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Deutsche Telekom AG - Interim Group report - January 1 to March 31, 2012

19Interim Group management report Total revenue. In the first quarter of 2012, our Europe operating segment generated total revenue of EUR 3.6 billion, down 2.6 percent compared with the prior-year quarter. The rate of decline was thus slowed again and despite negative exchange rate effects was the lowest since 12 months. The development of exchange rates against the euro – mainly driven by the Polish zloty and the Hungarian forint – had a significantly negative impact on our revenue: Around 75 percent of the revenue decline was due to exchange rate effects. Adjusted for this effect, segment revenue stabilized approximately on a par with the level in the prior-year period. The first quarter was characterized by continued price erosion in most Euro- pean countries, driven on the one hand by intense competition and on the other by the reduction in mobile termination rates imposed by the regulatory authorities. Furthermore, the difficult economic situation, especially in Southern and Eastern European countries, had a negative impact. In Greece, revenue declined in fixed-network business, in Croatia, both fixed-network and mobile communications business were affected. Higher revenue from operations in several countries largely offset the slight revenue losses at segment level. Growth in broadband, television, ICT and energy in several countries of our segment had a positive effect on the revenue trend at segment level and partially compensated for the negative effects from traditional fixed-network business. In mobile communications, strong growth in data revenue, which increasedbymorethan11 percentandadjustedforcurrencytranslationeffects by as much as 14 percent, had a positive effect on our revenue trend. Almost all the countries in our Europe operating segment contributed to this growth, especially the Netherlands, Austria, the Czech Republic and Poland. EBITDA, adjusted EBITDA. Our Europe operating segment generated adjusted EBITDA of EUR 1.2 billion in the first quarter of 2012, a year-on-year decrease of 4.3 percent. Excluding the strong negative exchange rate effect from the translation of the Hungarian forint and the Polish zloty, adjusted EBITDA decreased by just 2.2 percent. The decreases in adjusted EBITDA in Greece, Hungary and the Czech Republic were largely offset by increases in adjusted EBITDA in the Netherlands and in the Romanian mobile operations. Overall, the decrease in revenue year-on-year had a negative impact on the development of EBITDA. By systematically reducing overheads, above all in Greece and Hungary, and targeting customers more efficiently, especially with regard to customer retention, we were able to partially offset this negative development. In addition, in the first quarter of 2012, EBITDA was negatively affected by the real estate tax in Greece which had not yet been introduced in the first quarter of the prior year, as well as a positive one-time effect in Hungary in the first three months of 2011. Development of operations in selected countries. Greece.RevenueinGreecetotaledEUR819millioninthefirstquarterof2012, a year-on-year decrease of 5.1 percent, which was attributable to the fixed- network business and only partially offset by an increase in mobile revenue. In the fixed network, declining revenue was primarily a result of line losses in traditional telephony. Furthermore, with regulation of fixed-network business in Greece continuing to be strict, we were not yet able to make planned broadband acquisitions and thus failed to generate the associated revenue. By contrast, mobile business performed very well: Compared with the same quarter in the prior year, we generated a slight increase in revenue despite the difficult economic environment and intense competition. This increase mainly resulted from higher revenue from voice telephony. Adjusted EBITDA decreased to EUR 309 million in Greece during the reporting period, a year-on-year decline of 5.5 percent. On the one hand, this was due to decreased revenue in fixed-network business, and to decisions by public authorities on the other. In September 2011, the Greek government introduced a real estate tax for 2011, which accounted for around half of the year-on-year decline in EBITDA in Greece in the first quarter of 2012. Our programs and initiatives to increase efficiency, most tangible in lower personnel costs, partially offset the decline in adjusted EBITDA. Hungary. In Hungary, we generated revenue of EUR 335 million in the first quarter of 2012, a year-on-year decrease of 4.8 percent. Adjusted for the negative exchange rate performance of the Hungarian forint against the euro, revenue from operations increased by 3.8 percent. A year-on-year increase in revenue from broadband, television and equipment sales partially offset the decreases in voice telephony. In addition, the strong growth in energy resale business made a positive contribution to revenue performance. As a result, our fixed-network operations recorded growth as of the end of the the first quarter.Inmobilebusiness,higherdata,textmessage,andterminalequipment revenue partially offset the revenue losses in voice telephony. The decline in voice telephony is mainly the result of price cuts due to competition as well as reductions in termination rates imposed by the regulatory authorities in the first quarter of 2012. Adjusted EBITDA amounted to EUR 122 million in the reporting period, representing a year-on-year decrease of 15.9 percent. As with revenue, this decrease was largely due to the unfavorable exchange rate performance of the Hungarian forint against the euro. Adjusted for this factor, EBITDA decreased by 8.3 percent. This was due on the one hand to a positive one-time effect in the first quarter of 2011, which did not recur to the same extent in the current quarter. On the other hand, increased customer acquisition and retention costs as well as costs from the energy business counteracted the positive revenue effects. Savings in overheads only partially offset increases in direct costs. Poland. In the first quarter of 2012, revenue decreased by 6.1 percent compared with the first quarter of 2011 to EUR 413 million. Adjusted for the significantly negative exchange rate performance of the Polish zloty against the euro, we generated a slight increase in revenue of 0.7 percent. Declining revenue from voice telephony due to intense competition impacted negatively on service revenues especially in the consumers segment. Increased equip- ment sales made a positive contribution to revenue, which was, among other factors, due to the successful marketing of smartphones. Adjusted EBITDA amounted to EUR 127 million in the first quarter of the year, down 11.8 percent year-on-year. Adjusted for negative exchange rate effects, the decrease was 5.4 percent, due in part to increased customer acquisition costs as a result of marketing higher-value terminal equipment. This effect was contrasted by savings in customer retention costs due to improved targeting of our high-value contract customers. Netherlands. Revenue in the Netherlands totaled around EUR 421 million in the first quarter of 2012, up slightly by 0.7 percent year-on-year. Our successful data business made a significant contribution here. A higher number of con- tract customers and a very high share of smartphones as a proportion of all terminal devices resulted in a positive contribution to revenue. This helped to partially offset the regulation-induced decreases in revenue from call termination.Fixed-networkbusinessdeclinedslightlyduetoasmalldecrease in the number of fixed-network lines compared with the prior-year period.