MORE THAN AN

ICT PROVIDER:

EMPOWERING

DIGITAL LIFE

In its role as a driver of digitalisation and beyond the provision of connectivity and bandwidth, Telekom Austria Group provides entire industries, business models and societal as well as personal areas of life with a wide range of positive development possibilities.

Innovation plays an important role as a differentiating factor in the highly competitive ICT sec- tor. At the same time, one’s offers to the customers must be characterised by sustainablevalue. Is that a contradiction? No. At least not when seeing innovation as a contemporary, even pioneer- ing contribution to the development of economical, social and personal potential.

AWARDS

-Overall winner of the futurezone network test 2016 (A1)

-Connect Test 2016: Awarded the best rating of ‘excellent’ for the eighth time in a row (A1)

-Top Service Austria (A1)

-Winner of the COMMUNICATIONS.INNOVATION.

FUTURE award (velcom)

-Best voice quality within the Commonwealth of Independent States, awarded by DMTEL (velcom)

-Best in Test award in the 2016 P3 Communications network  test (one.Vip)

FUTURE-PROOF INFRASTRUCTURE IN THE DIGITAL AGE

To make sure new products and services enrich one’s professional and private life, net- works and applications on which they are based must be highly capable, safe and prepared for future needs. At the same time, services and content offered by traditional ICT providers is competing with so-called OTT (over the top) providers that offer their services without having their own infrastructure (e. g. Netflix, …). Despite this fact, local market knowledge and customer care will continue to play an important role.

SUSTAINABLE INVESTMENT IN FIXED-LINE NETWORKS

& MOBILE COMMUNICATION

Telekom Austria Group sees itself as a driver and pioneer of the digital age. Corresponding- ly, beyond its traditional core business — providing connectivity and bandwidth — it offers know-how for digital business models and solutions, from conceptualisation to operation. Convergence plays a major role in this context, not least in the light of the dynamic in- crease of data volumes transferred via these networks. For only the intelligent combination of fixed-line networks and mobile communication allows for ever growing regional cover- age at higher bandwidths. Its corporate footprint shows the priority Telekom Austria Group gives this fact in the framework of its strategic direction: The Group is operating as a con- vergent provider in six out of seven countries it is active in (Austria, Bulgaria, Croatia, Be- larus, Slovenia, Republic of Macedonia).

This is accompanied by targeted LTE expansion in the mobile communication network as well as the expansion of the fibre network and copper-based broadband technologies in the fixed-line network such as vectoring, VPlus and G.fast. LTE (4G) accelerates data transfer in the mobile communication network by a factor of ten when compared to UMTS. Austrian subsidiary A1 is approaching full LTE expansion. In Croatia, Slovenia and the Republic of Serbia as well as the Republic of Macedonia, the accelerated roll-out of the LTE technology is also advancing at full steam. Thus, even remote regions will be supplied with higher bandwidths including increased capacity and better stability. PA1

BROADBAND ROLL-OUT IN THE FIXED-LINE NETWORK

In 2016, the Group invested a total of EUR 764.1 mn (CAPEX), focussing particularly on broadband expansion. When it comes to the fixed-line network, Telekom Austria Group aims at offering fibre coverage of 70 % at speeds of at least 30 Mbit/s in Austria by the end of 2018. This is why it started its accelerated broadband roll-out as early as 2015. By the end of 2016, 50 % of Austrian private and business addresses could be provided with at least 30 Mbit/s products via the A1 fixed-line network. 70 % coverage is scheduled to be reached by the end of 2018. 203-1

TURBOCHARGING MOBILE DATA

When it comes to the mobile communication network, Telekom Austria Group employs LTE carrier aggregation to provide faster mobile Internet in metropolitan areas across Aus- tria, Bulgaria, Croatia and the Republic of Serbia. This allows for data transfer rates of up to 300 Mbit/s. Combined with a modulation method new to the mobile communication mar- ket as well as three frequency ranges, the possible transfer rate in the live network of Austri- an subsidiary A1 increased to more than 500 Mbit/s in 2016. This method bundles frequen- cies in the area of 2.6 GHz, 1,800 MHz as well as 800 MHz and combines them with the com- plex modulation method 256 QAM. This yields significantly higher bandwidths than today’s LTE standard. PA4

A field trial in the A1 live network transferred 513 Mbit/s onto a mobile router and 463 Mbit/s onto a smart phone — a considerable step towards the fifth mobile communication generation (5G). The latter is technically based on 4G. 5G is expected to arrive in 2019, even if the generally applicable technical specifications are still to be defined. Its implementa- tion could then start in 2020. 102-2

NETWORK RELIABILITY AND SAFETY

Telekom Austria Group is one of the largest backbone network operators in the world. It op- erates 200 nodes in 47 countries and is regarded as a particularly trustworthy partner when it comes to the reliability of its networks. Among others, the certification of Austrian sub- sidiary A1’s leased lines (including alarm transmission) in accordance with ISO 9001 — con- firming particularly high quality management standards — prove that. The fact that it regu- larly achieves top results in tests and rankings of its network quality (see Awards) confirms Telekom Austria Group’s pioneering role regarding infrastructure. PA3

Not least, this quality and reliability is crucial in emergency situations, in which Telekom Austria Group deploys specially trained emergency response teams, while subsidiaries help each other out too. They furthermore cooperate closely with the fire brigades, paramedics and the Red Cross. Of course, calling official emergency phone numbers is free in all of the Group’s countries. PA6

Electromagnetic fields (EMF) are a recurring topic when talking about mobile communica- tion. Speculation on this topic abound despite the fact that the results of international re- search efforts such as the Scientific Committee on Emerging and Newly Identified Health Risks (SCENIHR), commissioned by the EU Commission, find no causal connection be- tween mobile communication and health risks. One thing is ensured: Telekom Austria Group meets or achieves values significantly lower than the limit value recommendations defined by the ICNIRP/WHO for base stations and mobile end-user devices in daily use. Fur- thermore, the different national laws and regulations in Telekom Austria Group’s countries of operation are strictly adhered to. A Group-wide EMF policy ensures that. If and when needed, designated EMF teams inform the population on location. Beyond that, regular measurements are taken during network construction and expansion while cooperating with local authorities and decision-makers. IO6

A1 DIGITAL INTERNATIONAL GMBH AND START-UP

PROMOTION PROGRAMME

The establishment of A1 digital international GmbH highlights Telekom Austria Group’s self-conception as a driver of digitalisation. The new subsidiary predominantly operates in the B2B area. This encompasses comprehensive services to accompany and support compa- nies in the digitalisation process. A1 digital thereby focusses on two core fields: The Inter- net of Things (IoT) and cloud-based ICT solutions. International M2M (machine to ma- chine) solutions are also part of the portfolio: From fleet management to smart metering services, meter data management and roll-out services all the way to modular solutions for industrial automation and remote maintenance, smart M2M technologies form the back- bone of the IoT.

Promoting innovation, even beyond its own sphere, Austrian subsidiary A1 has been sup- porting start-ups in the framework of its A1 Start Up Campus initiative since 2011. At the A1 Start Up Campus, start-ups have been receiving support and know-how from A1 experts in the form of offices, media presence, events and ICT infrastructure since 2015. Some 10 start- ups have already made use of these offers TA1,2

CUSTOMERS

Digitalisation enters more and more aspects of life. Telekom Austria Group meets the asso- ciated demand with telecommunications solutions that — besides business applications — increasingly focus on solutions for entire households, too. It thus, for instance, covers all its customers’ needs with convergent product bundles containing, for example, TV and mu- sic streaming services or cloud solutions. New products such as the A1 Hybrid Modem are the result of a clear focus on customer needs (see Thinking globally, leading regionally). In order to identify these needs and to find out how the Group’s products and services are re- ceived on the market, Telekom Austria Group utilises many information channels: Shops and service lines, social media such as Facebook, Twitter and YouTube, customer apps and Google+ as well as designated support communities.

DIGITALISATION & NETWORK

& CUSTOMERS

Telekom Austria Group aims at becoming the first contact point and central partner in the digital transformation of compa- nies and to tap into new potentials in the field of digital services such as cloud and ICT solutions. Yet, digital telecommunica- tions solutions also concern more and more realms of life in the private cus- tomer sector. In this context, the focus is on solutions for entire households and convergent product bundles containing, for instance, TV and music streaming ser- vices as well as cloud solutions. Apart from the visualisation of network in- frastructure, services are also mapped in a virtual, cloud-based infrastructure. This allows for significantly improved operat- ing processes at lower costs as well as an accelerated market launch of new ser- vices, thus offering an ideal platform for competitive innovation.

TELEKOM AUSTRIA GROUP’s COOPERATIONS

-Research Centre for Telecommunications Vienna

-Vienna University of Technology

-Christian Doppler Laboratory

for Wireless Technologies for Sustainable Mobility

-Josef Ressel Center for

user-friendly and secure mobile environments

-102-12

DONE 2016

PLANNED 2017

TARGETS1)

-Demand-oriented expansion of the network infrastructure using innovative broadband technologies

-Investments (CAPEX) of EUR 764.1 mn in broad- band expansion, including acquiring additional frequencies

-Pushing demand-oriented infrastructure expansion as well as increased use of new technologies

2016–2018

LTE coverage of

80 % in Telekom Austria Group

2016–2018

Fibre coverage in Austria exceeding

70 % with at least

30 Mbit/s

-Further expansion of the initiative A1 Start Up Campus

-Evaluation of the expansion of the start up initiative to subsidiaries

-Establishing innovation officers in the subsidiaries to further the promotion of innovation and start-ups

-Staging an ‘Innovation JAM Session’ to further develop the e-health business field at Austrian subsidiary A1

-Rolling out services offered by start-ups promoted in Austria on other markets in the footprint of the Telekom Austria Group

-Starting the ‘Intrapreneurship’ programme to offer employees the possibility to implement innovative ideas as start-ups

2016–2018

Identification and promotion of market- able innovations, for example via start-up initiatives

1) Baseline for targets is 2015.

In early 2017, Belarusian subsidiary velcom imple- mented the world’s first entirely virtual commer- cial core network in the framework of its ‘virtual one core’ lighthouse project. velcom thus owns one of the most innovative virtual telecommunications core architectures based on OpenStack — an open-source software — and serial standard hardware. This allowed velcom to reduce its oper- ating costs by more than 50 %. Voice telephony and Internet customers benefit from this technology through more flexibility and new functionalities.

Large-scale smart meter roll-out in Graz (Styria): In a matter of four years, 187,000 meters are converted to smart meters for Stromnetz Graz GmbH & Co. KG. Apart from replacing the meters, Austrian subsidiary A1 also organises the entire technician deployment planning, parts of the material logistics and the customer project management. The project took off in November 2016 while the roll-out itself will take place in 2018.

Since 2016, Austrian subsidiary A1 has been pro- moting the start-up AdScanner in the framework of its A1 Start Up Campus initiative. AdScanner tracks TV campaign signals on all channels in real time and can thus immediately report when and where commercials have been placed. This data is subsequently combined with that provided by the A1 TV customer panel — consisting of 4,000 par- ticipating TV households — which allows the pro- gramme to provide precisely calculated contact opportunities for the respective placement. The second important function of AdScanner lies in monitoring the competition: One can precisely follow when and on which channels competitors place commercials.

Since July 2016, Austrian subsidiary A1 has been offering its customers a hybrid modem that combines mobile communication and fixed-line infrastructure, thus being able to offer fixed- line products at higher bandwidths. The modem’s smart technology allows for the combina- tion of both technologies’ bandwidths. As and when needed, the A1 Hybrid Modem supple- ments the DSL fixed-line broadband connection with 4G/LTE, thus providing speeds of up to 100 Mbit/s. This allows households to surf the Internet with higher bandwidths.