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

31Interim Group management report Total. In the first nine months of 2011, customer development in the Europe segment was impacted by various factors. Our customer base was adversely affected by the strained macroeconomic situation, especially in Greece. In addition, we were unable to further expand our customer base in Greece, because the Greek regulatory authority obstructed the introduction of our proposed com- petitive fixed-network calling plans. Overall, we faced major challenges from intense competition on our increasingly saturated markets. The reclassification of our business customer base, dividing it between the Europe and Systems Solutions operating segments as of January 1, 2011, whereby we reassigned the mobile and fixed-network lines of our corporate customers in Hungary to T-Systems, also reduced the customer base. In countries where we offer mobile and fixed-network communications, we bundle all kinds of mobile communica- tions, broadband and fixed-network services. As a result, we partially offset line losses in the fixed network with an increase in broadband lines. But even in the fixed network, we succeeded in our efforts to reduce line losses in the course of 2011, such that we lost less than 2 percent in each of the last two quarters. Despite the adverse effect from the customer reclassification in Hungary, our total mobile customer base was almost on a par with the end of 2010. Fixed network. Connected worlds: telephone, Internet and television. At the reporting date of September 30, 2011, some 10.8 million customers in the Europe segment had a fixed-network line. This represents a decrease of 4.4 percent against the end of 2010. This development is largely attributable to Greece, Hungary and Romania, which together accounted for some 90 percent of the line losses in traditional fixed-network business. In Greece and Romania, the economic situation and the resulting intense competitive pressure led to a decline in the number of customers. In Hungary, the number of fixed-network lines also decreased as a result of the reclassification of the business customer base. In Slovakia too, the number of lines declined compared with the end of 2010. In line with our strategic orientation, we focus on fast and efficient telecommunication networks. For this reason, we are consistently building out our broadband network. As a result, the number of retail broadband lines marketed has increased steadily each quarter. In the first nine months of 2011, the number of retail broadband lines and bundled and unbundled wholesale broadband lines rose by more than 3 percent from the end of 2010 to 4.7 million lines in total. Most countries in our Europe operating segment contributed to this result. In Romania in particular, but also in the Czech Republic and in Slo- vakia, we successfully marketed our products, thereby generating encouraging absolute growth. The number of IPTV customers also grew steadily: Compared with the end of 2010, we generated strong growth of around 18 percent. The main drivers of absolute growth in this regard were Hungary and Croatia. Mobile communications. At the heart of life everywhere: mobile telephony and data applications. We had a total of 59.5 million mobile customers in our Europe segment in the first nine months of this year. Our efforts to put the brakes on losses in mobile communications took effect. We succeeded, for example, in slowing the down- ward trend compared with the end of 2010, and in stabilizing our customer base at the level as of June 30, 2011. Above all, the Netherlands, Bulgaria, Austria and Poland recorded increases in their total customer base, which fully offset customer losses, especially in Hungary, Croatia and Romania. The largest customer losses were incurred in the prepay segment. In Croatia, the number of prepay customers decreased by around 0.5 million customers as of September 30, 2011, because the reporting logic was switched to the definition prescribed by the local regulatory authority. According to this definition, only prepay customers that have been active in the last 90 days are counted. The number of prepay customers also declined in Romania, firstly because inactive customers were deregistered and secondly due to the difficult economic situ- ation. Since the process of deregistering inactive cards in Greece was com- pleted, the prepay customer base has been recovering slightly. Nevertheless, there was still a net decline in the prepay customer base compared with the end of 2010. In Poland, a change in the prepay deregistration logic had a positive effect on the customer base as of September 30, 2011. High-value contract customer business showed consistently stable growth. Thanks to encouraging increases, mainly in the Netherlands, the Czech Re- public, Bulgaria and Austria, we were able to compensate for customer losses resulting from the reclassification in Hungary, such that the contract customer base was once again on a par with the level at the end of 2010. Overall, contract customers as a proportion of the total number of customers in the Europe operating segment increased slightly to over 44 percent compared with the end of 2010. This positive development was the result of our focus on our strategic aim of winning and retaining high-value customers. The marketing of attractive bundle rates including minute buckets, and mobile broadband played a central role. As part of our connected life and work strategy, we successfully targeted new groups of customers with innovative data and content services for the mobile Internet and innovative mobile devices. By continuously upgrading our networks, for example with HSPA+ technology, we offer our customers fast, mobile Internet connection, which our customers use, for example, for mobile surfing with smartphones. Owing to high demand for these devices, especially in the Netherlands and Austria, smartphones as a proportion of all terminal devices marketed in the Europe operating segment increased yet again.