Telekom Austria will book an impairment of €400 million for its Bulgarian subsidiary Mobiltel, blaming a rise in capital costs.

The operator said other reasons for the mark-down included changed expectations regarding macroeconomic developments, as well as related market effects which affect the valuation of Telekom Austria’s business plan for Mobiltel.

A 20 percent increase in the weighted average cost of capital (WACC) was caused by volatility in the Telekom Austria’s share price.

However, no other subsidiary is affected, the operator said.

Meanwhile, the macroeconomic risks include the geopolitical crisis in Ukraine and rating agency Standard & Poor’s cut in Bulgaria’s sovereign credit rating.

Telekom Austria’s management had expected a mid-term recovery for Bulgaria, but said this no longer appears sustainable.

The impairment will be reflected in the operator’s first half results and will negatively impact net income and equity.

In the first quarter, a shrinking customer base, pricing and volume effects in the mobile business, plus a €2.6 million fallout from regulatory effects caused a 6.4 percent fall in Mobiltel’s revenues to €91.2 million.

Overall, Telekom Austria’s revenues were down seven percent to €976 million.

The operator is awaiting the decision of its shareholders as to whether they will accept a takeover offer by América Móvil.

Shareholders have until 10 July to accept the offer, which includes a €1 billion capital increase.

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