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

28 The decline in revenue in the Wholesale area was largely attributable to price cuts for dedicated lines for voice and data traffic (digital leased lines) and termination rates, as well as to the volume-driven decrease in interconnection services. This was partially offset by the increase in the number of unbundled wholesale lines. At the beginning of 2011, the Digital Services customer segment was broken up into areas to focus on in the longer term and areas that will not be pursued as part of the growth strategy, which ultimately account for the decline in revenue from Digital Services. This trend was partially offset by growth in the Scout24 group in particular, and by increases in online advertising and the first-time consolidation of ClickandBuy. The decreased use of premium rate numbers, such as directory inquiry ser­ vices, and of public telephones, led to a decline in revenue from Value-Added Services. EBITDA, adjusted EBITDA. Adjusted EBITDA as a percentage of total revenue – the adjusted EBITDA margin – increased by 2.6 percentage points to 39.7 percent compared with the first quarter of the prior year. Adjusted for special factors, EBITDA increased year-on-year by EUR 0.1 billion to EUR 2.4 billion despite the revenue decline. The special factor in the first quarter of 2011 related to provisions recognized for litigation risks. The increase was partly attributable to our large-scale projects aiming to improve service and make cost management more effective as part of Save for Service. Despite the sharp increase in expenses for marketing smart- phones, 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. These included the discontinuation of operations that we do not intend to pursue further as part of our strategy of value-driven growth, and a reduction in cost of sales. EBIT. We improved our profit from operations by EUR 0.1 billion compared with the first quarter of 2010, to EUR 1.2 billion. This improvement was achieved in spite of higher depreciation and amortization as a result of the positive trend in EBITDA. Cash capex. The increase in our cash capex in the first quarter of 2011 compared with the first quarter of the prior year is mainly attributable to investments made at the end of 2010 but not cash-effective before 2011. In 2011, we are investing mainly in network infrastructure for the next-generation Gigabit society, in connecting high-bit-rate base stations and in the transmission network to support the new mobile communications cells. Employees. As of the end of the first quarter of 2011, we had an average headcount of 76,598 in the Germany operating segment, making us one of the largest employers in Germany. The decline in the headcount compared with the first quarter of 2010 is mainly attributable to our socially responsible staff restruc­ turing and reduction measures, and to staffing changes within the Group.