Deutsche Telekom AG — Earnings Release 2009

Apr 21, 2009

News Details

Ad-hoc | 21 April 2009 14:11

Deutsche Telekom AG: Deutsche Telekom expects adjusted EBITDA in 2009 to be 2 to 4 percent below the prior-year figure and free cash flow of around EUR 6.4 billion

Deutsche Telekom AG / Quarter Results/Change in Forecast

Release of an Ad hoc announcement according to § 15 WpHG, transmitted by
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The issuer is solely responsible for the content of this announcement.

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Deutsche Telekom expects adjusted EBITDA in 2009 to be 2 to 4 percent below
the prior-year figure and free cash flow of around EUR 6.4 billion

In a tough economic environment, Deutsche Telekom increased revenue by
around 6 percent to approximately EUR 15.9 billion in the first quarter of
2009 with the Greek company OTE consolidated for the first time. Adjusted
EBITDA increased by some 3 percent to EUR 4.8 billion. Excluding the
consolidation of OTE, Group revenue was stable at EUR 15.0 billion, with
adjusted EBITDA dropping by 5 percent to EUR 4.5 billion. Free cash flow
was between EUR 0.2 billion and EUR 0.3 billion in the first quarter of
2009, compared with EUR 1.6 billion in the same period last year and EUR
0.5 billion in the first three months of 2007. Higher capital expenditure,
the deviation in adjusted EBITDA and increased expenses for staff-related
measures had an impact in the first quarter of 2009.

Overall, Deutsche Telekom's figures were slightly above forecast in
Germany, in both fixed-network and mobile business. T-Systems also
increased its contribution to results.

On the other hand, the Group felt the impact of the economic slowdown and
the more intense competitive environment, particularly in the United States
and the United Kingdom. In Poland and the United Kingdom, fluctuations in
the local currency exchange rates also had a negative effect on revenue and
adjusted EBITDA.

Disregarding the growth effect of the Greek company OTE that has been
consolidated since February 1, 2009, Deutsche Telekom expects adjusted
Group EBITDA in these unfavorable conditions to be between 2 and 4 percent
lower for the full year, compared with EUR 19.5 billion in the prior year.
The Board of Management today initiated a package of measures to safeguard
the expected results. Free cash flow is expected to reach around EUR 6.4
billion, compared with EUR 7.0 in the prior year, on the back of these
measures. This will also lay the foundation for a shareholder-friendly
dividend policy.

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Information and Explaination of the Issuer to this News:

Revenues of national companies in the United States, the United Kingdom and
Poland in particular were impacted by the marked downturn in the economic
environment, for example with lower roaming revenues as a result of the
lower level of traveling. In addition, there were dramatic movements in the
exchange rates with the United Kingdom and Poland. European mobile
communications business in the prior consolidation group - i.e., excluding
OTE - recorded a decrease in revenue of EUR 0.4 billion. Of this, exchange
rate effects accounted for around EUR 0.3 billion. These exchange rate
effects had a negative impact of around EUR 0.1 billion on adjusted EBITDA.
In total, adjusted EBITDA fell by around EUR 0.3 billion. In addition, high
levels of expenditure for customer acquisition and retention led to
increases on the cost side.

In the United States, the 3G network will be rolled out much further as
part of the package of measures passed by the Board of Management, and the
portfolio of 3G-enabled handsets will be expanded to reinforce the
competitive position of T-Mobile USA. The overlay of the proprietary 2G
network is being accelerated to reduce the amount of roaming charges that
have to be paid. In addition, agreements on interconnection charges and
data business are to be renegotiated. A reduction in non-usage-driven
variable costs is planned and overarching costs such as marketing expenses
and travel costs are to be cut, while increases in wages and salaries are
on hold.

Strict controls on costs in the areas of administration, advertising and
systems are scheduled for T-Mobile UK. The main task for the new management
team is to reposition the company. In addition, prepay and contract
customer offers are to be improved.

Expenditures for new customer acquisition and retention are to be reduced
in Poland. In addition, PTC will cut overarching costs such as advertising
and staff costs. The timing of the distribution of operating costs and
expenditures will be tied more closely to the development of business in
order to avoid phases of higher ongoing costs in coming quarters.

These new expectations are based on the assumption that the economic
environment will not decline significantly further and that exchange rates
will remain approximately at current levels.

All statements are based on preliminary calculations prior to conclusive
consolidation and review. As such, these figures may deviate from the
finalized quarterly figures to be published on May 7.

In the Outlook section, this ad hoc notification contains forward-looking
statements that reflect the current views of Deutsche Telekom management
with respect to future events. Forward-looking statements are based on
current plans, estimates and projections. They should therefore be
considered with caution. Such statements are subject to risks and
uncertainties, most of which are difficult to predict and are generally
beyond Deutsche Telekom's control, including those described in the
sections 'Forward-Looking Statements' and 'Risk Factors' of the Company's
Form 20-F annual report filed with the U.S. Securities and Exchange
Commission. Among the relevant factors are the progress of Deutsche
Telekom's workforce reduction initiative and the impact of other
significant strategic or business initiatives, including acquisitions,
dispositions, business combinations, and cost reduction measures. In
addition, regulatory decisions, stronger than expected competition,
technological change, litigation and regulatory developments, among other
factors, may have a material adverse effect on costs and revenue
development. Furthermore, an economic downturn in Europe or North America
and changes in exchange and interest rates could also affect our business
development and the availability of capital under favorable conditions. If
these or other risks and uncertainties materialize, or if the assumptions
underlying any of these statements prove incorrect, Deutsche Telekom's
actual results may be materially different from those expressed or implied
by such statements. Deutsche Telekom can offer no assurance that its
expectations or targets will be met. Deutsche Telekom does not assume any
obligation to update forward-looking statements to take new information or
future events into account or otherwise. Deutsche Telekom does not
reconcile its adjusted EBITDA guidance to a GAAP measure because it would
require unreasonable effort to do so. As a general matter, Deutsche Telekom
does not predict the net effect of future special factors because of their
uncertainty. Special factors and interest, taxes, depreciation and
amortization (including impairment losses) can have a significant effect on
Deutsche Telekom's results.

In addition to figures prepared in accordance with IFRS, Deutsche Telekom
presents non-GAAP financial performance measures, including EBITDA, EBITDA
margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBT, adjusted net
profit, free cash flow, gross debt and net debt. These non-GAAP measures
should be considered in addition to, but not as a substitute for, the
information prepared in accordance with IFRS. Non-GAAP financial
performance measures are not subject to IFRS or any other generally
accepted accounting principles. Other companies may define these terms in
different ways. For further information relevant to the interpretation of
these terms, please refer to the chapter 'Reconciliation of pro forma
figures' posted on Deutsche Telekom's website (www.telekom.com) under the
link 'Investor Relations.'

21.04.2009 Financial News transmitted by DGAP

Language: English
Issuer: Deutsche Telekom AG
Friedrich Ebert Allee 140
53113 Bonn
Deutschland
Phone: +49 (0)228 181-88880
Fax: +49 (0)228 181-88899
E-mail: investor.relations@telekom.de
Internet: www.telekom.com
ISIN: DE0005557508
WKN: 555750
Indices: DAX, EURO STOXX 50
Listed: Regulierter Markt in Berlin, Frankfurt (Prime Standard),
Hannover, Düsseldorf, Stuttgart, München, Hamburg;
Terminbörse EUREX; Foreign Exchange(s) Amsterdam, London,
NYSE, Tokyo

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