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

45Interim Group management report Development of revenue and profits.1 The statements in this section reflect the current views of our management. Expectations of business developments are based on the opportunities and risks that arise as the year progresses as a result of the conditions on the mar- ket and the competitive environment. For more information on existing oppor- tunities and risks, please also refer to the disclosures in the Annual Report as of December 31, 2010 and in this Interim Group Report. For additional information and recent changes in the economic situation, please refer to the section “The economic environment” in this interim Group management report. Expectations for the Group. We aim to achieve organic revenue growth with a broader revenue mix. Rev- enue in the new growth areas is expected to increase sharply in the next few years; these areas are mobile Internet, the connected home, Internet services, T-Systems (external revenue), and intelligent network solutions. In order to achieve these targets, we will invest further in next-generation technologies. In 2011 and 2012, for instance, in addition to expanding the fast broadband network in Germany, we intend to acquire high-performance mobile spectrum in other countries in Europe. We have set ourselves ambitious targets that will have a positive effect on profitability: In the second phase of the Save for Service program, costs are to be cut by a further EUR 4.2 billion by 2012 com- pared with their 2009 level. Also by 2012, return on capital employed (ROCE) throughout the Group is to increase by around 150 basis points. We maintain our guidance for the Group as communicated. T-Mobile USA’s profit/loss after taxes is included in aggregate form in the item “Discontinued operations” in the consolidated income statement as a consequence of the planned sale of the company to AT&T. This did not result in any change in the reporting of free cash flow and capital expenditure. These changes affect the guidance set out in the 2010 Annual Report as the Group’s adjusted EBITDA no longer includes T-Mobile USA’s adjusted EBITDA. Adjusted for the change in the disclosure of T-Mobile USA, we expect to gener- ate adjusted EBITDA of around EUR 14.9 billion in 2011. Without any change in reporting, we likewise expect free cash flow to remain stable or increase slightly in 2011 compared with 2010, at around EUR 6.5 billion (excluding the effects from the PTC transaction completed in January 2011, totaling EUR 0.4 billion) and capital expenditure to amount to around EUR 9 billion (before any invest- ments in spectrum). In 2012, we expect sustained high levels of adjusted EBITDA and free cash flow. Despite high levels of investment in our future viability, we also want to remuner- ate our shareholders appropriately in 2011 and 2012, subject to the achieve- ment of a corresponding level of unappropriated net income. A minimum dividend of EUR 0.70 per share is to be paid out to Deutsche Telekom AG shareholders. Including the share buy-backs to be carried out until 2012, this amounts to a total shareholder remuneration of EUR 3.4 billion per year.2 The dual policy of dividend payments and share buy-back aims to ensure the cash inflow for our shareholders and also to support our share price. We intend to continue leveraging international economies of scale and syner- gies in the future, through appropriate acquisitions in markets where we are already represented. There are no plans, however, for major acquisitions or expansion in emerging markets. The general mood on the international finance markets in 2010 was dominated by the debt crisis, which meant that some countries had difficulties refinancing their due debts on the international capital markets. In 2011, the performance of the financial markets is expected to depend largely on the implementation of suitable measures to tackle the debt crisis. 1 The forecasts for the development of revenue and profits contain forward-looking statements that reflect management’s current views with respect to future events. Words such as “assume,” “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “could,” “plan,” “project,” “should,” “want,” and similar expressions identify forward-looking statements. These forward-looking statements include statements on the expected development of key performance indicators until 2012. Such statements are subject to risks and uncertainties, such as an economic downturn in Europe or North America, changes in exchange and interest rates, the outcome of disputes in which Deutsche Telekom is involved, and competitive and regula- tory developments. Some uncertainties or other imponderabilities that might influence Deutsche Telekom’s ability to achieve its objectives, are described in the “Risk and opportunities management” section in the combined management report and the disclaimer at the end of the Annual Report as well as in the “Risks and opportunities” section of this interim Group management report. Should these or other uncertainties and imponderabilities materialize or the assumptions underlying any of these statements prove incorrect, the actual results may be materially different from those expressed or implied by such statements. We do not guarantee that our forward-looking statements will prove correct. The forward-looking statements presented here are based on the current structure of the Group, without regard to significant acquisitions, dispositions, business combinations or joint ventures Deutsche Telekom may choose to undertake. These statements are made with respect to conditions as of the date of this document’s publication. Without prejudice to existing obligations under capital market law, we do not intend or assume any obligation to update forward-looking statements. 2 This policy is subject to the requisite unappropriated net income being posted in the single-entity financial statements of Deutsche Telekom AG for the financial year in question and the ability to form the necessary reserves for the share buy-back and compliance with the requisite legal framework for a share buy-back. It is also contingent upon the executive bodies adopting resolutions to this effect, taking account of the Company’s situation at the time.