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

47Interim Group management report Expectations for the operating segments. Germany. In the next few years, we will focus our strategy on areas that form the basis of our successful German operations: −− First-class product and service quality for our customers −− LTE and fiber-optic roll-out – investment in broadband in Germany −− Entertain – innovative television and entertainment platform of the future −− Save for Service – we are making our Company fit for the future. We expect revenue in the Germany operating segment to decrease in 2011, mainly as a consequence of regulatory intervention and our focus on high-mar- gin business. We intend to counter this decrease in the coming years by con- tinuing the broadband roll-out, developing our mobile data business further, investing in intelligent and innovative network structures, developing our prod- uct portfolio further, and continually improving our service. All these activities are intended to contribute to stabilizing revenue from 2012 onward. We expect adjusted EBITDA to continue to stabilize year-on-year, or even increase slightly in 2011 and 2012; and we expect the EBITDA margin to develop positively. The fixed-network and broadband markets are almost saturated, however, and many lines will be lost. Nevertheless we will be able to maintain our market leadership. We intend to further establish our television service Entertain in the mass market, for example, by offering an extended range of 3D and HD programs. We are well prepared for intense competition in the German mobile communications market with our attractive calling plan structure. Our broad range of handsets includes innovative, high-class smartphones running all operating systems as well as the Apple iPhone with exclusive applications for our customers. The Federal Network Agency has decided to reduce mobile call termination rates by almost 50 percent to 3.38 eurocents per minute. This will impact nega- tively on our mobile service revenues in 2011. Overall, however, we expect our mobile service revenues to continue developing positively and that our data revenues will continue to grow strongly. We plan to invest more than EUR 10 billion in the Germany operating segment between 2010 and 2012, concentrating on our strategic growth and innova- tion areas, such as our fixed-network and mobile network infrastructures, to respond to our customers’ increasing need for bandwidth. We have been roll- ing out our LTE sites in rural areas since 2010, which allows customers in 1,000 areas that were previously not covered by broadband Internet to access the Internet and make calls on flat rates with the Call & Surf Comfort calling plan, all via the mobile network. The roll-out of optical fiber will also play an ever increas- ing role in the next few years, following a number of successful pilot projects. Europe. In the Europe operating segment, we intend to continue to defend our strong market position, and expand our market shares in some countries. In line with our strategy of connected life, we aim to win over our consumers and business customers with new, intelligent handsets and attractive rate plans. Moreover, we intend to improve our range of innovative data and content services for smartphones and laptops. In countries where we offer both fixed-network and mobile services, we will push our product portfolio by increasing the number of innovative bundled offers. IPTV and satellite TV will be important elements of this strategy. Intelligent ICT solutions will also become more important in the Europe operating segment as part of our “connected work” strategy. In order to strengthen our competitiveness, we will focus our capital expendi- ture on upgrading the network infrastructure. In mobile communications, we will concentrate our efforts on introducing LTE as the fourth-generation mobile technology in Austria and various other countries of our Europe segment. At the same time, investments are planned to build out the UMTS networks, introduce HSPA+, and upgrade the GSM networks. More investments are to be made in the fixed network in order to increase broadband coverage, for instance, by building out the fiber-optic infrastructure. Further investments are planned to improve customer service and make processes more efficient. The overall economic situation in the Europe operating segment remains tense. In Greece and Romania in particular, we expect the economic situation to remain critical this year. On top of that, we continue to fight intense competition and the associated price erosion. Regulatory measures and changes in legis- lation (e.g., as part of government austerity programs) could have a negative impact on revenue and earnings. In Hungary, for example, the special tax for large corporations in the trade, energy, and telecommunications sector passed in October 2010 will continue to reduce revenue and earnings and limit invest- ment potential in the country this year, too. The same applies in Croatia for the mobile communications tax levied since August 2009. In addition, exchange rate effects could adversely affect earnings on a euro basis. On the other hand, cost-cutting measures and strategic initiatives, some of them part of the Save