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

40 Total revenue. Total revenue in our Systems Solutions operating segment in the first nine months of the financial year amounted to EUR 6.8 billion, a year-on-year increase of 3.3 percent. This increase is partly attributable to deals secured with E.ON and Deutsche Post DHL in the prior year as well as contracts signed with companies such as Everything Everywhere, Magna and TOTAL in 2011. The new deals offset the general negative price trend in IT and communica- tions. Revenue generated with Deutsche Telekom’s other operating segments amounted to EUR 2.0 billion in the reporting period, an increase of 3.7 percent. As a service provider for the Group, T-Systems continues to develop Deutsche Telekom’s IT landscape on an ongoing basis. As part of this process, standard- ized systems contribute significantly to reducing the Group’s IT costs. Net revenue. T-Systems expanded business with customers outside the Deutsche Telekom Group. The Swiss trading company Valora, for example, commissioned T-Systems with the operation of its data centers and ICT infrastructure. The operating segment generated net revenue of EUR 4.8 billion, 3.1 percent more than in the prior-year period, due to growth in systems integration business, especially as a result of the development and operation of customer applica- tions (Application Management & Development). Revenue also increased in the intensely competitive telecommunications business, where the agreement entered into last year with E.ON provides further positive impetus. EBITDA, adjusted EBITDA. In the reporting period, the Systems Solutions operating segment generated EBITDA of EUR 0.4 billion. The 16.6-percent decline compared with the same period of 2010 is attributable to increased contract-related expenses, such as for the successful migration of the customer infrastructure in T-Systems’ op- erational business, start-up expenses for new contracts, and the development of new business areas, such as intelligent networks for energy, healthcare and connected vehicles. Savings generated by the comprehensive restructuring and efficiency enhancement program Save for Service did not offset the rise in costs. In addition, EBITDA was negatively affected by stronger special effects than in the prior-year period, primarily attributable to measures to improve competitiveness such as the roll-out and expansion of an internal nearshore and offshore delivery network and staff restructuring measures. Accordingly, adjusted EBITDA declined to a lesser extent, by 9.1 percent, to EUR 0.6 billion in the first nine months of 2011. EBIT, adjusted EBIT. Adjusted EBIT is EUR 68 million lower than in the prior-year period. This decrease is attributable not only to effects of increased expenses related to contracts, but also to increased depreciation, amortization and impairment losses following capital expenditure to expand business in the prior year. The comprehensive Save for Service restructuring and efficiency enhancement program offset this development only partially. The adjusted EBIT margin decreased from 3.0 percent in the first nine months of 2010 to 1.9 percent in the reporting period. Cash capex. At EUR 0.4 billion, cash capex in the reporting period was well below the prior-year level. This was primarily due to the fact that T-Systems significantly expanded its Dynamic Computing platform in the prior year. The consistent implementation of efficiency enhancement measures, such as the increasing standardization of our ICT platforms, also contributed to the reduction in capital expenditure. Employees. The average number of employees increased by 707 in the first nine months of 2011 to 48,234, a year-on-year increase of 1.5 percent. The average number of employees in Germany increased by 436 or 1.7 percent to 25,508, interna- tionally by 271 or 1.2 percent. The increase is largely due to staff taken on in connection with large-scale contracts, an increase in insourcing, i.e., the provision of services previously rendered by third parties, and the set-up and expansion of nearshore and offshore sites. Measures taken to cut costs partially offset this increase.