HSPA plus 42, providing more than 184 million Americans with access to T-Mobile USA's mostadvanced 4G mobile broadband network with possible download speeds of 42 Mbits/s and increasednetwork capacity and reliability.The primary reason for the decline in 2010, compared to 2009, relates to the high levels of cash capexspending in 2009 in connection with the build-out of Deutsche Telekom's national UMTS/HSPAnetwork.T-Mobile USA plans to focus on investment in, and enhancement of, network quality and coverage,particularly on the further expansion and upgrade of its mobile broadband communications network. Inconnection with the termination of the TMUS Purchase Agreement, T-Mobile USA will receiveAdvanced Wireless Solutions spectrum licenses from AT&T, contingent upon regulatory approvals. T-Mobile USA is currently exploring the possibility of making significant investments in connection withthe deployment of an LTE network, which would support an LTE launch in 2013. For example,Deutsche Telekom plans to invest approximately USD 4 billion in the modernisation of its network andthe build-out of an LTE network in the coming years, of which approximately USD 1.4 billion would beinvested during 2012 and 2013. In addition, T-Mobile USA is reviewing further options to leveragenetwork investments to enhance its Challenger strategy.Systems SolutionsSelected DataThe following table provides information data related to T-Systems' business development.31 Dec.201131 Dec.2010 ChangeChange(%)New orders(millionsof €) 8,826 9,281 (455) (4.9)Computing &Desktop <strong>Services</strong>Number of serversmanaged and serviced units 58,053 58,073 (20) -Number of workstationsmanaged and serviced (millions) 2.00 1.95 0.05 2.6Systems IntegrationHours billed (millions) 9.7 9.2 0.5 5.4Utilisation rate % 84.1 84.0 0.1pThrough T-Systems, Deutsche Telekom's Systems Solutions operating segment provides Informationand Communications Technology, or ICT, infrastructure and solutions, primarily to multinationalcompanies, government agencies and non-profit organisations. T-Systems' primary market isGermany, with operations in other countries.T-Systems is comprised of one sales unit, one service unit and two delivery units, Production andSystems Integration. The sales unit has overall responsibility for T-Systems' customers and focuseson obtaining business with new customers and expanding business relationships with existingcustomers. The sales unit focuses on fostering synergies within the business, marketing sectorspecificservice products, expanding industry skills to provide customers with timely andcomprehensive advice and further developing its presence in regional markets.The service unit focuses on maintaining customer service and quality by providing standardised ICTproducts and solutions. This unit is responsible for designing and calculating the costs of customer96
solutions. It also manages and develops T-Systems' product and service portfolio and is responsiblefor all transition and transformation projects.The two delivery units, Production and Systems Integration, complement the activities of the otherunits. The Production delivery unit is responsible for providing services relating to customer ICTinfrastructure, including computing services, desktop services, application services andtelecommunications services. It aims to ensure uniform standards for product quality and processesworldwide. Systems Integration focuses on IT integration projects, application management andapplication development.The decline of orders in 2011 was primarily due to strong competition in the ICT market. Despite theoverall decline in orders, T-Systems brokered a number of major deals in 2011, including several inthe growth area of cloud computing, an expanding area of T-System's business. Through cloudcomputing, Deutsche Telekom offers dynamic services that allow customers to obtain bandwidth,computing capacity and storage services as needed, and share the infrastructure. Cloud-basedcontracts are billed based on use and only stipulate a minimum purchase quantity. T-Systems isbenefitting from the fact that companies and businesses increasingly use software on a secureInternet connection, or private cloud, to manage their business processes.In 2011, the number of servers managed and serviced remained at the same level as in 2010, sincethe capacity utilisation of high-performance servers was further improved. The consolidation of datacenters was also continued. The number of workstations managed and serviced increased by 2.6%,mainly due to new orders. Systems Integration also continued to perform well, with T-Systems billingsubstantially more hours than in 2010 and increasing the utilisation rate once again.In 2010, the number of servers managed and serviced increased by 23.3%, primarily as a result of anincrease in demand for dynamic computing services, such as cloud computing. The number ofworkstations managed and serviced also increased significantly, mainly due to new orders. In addition,Systems Integration developed positively, despite the continuing cost pressure from competition.Although fewer hours were billed, this effect was offset by a higher utilisation rate. Deutsche Telekomalso experienced an increase in demand from energy providers for services relating to smart electricitygrids, in addition to traditional ICT services. Deutsche Telekom secured new deals in 2010, mostrecently with the city of Emden's municipal utilities, concerning the recording, transmission andprocessing of energy data.- CompetitionThe IT and telecommunications markets in which T-Systems operates are subject to intensecompetitive pressures, both in Germany and globally. These markets are characterised by strongpricing pressures and competition will remain intense for the foreseeable future.The IT market is characterised by reduced customer IT budgets, prolonged customer sales cycles andaggressive competition from offshore providers. As a result of these competitive pressures, manycompanies, including T-Systems, are attempting to maintain or expand market share throughimproved productivity, cost-cutting and efficiency measures. This situation has also led to aconsolidation in the IT sector, which T-Systems expects to continue for the foreseeable future.However, T-Systems expects the global IT services markets to continue to grow only slightly in thenear future, while competition will remain intense.The telecommunications market is characterised by substitution of traditional services (voice and data)by IP and mobile services. The competitive landscape over the past several years has beencharacterised by market participants attempting to reduce their indebtedness and increase theirprofitability through strategic refocusing and concentration on IP services, fixed-mobile convergenceand network-centric ICT solutions. Additionally, consolidation in the ICT market (primarily in the U.S.market) has increased competition. T-Systems expects this strategic refocusing to continue in 2012and therefore expects similarly fierce competition.97
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