Ad-hoc | 12 August 2004 06:34

Part 2 of the ad hoc notification of Deutsche Telekom

Ad-hoc-announcement transmitted by DGAP. The issuer is solely responsible for the content of this announcement. ——————————————————————————– Part 2 of elaborations concerning this ad hoc notification of Deutsche Telekom AG end of ad-hoc-announcement (c)DGAP 12.08.2004 Issuer’s information/explanatory remarks concerning this ad-hoc-announcement: Part 2 of elaborations concerning this ad hoc notification of Deutsche Telekom AG Group EBITDA amounted to EUR 6.2 billion in the second quarter of 2004 – up EUR 1.4 billion or 30.7 percent year-on-year. EBITDA in the first half of 2004 amounted to EUR 10.7 billion, a year-on-year increase of 11.0 percent. The second quarter of 2004 saw positive special factors amounting to EUR 2.0 billion from income relating to the write-up of U.S. mobile communications licenses (EUR 1.8 billion), and the sale of SES and Virgin shares (each around EUR 0.1 billion). However, EBITDA was impacted by special factors from the recognition of accruals totaling EUR 0.6 billion relating to the dissolution of the U.S. mobile communications joint venture. Special factors totaling EUR 1.3 billion had a positive effect on EBITDA in the first half of 2004. Adjusted for special factors, Group EBITDA increased by EUR 0.2 billion, or 4.0 percent, to EUR 4.8 billion in the second quarter, with the largest growth contribution coming from T-Mobile. In the first half of 2004, adjusted EBITDA amounted to EUR 9.4 billion – up EUR 0.3 billion, or 3.2 percent, year-on-year. All the divisions of the Group contributed to this increase. Organic growth in adjusted EBITDA was significantly above 5 percent. Adjusted EBITDA increased at a slightly lower rate than revenue which is mainly due to the increase in subscriber acquisition costs as part of the growth strategy. The adjusted EBITDA margin declined moderately from 33.3 percent in the first half of 2003 to 33.0 percent in the period under review. The increase in net income by 64.5 percent to EUR 1.8 billion is mainly attributable to clearly improved results from ordinary business activities. In the first half of 2004, Deutsche Telekom recorded income tax expenses amounting to EUR 0.7 billion, compared with tax income of EUR 0.2 billion in the prior-year period. Adjusted for special factors (in particular net income relating to the dissolution of the mobile communications joint venture in the United States), net income more than tripled year-on-year to around EUR 1.0 billion. In the first of half of 2004, free cash flow increased by EUR 0.2 billion year-on-year to EUR 4,2 billion. This is the result of offsetting effects: an improvement in net cash provided by operating activities – driven in particular by the improvement in operational business and an increased positive balance from income tax refunds and payments – set against a higher level of spending on property, plant and equipment. Free cash flow in the second quarter of 2004 amounted to EUR 1.3 billion, a year-on-year decrease of EUR 0.7 billion attributable to higher investments and a decrease in netted tax received/paid. Net debt was reduced to around EUR 43.3 billion in the first half of 2004. This means that around EUR 1.3 billion of debt has been repaid since the end of March 2004. This was possible in particular due to the continued positive free cash flow and the proceeds from the sale of SES shares. Year-on-year, net debt was reduced by around EUR 9.7 billion. Results from ordinary business activities quadrupled year-on-year to more than EUR 2.4 billion in the second quarter of this year. In the first six months, the results from ordinary business activities amounted to around EUR 2.8 billion, clearly exceeding the 2003 full-year figure of EUR 1.4 billion. In view of its results for the first half-year, Deutsche Telekom has revised and increased its forecasts for certain key performance indicators for the second half of the year. The significantly improved operating performance means, for the full financial year, we expect to triple the results from ordinary business activities of just over EUR 1.4 billion we achieved last year to EUR 4.2 billion. Deutsche Telekom is aiming to increase its net income by at least 100 percent to EUR 2.5 billion compared with 2003. Deutsche Telekom’s CEO Kai-Uwe Ricke announced the intention to pay an attractive dividend for the 2004 financial year. Free cash flow in 2004 is now expected to reach at least EUR 7 billion, after an original forecast of EUR 6 billion. The expectation that adjusted EBITDA will grow from EUR 18.3 billion to at least EUR 19.2 billion remains unchanged. In mobile communications in United States, Deutsche Telekom now expects to have around 17 million subscribers by year-end, representing approximately 4 million net additions in 2004. Deutsche Telekom also expects the number of broadband customers to increase from the original target of 5.0 million to at least 5.6 million by year-end. Selected key figures of the divisions T-Com Q2/2004 Q2/2003 Change millions millions % of EUR of EUR Total revenue 6882 7153 (3.8) EBITDA 1) 2592 2258 14.8 Adjusted EBITDA 2) 2592 2554 1.5 T-Mobile Q2/2004 Q2/2003 Change millions millions % of EUR of EUR Total revenue 6237 5557 12.2 EBITDA 1) 3210 2088 53.7 Adjusted EBITDA 2) 1930 1743 10.7 End of part 2 of the ad hoc notification of Deutsche Telekom, part 2 follows ——————————————————————————– WKN: 555750; ISIN: DE0005557508; Index: DAX, EURO STOXX 50 Listed: Amtlicher Markt in Berlin-Bremen, Düsseldorf, Frankfurt (Prime Standard), Hamburg, Hannover, München und Stuttgart; EUREX; London; Amsterdam; NASDAQ Europe; Virtex; New York (ADR); Tokio 120634 Aug 04