Prospectus-Final (clean) - Malta Financial Services Authority

2010. The demand for ever-faster data transmission rates also requires further measures in the areaof mobile communications frequencies. In 2011, some countries held auctions, in which DeutscheTelekom participated, to extend existing licenses and distribute additional frequency bands.Telecommunications providers that offer both mobile and fixed-network communications areincreasingly consolidating their services for mobile, broadband/TV and fixed network into triple-play(includes high-speed Internet access, communication services and entertainment offerings) and evenquadruple-play offers. Moreover, many services are converging. For example, television can now bewatched on a television set, computer or smartphone. Television accounts for a larger proportion ofthe business in the markets in the Europe operating segment and Deutsche Telekom's televisionservices are available through IPTV, cable and, in some countries, through satellite.United StatesIn 2011, the slow growth of the U.S. mobile telecommunications market continued. Once again,increasing data revenue more than compensated for declining voice revenue. The market is dividedamong four national cellular providers, AT&T Wireless, Verizon Wireless, Sprint and T-Mobile USA,and various regional network operators. There are also a number of mobile virtual network operators,which use the networks of one or more of the four national cellular providers. The two largestproviders, AT&T Wireless and Verizon Wireless, achieved strong revenue growth and healthy marginsin 2011. This was primarily driven by strong growth in smartphone adoption and rising postpaidaverage revenue per user. Due to advantages of size, scale and their ability to bundle wireless servicewith other non-wireless communication services, AT&T Wireless and Verizon Wireless were able tooffer cheaper service and increase their customer base.AT&T has had a competitive advantage in the past three years as a result of its exclusive distributionrights for the Apple iPhone that expired in 2011. Verizon and Sprint became additional distributors ofthe Apple iPhone, gaining a competitive advantage as well. Verizon and AT&T were able to increasetheir net customer gain disproportionately during 2011. Increased competition from low-cost regionalfull-service providers also put downward pressure on prices. These effects resulted in a decline inmarket share for T-Mobile USA. Measured against the total number of mobile communications usersin the United States, T-Mobile USA's market share declined from 11.4% at 30 September 2010 to10.6% at 30 September 2011.Deutsche Telekom expects the roll-out of 4G networks to be a major theme for the industry in theUnited States. Verizon Wireless has started to roll out LTE network technology. By the end of 2011,LTE was available to a population of over 200 million. AT&T and T-Mobile USA have deployed HSPAplus networks, which are more advanced than UMTS. By the end of 2011, the coverage of T-MobileUSA's 42 Mbit/s HSPA plus network had reached more than 184 million. AT&T also began rolling outLTE in 2011 and coverage had risen to 74 million by the end of the year. Sprint does not yet have itsown 4G network but is relying on Clearwire, in which it has a non-controlling stake. By the end of thethird quarter of 2011, Clearwire's WiMAX network covered a population of approximately 133 million.Sprint plans to roll out LTE services in its own spectrum during 2012.Systems SolutionsDevelopments during 2011 resulted in continuing cost pressure, delayed investment decisions byclients and customers, and stronger competition. Overall demand is undergoing a fundamental shift.Cloud services, embedded systems, and intelligent networks in particular are increasinglytransforming the market.Deutsche Telekom's business areas within T-Systems were affected in very different ways by thesemarket trends:• Telecommunications: The economic upswing in 2010 and early 2011 only had a minor effect onthe telecommunications market segment. As in previous years, this market was highly competitiveand therefore also characterised by falling prices.• IT services: The market for IT services grew slightly once again during 2011.• Outsourcing: There was a tangible recovery in the outsourcing business in the area of Computingand Desktop Services in 2011. This is due not only to the traditional outsourcing business, but alsothe success of cloud services, the provision of IT services through the Internet. The current53