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Deutsche Telekom AG - Interim Group report - January 1 to September 30, 2015

25Interim Group management report Deutsche Telekom. Interim Group Report 9M 2015. Total In the first nine months of 2015, the telecommunications markets in the countries of our Europe operating segment continued to be subject to intense competition. Nevertheless, mobile customer numbers remained more or less stable, with our TV and broadband lines even increasing slightly. This is down to our strategy of investing in higher bandwidths, for both mobile and fixed-network communications. Above all the build-out and marketing of lines based on fiber-optic technology is becoming increasingly relevant for our customers, with TV business profiting in particular. As part of our pan- European network strategy, we were able to steadily increase the number of IP lines – primarily through the successful migration from traditional PSTN lines to IP technology in many countries of our Europe operating segment. Mobile communications Mobile telephony and data services. As of the end of the third quarter of 2015, we had a total mobile customer base of 55.7 million. Despite persis- tently intense competition on the European mobile markets, we performed well and the customer base remained more or less on a par with the level at the end of the prior year. We are positioning ourselves in the relevant markets as a quality provider with the best service – and in many countries also as the provider with the best mobile network. Part of our network strategy is to systematically build out our mobile networks with 4G/LTE technology. Since the third quarter of 2015, we have also been marketing LTE to our customers in Albania, and are thus now represented with 4G/LTE technology in all of our national companies. Thanks to our investments in our 4G/LTE network, we can provide our customers with fast mobile broadband as well as more extended network coverage. For example, we had reached 95 percent of the population in Hungary with LTE by the end of the third quarter. In Croatia, we cover more than 90 percent. By 2018, we also want to achieve network coverage of between 75 and 95 percent in other countries. Thanks to the high speed of our networks in combination with innovative bundled products and an attractive terminal equipment portfolio, we recorded moderate growth, especially in the high-value contract customer business. As a result, the contract customer share of the total customer base increased to 46 percent. The main reason for this is the positive development in business customer operations. As a result of our strategy of focusing on high-value contract customer business, the prepay customer base declined by 1.1 percent as of the end of the third quarter of 2015 compared with year- end 2014. Fixed network Telephony, Internet, and television. Our investments in TV broadcasting rights in many countries of our operating segment gave a substantial boost to demand for our TV products, also thanks to some exclusive content. Our customer numbers grew by 3.2 percent to 3.8 million. Compared with the first nine months of 2014, they increased by as much as 4.4 percent. The majority of the 162 thousand net additions in total were customers in Greece, Hungary, and Slovakia. As an integrated telecommunications provider, we want to drive forward the convergence of fixed-network and mobile technology and, in all our integrated countries, we already offer our customers fixed-mobile convergence (FMC) products. By the end of the third quarter of 2015, we had launched our new rate model Magenta1 on the market in four national companies (Slovakia, Romania, Hungary, and the F.Y.R.O. Macedonia). The technical basis for FMC products is a simplified and standardized network, which we are creating by migrating all of our national companies with a fixed-network architecture to IP technology. This is proving successful: As of September 30, 2015, we recorded more than 3.9 million IP-based lines – an increase of 13.1 percent compared with the end of 2014. Following the successful completion of IP migration in Slovakia and the F.Y.R.O. Macedonia last year, Croatia and Montenegro will now follow by the end of 2015. We are well on track in this regard, with migration rates of 98 percent and 96 percent respectively after the first nine months of the year. At segment level, IP-based lines accounted for 45.2 percent of all lines. Around 8.7 million customers in our Europe operating segment used a fixed-network line as of the end of the third quarter of 2015. The decline of 3.3 percent against the end of 2014 was primarily attributable to line losses in traditional telephony (PSTN). The number of retail broadband lines continued to grow apace, increasing by 2.4 percent to 5.1 million, driven mainly by DSL business, especially in Greece, where VDSL technology is enjoying dynamic growth. But the number of broadband lines also increased in Hungary and Slovakia. We are making good progress in the roll-out of fiber-optic technology. Network coverage in our operating segment increased to 18 percent of households as of September 30, 2015. By 2018, we want 50 percent of households – in our integrated national companies – to have access to a 100 Mbit/s service with FTTx.

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