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

34 Croatia. In the first quarter, we generated revenue of EUR 256 million in Croatia. This constitutes a reduction of 4.1 percent. Adjusted for the negative exchange rate effects from the translation of Croatian kunas to euros, the decline in revenue was only 2.5 percent. The mobile business was the main reason for the slight decline in revenue from operations. Reductions in termi- nation rates imposed by regulation in January 2011 had a negative impact on service revenue. Lower revenue from data services and visitors additionally reduced revenue. By contrast, revenue from operations in the fixed-network business grew compared with the prior-year period. Positive revenue contribu- tions from the strong increase in broadband and TV lines and the revenues from ICT business more than offset the decline in revenue from traditional fixed-network business. Netherlands. In the Netherlands, revenue declined by 5.4 percent year-on- year to EUR 418 million in the first quarter of 2011, primarily as a result of lower service revenue. Three regulatory decisions to reduce termination rates imposed within the past nine months resulted in significant losses in revenue from voice telephony. Moreover, a decline in online revenue also had a negative impact. The negative effect of lower termination rates was partially offset by a rise in revenue from monthly charges, roaming, text messages, and an increase in the number of handsets sold. Slovakia. In Slovakia, revenue decreased by 12.2 percent to EUR 202 million in the first quarter of 2011. Most of this decline in revenue was attributable to lower mobile revenue. Intense competition resulted in a reduction in voice-telephony revenue, while lower visitor revenue had an additional negative impact on service revenue. Higher non-voice revenue only partially offset these negative factors. Revenue also remained under pressure in the fixed-network business. In spite of the positive development of broadband lines and the successful marketing of the television products IPTV and satellite TV, revenue, in particular from IP and Internet fees, decreased compared with the prior-year quarter. Austria. Revenue in Austria decreased by 7.7 percent year-on-year, to EUR 229 million. This decline, which primarily related to service revenue, was the result of intense competition and reductions in termination rates imposed by regula- tion. Higher revenue from monthly charges in part offset the decline in revenue. EBITDA, adjusted EBITDA. 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. Almost half of this decline in EBITDA was attributable to the deconsolidation of T-Mobile UK as of April 1, 2010. In addition, adjusted EBITDA decreased as a result of the special tax in Hungary and the reclassification of the Hungarian business cus- tomer base. Positive exchange rate effects from the translation of Czech korunas 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 by 11.6 percent. Signifi- cant potential savings in overhead costs were realized, for example, by target- ing specific customer groups and thus considerably reducing selling expenses. Greece. In the first quarter of 2011, we generated adjusted EBITDA of EUR 327 million in Greece. This 13.0-percent decline was primarily the result of the year- on-year decline in revenue. Savings in overheads and efficiency-enhancing initiatives, such as the staff reduction measures taken in the previous year, now had a positive effect on EBITDA. Romania. In Romania, adjusted EBITDA declined by 15.3 percent compared with the prior-year quarter, to EUR 61 million, primarily due to the decrease in revenue in the fixed-network business and higher marketing expenses in response to strong competition. Savings in overheads were insufficient to fully offset these effects. By contrast, we generated higher adjusted EBITDA in the mobile business, although this only partially offset the negative impact of the decline in EBITDA in the fixed-network business. By keeping marketing ex­ penses at a moderate level in the first quarter of 2011, we offset the negative impact of the decline in revenue in the mobile business. Hungary. In the first quarter of 2011, adjusted EBITDA was down 10.5 percent year-on-year to EUR 145 million. This result was driven in particular by the introduction at the end of 2010 of a new special tax, which was responsible for a year-on-year decline in EBITDA of around EUR 20 million. In addition, the reclassification of the business customer base had a negative effect on earnings. Adjusted for these two factors and the slightly negative exchange rate effects from the translation of Hungarian forints into euros, EBITDA grew by 7.1 percent. Efficiency-enhancing measures countered the decline in rev- enue from operations.