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

9Interim Group management report Regulatory influence on Deutsche Telekom’s business. On September 29, 2011, the Federal Network Agency published its final ruling on fixed-network termination rates. The final ruling confirms the rates for the most important services that have been applicable since a provisional rate ap- proval on July 1, 2011. For the most important rate options of “termination” and “origination” at the lowest network level, the provisional rate approval resulted in a reduction of approximately 17 percent (at peak times from 0.54 eurocents/ min to 0.45 eurocents/min) and of approximately 16 percent (at off-peak times from 0.38 eurocents/min to 0.32 eurocents/min). The European Commission’s draft of a new Roaming Regulation dated July 6, 2011 will tighten/lengthen existing price regulation in the areas of voice, text messages, and data wholesale beyond 2012 and extend price regulation to retail prices for data roaming. In addition to the extended and expanded price regulation, the European Commission is planning to specify structural measures to promote additional competition. From 2012, it aims to introduce a wide-ranging wholesale access obligation for MVNOs and others as well as, from 2014, the option of unbundling roaming and national services so that end customers could conclude a second contract with a different provider exclu- sively for roaming services. These measures will involve implementation effort for the European mobile industry, putting a drain on resources and leading to additional expense. In view of the sharp increase in competition over recent months with many new and attractive roaming offers, particularly in the area of data roaming, the proposed measures constitute disproportionately intense regulation. The existing LTE roll-out obligations in the federal states of Baden-Württem- berg, Bavaria, Hesse, North Rhine-Westphalia, Rhineland-Palatinate and the Saarland have been met. Frequency spectrum for wireless network access was auctioned in the 800 MHz and other frequency ranges in May 2010. The allocations of the 800 MHz frequency spectrum each entail a successive roll- out obligation under which a network operator is obligated to progressively offer broadband lines for the use of the 800 MHz frequency spectrum in all federal states based on four priority levels. Top priority (priority level 1) has the mobile broadband coverage of communities of fewer than 5,000 inhabitants, to be subsequently followed by larger towns. To this end, the federal states had previously named unserved and underserved towns and communities, which were then assigned to the four priority levels according to the number of inhab- itants. On the basis of the phased coverage requirement, Telekom Deutschland GmbH is required to initially cover at least 90 percent of the population of the named towns and communities in one priority level before moving on to towns and communities in the next level. The Federal Network Agency stated on September 14, 2011 and September 28, 2011 that the roll-out obligations specified in the license have been met in North Rhine-Westphalia and the Saarland, as well as in Baden-Württemberg, Bavaria, Hesse, and Rhineland-Palatinate. The 800 MHz frequency spectrum allocated can therefore be used freely in these regions from now on.