Prospectus-Final (clean) - Malta Financial Services Authority

Special Requirements Applicable to Providers with Significant Market PowerThe most significant impact on Deutsche Telekom's business comes from the EU Framework's specialrequirements applicable to providers with significant market power. Obligations in relation to networkaccess, price setting, separate accounting for interconnection services, publication, and nondiscrimination,can be imposed on those operators that are designated by the relevant NRA as havingsignificant market power in an electronic communications market. Such determinations are based onEU guidelines and EU competition case law. Deutsche Telekom has been designated as havingsignificant market power primarily in most fixed-line markets in which it operates, as well as in mobilevoice call termination markets.In particular, an NRA may subject providers with significant market power, and their affiliates, toseveral rules and obligations specified within the EU Regulatory Framework and its directives andguidelines, such as:• The obligation to offer other companies unbundled network access (including interconnection) aswell as access to certain services and facilities on a non-discriminatory basis. This includes fullunbundled access to copper-paired wire lines, including unbundled access to the high-frequencyspectrum of those lines (line-sharing), bitstream access and access to other parts of the networks.In particular, unbundling has led to a considerable loss of Deutsche Telekom's market share. Formore information regarding the effects of unbundling obligations, see"—German Fixed NetworkTelecommunications Regulation—Local Loop Access" below.• Prior approval or retroactive review of charges, insofar as such charges and conditions relate to amarket in which the provider holds significant market power.• The obligation of transparency in relation to interconnection and/or access, requiring operators tomake public specified information, such as accounting information, technical specifications, networkcharacteristics, terms and conditions for supply and use, including any conditions limiting access toand/or use of services and applications.• The obligation of non-discrimination in relation to interconnection and/or access. Obligations of nondiscriminationrequire the operator to apply equivalent conditions in equivalent circumstances toother companies providing equivalent services, and to provide services and information to othersunder the same conditions and of the same quality as it provides for its own services, or those of itssubsidiaries or partners.• The obligation to maintain separate accounting systems with regard to interconnection and accessservices. This obligation is intended to allow for transparency with respect to varioustelecommunications services in order to prevent, among other things, the cross-subsidisation ofservices. In this regard, an NRA may specify the structure of a provider's internal accounting forparticular telecommunications services, which can increase costs of compliance.• The obligation on vertically integrated undertakings to place activities related to the wholesaleprovision of relevant access products in an independently operating business entity (functionalseparation). This is an exceptional measure to be employed if the NRA concludes that therespective obligations already imposed have failed to achieve effective competition and that thereare important and ongoing competition problems and/or market failures identified in relation to thewholesale provision of certain access product markets.On 20 September 2010, the European Commission issued its Recommendation on regulated accessto Next-Generation Access Networks ("NGA" Recommendation), containing guidelines to be observedas far as possible by NRAs when obligating market-dominant companies to grant access to thesenetworks. Its aim is to harmonise regulatory requirements in Europe. The object of the NGARecommendation is general regulation of access to the physical network infrastructure at thewholesale level and in the broadband access market. In addition, in October 2011, the EuropeanCommission launched two public consultations related to access for alternative operators to the fixedtelephone and broadband networks of established operators. One consultation concerns nondiscriminatoryaccess for alternative operators to the infrastructure and services of dominant telecomoperators. The second concerns the way national regulators calculate prices that operators have topay for this wholesale access (cost-orientation remedies). Depending on further developments,regulations from current copper networks may also be applied to new fiber networks. This may cause55