Prospectus-Final (clean) - Malta Financial Services Authority

The decrease in adjusted EBITDA in 2010 was primarily due to the offsetting effects that affectedrevenue. Adjusted EBITDA declined as a result of the deconsolidation of T-Mobile UK effective1 April 2010 and the newly imposed special tax in Hungary that applied retroactively to the entire 2010financial year. Adjusted EBITDA was positively affected by the first full-year consolidation of OTE.Positive exchange rate effects attributable primarily to the translation from Polish zlotys, Czechkorunas, Hungarian forints, Croatian kunas and pounds sterling also had a positive effect.For 2012, Deutsche Telekom expects adjusted EBITDA in the Europe operating segment to decline.Adjusted EBITDA may be adversely affected by changes in legislation, for instance in connection withgovernment austerity programs. The special tax in Hungary, for instance, will impact adjusted EBITDAnegatively in 2012 by leading to lower revenues. The same is true for Greece, which introduced a realestate tax in 2011, as well as for Croatia, which reintroduced a mobile communications tax on 26January 2012. Exchange rate effects could also adversely affect adjusted EBITDA on a euro basis.Deutsche Telekom intends to continue to increase productivity by cutting costs, which will entailheadcount reductions in some of the countries in this segment.Adjusted EBITDA in the main countries of Deutsche Telekom's Europe operating segment developedas described below.Greece. The decrease in adjusted EBITDA in 2011 was due to lower revenues and decisions bypublic authorities. In September 2011, the Greek government introduced a real estate tax for 2011. Inaddition, regulated rates were retroactively adjusted in the second quarter of 2011. DeutscheTelekom's programs and initiatives to increase efficiency, particularly in lower personnel costs,partially offset the decline in adjusted EBITDA.Adjusted EBITDA remained almost stable in 2010 in the Greek mobile and fixed-network operations,due in particular to the positive effect from the first full-year consolidation of OTE and lower expensesrelated to overhead. This increase was partially offset by the negative revenue trend and highercustomer acquisition costs resulted from intense mobile competition.Hungary. In 2011, similar to the development of revenue, approximately 73% of the decrease inadjusted EBITDA was due to the reclassification of business customers and the unfavorable exchangerate performance of the Hungarian forint against the euro. Savings in overhead costs largely offset thenegative effects of the decline in revenue from operations.The decline in adjusted EBITDA in 2010 was primarily a result of the tax imposed by the HungarianGovernment described above. However, positive exchange rate effects from the translation of theHungarian forint to euros mitigated this decline. Adjusted EBITDA from mobile operations increasedslightly.Poland. The decline in adjusted EBITDA in 2011 was primarily attributable to sales and customerservice costs for rebranding Era to T-Mobile in June 2011 as well as negative exchange rate effects.Improving the way Deutsche Telekom address servings its high-value contract customers had apositive effect on EBITDA, which partially offset the negative effects of revenue decreases andrebranding costs.In 2010, adjusted EBITDA increased due primarily to positive exchange rate effects. In addition, lowercustomer retention costs and savings on overhead, especially in technology and marketing, helpedcompensate for the negative effects of the revenue decline. A positive effect recorded in the fourthquarter of 2010 contributed further to the increase in adjusted EBITDA.The Netherlands. The increase in adjusted EBITDA in 2011 resulted primarily from savings incustomer acquisition and overhead costs, which offset the negative revenue effects from regulation.In 2010, T-Mobile Netherlands increased adjusted EBITDA, primarily as a result of lower customeracquisition costs and an effect in the second quarter of 2010. Growth in adjusted EBITDA was due tosignificant savings in overhead costs, following the completed integration of Orange.- Profit from OperationsThe decrease in profit from operations in 2011 in Deutsche Telekom's Europe operating segment wasdue to the decrease in adjusted EBITDA described above and the higher overall depreciation,amortisation and impairment losses at the segment level. Impairment losses on goodwill and property,plant and equipment totaled EUR 1.0 billion in 2011, compared to EUR 0.7 billion recorded in 2010.Impairment losses on goodwill in 2011 were mainly recognised in the cash-generating units of Greece91