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

33Interim Group management report Total revenue. In the first quarter of 2011, the Europe operating segment generated total revenue of EUR 3.7 billion, a decrease of 23.1 percent compared with the prior- year period. This decline is primarily due to the deconsolidation of T-Mobile UK as of April 1, 2010 and the reclassification of the business customer base in Hungary. Overall, marginally positive exchange rate effects against the euro resulted in an improvement in segment revenue, with above all the Czech koruna and the Polish zloty more than offsetting the negative exchange rate effects of the Hungarian forint and the Croatian kuna. Adjusted for these fac- tors, segment revenue was down just 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 busi- ness, primarily in broadband and television. Greece. In Greece, revenue decreased by 13.4 percent year-on-year in the first quarter of 2011. These declines affected both the fixed-network and the mobile business. In the fixed network, line losses had a negative impact on revenue. In part, this decline was offset by positive developments in wholesale and TV rev- enue. The mobile business was mainly affected by intense competition and the tough macroeconomic situation in the first quarter of 2011. These factors led to a reduction in service revenue as compared with the previous year. In addition, the prepay registration requirements and the regulation-induced reduction in termination rates had a negative impact on revenue. This was offset by slight increases in roaming and content revenue. Romania. Revenue in Romania was down by 10.0 percent in the first quarter of 2011, in particular as a result of the continuing price war in the Romanian telecommunications market and the still tense economic situation, which trig- gered line losses in both traditional fixed-network and mobile business. Strong broadband customer growth and the resulting slight increases in revenue par- tially offset the decline in the traditional fixed-network business. In the mobile business, service revenue was only marginally down, tracking lower revenue from monthly charges and text messages. Higher voice-telephony revenue, on the other hand, made a positive contribution and partially offset this decrease. Hungary. In Hungary, we generated revenue of EUR 352 million in the first quarter. This decline of 12.4 percent was primarily due to two factors. Firstly, the special tax imposed by the Hungarian government at the end of last year reduced revenue by EUR 20 million. In addition, the reclassification of the busi- ness customer base had a negative impact on revenue of around EUR 13 mil- lion. The unfavorable development of the exchange rate of the Hungarian forint against the euro exacerbated the effect on the result. Adjusted for these factors, the decline in revenue from operations was only 3.1 percent year-on-year, primarily caused by the general economic situation. Higher broadband and TV revenue only partially offset the revenue losses in the traditional fixed-network business. In mobile communications, service revenue was down, especially from voice telephony. Here, revenue was negatively affected by price reduc- tions driven by intense competition and lower mobile termination rates. Poland. Due to positive exchange rate effects of the Polish zloty against the euro, we stabilized our revenue in Poland at the prior-year level, generating EUR 440 million in the first quarter of 2011. Service revenue from operations declined slightly, mainly due to lower revenue from voice telephony and text messages. These decreases in revenue were almost fully offset by higher rev- enue from monthly charges and data services as well as lower price discounts. Czech Republic. Compared with the prior-year quarter, revenue in the Czech Republic decreased by 3.9 percent to EUR 268 million. Positive exchange rate effects from the translation of Czech korunas to euros only partly compensated for the decrease in revenue from operations. This was primarily due to lower service revenue, which was negatively impacted by two regulation-induced reductions in termination rates. Revenues from voice telephony and data services decreased. This was partially offset by higher monthly charges and higher revenues from terminal equipment on the back of an increase in the number of handsets sold. Moreover, the encouraging increase in fixed-net­ work business made a positive contribution to revenue and offset declines elsewhere.