Deutsche Telekom AG - The 2009 financial year

Group strategy. Telecommunications is an industry marked by constant change in fixed- network business, mobile communications, and the Internet, a momentum that even economic upheaval is unable to suppress. This affects key areas of the macroeconomy, technology, consumers, the markets, and our com- petitors. At the same time, the boundaries to related industries – IT, the media, entertainment, and software – are becoming blurred, creating new competitive constellations and increasingly requiring strategic partnerships. Deutsche Telekom’s aim is to position itself successfully in this complex environment and become a market leader in connected life and work in the long term. In the 2009 financial year, Deutsche Telekom continued to systematically implement its “Focus, fix and grow” strategy successfully with the following four strategic areas of action: – Improve competitiveness in Germany and in Southern and Eastern Europe. – Grow abroad. – Mobilize the Internet. – Roll out network-centric ICT. Improve competitiveness. Markets in Germany and in Southern and Eastern Europe are becoming saturated, particularly in the fixed-network area, and competition is intense. In this challenging environment, Deutsche Telekom holds its own by focusing capital expenditure on the broadband infrastructure, first-rate products and excellent service, and continuously streamlining its cost base. Deutsche Telekom expects its integrated market strategy to make the Group more competitive. Focused network expansion. As Deutsche Telekom aims to retain its broadband and innovation leadership it is focusing its investments on network expansion. In its footprint markets, the Group is continuously expanding and upgrading its UMTS networks and enabling fast mobile Internet usage with HSPA+ and other technologies. In the German fixed network, Deutsche Telekom already supplies around 1,000 towns and cities with ADSL2+ and 50 towns and cities with VDSL. As it continues to expand the broadband network, the Group has not only launched coop- eration projects with local authorities but is also entering into partnerships with competitors. Innovative entertainment products. Since 2009, Entertain customers in Germany have been able to link up several media receivers using the connected video recorder, share photos with friends and relatives, and subscribe to LIGA total! to watch Bundesliga soccer games on TV or while on the move. Three years after the launch of the Dolce satellite service, OTE’s Romanian subsidiary Romtelecom expanded its entertainment range and introduced its new Dolce Interactive IPTV product in ten towns and cities around the country in 2009. In Slovakia, the expansion of satel- lite broadcasting will permit nationwide reception of Magio TV’s digital television. Service and quality. Entertain has received several awards from customers and neutral experts. The readers of “connect” magazine (May 2009 issue) named Entertain the best triple-play provider in 2009. Deutsche Telekom also beat the competition in a ranking published in the September 2009 issue of “Computer Bild.” Furthermore, the Company topped the one- million mark with the marketing of Entertain, the Apple iPhone, and the terminal equipment service package, demonstrating that with excellent service and high-quality products Deutsche Telekom can make a lasting impression on customers even in saturated markets. In the 2010 financial year the Company will introduce the ACCI/ICCA (After Customer Contact Interview; International Customer Contact Analysis) study to measure customer perception in other national companies and customer contact channels and improve customer service further. Fixed-mobile convergence. The Company is also improving competitive- ness by integrating fixed-network and mobile operations. As part of the One Company project, Deutsche Telekom intends to boost its presence in the market as an integrated provider offering convergent products from a single source. To this end, the Group is currently realigning its activities in Croatia, Slovakia, and Germany with a new organization and strategy. This move will improve Deutsche Telekom’s customer service, safeguard jobs, and unlock potential for more innovation, additional revenue, and cost synergies. Improved cost base. In addition to tapping growth potential, Deutsche Telekom needs to work steadily on improving its cost base. To this effect, the Save for Service program was launched in 2006 with the goal of achieving savings of up to EUR 4.7 billion by 2010. By the end of 2009, Group strategy and Group management. Successful implementation of Deutsche Telekom’s strategy 62