Prospectus-Final (clean) - Malta Financial Services Authority

In Deutsche Telekom's European markets outside of Germany, the regulation and competitioninduceddecline in voice telephony will continue to impact the markets negatively. Deutsche Telekomassumes that revenue growth resulting from data usage, innovative products and an expanding ICTsegment will not be entirely capable of compensating for this decline. Although some of DeutscheTelekom's markets in Southern and Eastern Europe may experience a partial recovery from theeconomic crisis towards the end of 2012, some governments may attempt to remedy their financialsituation through fiscal policy interventions. This type of action could negatively affect privateconsumption and consequently market volumes. Deutsche Telekom expects the macroeconomicsituation in Greece to remain strained. Overall, Deutsche Telekom does not expecttelecommunications markets in the Europe operating segment to stabilise before 2013.The United States mobile telecommunications market faces intense competition among the majorwireless carriers, while the consumer climate improves and unemployment remains relatively high. Inthe context of the competitive and economic environment, the telecommunications market is expectedto grow, driven by marketing mobile broadband non-voice services. This revenue growth is likely tooffset declining revenue from voice services and text messaging, which continue to experience pricepressure among the U.S. wireless competitors offering unlimited plans. In addition, prepaid productsare expected to continue to gain strength.The general development of the economy in recent months further weakened the recovery in the ICTmarket that had been forecast in early 2011. Deutsche Telekom expects growth in the ICT market tocontinue to slow in 2012 and IT services to experience a slight decline in 2012. Deutsche Telekomanticipates that the long-term outsourcing business will grow despite increasing pressure on prices.Deutsche Telekom expects opportunities for business with new customers to result from pressure oncosts and consolidation tendencies in the market. While companies are modernising their ITinfrastructures and launching new projects, general developments in Western Europe suggest thatgrowth will slow considerably in 2012. Contrary to previous expectations, the market fortelecommunications services for corporate customers will continue to be dominated by traditionalrather than by all-IP products. Deutsche Telekom expects demand for bandwidth to increase whileprices in all segments of the telecommunications market decline.Expectations for the GroupIn light of the macroeconomic situation, severe competition in several markets and regulatoryinterventions, Deutsche Telekom expects revenue to decline slightly in 2012. Any regulatoryinterventions beyond what Deutsche Telekom anticipates currently would lead to a further decline inrevenue. Assuming average exchange rates in 2012 are the same as 2011 average exchange rates, acomparable group consolidation structure and no further significant deterioration in the economic andregulatory environment in the markets in which Deutsche Telekom operates, at present DeutscheTelekom expects a low to mid-single digit percentage decline in adjusted EBITDA and a single digitpercentage decline in free cash flow in 2012. In 2012, Deutsche Telekom expects its net investmentlevels to remain approximately at the same level as the prior year, excluding any investments inspectrum. Exchange rate fluctuations can have a considerable impact on these expectations.Should Deutsche Telekom find that its plans would benefit from strategic alliances with othercompanies, Deutsche Telekom would be open to such partnerships. In addition, Deutsche Telekomintends to continue leveraging international economies of scale and synergies in the future, throughappropriate acquisitions in markets where Deutsche Telekom is already represented. There are noplans, however, for major acquisitions or expansion in emerging markets.Despite high levels of investment in its future viability, Deutsche Telekom also wants to remunerate itsshareholders appropriately in 2012, subject to the achievement of a corresponding level ofinappropriate net income. Accordingly, Deutsche Telekom intends to pay a minimum dividend ofEUR 0.70 per share to Deutsche Telekom AG shareholders in 2012. Including any share buy-backsthat may be carried out from time-to-time in 2012, this would amount to total shareholder remunerationof EUR 3.4 billion for 2012.The general mood in the international finance markets in 2011 was dominated by the Europeansovereign debt crisis, which meant that some countries had difficulties refinancing their maturing debtsin the international capital markets. For Deutsche Telekom's Group, repayments totaling EUR 3.6billion in bonds, medium term notes, and promissory notes will be due in 2012. In 2012, theperformance of the financial markets is expected to depend largely on the implementation of suitablemeasures to address the sovereign debt crisis. Deutsche Telekom may take advantage of favorable102