Q1/10 Results Presentation. Deutsche Telekom. May 12, 2010 1 - PowerPoint PPT Presentation

Q1/10 – Results Presentation. Deutsche Telekom. May 12, 2010 1

Disclaimer. This presentation contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows and personnel-related measures. You should consider them 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 Deutsche Telekom’s Annual Report on Form 20-F filed with the U.S. Securities and Exchange Commission. Among the factors that might influence our ability to achieve our objectives are the progress of our workforce reduction initiative and other cost-saving measures, and the impact of other significant strategic, labor or business initiatives, including acquisitions, dispositions and business combinations, and our network upgrade and expansion initiatives. In addition, stronger than expected competition, technological change, legal proceedings and regulatory developments, among other factors, may have a material adverse effect on our costs and revenue development. Further, the economic downturn in our markets, and changes in interest and currency exchange rates, may also have an impact on our business development and the availability of financing on favorable conditions. Changes to our expectations concerning future cash flows may lead to impairment writedowns of assets carried at historical cost, which may materially affect our results at the group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance may materially differ from the performance expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved. We do not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise. In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net income, 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”, which is posted on Deutsche Telekom’s Investor Relations webpage at www.telekom.com. 2

Agenda. Deutsche Telekom Results Presentation. René Obermann CEO Timotheus Höttges CFO 3

Q1 Highlights – Good start into the year. Improved EBITDA, strong growth in free cash flow and net income  Germany: Mobile continues to expand market leadership, outpacing competition. Excellent customer KPIs in German  fixed, improved revenue trends, fixed margin impacted by one-timers. SEE: 22% revenue and 16% adj. EBITDA growth – supported by F/X and acquisitions. Margin at 39%.  Europe with nearly stable revenues (-1%), adj. EBITDA up 42%, supported by margin improvements in all operations.  Systems solutions with 1.2% revenue growth driven by external revenue growth of 2.4%. Promising order entry up  7.3%. Adj. EBIT further improved. USA: Good development on data ARPUs and EBITDA. Revenue and subscriber trends remain in management focus.  New 3 year shareholder remuneration policy: €3.4 billion annually with €0.70 minimum dividend per share, remainder  returned via share buybacks New board member compensation scheme approved by AGM, incl. share ownership and long-term incentivization based  on four parameters incl. ROCE and EPS. Closing of joint venture in the UK  New strategy “fix, transform and innovate” presented in March with focus on shareholder returns and return on capital  employed as steering logic Guidance for full year 2010 confirmed 4

Q1 financial overview: strong year on year improvement. in € million Q1/09 Q1/10 Change in % Revenue 15,902 15,812 -0.6% Adj. EBITDA 4,812 4,890 +1.6% Adj. Net income 655 891 +36% Net income -1,124 767 n.m. Free cash flow 416 1,439 +249% Cash capex 2,611 1,934 -26% Adj. EPS (in €) 0.15 0.21 +40%  Improvement in adj. net income driven by better EBITDA and lower D&A on tangible assets  Net income Q1/09 impacted by goodwill impairment in the UK  Free cash flow improvement due to less CAPEX and improved working capital  Lower CAPEX driven by delays in underground constructions caused by hard winter and different seasonality of spending 5

Q1 financial overview: positive adj. EBITDA development. Revenue (€ million) Adj. EBITDA (€ million) -0.6% +1.6% +513 +183 4,890 15,902 15,812 4,812 -83 -521 -12 -93 Q1/09 Acquisitions F/X Organic Q1/10 Q1/09 Acquisitions F/X Organic Q1/10 Revenue Q1/09 vs. Q1/10 (€ million) Adj. EBITDA Q1/09 vs. Q1/10 (€ million) 2,363 6,331 Germany Germany 2,299 6.189 1,061 4,137 USA USA 1,008 3,814 467 Europe 665 2,436 Europe 799 2.412 SEE 925 1,964 SEE 211 2,387 SYS Q1/09 196 2,106 -50 SYS Q1/10 GHS 2,131 -172 6

Strategy Update: Fix – Transform - Innovate on track. Fix Transform Innovate Improve perfor- Leverage Build networks and Connected work Connected life mance of mobile- one company in processes for the with unique across all screens centric assets integrated assets gigabit society ICT solutions  US: Accelerated data  “Telekom Deutschland”  3G in Romania, Zapp  Launch of mobile media  Deutschland LAN  US: Accelerated data  “Telekom Deutschland”  3G in Romania, Zapp  Launch of mobile media  Deutschland LAN ARPU growth in Q1 legally implemented as integration on track distribution in Germany ARPU growth in Q1 legally implemented as integration on track distribution in Germany  ABB power grid  ABB power grid of April 1 st . of April 1 st . (+1.50US$) yoy. (+1.50US$) yoy.  3G roll-out in Czech  TV push in SEE: +110k partnership  3G roll-out in Czech  TV push in SEE: +110k partnership  UK: Joint Venture up and  Croatia since January 1 st Republic TV net adds  UK: Joint Venture up and  Croatia since January 1 st Republic TV net adds  Acquisitions of strong  Acquisitions of strong running as of April 1st. in “One company” running as of April 1st. in “One company”  Progress on 3G in the  Click ‘n’ buy leading local players in Slovakia  Progress on 3G in the  Click ‘n’ buy leading local players in Slovakia Launch of “everything structure Launch of “everything structure US, HSPA+ roll-out in payment platform and Croatia to transform US, HSPA+ roll-out in payment platform and Croatia to transform everywhere”. everywhere”.  The legal merger of key markets acquired pure Telco business  The legal merger of key markets acquired pure Telco business  NL & A: Dutch (+9pp) Slovak Telekom and segment into ICT  NL & A: Dutch (+9pp) Slovak Telekom and  Fiber roll-out SEE  STRATO acquisition to segment into ICT  Fiber roll-out SEE  STRATO acquisition to and Austrian (+14pp) T-Mobile Slovensko will and Austrian (+14pp) T-Mobile Slovensko will strengthen position in  Several new Big Deals in strengthen position in  Several new Big Deals in  2.6 GHz spectrum  2.6 GHz spectrum EBITDA margins come into effect on July EBITDA margins come into effect on July web hosting business Q1/10 won: German web hosting business Q1/10 won: German acquired in the acquired in the improved 1 st improved 1 st Aerospace Center (DLR), Aerospace Center (DLR), Netherlands Netherlands  Netherlands and Poland Deutsche Post DHL,  Netherlands and Poland Deutsche Post DHL, outperforming peers SBB (Swiss Railways), outperforming peers SBB (Swiss Railways), TUI Travel TUI Travel 7

Strategy update: growth areas. DT’s Growth Areas 2009 Q1/10 2015e Revenue in € bn. 1.1 Mobile Internet 4 ≈ 10 Connected Home 5 1.4 ≈ 7 Double & triple play, Home Gateway and Communication Suite 0.2 Online Consumer Services 0.8 2 - 3 T-Systems external revenue 6.1 1.5 ≈ 8 incl. Cloud Services Intelligent Networks 0 0 ≈ 1 in Energy, Health, Media Distribution, Connected Car 8