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

33Interim Group management report Total revenue. In the first nine months of the current financial year, the Europe operating seg- ment generated total revenue of EUR 11.4 billion, a decrease of 12.2 percent compared with the prior-year period. Half of this decline was attributable to the deconsolidation of T-Mobile UK effective April 1, 2010. In addition, the special tax in Hungary had a negative impact on segment revenue. Slightly positive overall exchange rate effects against the euro, primarily driven by the transla- tion of Czech koruna and the Hungarian forint, partially offset the negative revenue effects. Adjusted for the aforementioned factors, segment revenue was down just 6.3 percent. This decline was primarily due to price erosion in almost all European countries. Price reductions were firstly the result of lower mobile termination rates imposed by the regulation, which particularly led to substantial revenue losses in the Netherlands, the Czech Republic and Austria. And secondly, high competitive pressure had a negative impact on revenue. The difficult macroeconomic situation in the countries of Southern and Eastern Europe in particular had a considerable impact on total revenue. The OTE group was hit especially hard. It accounted for almost half of the decline in operating revenue. The negative effects were partially offset by encouraging revenue growth in the fixed-network business, primarily in broadband/TV, and wholesale. In addition, strong mobile data revenue growth of around 15 percent had a positive impact on segment revenue. Almost all countries in the segment, especially the Netherlands, Greece and Poland, contributed to this growth. EBITDA, adjusted EBITDA. Our Europe operating segment generated adjusted EBITDA of EUR 3.9 billion in the first nine months of 2011, a year-on-year reduction of 12.3 percent. Almost a third of the decline in EBITDA was attributable to the deconsolidation of T-Mobile UK as of April 1, 2010. In addition, the special tax imposed in Hungary and the real estate tax introduced by the Greek government in September 2011 had an adverse effect on the segment’s adjusted EBITDA. The slightly positive exchange rate effects against the euro were driven by the Czech koruna and the Hungarian forint. Excluding the aforementioned effects, adjusted EBITDA declined by 7.7 percent. The decrease in adjusted EBITDA was largely driven by negative effects from the decline in revenue. By systematically reducing our overhead costs, for ex- ample by means of efficient measures in Hungary and Greece in particular, we partially offset the negative effects in the Europe operating segment resulting from the year-on-year revenue decline. Last but not least, one-time effects, for instance in Poland, also affected EBITDA positively in the current financial year. Development of operations in selected countries. Greece. In Greece, revenue decreased by 8.8 percent year-on-year to EUR 2.7 billion in the first nine months of 2011. This decline affected fixed- network and mobile business in almost equal measure. The revenue decrease in the fixed network was mainly the result of line losses in traditional fixed- network business. However, the significant growth in wholesale revenues largely balanced out these reductions. Since fixed-network business is still subject to strict regulation, broadband customer acquisition targets – and the associated revenue – were not achieved. Mobile business in the first nine months was mainly influenced by the difficult macroeconomic situation and intense competition. In addition, the regulation-induced reduction in termina- tion rates and the prepay registration requirements had a negative impact on our revenue. This was partially offset by substantial increases in data revenue. Adjusted EBITDA in Greece decreased by 10.8 percent to EUR 979 million in the first nine months. This decline was firstly due to lower revenue than in the prior-year period and secondly to decisions by public authorities. In September 2011, for example, the Greek government introduced a real estate tax for the 2011 financial year. The retroactive adjustment of regulated rates by the Greek regulatory authority in the second quarter of 2011 also impacted negatively on earnings. Our programs and measures to increase efficiency partially offset the decline in adjusted EBITDA. Hungary. In Hungary, we generated revenue of EUR 1.1 billion in the first nine months of the year. It declined by 8.9 percent primarily due to two factors. Firstly, the special tax imposed by the Hungarian government at the end of last year reduced revenue by around EUR 59 million. In addition, the reclassification of the business customer base had a negative impact of around EUR 32 million on revenue. The marginally favorable development of the exchange rate of the Hungarian forint against the euro partially offset the decrease in revenue. Adjusted for these factors, the decline in revenue from operations was only 2.7 percent year-on-year, primarily caused by the general economic situation. Higher broadband and TV revenue only partially offset the revenue losses in the traditional fixed-network business. In mobile communications, service revenues decreased as a result of lower revenues from voice telephony. These decreases were attributable to price reductions driven by intense competition and lower mobile termination rates. Slightly higher equipment revenue had an offsetting effect.