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

37Interim Group management report Total revenue. Total revenue at the United States operating segment (T-Mobile USA) of EUR 11.0 billion for the first nine months of 2011 decreased by 9.7 percent com- pared to EUR 12.1 billion for the first nine months of 2010, due in part to fluctua- tions in the currency exchange rate. In U.S. dollars, revenues of T-Mobile USA declined by 3.3 percent year-on-year, due primarily to the decrease in T-Mobile USA branded customers (total customers excluding MVNO and connected devices) resulting in service revenue declines. Service revenues declined due to lower access and voice revenues partially offset by continued strong growth in data revenues from customers using smartphones with mobile broadband data plans. The number of customers using 3G and 4G smartphones (which include UMTS/HSPA/HSPA+ enabled smartphones) was 10.1 million at the end of the third quarter of 2011, an increase of over 40 percent compared to the 7.2 million at the end of the third quarter of 2010. Additionally, T-Mobile USA’s first nine months of 2011 total revenues were impacted by lower equipment revenues from decreased volumes and only partially offset by T-Mobile USA benefiting from the launch of its handset protection insurance program in the fourth quarter of 2010. EBITDA, adjusted EBITDA. Adjusted EBITDA, excluding EUR 80 million in transaction-related expenses associated with the pending AT&T acquisition of T-Mobile USA, decreased year-on-year in the first nine months of 2011 by 11.7 percent to EUR 2.8 billion compared to EUR 3.2 billion in the first nine months of 2010. In U.S. dollars, adjusted EBITDA fell by 5.3 percent primarily due to the decrease in revenues as discussed above. Operating expenses in U.S. dollars decreased 1.7 percent year-on-year due primarily to lower volume-driven handset and commission costs. These costs were offset in part by higher marketing expenses related to advertising America’s largest 4G network and increased network costs as­ sociated with the build out of the 4G HSPA+ network. Additionally, the ongoing expense management programs in the first nine months of 2011 have been effective in optimizing the cost base. EBIT. EBIT increased year-on-year by 38.6 percent (43.5 percent after adjusting for costs associated with the AT&T transaction) to EUR 2.2 billion in the first nine months of 2011 from EUR 1.6 billion in the first nine months of 2010 due primar- ily to a change in accounting impacting depreciation expense. In March 2011, T-Mobile USA’s non-current assets were classified as held-for-sale in relation to the pending sale to AT&T. Accordingly, T-Mobile USA discontinued depreciat- ing these assets for accounting purposes as of the announcement of the pend- ing transaction. If the assets had continued to be depreciated for the full nine months ended September 30, 2011, EBIT would have decreased year-on-year due to the factors described above. Cash capex. Cash capex increased 2.6 percent year-on-year to EUR 1.6 billion in the first nine months of 2011 compared to EUR 1.5 billion in the first nine months of 2010. In U.S. dollars, cash capex increased by 9.8 percent due primarily to spending on system development projects to support T-Mobile USA operations, network coverage expansion and the upgrade to HSPA+ 42. T-Mobile USA op- erates America’s largest 4G network with HSPA+ service reaching customers nationwide. Additionally with HSPA+ 42, more than 170 million Americans now have access to T-Mobile USA’s most advanced 4G mobile broadband network with theoretical download speeds of 42 Mbit/s with increased network capacity and reliability. Employees. The average number of employees decreased in the first three quarters of 2011 by 7.4 percent compared to the first three quarters of 2010. This decrease was due in part to fewer customer support employees driven by lower customer care call volumes and a decrease in the number of retail employees due to the implementation of labor efficiency and store rationalization programs.