Efficiency. 32,000 job reduction program well on track. � 12,200 employees have left the group as of year-end 2006 � Of which 8,700 early and partial retirement and severance programs � Of which 600 sale of Vivento business units � Of which 2,900 turnover and regular retirement � Total restructuring expenses 1 for 32,000 job reduction program of €3.4 billion 2,3 : � € 0.9 billion 2 in 2005 � € 2.4 billion 2 in 2006 � € 0.1 billion in connection with sale of Vivento business units in 2006 1 Booked as special factors. 2 Net of partial retire m ent and internation al operations ( n ot included in 32,000 job reduction program ) . 3 Th ereof €3.0 billion addition s to provisions. FY 2006 Investors Day Investor Relations March 1, 2007, Page 15
Balance sheet. Balance sheet continues to be in excellent shape. € billion 31.12.2006 31.12.2005 Balance sheet total 130.2 128.5 Shareholders‘ equity 49.7 48.6 Net debt 39.6 38.6 Net debt/adj. EBITDA 2.04x 1.86x Gearing 0.8x 0.8x Equity ratio 38.2% 37.8% FY 2006 Investors Day Investor Relations March 1, 2007, Page 16
Dividend. 2006 dividendof € 0.72 per share proposed. Amount Payout (€ billion) ratio Dividend 3.1 Reported net income 3.2 99% Adjusted net income 3.9 81% FCF before spectrum capex 5.7 55% FY 2006 Investors Day Investor Relations March 1, 2007, Page 17
FY 2006. Corporate Strategy. “Focus, fix and grow”.
We mobilize personal and social networking. @home mobile @work FY 2006 Investors Day Investor Relations March 1, 2007, Page 19
Global trends in Telecommunications. � Personal communication in social networks complementary to traditional voice and messaging usage Mobilize � Mobile internet as mega trend internet and Web 2.0 trend � Internet services incl. IPTV independent of access (“multi-access”) � Devices and user interface as potential differentiator � Broadband everywhere FY 2006 Investors Day Investor Relations March 1, 2007, Page 20
DT portfolio – Consumer. Total DT customer base > 100 million Fixed Mobile Improve DT market share 1 competitive- percent 89 ness in ~ 86 Germany (and CEE) 45 37 35 34 24 15 12 123 161 205 274291 493 Germany CEE 2 A 4 PL GB 5 NL US DT revenue share Market size 1,3 ~54% Million customers 1 M arket si ze and market shares Q3 2006. Number of fi xed line custom er set equal to number of lines, DSL c u stom ers not additive, but assumed to be FY 2006 Investors Day 100% overlapping with fixed line customers; 2 Fi x ed lines b u siness in integrated countries (Hungary , Sl ovaki a and Croatia); Fixed lines assumed to be Investor Relations equal to SB co nnections; Includes HU, HR, SK , M K , CG; 3 Fi xed and m obile, not mutually exclusi ve; 4 incl. Tel e.Ringeffect anorganic (2006); 5 Incl. Virgin March 1, 2007, Page 21 Source: T-Com Controlling, TM O Controlling, i PF 2006, annual report
DT portfolio – Consumer. Total DT customer base > 100 million Fixed Mobile DT market share 1 Grow abroad percent 89 ~ 86 with mobile 45 37 35 34 24 15 12 123 161 205 274291 493 Germany CEE 2 A 4 PL GB 5 NL US Market size 1,3 Million customers 1 M arket si ze and market shares Q3 2006. Number of fi xed line custom er set equal to number of lines, DSL c u stom ers not additive, but assumed to be FY 2006 Investors Day 100% overlapping with fixed line customers; 2 Fi x ed lines b u siness in integrated countries (Hungary , Sl ovaki a and Croatia); Fixed lines assumed to be Investor Relations equal to SB co nnections; Includes HU, HR, SK , M K , CG; 3 Fi xed and m obile, not mutually exclusi ve; 4 incl. Tel e.Ringeffect anorganic (2006); 5 Incl. Virgin March 1, 2007, Page 22 Source: T-Com Controlling, TM O Controlling, i PF 2006, annual report
We mobilize personal and social networking. Improve com- Mobilize petitiveness Grow abroad Business internet and in Germany with mobile customers Web 2.0 trend (and CEE) T = Leading broadband provider through combination of efficient technologies FY 2006 Investors Day Investor Relations March 1, 2007, Page 23
We mobilize personal and social networking. Improve com- Mobilize petitiveness Grow abroad Business internet and in Germany with mobile customers Web 2.0 trend (and CEE) � Market and customer situation � Products and Innovation � Sales, Service, and Marketing � Brand architecture � “Save for Service” FY 2006 Investors Day Investor Relations March 1, 2007, Page 24
Market situation in Germany. Consumer retail 2006 CAGR 2010 market Germany EUR billions +1.0% 47.6 45.8 -1.7% Drive major innovation through IPTV VAS/IP services 6.7 11.1 and mobile internet Maximize value share in the core business Mobile 21.2 21.8 � Stabilize mobile share � Push broadband Fixed broadband 3.1 � Reduce PSTN line losses 6.4 Fixed voice 14.8 Improve our cost position 8.3 significantly FY 2006 Investors Day Own estim ates Investor Relations March 1, 2007, Page 25
Different customers ... Example: “IP generation” EUR 140 monthly ICT budget 66% 99% 39 years DSL users Mobile phone users Average age 66 years 4% 50% “Best agers” EUR 45 monthly ICT budget Example: “Conservative voice users” FY 2006 Investors Day Note: Seg m ent sh are “IP gen eration”: 15%; “ Conservative voice users”: 17% (based on h ouseholds) Investor Relations March 1, 2007, Page 26
... require differentiated offers and innovations. Standard � Standard products � ISP fees included in � IPTV nationwide via offers with full options DSL access ADSL2+ (750 cities) suite (e.g., “Euro flat”, and VDSL (50 cities) � Hotspots included “Mobile flat”) � New pricing model Innovative � Voice-operated � Remote configuration � Hybrid box also for DVB service functionality and troubleshooting � In-house cabling alter- features � Visual, non-serial, � New UI: Easy access to natives multi-access voicemail messaging, PIM, � Interactive TV search, storage/load applications Stabilization and later 40% -45% retail DSL ~1.5 million IPTV reduction of PSTN line share of broadband users in 2010 losses net adds from 2007 FY 2006 Investors Day Investor Relations March 1, 2007, Page 27
IPTV end of 2006. 10 cities VDSL, end of 2006 FY 2006 Investors Day Investor Relations March 1, 2007, Page 28
IPTV will be widely available. 750 cities � ADSL2+ 2007 � 50 cities VDSL 2008 FY 2006 Investors Day Investor Relations March 1, 2007, Page 29
... also in mobile: innovative products and devices. Devices Strategic � Inner circle bonding – � Strengthen category � Compelling and direction leverage personal leadership in “real differentiated devices social networks time” internet with worry free pricing Product � Community tariff � Easy mobile email � Next generation MDA: example Ameo � Mobile Instant � New “worry-free” data Messaging tariffs � Web’n’walk 3.0 Stabilize mobile market share FY 2006 Investors Day Investor Relations March 1, 2007, Page 30
Develop sales further ... Differentiation Substantial improvements � Largest “branded” sales surface Immediate relief � Shift sales to direct � Integrated customer (e.g., expansion perspective along all T-Punkte) � Integrated points of contact T-Retail-Partner � Integrated channel program management � Standardized � Expansion POS-formats in e-Channel retail � Product launch process FY 2006 Investors Day Investor Relations March 1, 2007, Page 31
... especially direct sales. Target 2007/08 !"§==Punkt= Substantial improvements North 96 +31 � 786 T-Punkte � Approx. 1,000 T-Partner East 96 � e-Channel share >15% 1 +55 West � Approx. 1,500 new jobs 244 +66 South 150 +48 FY 2006 Investors Day 1 M obile exa m ple, fig ure refers to gross add sh are “weiße Karte”; Valu e m arkup TMD represents weig hted average of Investor Relations prepaid/contract custo m er lifetim e valu e direct vs.SP, 2005 March 1, 2007, Page 32
Professional service. Customer Differentiation satisfaction Substantial index 1 improvements � Differentiation with “services as Bench- 100 a product” mark � Benchmark Immediate relief customer � Customer segment- satisfaction specific service � Task forces to levels � Fix IT systems address immi- and processes incl. nent issues 2 selective greenfield Target 2008 � Availability 80% 4 � Telekom-Service 3 : � On-time adherence 90% Professional ser- � First-done rate 80% vice near market level labor con- ditions TMD T-Com FY 2006 Investors Day 1 Rescaled to benchm ark level 100 based on TM D Net Prom oter Score, 11/2006, and T-Com TRI *M custo m er satisfaction index, 04 – Investor Relations 07/2006 ; 2 Availability, backlog, on tim e adherence, IT stability, waitingtim es; 3 Call center and TK; 4 Availability within 20 seconds March 1, 2007, Page 33 (E20)
Marketing: segment-specific bundles. EXAMPLES Customer segments Standard offers 1 Community bundle Families Triple play bundle IP Targets 2007 Generation � > 10 million MAX06 bundles Double play bundles � > 1 million Young T-Vorteil Single play offers Best ager FY 2006 Investors Day 1 Standard offers consist of 1) Standard connectivity offers fro m voice, intern et, TV; 2) option suite = selected packages of Investor Relations features/options with hig h preferen ce sh are across seg m ents March 1, 2007, Page 34
Today’s brand situation. " – Pay !"§==Com= T-Mobile@home " - DSL !"§==Systems= !"§==Mobile= Xtra Smart " - One Xtra " - ISDN Friends !"§==Online=Business Xtra Classic !"§==Online= !"§==Punkt= Xtra FY 2006 Investors Day Investor Relations March 1, 2007, Page 35
Future branding architecture – Consumer. ===!"§ as institutional sender !"§==Mobile= !"§==Home= Differentiating offerings “on the move” and “at home”in integrated markets International consumer brand FY 2006 Investors Day Investor Relations March 1, 2007, Page 36
Branding architecture: potential in young segment. Δ to fair market share, percent Segment Mobile 2 DSL Price- � Market share at risk due -1.2 -0.5 3 to “no-frills” offers in market sensitive � Low brand differentiation -4.0 -9.0 Young 1 � Bad price perception -4.5 -1.9 Women Fair share Fair share Ø37% Ø45% 1 For T-M obile “Youn g FY 2006 Investors Day ”m arket share is based on seg m ent 14-25 years old, for DSL m arket share is calculated for 20-29 years old Investor Relations 2 Postpaid exam ple, prepaid sim ilar values except for price sensitive March 1, 2007, Page 37 3 Estim ate
Branding architecture: gain share in the young/price sensitive segment. Second brand as a new category in the market Introduction: Positioning: Approach: Summer season Simple and value for money “Grass roots”marketing � Fun � Simple product � Good value for � Primarily online portfolio (mobile, money and call center � Trendy DSL, bundles) � ~1.0 EUR billion revenue in 2010 � Moderate investment FY 2006 Investors Day Investor Relations March 1, 2007, Page 38
“Save for Service”. EXAMPLES Cost savings measures � Migration to IP factory by 2012 All-IP network (“NGF”) � Capex/opex reduction, savings reinvested for IP migration Targets � EUR 2.0 billion savings in 2007 Telekom- � Separate technical, infra- structure, technical service, � EUR 4.2 – 4.7 billion savings by Service and call center units to increase 2010 productivity approaching near � Both personnel and material market-level labor cost while costs securing jobs � All units and hierarchy levels contribute IT efficiency � Consolidate IT infrastructure and operations across busi- ness units ... FY 2006 Investors Day Investor Relations March 1, 2007, Page 39
“Next Generation Factory”. From … … to Technology � Circuit-switched � IP-based Significant reduction � Copper � Optical 1 of production costs � High complexity – � Reduced complexity - (EUR 1.2 bn. in 2010) diversity and few platforms technologies Architecture � Vertical “silos” � Horizontal “layers” Improvement of � Redundancy per silo � Simplified architecture performance and customer service Integration � Multiple production � Shared production level platforms elements Services � Centered around � Flexibility for new services Increased flexibility voice services (innovation rate, time- � Common service to-market of new capabilities products/services) 1 Optical and copper in last m ile FY 2006 Investors Day Investor Relations March 1, 2007, Page 40
Improve com- Mobilize petitiveness Grow abroad Business internet and in Germany with mobile customers Web 2.0 trend (and CEE) FY 2006 Investors Day Investor Relations March 1, 2007, Page 41
“Core beliefs” international growth. � Devices and Growth infrastructure � OECD and procurement International Non-OECD � Roaming synergies scale effects � Organic and potentially inorganic � International TMO Group development and > EUR 1.2 bn. � Applying strict operation of service per year economic discipline platforms � Network operations � ... + Local � Local market and competition customer needs FY 2006 Investors Day Investor Relations March 1, 2007, Page 42
Grow abroad with mobile. USD billions Mobile OECD Non-OECD Fixed 317 USD USD Focus Data/ billions billions 80 17 203 internet 89 market 237 46 20 186 5 69 41 2007 2012 2007 2012 USD USD 730 billions billions Voice/ 669 messaging market 416 415 343 277 Invest Potentially in growth, 201 inorganic 157 314 potentially growth/leverage 254 120 142 also inorganic efficient additions technologies 2007 2012 2007 2012 FY 2006 Investors Day Sou rce: Projections based on IDC Black Worldwide Telecom Book (Septem ber 2006), Yankee Investor Relations March 1, 2007, Page 43
Grow in existing footprint. Subscriber additions in 2007/08 for key TMO NatCosabroad Million SIMs � Segment-specific propositions US > 5 � Reduce churn � Manage transition to 3G, leverage AWS spectrum � UK: Shift to contract, shift to direct, further improve brand experience Western 2 - 3 � AT: Push voice with both brands, mobile internet Europe 1 � NL: Continued shop roll-out; targeted growth in segments with voice/data propositions, cross-/up-selling � CZ: FMS, selective FMC, and data; service culture; PL: capture market growth CEE 2 ~ 1 � HU, SK, HR: Defend market share; leverage synergies 1 W. Europe excl. Ger FY 2006 Investors Day m any, UK incl. Virgin M obile, AT in cl. Tele.Rin g effect inorganic 2 Poland, Czech Republic, H Investor Relations ungary, Croatia, Slovakia and subsidiaries March 1, 2007, Page 44
Improve com- Mobilize petitiveness Grow abroad Business internet and in Germany with mobile customers Web 2.0 trend (and CEE) FY 2006 Investors Day Investor Relations March 1, 2007, Page 45
Mobilize internet and Web 2.0 trend. 12.40 User-generated online video streams Top 3 video sites 1 : US, Billions 160 million 0.35 Ad revenue of downloads per day social networking sites US, USD billions Duplication rate of blogs: 7 months 0.07 0.03 0.01 0.00 2004 2005 2006 1 YouTube, MySpace, Yah oo worldwide FY 2006 Investors Day Investor Relations March 1, 2007, Page 46
Theneed ...
Support human need to network. � Select buddies � Fit with personal interests Personal � Customize user interface (UI) for me � Utilize location information FY 2006 Investors Day Investor Relations March 1, 2007, Page 48
Support human need to network. � Select buddies � Fit with personal interests Personal � Customize user interface (UI) for me � Utilize location information + � One click to all communication services (voice, messaging, video Social etc.) � Communicate seamlessly across P2P bearers and devices interaction 1 � Enjoy interactive entertainment 1 On e-to-on e and on e-to m any FY 2006 Investors Day Investor Relations communication March 1, 2007, Page 49
Support human need to network. EXAMPLES � Select buddies � Fit with personal interests Personal � Customize user interface (UI) for me � Utilize location information + � One click to all communication services (voice, messaging, video Social etc.) � Communicate seamlessly across P2P bearers and devices interaction 1 � Enjoy interactive entertainment + � Invite friends and family Networking � Interact in your communities Easily � Share with online and selected linking offline communities TM US example: myFaves customers your network � “Pro-sume” user generated with significantly higher ARPU content 1 On e-to-on e and on e-to m any FY 2006 Investors Day Investor Relations communication March 1, 2007, Page 50
Partner, make, venture. Partner management Own development Venturing (manage “co-opetition”) Partner with leading Internal development Invest in new Web x.0 players to integrate the efforts leveraging the ventures through most popular internet existing T-Online know- “entrepreneurial services how investment management” FY 2006 Investors Day Investor Relations March 1, 2007, Page 51
Improve com- Build the ICT Mobilize petitiveness Grow abroad business internet and in Germany with mobile Web 2.0 trend (and CEE) With a partner FY 2006 Investors Day Investor Relations March 1, 2007, Page 52
Growing ICT market. TC/IT revenue distribution Major trends Western Europe 1 Percent TC market stagnating/declining 100 with shrinking margins TC (up to -20% p.a.) 80 ICT New growth market ICT – 60 66 IT and TC world are technically 61 converging 40 Still growing IT market IT ( ~ 6% CAGR) with attractive 20 margins (esp BPO) 0 2006 2010 (EUR 174 billion) (EUR 200 billion) FY 2006 Investors Day 1 M arket as definiedin project “Weltm eister” (focus countries, industries, and products) Investor Relations March 1, 2007, Page 53
Existing strengths in TC and IT. Today TC IT Trusted partner for security Top 3 position (globally) in � ( � ) services automotive IT services Ongoing IP service � � Over 1,550,000 SAP users migration Unique German transport Biggest European main- � � and access network frame operations infrastructure FY 2006 Investors Day Investor Relations March 1, 2007, Page 54
Existing strengths in ICT. TC + IT = ICT End-to-end management of ICT enabled processes E.g., Toll Collect ( � ) New platforms and solutions E.g., dynamic computing � Integrated infrastructure services � E.g., double WAN connection FY 2006 Investors Day Investor Relations March 1, 2007, Page 55
Ensure success of ICT business by evaluating our options, in particular partnerships. � Although attractive assets existing, T-Systems needs to overcome structural challenges, e.g. � Lack of relevant international footprint � Portfolio mix with high portion of declining business (TC legacy, captive) � Lack of scale � Current performance shows need to act � We are determined to further develop the ICT business � To execute we examine our options, in particular the possibility of strategic partnerships FY 2006 Investors Day Investor Relations March 1, 2007, Page 56
Our strategy – summary. Improve com- Build the ICT Mobilize petitiveness Grow abroad business internet and in Germany with mobile potentially with Web 2.0 trend (and CEE) a partner T = Leading broadband provider through combination of efficient technologies FY 2006 Investors Day Investor Relations March 1, 2007, Page 57
We mobilize personal and social networking. Improve com- Build the ICT Mobilize petitiveness Grow abroad business internet and in Germany with mobile potentially with Web 2.0 trend (and CEE) a partner Imple- Financing Execution mentation T = Leading broadband provider through combination of efficient technologies FY 2006 Investors Day Investor Relations March 1, 2007, Page 58
Strategic financial KPIs. Return on invested capital EVA Profit Financial KPIs Financial Growth flexibility Net Debt/EBITDA Gearing profitable revenue growth FY 2006 Investors Day Investor Relations March 1, 2007, Page 59
Prioritize sources and uses of funds. Funding options Use Maintain attractive Free cash-flow from 1 existing dividend policy current operations flexibility Invest in existing business Prioritize Dispose 2 cash usage non-core assets (CAPEX, restructuring) Increase funding Flexibility given today’s leverage Pursue M&A 3 ratio FY 2006 Investors Day Investor Relations March 1, 2007, Page 60
Assets for potential divestiture under scrutiny. � DFMG � US Towers � Club Internet � Ya.com � Media & Broadcast � DeTeImmobilien � Sireo (remaining stake) � Real estate portfolio FY 2006 Investors Day Investor Relations March 1, 2007, Page 61
Execution has begun. Measures Implemented Started � New management structure – “One company” Sales & service, � Products & Innovation, Network, Administration � Service Task-Forces initiated � � T-Punkt roll-out � � Simplified branding architecture � � Second-brand � � ADSL2+ for IPTV � � Development of community services and tariffs � � Development of new product roadmap � � “Save-for-Service” � � “Telekom-Service” preparation � � Divestiture of non-core assets � � Adjusted budget 2007 � � New target system for executives � FY 2006 Investors Day Investor Relations March 1, 2007, Page 62
We mobilize personal and social networking.
FY 2006. Broadband/Fixed Network.
Our goals 2007. Secure competitiveness of T-Com. Development of � 40-45% DSL retail market share in 2007 broadband market � 2.1 million DSL net adds leadership � PSTN line losses at level of 2006 � 100,000 – 200,000 IPTV-Customers in 2007 T-Home for the mass market � 786 T-Punkte (+ 200 shops) Largest sales � 1,000 partners footprint � Increase availability: 65% Fulfill customer expectations � Increase punctuality: 80% � Cost savings of €1.2 billion Save for service � One company Winning culture � Telekom Service FY 2006 Investors Day Investor Relations March 1, 2007, Page 65
Where are we today in Germany? We will face challenges going forward � 2 million customer loss in fixed in 2006 � Innovative products clearly failed their targets (T-Home, T-One) � Strong competition and price pressure in fixed and mobile � Improve customer satisfaction and service quality, e.g. availability and punctuality � Increase efficiency of T-Com � Strong competition from alternative carriers (cable, ULL >65% pop coverage) Nevertheless – clear strengths � Domestic market leaders (T-Com: 87% PSTN/ T-Mobile Germany: 37% SIMs) � Best-in-class networks (VDSL, HSDPA) and innovative and competitive products (Double play offers, Web&Walk) � DSL- growth market in Germany (T-Com grew faster than the market in Q4/06) FY 2006 Investors Day Investor Relations March 1, 2007, Page 66
Customer losses in Germany. 89% 1 of the losses choose DSL after migration from T-Com. Reasons for customer losses 1 Customer/ PSTN losses (in ‘000) � Aggressive pricing from 2006 2005 competitors Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 � Customer dissatisfaction with weak service Drivers of customer losses 1 � Migration to DSL offers from infrastructure based network operators and cable -355 -358 -373 � Fixed mobile substitution -432 -504 -503 -503 -538 High DSL retail share to reduce customer losses is necessary 1 Based on custom er survey from T-Com . FY 2006 Investors Day Investor Relations March 1, 2007, Page 67
Broadband/DSL. DSL push to fight customer losses. � Development in Q4/06 DSL retailnet adds(in ‘000) � T-Com and resale: 525 878,000 DSL net adds � best quarter ever! � T-Com: 563,000 DSL net adds � best quarter ever! 197 186 � Broadband market expected to grow by 10 million to 25 million lines in Germany by 2010 Ø Q1-Q4 Ø Q1-Q4 Ø Q1-Q4 Ø Q1-Q4 � Increase share of retail net adds 2005 2006 2007 2007 through attractive pricing and value added services Retail share 1 DSL 21% 19% 40-45% net adds Target 1 Based on broadband subscribers from retail, resale, cable and via ULL. FY 2006 Investors Day Investor Relations March 1, 2007, Page 68
Development of market leadership in broadband. Aggressively defend our competitive position. Churnmanagement Product portfolio push High network quality � Attractive entry offers Triple- Play � More features � IPTV for all (16 MB) Best mobile network in 2006 � Always competitive pricing Double- Play � Enhancement through � Higher bandwidths � Hot Spot Flat � Attractive entry offers Best internet and DSL � Strong up-selling Single- provider in 2006 Play � Pricing in accordance with market development � Attractive entry offers � Introduce fixed-to-mobile flat rate � Expand international flat rate FY 2006 Investors Day Investor Relations March 1, 2007, Page 69
IPTV for the mass market. New strategy: tripling IPTV coverage to 17 million homes in 2007. � Increase of IPTV coverage from 16% to 44% � Launch of IPTV via ADSL 2+ � VDSL (premium): 8 million homes � Mid term: VDSL in up to 50 cities � VDSL/ ADSL2+ (IP TV): 17 million homes � ADSL2+ in up to 750 cities � Attractive price offers for IPTV � Increase stability of IPTV offer � New hardware � Software integration for DVB-T � Content: Bundesliga (soccer), over 150 channels and over 1,200 movies � HDTV ADSL 2+ VDSL FY 2006 Investors Day Investor Relations March 1, 2007, Page 70
Service Germany. Excellent service is key to secure broadband growth. Key focus Availability –accepted calls within 20 seconds by call center � Availability: � Call avoidance 65% � Productivity boost 34% � Expand internal resources � External resources for peak Average in 2006 Goal 2007 management Punctuality –share of punctual installations at the customer � Punctuality: � Logistics tracking/quality gate 80% 67% � “One package to the customer” � Improvement of IT stability Average in Jan., 2007 Goal 2007 FY 2006 Investors Day Investor Relations March 1, 2007, Page 71
Sales Germany. Increase number of point of sales in Germany. T-Punkte Increasenumber of T-Punkte � Increase number of own shops from 586 to 786 in 2007 December 2006 December 2007 eChannel � 30 million service transactions North North in 2006 96 T-Punkte 127 T-Punkte � Goal: 15 % share of 3x3 product East East sales in 2007 96 T-Punkte 151 T-Punkte West West Partners 244 T-Punkte 310 T-Punkte � 1,000 partners in 2007 South South � Integrated T-Partner program 150 T-Punkte 198 T-Punkte (key account management, bonus system, etc.) VSE segment � Huge up-selling opportunities for VSE sales force FY 2006 Investors Day Investor Relations March 1, 2007, Page 72
T-Com and T-Mobile -stronger together. Integrated sales & service team implemented. Integrated Sales & Service Team Germany Advantages and benefits � More focus on service than ever before Market Sales and � One management team for sales T-Com/ Quality T-Mobile and service in Germany Manage- ment � Clear responsibilities for T-Com, T-Com/ Customer T-Mobile T-Mobile Deutschland und T-Punkt Service shops T-Com/ T-Mobile � From divisional view to customer view � one stop shopping Technical customer T-Punkte service FY 2006 Investors Day Investor Relations March 1, 2007, Page 73
Telekom Service. Secure competitiveness in Germany. Service quality 3 unitsof Telekom Service � Integration of customer care � Concentration of service experts Call Center Reduction of costs � Segment specific conditions required Technical Service � Increase efficiency (e.g. increase in working hours) Technical infrastructure FY 2006 Investors Day Investor Relations March 1, 2007, Page 74
Save for Service Efficiency program of T-Com in Germany . Development of cost base 2 in 2007 Main measures in 2007 Save for Service � Marketing €0.2 bn � Simplification of product portfolio 15,0 EUR - 0.9 bn -1,2 � Joint-group wide-campaign management and sourcing � Production €0.5 bn � Automation & centralization of network management functions 0,4 14,1 � Reduction of component fault rates -0,3 � Reduction of processing time back office 0,2 � Distribution €0.4 bn � Extension of eChannel � IT & Others €0.1 bn � Optimization IT / Reduction of complexity � Shut down of cost intensive legacy systems 2006 Cost Ter- VDSL SACs Goal � Reduction of IT- development costs reduc- mina- DSL, 2007 tion tion T-Punkt � HR shops & � Improve terms and conditions 1 Others 1 Included in the savin g s sh own above. Prim arily in production and distribution. 2 Based on revenu e m inus other operatin g in co m e m inus EBITDA. FY 2006 Investors Day Investor Relations March 1, 2007, Page 75
Roadmap Sales & Service Germany. Focus on quality and competitiveness. Immediate measures Fixing the basics Differentiation (2007) (2007/2008) (from 2008) � Partner program � Multichannel control � Biggest branded sales interface � T-Partner � Increase number of own Sales shops � Integrated customer view at Germany all customer touchpoints � Expansion of e-channel � Punctuality � T-Service � Segment-specific services � Availability � CRM � Services culture Service � IT stability � Integrated customer insight Germany over all customer contact points � Reduce customer losses � Push T-Home � Universal customer base management � Push DSL � Push IPTV via ADSL2+ Market position/ � Churn management competitiveness Performance culture FY 2006 Investors Day Investor Relations March 1, 2007, Page 76
First achievements. Fix the basics 2007 Planned and decided implemented Management � Integrated Sales & Service � � Team in Germany Team � Expansion T-Punkte Q4/07 � Sales � Integrated Germany T-Partner program CeBit � � � Task force Punctuality Service � Task force Availability Q4/07 � Germany � Task force IT stability � Q2/07 � Push DSL � � Push IPTV via ADSL2+ 2H/07 � Market position � Churn management Q1/07 Q2/07 � competitiveness � 2nd brand 2H/07 � � � Single Play Q1/07 2H/07 � Efficiency � Telekom Service 2H/07 � FY 2006 Investors Day Investor Relations March 1, 2007, Page 77
FY 2006. Priorities 2007, T-Mobile.
2006 Review: Continued Growth. � More than 106 million mobile customers worldwide, up 8.8 percent � More than 25 million customers in the US, up 15.4 percent � More than 27 million customers in Eastern Europe1), up 13.7 percent � €27.9 billion service revenues, up 10.7 percent � Mobile data source for growth � 1.1 million web’n’walk customers, 60-70 percent of devices web’n’walk enabled � Nearly € 1.4 billion data revenues (w/o SMS), more than € 100 million WLAN revenues � Networks fully HSDPA enabled � New devices of the successful MDA series (T-Mobile Ameo) � Mobile data rapidly growing in all markets 1) Incl PTC and TMCZ. FY 2006 Investors Day Investor Relations March 1, 2007, Page 79
2006 Review: Most Highly Regarded Service Company. � Improved customer touch-points � Number 1 in customer service in 2006 in NL, CZ, A, HU, HR and SK � Number 1 or 2 in shop customer satisfaction e.g. in UK, A, CZ, NL, HU � 286 new shops opened in TMO 5 plus TMH; 99 new shops opened in TMUS � Improved segment specific propositions � 1.1m T-Mobile@home subscribers in Germany � 1.3m Flext subscribers in UK � Improved end-to-end network experience � TMD: Winner of “connect” drive test, 7th consecutive “Network of the Year” award � Co-lead in A, CZ (2G); TMNL catching up with the leading competition � Save for Growth completed, target overachieved (beyond € 1.3bn) FY 2006 Investors Day Investor Relations March 1, 2007, Page 80
Growth Outlook 2009. Growth Drivers Estimated Mobile Market Growth –CAGR 06-09 � Continued subscriber growth/ 10% 10 market penetration USA SK � Mobile data uptake 8% 8% CZ Growth � Fixed mobile substitution 6% 6% US HR � Usage stimulation by price nue G Revenue 4% 4% perception management UK 1) WE � Mobile data uptake HU rvice R 2% 2% NL Serv D 0% 0% D 2% 2% 4% 4% 6% 6% 8% 8% 10 10% A � Continued subscriber growth/ -2% -2 market penetration Subscrib Su iber er ( (SIM) Growth CEE � Mobile data uptake Note: Bubble size indicates 2006 service revenue market size in Euro 1) Mobile operator only view for service revenues Source: TMO Market Models CAGR: Compound Annual Growth Rate FY 2006 Investors Day Investor Relations March 1, 2007, Page 81
T-Mobile Deutschland.
Fixed-Mobile Substitution. Share of Outgoing Voice Minutes per Capita 2005A Fixed 39% 45% 45% 47% 54% 56% 58% 58% 59% 66% 67% 71% 74% 84% Mobile 61% 55% 55% 53% 46% 44% 42% 42% 41% 34% 33% 29% 26% 16% US UK FIN D F I NL E A P HU PL CZ EU* Source: NRAs, CTIA, Company reports, IPSOS/Eurostat 2004/05, Merrill Lynch 2005; Strategy Analytics 2005; CE1 MCI analysis. *EU refers to EU15 (excl. Luxemburg,) plus Switzerland, Norway, Czech Republic, Poland and Hungary FY 2006 Investors Day Investor Relations March 1, 2007, Page 83
German Mobile Market: Usage Increase Still not Compensating Price Decline. Price-/Usage Development in Germany (indexed) Price E e Elasti ticity ty Price E e Elasti ticity ty 130% ≈ 0. 0.6 ≈ 0. 0.0 Price E e Elasti ticity ty 120% ≈ 0. 0.3 +20% 110% 100% 90% -33% 80% 70% Avg. Revenue Per Minute 60% Avg. Minutes 3Q03 4Q03 1Q04 2Q04 3Q04 4Q04 1Q05 2Q05 3Q05 4Q05 1Q06 2Q06 3Q06 of Use � 33 percent price reduction resulted in only 20 percent usage increase (0.6 price elasticity) � Slight decline of market service revenues in the German market (-0.3 percent compared to 2005) Source: Merrill Lynch European Wireless Matrix 3Q 2006; Note: Elasticity figures only indicative approximations FY 2006 Investors Day Investor Relations March 1, 2007, Page 84
T-Mobile Brand Not Appealing to Young Segment. Young not@work Students Pupils 35% 33% TMD share 26% 06 06 06 � Average customer age for T-Mobile Deutschland is 42 years � High price perception associated with Brand � Relatively low Net Promoter Score Source: TMD, GfK FY 2006 Investors Day Investor Relations March 1, 2007, Page 85
Stabilization Measures for T-Mobile Germany. 5 levers ... ... to implement “Game changers” 1 Push Correct price and image perception in � Refresh Young segment Young customer Segment-specific offers for youth (e.g. Relax / Max � Student, Xtra Friends NonStop, w’n’w@home) 2 base Second Target share in Young segment of ≈ 35% in 2007 � brand “Game changers” Protect T-Mobile brand position against discounter 3 � attack Churn Diversify Launch Young-focused brand with attractive reduction brand � pricing 4 Up- and cross- selling Strong push of direct channel – 200 new shops � Radically Balance retention & acquisition to reduce churn: � shift market 5 2007 target of <15% in contract churn Push acquisition approach Cross-SBU up-selling � in direct channels FY 2006 Investors Day Investor Relations March 1, 2007, Page 86
Targeted Approach to Young & Low Frills Market Segments. Direct White Label SPs Online Sales Partner Own young focused second brand FY 2006 Investors Day Investor Relations March 1, 2007, Page 87
T-Mobile USA.
T-Mobile USA. Successful New Products Drive Growth. � myFaves tariffs successfully launched � Unlimited calling to 5 people on any network � People-centric unique user interface � Converged devices (e.g. Sidekick 3 & Blackberry Pearl) drive data ARPU: � Approx. $6.50 in Q4 (up 36% yoy) � >200,000 net adds in Q4 � T-Mobile HotSpot @Home � Leveraging America’s leading hotspot network – T-Mobile HotSpot � National launch in 2007 FY 2006 Investors Day Investor Relations March 1, 2007, Page 89
T-Mobile USA. Leading in Service & Outstanding Network. � JD Power Award for best customer care 5x in a row � Expand quality distribution in 2007 � Expand # of company stores � Add high quality dealer locations � Improve coverage � Further expand suburban coverage � 1,200 3G cell sites already deployed in NY � Broad 3G coverage within 18-24 months � Contracts with Ericsson and Nokia concluded � HSPA logical technology choice � 2x more efficient than GSM in voice � Supports rich data applications and Internet access � Same technology path as T-Mobile in Europe FY 2006 Investors Day Investor Relations March 1, 2007, Page 90
T-Mobile UK.
T-Mobile UK: Profitable Growth And Improving Operations. � 2006: Balancing Growth And Profitability � Service revenue growth in 4Q of 16% YoY � Margin back at 26.9% in Q4 while adding a strong 246k net adds � Flext: more than 1.3m customers since February 2006 � Driving Most Highly Regarded Service Company in 2006 � Strengthened direct sales: 119 new shops to a total of 247 in 2006 � Contract churn in 4Q decreased from 2.9% to 2.1% YoY � First to launch HSDPA; leading broadband coverage in major cities � 2007: Continue Profitable Growth � Increase data revenues and continue shift to contract (target of >1m contract gross adds in 2007) � Improve loyalty & retention via truly differentiated customer experience � Improve cost base via Save for Service FY 2006 Investors Day Investor Relations March 1, 2007, Page 92
Other Markets.
Review 2006 / Operational Levers. Achievements 2006 Operational Levers (2007/08) � Simplified & innovative tariffs: � Develop customer base & NL - 225k web ’ n ’ walk subs, 300k increase usage: Flex subs; Austria - 80k Mobile � New propositions Internet � Cross- & up-selling NL � Significant improvements in � Churn reduction program CZ customer service: #1 in call center � Manage competitive & A satisfaction in all 3 markets regulatory pressure: � Successful integration of tele.ring: � Continue push in direct channels First synergies realized (e.g. network � Reduction of cluster costs & IT) Organizations aligned � Successful re-branding � Prepare for Further Competition: in Montenegro and Macedonia � Lock customer base via loyalty programs � Successful launch of new � National Roaming propositions : e.g. HSDPA data CEE cards in SK & HU � Mobile broadband build-out � Improved customer experience in � Leverage Integrated Telco Approach: all markets: #1 in call center e.g. use of common retail network, satisfaction bundles FY 2006 Investors Day Investor Relations March 1, 2007, Page 94
Mobile Industry Trends.
Further Trends and Developments in the Telco Industry. � Personal communication in social networks and communities replacing traditional voice and messaging usage patterns � Mobile Internet as mega trend � Multi-access and net-centric IP services � Devices and user interface as differentiator Opportunities for innovative products and customer-centric services FY 2006 Investors Day Investor Relations March 1, 2007, Page 96
Focused and Innovative Product Roadmap. Strategic Direction Product Example � Community Tariff & UI Inner circle bonding – Personal leverage personal � Mobile IM Communication social networks � Easy mobile email � New „worry-free“ Strengthen category leadership in Mobile data tariffs “real time” Internet with worry- Internet free pricing � Web‘n‘Walk 3.0 Compelling and � Next Generation Terminals MDA: Ameo differentiated devices FY 2006 Investors Day Investor Relations March 1, 2007, Page 97
Summary. Deliver on 2007 financial envelope � Stabilize T-Mobile Deutschland financial performance � Sustain growth & profitability in TMUS & TMUK and other markets � Increase execution speed and build on the One Company success � Continue focus on contract growth & revenue market share � Continue aggressive push towards direct channel in all markets � Strengthen Brand, particularly in youth segments and position for Social Networking � Prepare to take advantage of mega trends in telecommunication via effective partnering & product development FY 2006 Investors Day Investor Relations March 1, 2007, Page 98
FY 2006. Operational Priorities – T-Systems.
Operational Priorities 2007. Challenges and Measures. Adjustmentsin captive business Revenue planning � Total Revenue flat Significant reduction of internal � revenue as a result of price decrease � of which external significant growth � of which very ambitious international growth Operational Priorities –Measures FY 2006 Investors Day Investor Relations March 1, 2007, Page 100
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