Prospectus-Final (clean) - Malta Financial Services Authority

oadband cable television connections. This is in addition to a small number of connections thatutilise other fixed-network technologies, such as fiber-optics. Deutsche Telekom believes there wereapproximately 27.1 million fixed-network broadband connections in Germany at the end of 2011, anincrease of around 5% compared to 2010.Service revenues in the German mobile telephony market remained nearly stable compared to 2010,despite lowered termination charges. Revenue from text messaging and data services was thegreatest driver, due to the growing popularity of smartphones and tablet PCs, which nearlycompensated for the decline in conventional mobile telephony. This is the reason why some mobilecommunications providers are placing greater emphasis on customer loyalty and value-driven growthamong contract customers by offering complete packages. Moreover, Deutsche Telekom is alsoseeing growth in new services and application, such as iMessage and MobileTV.Nearly one in three Internet users in Germany accesses the Internet using a mobile device, andmobile access to online communities, location-based services and shopping is growing rapidly.Deutsche Telekom expects the mobile payment business to continue to grow as a result.According to the Federal Network Agency, German network operators invested more than EUR 93billion in telecommunications networks between 1998 and 2010, and nearly EUR 6 billion in 2011alone. Broadband connections with speeds of at least 1 Mbit/s are now available to nearly 99% ofhouseholds in Germany. The remaining coverage gaps are provided with high-speed Internet throughwireless technologies. The German government and network operators intend to make connectionswith transmission rates of at least 50 Mbit/s available to 75% of households by 2014.To facilitate this expansion, some of Deutsche Telekom's competitors are upgrading their LTEinfrastructure. Deutsche Telekom is building on a mix of technologies, comprising mobiletelecommunications, fiber-optics and copper-based connections in the fixed-network. Currently,Deutsche Telekom has equipped its mobile network in Germany with the powerful HSPA plustechnology and can now offer customers transmission speeds of up to 42 Mbit/s. While DeutscheTelekom is initially deploying the 800 MHz frequency band to supply broadband LTE to rural areas,frequencies in the 1,800 MHz range will be used in metropolitan areas. This increases thetransmission capacity for the rapidly rising volume of data traffic and will enable even highertransmission speeds.EuropeIn 2011, the telecommunications markets in the countries of Deutsche Telekom's Europe operatingsegment were characterised by intense competition, continuously falling retail prices and stronggovernment and regulatory impact. In particular, the reductions in termination rates, some of whichwere substantial, presented the companies operating in these markets with considerable challenges.Falling prices, the result of regulatory intervention, major competitive pressure, and in some casesweak purchasing power, caused the size of telecommunications markets in almost three quarters ofthe countries in this operating segment to either contract or stagnate.The telecommunications markets (measured by revenues) in the Czech Republic, Albania, andRomania all experienced a contraction. In addition, the situation was particularly severe in Greece,where telecommunications revenues dropped around 8% compared with 2010. The debt crisis and theGreek government's strict austerity program translated into lower consumption and, in turn, lowerspending on telecommunications. Poland experienced market growth of approximately 3%. Incontrast, telecommunications markets in Austria and the Netherlands remained stable or experiencedslight growth.In the fixed-network segment, trends from 2010 continued. Significant growth in the broadbandbusiness compensated for some of the decline in revenue from voice telephony. Broadband coveragevaries among the countries included in Deutsche Telekom's Europe operating segment. Faced withincreasing demand for greater bandwidths, both cable network operators and telecommunicationsproviders are investing in upgrading their broadband networks, resulting in increasing competition.Fiber-optics play a crucial role in upgrading broadband networks and Deutsche Telekom is investing inthe construction of a pure-fiber network in certain of the countries in the Europe operative segment.To meet the rising demand for fast data transfer, Deutsche Telekom is modernising and upgrading itsmobile networks by equipping them with faster HSPA plus technology and implementing the newmobile communications standard LTE. In Austria, for example, LTE was implemented in December52