Group Management Report

Key financial data of EuroTeleSites

Business environment

Overall economic development remained under high pressure in 2023. In addition to geopolitical crises, the year under review was characterized by persistently high, albeit somewhat lower inflation rates, which continue to weigh on purchasing power and overall economic demand. In general, economic growth slowed further and the global economic outlook was revised downwards compared to the previous forecast.

Starting from a high level at the end of 2022, inflation rates fell over the course of 2023 in both the U.S. and Europe. In the U.S., inflation fell from a high of 9.10% in June 2022 to 6.45% at the beginning of 2023, before reaching its lowest level since March 2021 at 3.20% in October 2023. In the Eurozone, inflation peaked at 10.60% in October 2022 and fell over the course of 2023, from 8.60% at the beginning of the year to 2.40% in November 2023.

In the year under review, the U.S. Federal Reserve raised its key short-term interest rate in four steps from a range of 4.25% to 4.50% to between 5.25% and 5.50% ¹ . The European Central Bank carried out a total of six interest rate hikes in 2023, increasing the rates on the main refinancing operations, the rates on the marginal lending facility, and the deposit facility from 2.50%, 2.75% and 2.00% to 4.50%, 4.75% and 4.00%, respectively ² . On June 15, 2023, the European Central Bank also announced that the reinvestment of assets in the Asset Purchase Program would be discontinued from July 2023 ³ .

On January 1, 2023, Croatia adopted the Euro as its currency, making it the twentieth member of the Eurozone. Croatia also joined the passport-free Schengen area, which allows freedom of travel and movement between participating countries. Joining the borderless Schengen area is expected to give a boost to Croatia’s important tourism industry, which accounts for 20% of its gross domestic product.

According to the World Economic Outlook published by the International Monetary Fund in October 2023, global economic growth was expected to fall from 3.50% in 2022 to an average of 3.00% in 2023 and 2.90% in 2024. However, there are significant changes in the underlying growth curves of the major economies, with stronger forecasts for the U.S. and downward revisions for China and the Eurozone. Growth in the Eurozone is expected to fall from 3.30% in 2022 to 0.70% in 2023, before rising to 1.20% in 2024. The forecast has been revised downwards by 0.20 and 0.30 percentage points compared to previous projections from July 2023 for 2023 and 2024 respectively. Here, too, there is a divergence in growth between the major economies in the Eurozone in 2023.

A similar overall economic development could be seen in EuroTeleSites’ operating countries.

Gross Domestic Product (GDP) growth and inflation in the operating markets ⁴

Inhabitants and GDP per capita ⁵

Revenues and earnings performance in 2023

EuroTeleSites became independent on September 22, 2023, with the Spin-off and separation of the towers business from A1 Group. This separation was carried out in all A1 Group operating markets. The belarussian assets were not spun-off to EuroTeleSites, and are not intended to be spun-off in the nearer future. The fourth quarter of 2023 was therefore the first independent quarter in the company’s history.

EuroTeleSites enjoyed revenues and earnings growth in its first reporting period despite a challenging macroeconomic environment. The 5G expansion is making progress in most EuroTeleSites segment markets. Higher inflation also resulted in index-based adjustments in the rental of passive infrastructure.

The tower infrastructure market is well developed in the countries in which EuroTeleSites operates. There are other tower companies in all countries except North Macedonia. Driven by the strong demand for data volume, EuroTeleSites expects a sales growth of 4-6% in the next years. Additionally, to generate further growth, EuroTeleSites also focuses on new business areas.

EuroTeleSites benefited from master lease agreements with A1 Group in the existing six markets in the reporting period. At the same time, EuroTeleSites remained a reliable partner for third parties. In an environment of rising costs, in particular workforce, energy and IT costs, the costs remained stable thanks to efficiency measures.

The following factors should be considered in the analysis of EuroTeleSites’ operating results in the fiscal year 2023:

• Revenues in the reporting period from September 22, 2023 to December 31, 2023 amounted to TEUR 71,916.
• In November 2023, changes in contracts from the transformation to a tower company business model and charges from previous periods, led to one time revenues 3rd parties.
• Total cost and expenses were TEUR 11,485, resulting in EBITDA of TEUR 60,431.
• An additional 118 A1 Group sites were sold to EuroTeleSites in the period under review. 85 sites in North Macedonia, 25 in Croatia and eight in Slovenia were acquired.
• The number of sites thus rose to a total of 13,465 in the period under review.

Austria has the largest revenue share

61% Austria

11% Bulgaria

11% Croatia

2% North Macedonia

4% Slovenia

10% Serbia

The share of revenues generated in Austria compared to international business amounted to 61% as of December 31, 2023.

The breakdown of radio towers by country as of the reporting date was as follows:

The tenancy ratio as of December 31, 2023, was 1.23.

EBIT as of December 31, 2023 was TEUR 30,457.

EBITDA as of December 31, 2023 was TEUR 60,431.

EBITDAaL as of December 31, 2023 was TEUR 40,084.

Cost and expenses in the reporting period amounted to TEUR 11,485, and were determined primarily by increased workforce costs due to collective agreement negotiations and services provided by A1 Group in the areas of finance, IT as well as the increase in additional resources. Maintenance costs and other costs such as IT expenses for SAP and costs for the “Sitetracker” project are also included here.

CAPEX amounted to TEUR 27,273 in the reporting period, in line with expectations as a result of the newly completed sites. CAPEX is generally strongest in the fourth quarter due to the business cycle. Less is built in the winter; construction work is carried out in the second and third quarters and the radio towers are generally accepted by customers in the fourth quarter. The CAPEX was also characterized by the purchase of 118 sites from A1 Group.

As of December 31, 2023, EuroTeleSites, through its 100% subsidiary A1 Towers Holding GmbH, also had the following ratings:

• Moody’s: Baa2
• Fitch Ratings: BBB-

Net assets and financial position

The major drivers of the balance sheet are related to the Spin-off from A1 Group. While in the opening balance the cash from the bond and bank loan were not released (due to the respective contracts), EuroTeleSites was financed by A1 Group. These finance liabilities and the cash were cleared in the days after the Spin-off. Another major change in this respect was the revaluation of the fixed assets in accordance with International Accounting Standard 16, which heavily increased property, plant and equipment and equity. The revaluation also drove the change in the asset retirement obligations and the change in deferred tax assets and liabilities.

Another change in respect of the Spin-off were the non-financing receivables and payables due to related parties. These were paid in the fourth quarter of 2023.

Balance sheet structure

Cash flow

Key performance indicators

Net debt

Free Cash Flow

CAPEX

Segment development

EuroTeleSites reports in six business segments: Austria, Bulgaria, Croatia, North Macedonia, Serbia, and Slovenia. The “Holding & Other, Eliminations” division is comprised mainly of holding companies.

Total revenues

EBITDA

EBITDAaL

Lease expenses

Lease interest

EBIT

Austria

Revenues in the Austria segment amounted to TEUR 44,119 in the 2023 reporting period, representing 61% of total EuroTeleSites revenues. Positive developments include the fulfilment of the master lease agreement with the anchor tenant A1 for additional orders and the Built-to-Suit program, although these are non-binding.

Revenues from rentals were also shored up by contractual inflation adjustments and the transformation of third party business relationships from an integrated telecom operator to a long-term neutral operator of passive infrastructure. Third party revenues are revenues from tenants other than the anchor tenant. The Austrian market is comprised of three radio tower companies: EuroTeleSites, GD Towers and Cellnex.

With regards to third party revenues, there were already contracts with all larger customers in Austria before the Spin-off. Accordingly, a significant portion of operating work in the first three months focused on the preparation of further development of the business relationships under the new company structure. All in all, the 2023 reporting year was thus dominated by the transformation of the business model.

Capital expenditure (CAPEX) amounted to TEUR 13,322 in the reporting year and was considerably affected by the 5G upgrades and the ongoing roll-out with the anchor tenant A1 under the master lease agreement.

EBITDAaL amounted to TEUR 27,700 in the period under review, which is a result of lease payments in conjunction with strict cost discipline in connection with high inflation. EuroTeleSites is impacted of inflation primarily in existing landlord rents and workforce costs.

Bulgaria

Revenues in the Bulgaria segment amounted to TEUR 8,186, in the 2023 reporting period, representing 11% of total EuroTeleSites revenues.

The demand for 5G in Bulgaria remained at a stable level. The three mobile network operators continued to upgrade their mobile networks to meet 5G requirements and have very similar network coverage and overlapping mobile infrastructure throughout Bulgaria. The joint use of sites by competitors is limited and decided on a case-by-case basis.

There are three independent radio tower companies on the Bulgarian market in the reporting period: EuroTeleSites, the Cetin Group and TAWAL, which took over the Bulgarian, Croatian and Slovenian mobile tower infrastructure from United Group BV in 2023.

EuroTeleSites provided the mandatory 5G upgrades for anchor tenant A1 as agreed in the master lease agreement. In collaboration with A1, the company also implemented additional telecommunications systems in the reporting period. EuroTeleSites made progress in acquiring tenants and developing infrastructure. EuroTeleSites also successfully rolled out new sites in the reporting period. This resulted in a CAPEX of TEUR 2,185.

EBITDAaL in the 2023 reporting period was TEUR 4,206.

Croatia

Revenues in the Croatia segment amounted to TEUR 7,659, in the 2023 reporting period, representing 11% of total EuroTeleSites revenues. This improvement was largely due to the new master lease agreement signed with the anchor tenant A1. This included a new pricing system.

Following the frequency auctions in 2022, the use of small cells is planned for urban areas. At the same time, the coverage obligations outline the need for network densification in rural and suburban areas.

There are three tower companies on the Croatian market: EuroTeleSites, TAWAL and Hrvatski Telekom. The latter still has an integrated radio tower business line.

The market has an interesting customer profile that responds to the quality of the mobile network and the continual demand for higher internet speeds. Considerable customer demand for higher data transfer rates in conjunction with the government’s efforts to increase internet speeds throughout the country is a key driver of growth in the mobile infrastructure sector and, in turn, represents major potential for EuroTeleSites.

In addition, new towers were built for the anchor tenant A1 in the reporting period, and the obligatory 5G upgrades were carried out as planned. This resulted in a CAPEX of TEUR 3,695.

EBITDAaL was TEUR 4,168, benefiting from the increase in revenues, offsetting changes in operating costs.

Serbia

Revenues in the Serbia segment amounted to TEUR 7,314 in the 2023 reporting period, representing 10% of total EuroTeleSites revenues. This development mainly reflects the constant monthly contribution of the anchor tenant A1 and increasing revenues from third parties.

Serbia is a mature mobile communications market with three mobile network operators. No 5G auction has yet been held and one is expected for 2025. The regular roll-out activities are expected to coincide with network densification after the auction and present an opportunity for radio tower companies to increase the tenancy ratio. There are three major players on the mobile towers market: EuroTeleSites, Cetin and the integrated tower and telecommunications company Telekom Srbija.

CAPEX in the 2023 reporting year was TEUR 2,489.

EBITDAaL reflects improved income and amounted to TEUR 3,793.

Slovenia

Revenues in the Slovenia segment amounted to TEUR 3,140 in the 2023 reporting period, representing 4% of total EuroTeleSites revenues. Most of this was generated with the anchor tenant A1.

Considerable customer demand for higher data transfer rates in conjunction with the government’s efforts to increase internet speeds throughout the country is considered a key driver of growth in the mobile infrastructure sector.

The mobile communications market in Slovenia is served by the two radio tower companies EuroTeleSites and TAWAL. The mobile network operator Telekom Slovenije and T-2 also have their own radio tower portfolio that they passively market to other mobile network operators.

In the 2023 reporting year, EuroTeleSites successfully maintained and expanded contracts with all mobile network operators (MNO) and additional non-MNOs. EuroTeleSites also serviced the anchor tenant A1 in the introduction of 5G by way of location upgrades and adjustments. The 5G upgrades were carried out in the reporting period as agreed in the master lease agreement.

CAPEX in the 2023 reporting year amounted to TEUR 1,934 and comprised material strategic investments in the new sites and the modernization of existing sites.

Rising workforce costs due to additional hires did not negatively impact EBITDAaL, as they were offset by revenues growth. EBITDAaL in the 2023 reporting period was TEUR 1,524.

North Macedonia

Revenues in the North Macedonia segment amounted to TEUR 1,498 in the 2023 reporting period, representing 2% of total EuroTeleSites revenues.

Besides EuroTeleSites, there are currently no independent tower companies operating in the market. However, several companies have radio towers in their portfolio. EuroTeleSites holds the position of the second largest company in the North Macedonian radio tower market. Other companies in the market include A1 Makedonija, along with various operators from the field of TV, radio, and state bodies.

During the reporting period, the potential for new tenant acquisitions was limited and impacted by the complex process to obtain necessary permits for new sites.

CAPEX in the reporting period amounted to TEUR 3,647 and essentially included new roll-outs, sites upgrades and investments, such as the cost of the acquisition of 85 sites by EuroTeleSites from A1 Group.

EBITDAaL amounted to TEUR 796 in the 2023 reporting period.

Outlook for the financial year 2024

In the 2024 financial year, the EuroTeleSites group will continue to focus on its core business, the rental of passive infrastructure, expand new macro-sites and set up new sites for third parties and non-MNO customers. EuroTeleSites is aiming for revenue growth of around 4-6% and plans to further increase the tenancy ratio. Growth is characterized by the strong increase in data volume in Austria and Central Eastern Europe (CEE), an economically well-developed region with a population of around 30 million.

As part of the “Sitetracker” transformation project, EuroTeleSites aims to establish an integrated software solution for assets and marketing. This will enable seamless and efficient management and marketing of the passive infrastructure through the use of Salesforce software for EuroTeleSites.

In 2024, there will also be a focus on further developing the ESG agenda to ensure that EuroTeleSites is prepared for the future and can fully comply with the regulatory requirements of the European Union. These efforts are already reflected in EuroTeleSites value chain.

The management anticipates additions to assets (CAPEX) of around 20% of the revenues. EuroTeleSites will fulfil its obligations under the master lease agreements with A1 Group, 5G upgrade for existing towers, construct new sites and carry out the corresponding maintenance. Contrary to expectations, there will be no 5G auction in Serbia in 2024, so EuroTeleSites will adjust the investments for 2024 in Serbia.

Risk and opportunity management

Principles and methods

EuroTeleSites’ risk management system analyses risk areas, assesses potential impact, and improves risk avoidance and risk remediation measures. EuroTeleSites relies on close cooperation between Group managers and local risk owners.

The starting point for EuroTeleSites’ Enterprise Risk Management (ERM) are strategic discussions with the Supervisory Board. In these discussions, the Management Board presents business risks and their relevance to EuroTeleSites as well as mitigating activities. It also presents planning assumptions (strategic orientation for the coming business plan period, priority setting, and planned measures for realizing opportunities).

Subsequently, the business plan maps out the expectations for business success (and necessary costs and investments) and evaluates assumed risks of higher-level goals.

Risks and opportunities are then evaluated by assessing two dimensions:

1. the potential impact; and

2. the likelihood that this impact materializes.

For risk management, the development of effective risk awareness and risk reduction measures is critical. Updates are made, among other things, on the basis of monthly performance calls or leadership meetings with the Management Board and following analysis of critical deviations from the targets set or the effectiveness of countermeasures taken.

The risk management system is divided into four risk categories:

1. Risks and opportunities related to our business strategy.

2. Risks and opportunities related to the operation of our business.

3. Risks and opportunities related to our financial performance or general economic conditions.

4. Risks and opportunities related to ESG, laws and regulations.

EuroTeleSites is active in Austria and five other countries, this means a geographical diversification. The risks in the respective markets vary, which is why risk management (and above all the mitigation of risks) is the responsibility of the local operating units. Risk management is coordinated by EuroTeleSites AG and monitored by the Audit Committee of the Supervisory Board.

Internal control system for financial reporting

EuroTeleSites has an internal control system (ICS) for financial reporting in accordance with applicable legal requirements. The listing of the (indirect) majority owner América Móvil on the New York Stock Exchange (NYSE) requires compliance with the Sarbanes-Oxley Act (SOX). The internal control system is designed to provide reasonable assurance regarding the reliability and accuracy of external financial reporting in accordance with international and national standards. Regular internal reporting to management as well as audits of the internal control system by Internal Audit also ensure that weaknesses are identified in good time and communicated and remedied accordingly. The most important contents and principles apply to all companies of EuroTeleSites Group.

The effectiveness of the internal control system is analyzed and evaluated at periodic intervals. At the end of each year, an evaluation of the internal control system is carried out by the management for relevant Group companies with the involvement of the responsible specialist departments. Based on the findings of this assessment and the defined criteria, management has assessed the internal control system over financial reporting as effective.

Risks and opportunities

From all the risks identified for EuroTeleSites, the most important risk categories and single risks that could have a significant impact on net assets, financial position and results of operations are explained below.

1. Risks and opportunities related to our business strategy

Revenue and tenancy growth

EuroTeleSites expects to grow its business by increasing tenancies on its sites, building new sites, developing new infrastructure and services to serve the growth of its customers.

EuroTeleSites is also exploring growth through investments based on an ambitious business plan to increase the number of the sites. Key drivers of growth are the following: growing mobile data volumes, acceleration of 5G rollout; change in user profiles, regulatory requirements and investments. EuroTeleSites’ mission will be to power the digital transformation, and the company believes its site portfolio is a key enabler for a sustainable, digital society in Austria and CEE.

Despite the focus of the experienced management on growth, EuroTeleSites may not be successful in competing in its markets or may not be able to capture tenancies in its markets and grow its customer base as expected or may lose tenancies, all of which could have an adverse effect on revenues, profitability and cash flow.

Market/Competitors

To achieve its target, EuroTeleSites will need to add further tenancies in addition to those for which it already has commitments. EuroTeleSites’ success will depend on its ability to compete against a variety of other telecommunications infrastructure companies which are active in the markets in which EuroTeleSites operates. In recent years, an increase in the number of European tower companies and corresponding number of available passive infrastructure on which active equipment is mounted has resulted in more intense competition for mobile network operators as customers while tower companies seek to increase their tenancy ratios, which may lead to downward pressure on prices for hosting services.

EuroTeleSites’ ability to compete for market tenancies and increase the number of tenancies on its sites may be affected by a number of factors beyond its control, including a slow-down in the growth of demand, or a reduction in demand for mobile communications services, the inability to effectively compete with other participants in the European telecommunications infrastructure industry, the development and implementation of new technologies such as satellite internet (including satellite-based 5G) and Radio Access Network (“RAN”) sharing that could reduce the use and need for tower-based mobile service transmission and decrease the demand for site space, the inability to renegotiate leases and customer churn due to mergers or consolidations among mobile network operators that could result in a decrease in the tenancy requirements of those consolidated companies.

In 2023, Hutchison Drei Austria GmbH and T-Mobile Austria GmbH have agreed on a cooperation regarding national roaming / active sharing as well as frequency pooling which has received the approval of the Austrian regulatory authority Telekom-Control-Kommission. This cooperation may reduce EuroTeleSites’ Austrian market share and availability of additional tenancies.

Last but not least some or more mobile network operators might take a strategic decision to again build more towers or particularly smaller form factors like microsites and indoor sites themselves.

Business Plan/Budget

In addition to regular management meetings and strategic discussions, EuroTeleSites has a multi-year plan. The close integration of the multi-year plan with risk management ensures adequate risk management.

Lease contracts

Leases are EuroTeleSites’ single largest cost. The renewal of a large proportion of EuroTeleSites’ lease contracts within a particular year could require significant upfront rent payments to be made upon such renewal, which in turn could decrease EuroTeleSites’ operating cash flow for that particular year.

EuroTeleSites could face the risk of having agreements with landlords that are shorter in duration than the master lease agreements with A1 Group. This scenario may require EuroTeleSites to either enter into new leases or pursue term extensions, which might not be achieved or could incur higher costs.

Landlord concentration also poses a risk to EuroTeleSites’ possibility to manage the site leases. Although the overall landlord landscape across all markets is not very concentrated, landlords with 3%-10% of total site leases exist in some markets. If these landlords abuse their market power or an agreement cannot be reached for some other reasons, this could negatively impact EuroTeleSites result from the short term need of either paying more or substituting a big number of sites at the same time.

In addition, companies of EuroTeleSites may in the future become involved in disputes with their landlords, which could interfere with EuroTeleSites’ operation of a given infrastructure site or force EuroTeleSites to construct new infrastructure sites in order to continue providing services to its customers.

Maintenance costs

EuroTeleSites’ ability to maintain a high level of service depends on its ability to develop, maintain and expand its passive infrastructure. This requires significant amounts of capital and other long-term expenditures and will depend on EuroTeleSites’ ability to assess the condition of its passive infrastructure assets and obtain sufficient financing for these projects.

Capital expenditure amounts related to the maintenance of EuroTeleSites’ passive infrastructure assets are expected to be relatively stable but may nevertheless vary from time to time based on factors such as the cost of machinery, construction works and connections to electricity networks.

2. Risks and opportunities related to the operation of our business

Macroeconomic Risks / Inflation risk

Any increases exceeding the limits of the inflation-indexed fee escalators under the master lease agreements with companies of A1 Group (which allow for an increase of up to 3% per year) or other customer contracts could reduce EuroTeleSites’ operating margins and cash flows and may have a material adverse effect on its financial condition and results of operations.

Low levels of inflation could adversely affect EuroTeleSites’ revenues growth because, under the terms of the master lease agreements concluded with companies of A1 Group, annual revenues are subject to inflation indexation.

Natural disasters, force majeure events, physical attacks or other unforeseen events or damage

EuroTeleSites’ sites and other facilities as well as the network operation center (“NOC”) and the shared services center maintained by companies of A1 Group under service agreements with EuroTeleSites, are subject to risks associated with natural disasters such as earthquakes, extreme weather (such as on-going heatwaves), storms or floods (in each case, when damaging or disabling EuroTeleSites’ sites and other facilities, the NOC or shared service center), acts of terrorism (when threatening, damaging or disabling EuroTeleSites’ sites and other facilities, the NOC or shared service center) and other unexpected events or damage such as power outages, telecommunication failures, network software failures, acts of vandalism, theft or fuel shortages. While insurance for assets is in place and service levels are agreed with partners, due to the nature of such events there is no guarantee that EuroTeleSites’ insurance coverage will adequately cover all costs of repairs or that its recovery plans will be sufficiently effective.

Computer system failure, cyber risks and data security

A computer system failure, security breach or cyberattack could significantly disrupt EuroTeleSites’ ability to operate its business. EuroTeleSites is exposed to the risk that third parties or malicious insiders may attempt to use cybercrime techniques, including distributed denial of service attacks, to disrupt the availability, confidentiality and integrity of the information technology (“IT”) systems on which EuroTeleSites relies which could damage assets. Any such disruption could have a material adverse impact on EuroTeleSites’ business.

3. Risks and opportunities related to our financial performance or general economic conditions

Repayment of outstanding debt

EuroTeleSites has incurred considerable liabilities because of the towers business Spin-off and may be unsuccessful in deleveraging and keeping investment grade rating. EuroTeleSites via A1 Towers Holding GmbH as its wholly-owned subsidiary issued notes in the amount of TEUR 500,000 in July 2023 and has entered into a term loan in the amount of TEUR 500,000 in June 2023. In addition, A1 Towers Holding GmbH entered in a revolving credit facility in June 2023, providing a TEUR 75,000 revolving credit loan facility.

The strategy of EuroTeleSites is to deleverage over a period of up to four years and to keep investment grade rating. This strategy currently envisages no dividend payments in the first four years by EuroTeleSites.

Interest rate, refinancing and liquidity risk

Fluctuations in interest rates may affect EuroTeleSites’ future growth and investment strategy and could increase EuroTeleSites’ financing costs because a rise in interest rates may force EuroTeleSites to finance acquisitions or investments or refinance existing debt at a higher cost in the future.

Due to the general shift from a low interest rate environment to the interest levels contemplated by the European Central Bank (and potentially other central banks in jurisdictions where EuroTeleSites operates), EuroTeleSites will be subject to the risk that refinancing can only be obtained at less favorable terms. As a result of deteriorating capital markets or an increased interest rate environment, EuroTeleSites’ debt and the terms and conditions of its existing and future financing arrangements may deteriorate and could increase its borrowing costs and the associated expenses. This may limit EuroTeleSites’ ability to refinance its existing and future liabilities.

4. Risks and opportunities related to ESG, laws and regulations

Failure to comply with environmental, social and governance (“ESG”) standards and expectations

EuroTeleSites will have to increasingly observe ESG standards and expectations regarding environmental concerns, such as climate change and sustainability, social concerns, such as diversity and human rights, and corporate governance concerns, such as organizational anchoring of sustainability. EuroTeleSites currently expects the new Corporate Sustainability Reporting Directive (CSRD) to apply to EuroTeleSites for the first time in the financial year 2025 (for reports published in 2026).

Regulation

EuroTeleSites’ business, and that of its customers, is subject to laws, regulations, administrative and judicial decisions. EuroTeleSites’ costs could increase, and its revenues could decrease due to changes thereto, that could restrict its ability to operate our business as we currently do or impact our or our customers’ competitive landscape. In particular, access regulations coupled with price regulations may have a negative impact on EuroTeleSites.

Tax Risk

Changes in tax laws, regulations or treaties or adverse determinations by taxing authorities could increase EuroTeleSites’ tax burden or otherwise affect its financial condition and results of operations. EuroTeleSites’ tax calculations and its interpretation of laws will be reviewed by tax authorities which may disagree with EuroTeleSites’ tax estimates or judgments and challenge EuroTeleSites’ assessments in relation to tax filings or other tax-related documentation and their compliance with applicable tax laws. Although EuroTeleSites believes that those tax estimates are reasonable, any additional tax liabilities resulting from these risks or any interest or any penalties or any regulatory, administrative, or other sanctions relating thereto could have a material adverse effect on EuroTeleSites’ business, financial condition and results of operations.

Compliance risks

EuroTeleSites has compliance and risk management systems in place to observe all applicable legal regulations on an ongoing and sustainable basis. Therefore, EuroTeleSites has implemented a compliance system which includes, inter alia, anti-corruption, anti-money laundering, antitrust regulations, and data protection in order to prevent, detect and respond to potential violations. EuroTeleSites’ risk management system operates group-wide and is a fundamental part of its corporate governance system.

There are, however, inherent limitations on the effectiveness of any risk management system that could have a material adverse effect on the business prospects and EuroTeleSites’ financial standing.

Other information

Disclosure in accordance with Section 243a of the Austrian Commercial Code (UGB): Shareholder structure and capital disclosures

The share capital of EuroTeleSites AG amounts to EUR 166,125,000 and is divided into 166,125,000 no-par value bearer shares. The share capital was paid in full in the form of a contribution in kind. On the basis of the Spin-off and Transfer Agreement including the Spin-off plan dated June 28, 2023 (file no 9.536 of the public notary Dr. Christian Mayer), Telekom Austria AG with its registered office in Vienna, FN 144477t, as the transferring company, transferred, as a contribution in kind, a share in A1 Towers Holding GmbH with its registered office in Vienna, FN 543743y, which corresponds to a fully paid-in share capital contribution of EUR 35,000 and 100% of the share capital, to EuroTeleSites AG in the course of a Spin-off for formation (§ 1 para 2 no 2 and 2 ff Austrian Spin-off Act) as of the Spin-off date March 31, 2023. As consideration for the transfer of the Spin-off assets to EuroTeleSites the shareholders of Telekom Austria AG were allocated one share in EuroTeleSites for every four shares in Telekom Austria AG upon effectiveness of the Spin-off on September 22, 2023. The entire share capital of EuroTeleSites was allocated to the existing shareholders of Telekom Austria AG on a pro rata basis as part of this allocation of shares. With the issuance of 166,125,000 no-par value bearer shares, the entire share capital of EuroTeleSites amounting to EUR 166,125,000 was allocated. At the end of 2023, 56.96% or 94,630,948 shares of EuroTeleSites were held by América Móvil B.V., Netherlands (“América Móvil B.V.”), a wholly owned subsidiary of América Móvil, S.A.B. de C.V. (“América Móvil”). The Republic of Austria held 28.42% of the shares via Oesterreichische Beteiligungs AG (“OeBAG”). The remaining 14.62% of the shares were in free float. This included 1,229 employee shares that were held in a collective custody account.

The company’s main financing agreements include market-standard “change of control”-clauses that provide for termination rights of the financing parties in the event of a change of control. None of these clauses became effective in the 2023 financial year or up to the reporting date.

The following information concerning the shareholders’ agreement is based solely on publicly available information. The company does not have any additional information. On 6 February 2023, América Móvil, América Móvil B.V. and OeBAG agreed to extend their shareholders’ agreement from 2014 regarding Telekom Austria AG for further ten years. As part of this extension, agreements were also reached regarding EuroTeleSites AG (subject to its subsequent formation). Accordingly, América Móvil, América Móvil B.V. and OeBAG have concluded a shareholders’ agreement with rules for the joint exercise of voting rights in the company’s bodies, for the election of Supervisory Board and Management Board members and for restrictions on the sale of shares. The company’s Supervisory Board shall consist of ten members, of which eight are nominated by América Móvil and two by OeBAG. The company’s Management Board shall consist of at least two and no more than three members. At least one member of the Management Board with the function of CEO (Chief Executive Officer) shall be nominated by América Móvil; one member of the Management Board, namely the CFO (Chief Financial Officer), shall be nominated by OeBAG. América Móvil shall nominate a possible third member of the Management Board. The company’s Articles of Association stipulate that as long as the Republic of Austria directly or indirectly holds at least 25% plus one share of the company’s share capital, resolutions on capital increases and the issue of instruments containing a conversion right or a conversion obligation for shares of the company, as well as amendments to these provisions of the Articles of Association, shall require a majority of at least three quarters of the share capital represented at the vote on the respective resolution. As long as OeBAG holds more than 25% plus one share of the share capital of EuroTeleSites, OeBAG shall be entitled, inter alia, to the following rights of codetermination under the shareholders’ agreement: the right to veto capital increases of EuroTeleSites and its subsidiaries, the issue of certain convertible instruments, the appointment of the auditor, the conclusion of related party transactions, the relocation of the company’s headquarters and core business functions, including research and development, changes to the dividend policy. In addition, OeBAG receives the veto rights of a minority shareholder holding 25% plus one share according to mandatory applicable law. Even if OeBAG’s shareholding falls below 25 % but remains above 10%, OeBAG shall retain certain veto rights.

Diversity of employees

Employees with different backgrounds, religions and education are working at EuroTeleSites in six countries in a wide range of roles for many years. Overall, EuroTeleSites has 165 employees with ten different nationalities.

EuroTeleSites encourages diversity at all levels. At management level, EuroTeleSites currently has eight female and 17 male managers. Women amount to 32% of managers, currently underscoring the company’s ambition of achieving greater gender diversity and EuroTeleSites’ aim of creating a balanced and inclusive management level.

EuroTeleSites has set itself the target of continuously increasing the proportion of women by 2030. Special emphasis will be placed on encouraging women in technical professions.

As well as promoting the individual development of EuroTeleSites employees, there are also mandatory training sessions for all employees covering compliance, information security and employee protection.

Value is also placed on workplace health and safety and on employee wellbeing. For this purpose, the company carries out regular safety assessments, has a culture of open communication about safety issues and reviews and refines its emergency plans on an ongoing basis.

Corporate Governance report

According to C-Rule 61 of the Austrian Corporate Governance Code, please note that the Consolidated Corporate Governance Report can be accessed on the internet at https://eurotelesites.com/en/corporate-governance.

Non-financial statement

EuroTeleSites does not meet the criteria for a reporting obligation under the Nachhaltigkeits- und Diversitätsverbesserungsgesetz (NaDiVeG), so that no non-financial statement will be prepared for the 2023 financial year.

Research and development

In the reporting period, no research and development projects were carried out on a scale that is material for EuroTeleSites.

Glossary of alternative performance measures

Vienna, February 19, 2024

The Management Board of EuroTeleSites AG

Ivo Ivanovski                  Lars Mosdorf

Chief Executive Officer     Chief Financial Officer

1 https://www.boerse-live.at/de/kurse-und-maerkte/zinsen/leitzinsen/zinsschritte-usa.html.

2 https://www.oenb.at/isawebstat/stabfrage/createReport?lang=DE&report=2.2.

3 h ttps://www.ecb.europa.eu/mopo/implement/app/html/index.en.html.

4 https://www.imf.org/en/Publications/WEO/Issues/2023/10/10/world-economic-outlook-october-2023.

5 https://data.worldbank.org/?locations=AT-BG-HR-SI-RS-MK.