Ad-hoc | 11 November 2004 06:35

Explanatory remarks concerning Deutsche Telekom’s ad hoc notification, part 2

Ad-hoc-announcement transmitted by DGAP. The issuer is solely responsible for the content of this announcement. ——————————————————————————– Explanatory remarks concerning Deutsche Telekom’s ad hoc notification, part 2 end of ad-hoc-announcement (c)DGAP 11.11.2004 Issuer’s information/explanatory remarks concerning this ad-hoc-announcement: In the first nine months of 2004, net revenue increased by 4 percent or approximately EUR 1.6 billion to around EUR 42.9 billion. Excluding changes in the composition of the Group and exchange rate fluctuations, organic revenue growth of around 6.3 percent was achieved. All in all, revenue development was slowed by negative exchange rate effects of EUR 0.6 billion and consolidation effects amounting to EUR 0.4 billion resulting, for example, from the deconsolidation of T-Com’s cable companies and deconsolidation measures at T-Systems. Group EBITDA increased year-on-year by 15.2 percent in the first nine months of the year from EUR 14.3 billion to EUR 16.5 billion. Adjusted EBITDA increased in the same period by 6.1 percent to EUR 14.6 billion. Organic growth in adjusted Group EBITDA was 7.6 percent. The adjusted EBITDA margin increased by 0.7 percentage points to 34.1 percent. Deutsche Telekom substantially increased its revenue again in the third quarter of 2004. Revenue increased by around EUR 0.4 billion or 3.2 percent year-on-year to over EUR 14.5 billion. Deutsche Telekom’s revenue growth was again driven by positive business development at the T-Mobile and T-Online divisions. The increase at T-Mobile amounted to 9.4 percent compared with the third quarter of 2003, and 11.2 percent compared with the first nine months of 2003 and was mainly driven by continued subscriber growth at T-Mobile USA. T-Online made a significant contribution to the positive development of the Group with more than 8.2 percent compared with the first three quarters of 2003, primarily as a result of the systematic continuation of the broadband strategy. Revenue at T-Com decreased by 4.2 percent year-on-year in the third quarter of 2004. However, the rate of decrease slowed to 5 percent compared with the first nine months of 2003 after a decline of 5.4 percent in a year-on-year comparison of the first six months. After deducting the pro-rata revenue of the remaining cable companies that were sold as of March 1, 2003, revenue was 4.3 percent lower year-on-year in the first nine months of 2004. For both the third quarter of 2004 and the first nine months of the year, T-Systems kept its revenue stable compared with the respective prior-year periods. Adjusted for deconsolidation effects, revenue increased in organic terms by 1 percent. International revenue increased by over 8 percent in a quarter-on-quarter comparison. Despite negative currency translation effects, the proportion of international revenue increased to 41.2 percent compared with 39.2 percent in the same period last year. The key factor behind this is primarily the sustained positive development of revenue at T-Mobile USA. Group EBITDA amounted to approximately EUR 5.8 billion in the third quarter of 2004 – up EUR 1.1 billion or 24 percent year-on-year. All divisions, as well as Group Headquarters & Shared Services, contributed to this increase. In the third quarter of 2004 there were positive special factors from the write-up of U.S. mobile communications licenses of around EUR 0.6 billion, which contrasted with expenses of EUR 0.1 billion for items such as voluntary redundancy payments and restructurings. Special factors with a net total of approximately EUR 1.8 billion had a positive effect on EBITDA in the first three quarters of 2004. Adjusted to exclude special factors, Group EBITDA increased in the third quarter by EUR 0.6 billion or 11 percent to EUR 5.3 billion, with T-Mobile making the largest contribution to the increase. Adjusted EBITDA in the first three quarters of 2004 amounted to approximately EUR 14.6 billion compared with EUR 13.8 billion in the same period last year. Results from ordinary business activities increased considerably year-on-year in both the third quarter and the first nine months of 2004 to over EUR 1.9 billion and EUR 4.7 billion respectively. In addition to the sustained growth in revenue, this increase was also due to improved cost structures, the write up of U.S. mobile communications licenses and the lower net interest expense included in net financial expense. By contrast, other operating expenses rose, particularly due to additions to accruals relating to the winding up of the U.S. mobile communications joint venture. Net income increased by EUR 0.9 billion year-on-year to EUR 1.4 billion in the third quarter of 2004. An increase of EUR 0.5 billion to EUR 1.0 billion was achieved in adjusted net income. In the first nine months of 2004, net income doubled year-on-year from EUR 1.6 billion to EUR 3.2 billion. This increase was mainly driven by the positive development of the results from ordinary business activities. Income tax expenses of EUR 1.2 billion had a negative effect, on the other hand. Adjusted for special factors, in particular net proceeds relating to the winding up of the mobile communications joint venture in the United States, net income almost tripled year-on-year from approximately EUR 0.7 billion to around EUR 1.9 billion. While free cash flow in the third quarter of 2004 increased by EUR 1.1 billion quarter-on-quarter to almost EUR 2.4 billion, it decreased by EUR 1.0 billion year-on-year. The figure for the first nine months declined year-on-year by EUR 0.8 billion to almost EUR 6.6 billion, mainly as a result of a renewed increase in capital expenditure. Despite this, Deutsche Telekom continues to expect free cash flow of at least EUR 7 billion for the full 2004 financial year. Net debt was reduced again in the third quarter of 2004 to just under EUR 40.8 billion. This represents a further decrease of around EUR 5.8 billion compared with the end of 2003. In the third quarter of 2004 alone, net debt was decreased by an additional EUR 2.5 billion, mainly driven by free cash flow. End of explanatory remarks concerning Deutsche Telekom’s ad hoc notification, part 2 Follows part 3 of the explanatory remarks concerning Deutsche Telekom’s ad hoc notification ——————————————————————————– 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 110635 Nov 04