Deutsche Telekom AG — M&A Activity 2012

Oct 3, 2012

News Details

Ad-hoc | 3 October 2012 14:43

Deutsche Telekom AG: Deutsche Telekom and MetroPCS to combine their activities in the U.S.

Deutsche Telekom AG / Key word(s): Merger/Strategic Company Decision

03.10.2012 14:43

Dissemination of an Ad hoc announcement according to § 15 WpHG, transmitted
by DGAP - a company of EquityStory AG.
The issuer is solely responsible for the content of this announcement.

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Bonn, October 3, 2012

Deutsche Telekom and the U.S. mobile communications company MetroPCS are
combining their business activities in the U.S. within MetroPCS. The Board
of Management and the Supervisory Board of Deutsche Telekom and the Board
of Directors of MetroPCS have approved an agreement to this effect.
Deutsche Telekom is contributing T-Mobile USA, including a then existing
shareholder loan to T-Mobile USA in the amount of USD 15 billion, into
MetroPCS, a listed company, following a recapitalization and reverse stock
split of MetroPCS. In return, it will receive 74 percent of the shares in
the combined company. Current MetroPCS shareholders will retain 26 percent
of the shares and receive a one-time payment of USD 1.5 billion funded by
MetroPCS's existing cash.

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Information and Explaination of the Issuer to this News:

Deutsche Telekom AG has the right to withdraw the proceeds, which have not
yet been received, arising from the agreement recently concluded with Crown
Castle for the long-term lease and usage of 6,400 and the sale of 800 radio
tower sites belonging to T-Mobile USA amounting to USD 2.4 billion, before
T-Mobile USA is contributed to the new company.

The combined company offers mobile communications services for around 42.5
million customers in the U.S. (pro forma as at Jun. 30, 2012). Based on
analyst consensus estimates, pro forma revenue of around USD 24.8 billion
and adjusted EBITDA of around USD 6.3 billion are expected for 2012. That
would correspond to an adjusted EBITDA margin based on service revenues of
around 28.6 percent.

The planned cost synergies from the combination of the two companies are
expected to have a net present value of USD 6 to 7 billion. Additional
upside is expected from expanded sales.

The combined company is expected to deliver five-year compound annual
growth rates in the range of 3 to 5 percent for revenues, 7 to 10 percent
for EBITDA and 15 to 20 percent for free cash flow (defined as EBITDA less
capex). Based on these planning figures, an EBITDA margin based on service
revenues of between 34 and 36 percent would be achieved after five years. A
cost synergy run-rate of between USD 1.2 and 1.5 billion annually is
expected from 2017 onward assuming the transaction is closed in mid-2013.

The transaction is subject to review by the U.S. Department of Justice, the
U.S. Federal Communications Commission and the U.S. Committee on Foreign
Investment in the United States. The shareholders of MetroPCS also have to
give their approval. Deutsche Telekom and MetroPCS expect to receive all
necessary approvals in the first half of 2013.

The transaction has no impact on the Deutsche Telekom Group's expected
adjusted EBITDA and free cash flow for the current financial year. Guidance
remains for adjusted EBITDA of around EUR 18 billion (assuming constant
exchange rates relative to the prior year) and free cash flow (before
dividends and investment in spectrum) of around EUR 6 billion. Deutsche
Telekom further expects the ratio of net debt to the Group's adjusted
EBITDA to remain between 2 and 2.5 following closing of the transaction.

Deutsche Telekom's shareholder remuneration policy for financial years 2010
to 2012 also remains unchanged. This includes, et al., a minimum dividend
of 70 eurocents per dividend-bearing share for each fiscal year. The
implementation of the shareholder remuneration policy is subject to
approval by the relevant bodies and further legal requirements.

The transaction triggers an impairment test which will lead to an
impairment of goodwill and other assets in Deutsche Telekom AG's
consolidated financial statements under IFRS at September 30, 2012 and
therefore to a one-time non-cash negative special factor on the Group's net
profit after taxes, expected to be between EUR 7 billion and EUR 8 billion.
In Deutsche Telekom AG's Annual financial statements under German GAAP as
of December 31, 2012, a possible negative factor will depend on the
expected long-term development of the fair market value of the shares in
MetroPCS as of that date. Such special factor would have a non cash impact
on income related to subsidiaries, associated and related companies in
Deutsche Telekom AG's Annual financial statements under German GAAP.

Disclaimer

To the extent that this release contains any statements that relate to
expectations, forecasts or to the future, these statements may be
associated with known and unknown risks and uncertainties. Therefore, the
actual events and circumstances may differ materially from these
statements. Subject to mandatory provisions of law, the company has no
obligation and undertakes no obligation to publicly update or revise any of
these statements to correctly reflect, subsequently to this release, the
actual events and circumstances.

03.10.2012 DGAP's Distribution Services include Regulatory Announcements,
Financial/Corporate News and Press Releases.
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Language: English
Company: Deutsche Telekom AG
Friedrich Ebert Allee 140
53113 Bonn
Germany
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, Düsseldorf, Frankfurt (Prime
Standard), Hamburg, Hannover, München, Stuttgart; Terminbörse
EUREX; Amsterdam, London, NYSE, Tokyo

End of Announcement DGAP News-Service

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