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Deutsche Telekom AG - Interim Group report - January 1 to September 30, 2015 - INTERIM GROUP MANAGEMENT REPORT

Group structure, strategy, and management, The economic environment

9Interim Group management report Deutsche Telekom. Interim Group Report 9M 2015. Interim Group management report GROUP STRUCTURE, STRATEGY, AND MANAGEMENT With regard to our Group structure, strategy, and management, please refer to the notes in the 2014 combined management report (2014 Annual Report, page 67 et seq.). No significant changes were recorded in this area from the Groupʼs point of view. THE ECONOMIC ENVIRONMENT This section provides additional information on and explains recent changes to the economic situation as described in the combined management report for the 2014 financial year, focusing on macroeconomic developments in the first nine months of 2015, the outlook, the currently prevailing economic risks, the telecommunications market, and the regulatory environment. The overall economic outlook is subject to the precondition that there are no major unexpected occurrences in the forecast period. MACROECONOMIC DEVELOPMENT Global economic growth was weaker in the first three quarters of 2015 than in the prior-year period. The declining growth rates are primarily attributable to emerging and developing economies. By contrast, growth in industrial nations benefited from the moderate recovery in the eurozone, lower oil prices, and an expansive monetary policy, and increased slightly. In our core markets, economic growth rates recorded positive trends again in the first nine months of 2015. In Germany, this development is driven by the continued positive trend in private consumption and by growing exports. GDP grew by 1.9 percent year-on-year in the third quarter. The German labor market is in a robust state with unemployment currently standing at 6.2 percent. The U.S. economy recorded growth of 2.2 percent. The economic trend in the United States is determined to a large extent by a strong labor market and the low-interest policy of the U.S. Federal Reserve. In the countries of our Europe operating segment, growth rates in the majority of economies recorded positive trends again in the first nine months of 2015. The situation on the labor market has also further improved in most countries. Greece continues to experience difficulties in emulating the growth seen in Europe as a whole. The uncertainty that has prevailed for many months over whether or not Greece will remain part of the eurozone has had a substantial negative impact on the Greek economy. Unemployment in Greece remains at an exceedingly high level of 25.5 percent. OUTLOOK In its fall forecast, the International Monetary Fund (IMF) expects global economic growth of 3.1 percent in 2015. For 2016, the IMF forecasts growth in the global economy of 3.6 percent. This acceleration will be driven by industrial nations (2.2 percent) and emerging and developing economies (4.5 percent) alike. Greater uncertainty prevails in the Asian economies. We continue to expect a stable economic trend in our European core markets. The German economy is also experiencing a modest upturn, primarily on the back of consumer spending and exports. The Greek economy is not expected to recover until after 2016 – despite efforts at reforms and the agreement reached with the European institutions. OVERALL ECONOMIC RISKS The European economy has recently profited from low oil prices, an expansive monetary policy, and relatively low euro exchange rates. However, a renewed intensification of the sovereign debt crisis with a potential impact on banks and financial markets remains the greatest economic risk for our European footprint countries in particular. The controversy over an extension of the bail- out packages for Greece in the third quarter of 2015 suggest that the fragile situation in Greece has the potential to escalate into another crisis. TELECOMMUNICATIONS MARKET Consolidation pressure remains high in the European telecommunications industry. This is primarily due to declining revenues, among other factors, due to growing competition. At the same time, high investments are needed for the network build-out. In light of this, the failed consolidation plan in Denmark has given rise to further uncertainty in the industry: In September 2015, Telenor and TeliaSonera canceled their merger plans after the parties were unable to agree suitable terms with the EU Commission. It remains to be seen what signal effect this decision will have on current and future consolidation plans in the European Union. In the United Kingdom, BT intends to acquire the EE joint venture, and Hutchison 3G to take over O2 UK. These transactions are currently being scrutinized by the Competition and Markets Authority in the United Kingdom and by the EU Commissionʼs Directorate General for Competition. Furthermore, in August 2015, Vimpelcom and Hutchison announced their interest in establishing a joint venture on the Italian mobile market. European General Data Protection Regulation. Part of the digital single market strategy is the reform of data protection through the General Data Protection Regulation which is currently being negotiated. The European Commission, the EU Council and the European Parliament had scheduled nine rounds of negotiations, with the aim of reaching an agreement by the end of 2015. As the negotiations currently stand, key points are still under discussion.

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