned to the management chapter. On the basis of 2017’s materiality analysis,the highlightedtopics emerged as material topics. You can find the management approach (103) towards thesetopics here: www.telekomaustria.com/en/csr/sustainability-reports
THE SUSTAINABILITY MANAGEMENT’S
Since 2010, Telekom Austria Group has been using a Group-wide, integrated sustainabilitymanagement system which is progressively developed. CEO Alejandro Plater, supported byCFO Siegfried Mayrhofer, is the principal and patron of sustainability agendas. A CorporateSustainability Team, as part of Group Communications and Sustainability, reports directly tothe CEO. This team manages and coordinates the implementation of the sustainability strate-gy in collaboration with the respective person responsible at the subsidiaries. Its cross-natio-nal approach guarantees compliance with the superordinate Group targets. At the same time,the sustainability strategy provides the flexibility necessary to honour regional features and abasis for exchange.
With the introduction of Workplace (‘Facebook at Work’), Telekom Austria Group established adigital Group-wide knowledge, work and exchange platform in 2016 (see Employees). Sincethen, the Group Sustainability Board — consisting of top management members — has beencommunicating and coordinating their activities through this social network as well. In parti-cular, this digital platform furthers the transnational networking of employees and managersall the way to the top management as well as international exchange and know-how transferwithin Telekom Austria Group. The Board and other decision-makers will use designatedgroups to directly report on progress and current topics from the field of sustainability at re-gular intervals. This measure aims at reaching the goal of maximum integration of sustainabi-lity aspects in the framework of the business strategy. 102-18
CERTIFIED ENVIRONMENTALMANAGEMENT SYSTEMS
-ISO 14001 for environmentalmanagement (since 2004)
-ISO 50001 for energy management(since 2008)
-EMAS (since 2013)
-ISO 14001 (since 2009)
-EMAS (since 2014)
-ISO 14001 (since 2015)
1) Si.mobil d.d.’s renaming into A1 Slovenija d.d. came intoeffect in the course of the rebranding in April 2017.
PLAYING IT SAFE WHEN ITCOMES TO DATA PRIVACY
-klimaaktiv mobil project partner (since2014)
-Austria Cyber Security Forum ofKuratorium Sicheres Österreich
-Code of Conduct on Data CentresEnergy Efficiency (since 2009)
All subsidiaries of Telekom Austria Group are committed to complying with the highest dataprivacy and security standards. In addition to the statutory requirements in the respectivecountries, all subsidiaries follow the data security standards created for this purpose as wellas other data privacy and data security directives specific to their countries. In the case of Aus-trian subsidiary A1, for instance, comprehensive certifications such as ISO 27001, ISAE 3402and ECO Datacenter 3.0 warrant these high security standards.
At the Austrian subsidiary A1 the data protection officer has been serving as a contact personfor compliance with statutory and internal data protection regulations for years.
The European Union’s General Data Protection Regulation currently presents a significantchallenge and will continue to do so in the years to come. With the respective ruling in May of2016, data protection law in the EU was harmonised and subjected to mostly uniform rules. Itfocusses on the protection of personal data and aims at the following: Offering effected per-sons increased control over their data and comprehensive information on its use, improvingprotection of children as well as facilitating access to legal protection.
The EU’s basic data protection regulation will come into effect on 25 May 2018 and has alreadybeen gradually implemented by Telekom Austria Group since 2016.
Honest, fair and transparent operation is an important part of Telekom Austria Group’s corpo-rate culture. To live up to these standards of integrity, the Group utilizes and elaborate Comp-liance Management System. The top management’s role model effect as well as employees ac-ting with a high degree of personal responsibility are thereby of particular importance.
To prevent potential misconduct, Telekom Austria Group has established clear rules for legal-ly compliant and hones conduct in all business relationships. Furthermore, adequate controlswere integrated into the business processes. Applicable across the Group, its Code of Conductwas reworked in early 2017 and adjusted to the new Guiding Principles (see Employees). Apartfrom the Code of Conduct, a version of which is available to all subsidiaries in their respectivecountry’s language as well as in English, detailed compliance rules provide help on specifictopics. These include corruption prevention and conflicts of interest, gifts and invitations,dealing with confidential information, management counselling and lobbying, sponsoring,donations and advertising, capital market compliance and antitrust law. The compliance gui-delines provide support in making sure that moral integrity is a matter-of-fact part of every-day work. The effectiveness of the compliance management system is furthermore increasedby means of regular communication measures and trainings, the help desk ask.me, audits aswell as anonymous whistleblowing platform tell.me.
An annual compliance risk assessment guarantees the needs-based development of thecompliance programme. In 2013, Telekom Austria Group’s compliance management systemwas reviewed and certified in accordance with the IDW PS 980 standard by an external audi-tor. In 2016, additional elements of the Compliance Management System were successfullyreviewed on their effectiveness by the Group’s Internal Audit and Group Compliance. Tothis end, communication measures to promote moral integrity and measures relevant tocompliance when hiring new managers and employees were audited. Also reviewed wereprocess and documentation requirements regarding donations and sponsoring as well ascompliance with internal regulations concerning gifts and invitations.
Some 50 % of all approximately 30 leads submitted through the tell.me whistleblowing platformin 2016 were substantiated and relevant to compliance. Depending on the nature of the trans-gression, the consequences ranged from individual trainings or process improvements to thetermination of collaborations with business partners as well as employees. The internal ask.mehelpdesk dealt with some 300 inquiries regarding compliance in 2016. Approximately 4,200classroom training courses and 2,600 online training courses on compliance in the fields of cor-ruption prevention, data protection, antitrust law and capital market compliance were held thisyear. A total of approximately 6,800 employees and managers attended the compliance trainingcourses (approx. 3,000 of which focussed on corruption prevention). 205-2
Further information on Telekom Austria Group’s Compliance Management System at:
EXTERNAL INITIATIVESTELEKOM AUSTRIA GROUP(SELECTION)
TELEKOM AUSTRIA GROUP
-Diversity Charta (since 2014)
-Next Generation Mobile NetworksAlliance (since 2014)
-UN Global Compact (since 2012)
-ETNO (since 1996)
-GSM Memorandum of Understanding(since 1988)
MEASURES TAKEN INPURCHASING
-Employee protection and workconditions in accordance with theregulations of the International LabourOrganization (ILO) have been includedin the Code of Conduct, the purchasingconditions and framework contracts
-Behavioural guidelines for suppliersregarding sustainability implemented
-Social and ecological requirementstoward products and services(including life-cycle perspective)
-Environmental and social criteria forregular vendor rating introduced atAustrian A1
-Sustainability criteria integrated intotenders
-Sourcing 100 % of electricity fromrenewable sources at the Austriansubsidiary A1, 66 % at the Slovenian
SUSTAINABILITY HAS ITS ROOTS PRIOR TO THE CORE BUSINESS
The sustainability of business activity is not just represented in the immediate ecological andsocial effects of one’s own business processes. That is why Telekom Austria Group also inclu-des upstream business processes, meaning the purchase of goods and services, into the re-spective assessment of its value chain. According to a 2013 study conducted byGreenBiz.com2) in cooperation with Trucost, upstream processes such as resource extraction,manufacturing, transport and packaging account for a not insignificant 85 % of all sustainabi-lity effects in the telecommunication industry.
Telekom Austria Group’s core business accounts for the majority of the purchasing volume:This concerns infrastructure components for its fixed-line and mobile communication net-works, end-user devices (mobile phones, tablets, set-top boxes, modems, routers …), IT andhardware components as well as power required to operate the networks. Office equipment,on the other hand, only represents a small portion of the overall purchasing volume.
Apart from commercial criteria, Telekom Austria Group — depending on the respective requi-rements — also considers ecological criteria such as environmental friendliness or energy ef-ficiency in its purchasing activities. At the same time, it includes labour rights, corruptionprevention regulations and data protection factors in its considerations. The use of so-calledconflict minerals such as tin, tantalum, tungsten and gold which are often extracted undercritical conditions presents a challenge to the industry in the production of ICT products. Te-lekom Austria Group does not manufacture such products, but uses and sells them in thecourse of its business activities.
Telekom Austria Group pursues the approach to anchor sustainability in its supply chain tothe greatest extent possible. For this purpose, a perennial project was created together withthe purchasing section in 2012. Various measures such as the integration of ESG3)- criteriainto the vendors self-assessment — especially at Austrian subsidiary A1 — or the acquisitionof resources from sustainable sources were successfully implemented in the past three years(see box above). Only long-term and effective measures can guarantee permanent andsuccessful deep anchoring of sustainability aspects in the purchasing process. This is whyTelekom Austria Group intends to consistently follow its chosen path.
2) The State of Green Business 2013, GreenBiz und Trucost 3) Environmental Social Governance
USEFUL INFORMATION FOR GRI EXPERTS
-102-6: Telekom Austria Group offers itsproducts and services to business andprivate customers from
-102-7: Telekom Austria Group has sevenoperating companies which are in accor-dance with the GRI definition of ‘opera-tion’. In some cases the holding compa-ny also fulfills these criteria and is high-lighted accordingly.
-102-10: No significant changes in thereporting period to the organisation’ssize, structure and supply chain in thereporting period. Please refer to the an-nual report 2016 page 18 for details onthe ownership structure.
-102-11: In all its activities, Telekom Aus-tria Group honours the precautionaryprinciple by taking into account potentialfuture developments and findings in itsdecisions (e. g. scenario analysis in thecontext of risk management, please seeannual report 2016 for further details onpage 74)
-102-18: There is no separate committeefor decision-making on ecologic and so-cial topics. With respect to committeeson economic decisions please refer tothe Corporate Governance Report onpage 37 of the annual report 2016.
-102-42: All groups that are impacted byTelekom Austria Group’s regular busi-ness activity form the basis for stake-holder identification. Stakeholder selec-tion was based on priorisation via inter-nal databases.
-102-43: Stakeholder dialogues are anongoing process and their results arelikewise included in the preparation ofreports.
-102-46: Boundaries for material topicswere defined according to an impact as-sessment inside and/or outside the or-ganisation. Telekom Austria Group’sability to influence the topic was consid-ered as well.
-102-48: No re-phrasing of informationfrom past reports took place.
-102-49: No changes to the extent andtopical boundaries compared to earlierreporting periods.
-201-1: Net added value 2016: EUR 845 mnto employees, EUR 816 mn for paid invest-ments, EUR 233 mn to capital providersand EUR 166 mn to public agencies.
-205-1: In 2016, the holding company aswell as the seven operating companiesA1, Mobiltel, velcom, Vipnet, A1 Slovenija,Vip mobile and one.Vip were internallyassessed with regards to corruption
risks. The companies generated almost100 % of Telekom Austria Group’s overallturnover and all locations of the abovementioned subsidiaries were taken intoaccount. In the course of the risk analy-sis, the management analysed 18 differ-ent corruption scenarios and definedmitigating measures. Taking into consid-eration the measures that have alreadybeen implemented, no significant re-maining risks could be identified.
-205-2: All employees and business part-ners are given access to information oncompliance as well as corruption preven-tion (see www.telekomaustria.-com/en/group/compliance). Almost 100% of employees, managers and supplierswere actively informed. Approximately3,000 (approx. 16 %) of employees andmanagers (including Board members) re-ceived training on corruption prevention.The Holding‘s Supervisory Board and Ex-ecutive Board as well as all subsidiariesreceive corruption prevention informationat least once per year, the entire Execu-tive Board receives training annually.
-418-1: No substantiated complaints re-garding the violation of customers‘ pri-vacy or loss of customer data were sub-mitted in 2016, the year under review.