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Deutsche Telekom AG - Interim Group report - January 1 to September 30, 2011

28 Revenue in the Digital Services area decreased by 12.2 percent to EUR 0.5 billion compared with the first three quarters of 2010. However, its core business remained stable in the reporting period, driven primarily by growth in the Scout24 group and increases in online advertising. At the beginning of 2011, this area was broken down into areas to focus on in the longer term and areas that will no longer be pursued as part of the growth strategy, which ultimately accounts for the decline in revenue from Digital Services, in particular as a result of the discontinuation of trade with mobile prepaid cards of other carriers. The decreased use of premium rate numbers, such as directory inquiry services, and public telephones, resulted in 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 1.8 percentage points to 40.6 percent compared with the first three quarters of the prior year. Adjusted for special factors, EBITDA increased year-on-year by EUR 0.1 billion to EUR 7.3 billion despite the revenue decline. A key contribution came from our effective cost management measures as part of Save for Service. Various technology and sales initiatives and the improve- ment of support processes further reduced operational costs. In addition, the reduction in termination rates and the discontinuation of certain operations as part of our strategy of value-driven growth also contributed to lowering the cost base. In the first three quarters of 2011, adverse effects on EBITDA mainly related to early retirement expenses, which were recognized as a special factor. EBIT. Profit from operations decreased by EUR 0.4 billion compared with the first three quarters of 2010, to EUR 3.5 billion. This decline was principally the result of increased depreciation, amortization and impairment losses and the early retirement expenses included under special factors. Increased depreciation, amortization and impairment losses mainly related to intangible assets which, among other factors, were impacted by the recognition of LTE licenses in the prior year. Cash capex. The decrease in cash capex compared with the first three quarters of the prior year was mainly due to cash outflow for the acquisition of LTE licenses (spectrum) in the second quarter of 2010. In the first three quarters of 2011, we primarily invested in network infrastructure for the next-generation gigabit society, the connection of high-bit-rate base stations, and the transmission network to support the new mobile cells. Employees. In the first three quarters of 2011, we had an average headcount of 76,219 in the Germany operating segment. The decline in headcount compared with the first three quarters of 2010 is mainly attributable to our socially responsible staff restructuring and downsizing measures, and to staffing changes within the Group.