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

17Interim Group management report The Germany operating segment generated a 3.7-percent increase in adjusted EBITDA despite a 3.2-percent decline in revenue. This increase was largely attributable to our large-scale Save for Service program, which aims to imple- ment better service and more effective cost management. Despite the sharp increase in expenses for marketing smartphones, we reduced our operating costs further in the first three months of 2011 with a range of measures in the fields of technology and sales, and by streamlining our support processes. Our Europe operating segment generated adjusted EBITDA of EUR 1.2 billion in the first quarter of 2011, a year-on-year reduction of 22.7 percent. As with the development of revenue, adjusted EBITDA was significantly impacted by the change in the composition of the Group due to the deconsolidation of T-Mobile UK. In addition, adjusted EBITDA decreased as a result of the special tax in Hungary. Positive exchange rate effects from the translation of Czech ko- runas and Polish zlotys into euros fully offset the negative exchange rate effects from the translation of Hungarian forints and Croatian kunas. Excluding the aforementioned effects, adjusted EBITDA declined 11.6 percent. The decline in revenue was therefore partially offset by cost cuts, for example, by targeting specific customer groups and thus considerably reducing selling expenses. In the United States operating segment, adjusted EBITDA decreased by 13.6 percent year-on-year in the reporting period to EUR 0.9 billion. In addition to the aforementioned decline in revenues, operating costs rose, due in parti­ cular to customer retention expenses, increased advertising expenses, and from the expansion of the 4G HSPA+ network. In the first three months of this year, the Systems Solutions operating segment generated adjusted EBITDA of EUR 0.2 billion. Despite an increase in revenue compared with the first quarter of 2010 (up 6.1 percent), adjusted EBITDA decreased by 3.6 percent, primarily due to increased start-up expenses for new contracts. Savings generated by the comprehensive restructuring and efficien- cy enhancement program Save for Service did not fully offset the rise in costs. Contribution of the operating segments to adjusted Group EBITDA. Q1 2011 millions of € Proportion of adjusted Group EBITDA % Q1 2010 millions of € Change millions of € Change % FY 2010 millions of € Germany 2,384 66.1 2,299 85 3.7 9,618 Europe 1,226 33.9 1,587 (361) (22.7) 5,748 United States 871 24.1 1,008 (137) (13.6) 4,156 Systems Solutions 189 5.2 196 (7) (3.6) 948 Group Headquarters & Shared Services (163) (4.5) (172) 9 5.2 (870) Reconciliation (27) (0.7) (28) 1 3.6 (127) EBITDA (adjusted for special factors) in the Group (continuing and discontinued operations) 4,480 124.1 4,890 (410) (8.4) 19,473 Discontinued operations (United States) (871) (24.1) (1,008) 137 13.6 (4,156) Reconciliation 0 0 0 0 0 2 EBITDA (adjusted for special factors) in the Group (continuing operations) 3,609 100.0 3,882 (273) (7.0) 15,319