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

The economic environment

8 This section provides additional information on and explains recent changes in the economic situation described in the combined management report for the 2011 financial year, focusing on global economic development in the first quarter of 2012, the regulatory environment and the currently prevailing economic risks, and the outlook. The overall economic outlook is subject to the precondition that there are no major unexpected occurrences in the forecast period. Global economic development.  The global economy performed slightly better than expected in the opening months of 2012. The economic risks arising from the eurozone sovereign debt crisis and the uncertainty about fiscal policy in the United States have eased slightly, lifting business and consumer confidence compared with the fourth quarter of 2011. Greece’s economic situation continued to deteriorate in the first quarter of 2012. The recessionary trend seen in the second half of 2011 intensified in the economies of the Netherlands and Croatia. Hungary also recorded a downtrend. GDP growth rates in our core countries. Q1 2012  compared with Q1 2011  % Germany 0.5 United States 2.1 Greece (9.1) Poland 3.5 Hungary 0.1 Czech Republic (0.1) Croatia (0.8) Netherlands (1.1) Slovakia 2.1 Austria 0.7 United Kingdom 0.6 Source: Oxford Economics, forecast from April 2012   Overall economic risk. One of the main risks still facing the global economy is a renewed intensifi­ cation of the European sovereign debt crisis. An unwavering high oil price, possibly accompanied by a geopolitical escalation in Iran, would have a further major impact on the global economy. Outlook. We expect the global economy to stabilize at a moderate level in 2012, but without achieving high growth rates. The pace of growth will continue to vary considerably from region to region, with some countries developing relatively robustly (e.g., Germany and Poland) and others displaying mild recessionary trends to say the least (e.g., Hungary and Croatia). And then there will be highly recessionary economies like Greece. Telecommunications market. According to the recent economic survey on business confidence in the information and telecommunications (ITC) industry conducted by the industry association BITKOM, the first quarter of 2012 saw a steady improvement in the ITC business climate, boosted primarily by the demand from corporates and private users for new devices such as tablet PCs and smartphones, applica- tions (apps) and services such as cloud computing. Regulatory influence on Deutsche Telekom’s business. VDSL contingent model in Germany rejected by Federal Network Agency. In a provisional decision on April 2, 2012, the Federal Network Agency rejected a VDSL price model presented by Telekom Deutschland in ex-post control pro- ceedings. The model, which has become known as the VDSL contingent model, provides for attractive prices for the VDSL wholesale product in return for an upfront payment for a minimum number of lines. On account of the EU-wide consultation on this provisional decision, the final decision is not expected until June 2012. Rejection of this model by the Federal Network Agency does not au- gur well for the broadband roll-out in Germany. It impedes cooperation models such as the network partnership planned with NetCologne. The telecommuni- cations industry has always stressed that partnerships and risk-sharing are vital for the broadband roll-out. Voluntary agreements within the industry not only allow companies to share the risk for network investments, but are also in the interest of customers. Vodafone, Telefónica, NetCologne and 1&1 underlined in a public hearing in April 2012 at the Federal Network Agency that they back a Deutsche Telekom VDSL contingent model for the sale of fast VDSL Internet lines. New decision on ULL rates in Germany. The Federal Network Agency set new one-time rates for unbundled local loop lines (ULLs) for the period April 1, 2001 through March 31, 2002 in its decision dated April 5, 2012. The new decision became necessary after the Cologne Administrative Court revoked the original ruling from 2001 for the corresponding plaintiffs. This reduces the charges in the most important rate options by between 10 and 18 percent. Reduction of termination rates at subsidiaries. In the first quarter of 2012, the mobile termination rates (MTRs) at our subsidiaries in Romania, Slovakia, Croatia, and Hungary were reduced as a result of regulatory decisions. In the fixed-network business, the highest cuts in termination rates were at our subsidiaries in Greece and Romania. At OTE in Greece, rates for wholesale services including ULLs were reduced. Fixed-network termination rates were reduced in Romania. Interim Group management report. The economic environment.

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