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Deutsche Telekom AG - Interim Group report - January 1 to March 31, 2011

15Interim Group management report Contribution of the operating segments to net revenue. Q1 2011 millions of € Q1 2010 millions of € Change millions of € Change % FY 2010 millions of € Germany 5,991 6,189 (198) (3.2) 25,145 Europe 3,672 4,774 (1,102) (23.1) 16,840 United States 3,770 3,814 (44) (1.2) 16,087 Systems Solutions 2,260 2,131 129 6.1 9,057 Group Headquarters & Shared Services 537 565 (28) (5.0) 2,166 Intersegment revenue (1,633) (1,661) 28 1.7 (6,874) Net revenue from continuing and discontinued operations 14,597 15,812 (1,215) (7.7) 62,421 Discontinued operations (United States) (3,770) (3,814) 44 1.2 (16,087) Reconciliation 3 4 (1) (25.0) 12 Net revenue from continuing operations 10,830 12,002 (1,172) (9.8) 46,346 Results of operations of the Group. Net revenue. In the first three months of the 2011 financial year, we generated net revenue from continuing operations of EUR 10.8 billion, a decrease of EUR 1.2 billion or 9.8 percent compared with the first quarter of 2010. The change in the composition of the Group described on the previous page resulting from the deconsolidation of T-Mobile UK had a negative effect of EUR 0.8 billion on this development. Exchange rate effects did not have any significant impact on net revenue from continuing operations. Excluding these effects, net revenue from continuing operations decreased by EUR 0.4 billion or 4.0 percent. The Systems Solutions operating segment increased its revenue, whereas all others recorded decreases. Revenue in the operating segments developed as follows: Revenue in our Germany operating segment was 3.2 percent down on the first quarter of 2010 at EUR 6.0 billion. This was mainly due to declining revenues from voice telephony in both mobile communications and the fixed network. Adjusted for the price effect of the reduction in termination rates from Decem- ber 2010, the first-time consolidation of ClickandBuy and the discontinuation of trade with mobile prepaid cards of other carriers, which was stopped as part of the measures for value-driven growth, we reduced the year-on-year decline in our revenue to 2.0 percent (revenue decline in the first quarter of 2010: 2.2 per- cent). This trend was partially offset by growing demand for complete packages with mobile data rates and broadband TV revenue, as well as the positive development of smartphone revenues. In the first quarter of 2011, the Europe operating segment generated revenue of EUR 3.7 billion. This represents a decrease of 23.1 percent against the prior- year quarter. This was impacted by the aforementioned change in the composi- tion of the Group of EUR 0.8 billion. Excluding this effect and adjusted for the slightly positive exchange rate effects, revenue decreased by only 8.0 percent. This decline was primarily caused by the price erosion in almost all European countries. Price reductions were firstly the result of lower mobile termination rates imposed by regulation, and secondly high competitive pressure was having a negative impact on revenue. In addition, special taxes in Hungary had a negative effect on segment revenue. The difficult macroeconomic situation in the countries of Southern and Eastern Europe in particular had a considerable impact on total revenue. Greece and Romania were particularly impacted. They accounted for around 51.1 percent of the decline in revenue from operations. The negative effects were in part offset by encouraging revenue growth in the fixed-network business, primarily in broadband and television. At EUR 3.8 billion, revenue in our United States operating segment was slightly down by 1.2 percent compared with the first quarter of 2010. Exchange rate effects from the translation of U.S. dollars had a positive effect on the revenue trend on a euro basis. On a U.S. dollar basis, revenue declined by 2.1 percent, due primarily to a decrease in equipment revenues and T-Mobile USA branded customers resulting in voice revenue declines. Service revenues, on the other hand, increased by 0.4 percent year-on-year on a U.S. dollar basis, primarily due to the strong growth in data revenue and the insourcing of the handset insurance business. Revenue in our Systems Solutions operating segment stood at EUR 2.3 billion in the first quarter of 2011, an increase of EUR 0.1 billion or 6.1 percent com- pared with the first three months of the prior year. This increase is mainly the result of the revenue from new contracts that T-Systems concluded, e.g., with DekaBank, Deutsche Post DHL and E.ON, this year and in the prior year. The deals offset the general negative price trend in IT and communications.