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Deutsche Telekom in the black in the first quarter of 2003

Bonn, April 24 2002  

Net income of EUR 0.85 billion in the first quarter 2003 compared with net loss of EUR 1.8 billion in the same period 2002 — Net debt reduced to EUR 56.3 billion by end of March compared with EUR 61.1 billion at the end of 2002 — Revenue increased by 6.6 percent to EUR 13.6 billion — EBITDA improved by almost 30 percent to EUR 4.9 billion, EBITDA excluding special factors increased by a good 18 percent to EUR 4.5 billion — Net cash provided by operating activities increased by 36 percent to EUR 3.1 billion; free cash flow increased by almost a factor of six to around EUR 2 billion — Goal for EBITDA (excluding special factors) set at EUR 17.2 billion to EUR 17.7 billion for the full financial year compared with previous plan of EUR 16.7 billion to EUR 17.7 billion 

After the difficult 2002 financial year, Deutsche Telekom broke even in the first quarter of 2003 and continued to reduce debt. For the first time since 2000 a net income, amounting to EUR 0.85 billion, was generated in the first three months of the year. Net debt fell by EUR 4.8 billion, from 
EUR 61.1 billion to EUR 56.3 billion. Revenue for the Group increased year on year by 6.6 percent, from EUR 12.8 billion to EUR 13.6 billion. Adjusted Group EBITDA improved by 18.4 percent, from EUR 3.8 billion to 
EUR 4.5 billion.

" We are very pleased with these figures" , Kai-Uwe Ricke, Chairman of the Deutsche Telekom Board of Management told on Thursday in Bonn. " And the figures demonstrate that we are delivering the results we promised. We are working hard to put the company on the road to long-term success. The financial statements for the first three months of 2003 are proof of the fact that our actions are taking effect. We are firmly on course with our program to reduce debt and increase earnings. We are producing a growing operating profit and are increasing our competitiveness. The first quarter shows that we have started the turnaround." Mr. Ricke added: " We are regaining financial and strategic flexibility."

Key figures at a glance

billions of € Q1 2003 millions of € Q1 2002 millions of € Change millions of € Change
%
Full Year
millions of €
Revenue- Domestic- International 13,6188,5065,112 12,7708,5184,252 848(12)860 6.6(0.1)20.2 53,68935,2881,8401
Group loss 853 (1,808) 2,661 n.a. (2,4587)
EBITDA adjusted to exclude special factors1) 4,476 3,782 694 18.4 1,6314
EBITDA1) 4,904 3,782 1,122 29.7 16,116
Net cash provided by operating activities 3,117 2,263 854 37.7 12,463
Investments in property, plant and equipment and intangible assets (909) (4,305) (3,396) (78.9) (12,410)
No. of employees at balance sheet date 252,406 255,681 (3,275) (1.3) 255,969

1) EBITDA = Results of ordinary business activities before net financial income / expense, including income related to subsidiaries, associated and related companies, amortization and depreciation, and before other taxes; for a detailed explanation of these figures, please refer to the chapter " Reconciliation to pro forma figures" in the Group Report on the first quarter of 2003.


Program for increasing efficiency takes effect
International business contributed 20 percent of the increase in Group revenue, while revenue in Germany remained stable in line with expectations. Thus, the proportion of Group revenue generated abroad rose to 37.5 percent. 

All divisions contributed to the above-average, 29.7 percent increase in Group EBITDA which rose from EUR 3.8 billion to EUR 4.9 billion. The EBITDA margin increased by more than six percentage points, from 29.6 percent to 36 percent. EBITDA adjusted to exclude special factors also increased markedly by 18.4 percent, from EUR 3.8 billion to EUR 4.5 billion. This progress is largely a result of the triple-E program to improve efficiency, which contributed EUR 0.4 billion, substantiating the considerably improved ratio of revenues to costs. The sale of shareholdings in the first quarter of 2003 also made a contribution to EBITDA increase.

Net income in the first quarter of 2003
The Deutsche Telekom Group generated net income of EUR 0.85 billion for the first quarter of 2003, compared with a net loss of EUR 1.8 billion in the same period last year. This considerable increase, in addition to the substantial improvement in profitability and results from ordinary business activities was also the result of positive tax effects and income from the disposal of shareholdings. Excluding these special factors, 
Deutsche Telekom generated a net income of around EUR 0.1 billion, compared with a net loss of around EUR 1.4 billion in the same period last year. 

Debt reduction on track 
Deutsche Telekom made rapid progress in debt reduction in the first quarter of 2003. By the end of March, net debt was reduced from EUR 61.1 billion at the end of 2002 to EUR 56.3 billion. This corresponds to a reduction of 7.9 percent, or EUR 4.8 billion. This brings the company considerably closer to its debt reduction target for 2003. The free cash flow, which grew considerably year on year, from EUR 0.3 billion to EUR 2 billion, also contributed to this. This must be viewed in light of the " 6+6" program announced in November last year, within which EUR 6 billion will be generated from free cash flow and a further EUR 6 billion will come from the sale of assets.
Deutsche Telekom generated a total of EUR 2.3 billion from the sale of assets in the first quarter of 2003, of which EUR 1.7 billion came from the sale of the remaining cable business, EUR 0.3 billion from the disposal of Telecash, Eutelsat and UMC, and a further EUR 0.3 billion from sales of real estate. In April, the sale of a total stake of 15 percent in the Russian mobile communications operator MTS was completed for EUR 0.5 billion. As regards additional asset disposals, the Member of Deutsche Telekom's Board of Management responsible for Finance, Karl-Gerhard Eick, said: " We will also execute further asset sales in future, provided the price is right. Given the good progress we have already made, we feel that we can be a bit more discerning here." However, in this context, Mr. Eick ruled out that any plans existed with regard to the Deutsche Telekom shareholding in MATÁV in Hungary or the sale of additional shares in T-Online. On the potential sale of the radio tower business he said: " After a detailed financial analysis including the possible tax consequences, we are ruling out the sale of our radio tower business in Germany."

T-Com maintains market position
In the first quarter of 2003, with revenue practically stable at EUR 7.5 billion, the T-Com division was able to increase EBITDA by 15.4 percent, from 
EUR 2.5 billion to EUR 2.9 billion. Taking special factors throughout the quarter into consideration, EBITDA increased by 7.2 percent, to a total of EUR 2.7 billion. Thus, T-Com was able to maintain its market position well in the first quarter in the face of continuing tough competition. The slight decrease in revenue of 0.6 percent can be mainly attributed to the spin-off of the cable companies sold in March. Dynamics in the T-Com business are reflected by the continuing trend towards advanced lines such as T-DSL. By the end of the quarter, 3.5 million T-DSL contracts have already been marketed, following 2.3 million in the first quarter of 2002. 


T-Systems reports healthy order situation
The T-Systems division achieved a revenue growth of 2.8 percent to just under EUR 2.6 billion, compared with EUR 2.5 billion in the first three months of the previous year, and increased EBITDA by 42.6 percent to 
EUR 368 million, compared with EUR 258 million in the first quarter of 2002. EBITDA (excluding special factors) increased by 10.9 percent to 
EUR 286 million. Despite a widely acknowledged weak market environment, 
T-Systems reported a healthy order book and demonstrated its growing profitability in the first quarter. 

T-Mobile continues growth story
T-Mobile added another chapter to its growth story in the first quarter of 2003. The mobile communications division's revenue increased by 18.9 percent to EUR 5.3 billion, compared with EUR 4.5 billion in the first three months of the previous year. In terms of EBITDA, T-Mobile enjoyed another record-breaking quarter, realizing an impressive 25 percent increase. U.S. business contributed to this to a large extent. T-Mobile USA generated EBITDA of EUR 323 million — more than three times the amount realized in the same quarter of 2002. The dynamic development in the mobile communications business is also reflected in customer figures. 
T-Mobile increased its customer base by 1.2 million against the end of 2002. T-Mobile maintained its leading market position in Germany with around 300,000 new customers, 62 percent of whom are postpay subscribers. The main growth driver in new-customer acquisition was T-Mobile USA with more than 900,000 new customers. T-Mobile USA thus again holds a leading position among US mobile communications providers in terms of growth.

T-Online continues positive development
In the T-Online division, revenue increased by 21.6 percent, from 
EUR 366 million to EUR 445 million. Again, this growth was mainly driven by the positive development in broadband Internet. In Germany, T-DSL continued to contribute significantly to the success story of T-Online. Likewise in T-Online's foreign subsidiaries, the customer base increased to a total of 187,000 in broadband business. Thanks to the expanding ADSL customer base at T-Online's Spanish subsidiary, Ya.com, broadband penetration in Spain is now among the highest in Europe, based on the total number of households with Internet access there. The number of broadband customers using Club Internet in France also increased considerably. 
T-Online EBITDA increased from EUR 14 million to a positive figure of 
EUR 75 million. 

EBITDA forecast redefined
Mr. Ricke was confident that, given the good quarterly results, the earnings target of reducing net debt to three times the amount of Group EBITDA (excluding special factors) expected for 2003, will be achieved. Given the progress realized thus far in increasing efficiency throughout the Group, the currently expected EBITDA range (excluding special factors) is being adjusted, from a scale of EUR 16.7 billion to EUR 17.7 billion, to a scale of EUR 17.2 billion to EUR 17.7 billion. Mr. Ricke added: " At the end of this year, I hope to be able to say that Deutsche Telekom has put its period of losses behind it."  

Development of customer figures

  March 31, 2023 millions March 31, 2023 millions Change millions Change %
Deutsche Telekom GroupTelephone lines(incl. ISDN channels) 58.20 57.9 0.3 0.5
T-ComFixed-network lines incl. ISDN channelsIn Germany1)- Standard lines- ISDN channels- T-DSL contracts 56.049.228.221.03.4 55.949.029.619.42.3 0.10.2(1.4)1.61.1 0.20.4(4.7)8.247.8
International2)- MATÁV3)- SlovenskeTelekomunikacie- Hrvatske Telekomunikacije 6.83.51.51.8 6.93.61.51.8 -0.1-0.10.00.0 (1.4)(2.8)0.00.0
Mobile customersT-Mobile DeutschlandT-Mobile UK4)T-Mobile USA5) T-Mobile AustriaT-Mobile Czeck RepublicT-Mobile Netherlands6) 24.912.210.82.03.61.6 23.010.87.52.03.01.2 1.91.43.30.00.60.4 8.313.044.00.020.033.3
Majority-owned subsidiaries of T-Mobile 55.1 47.5 7.6 16.0
WestelHrvatske Telekomunikacije 3.41.3 2.71.0 0.70.3 25.930.0
Majority-owned subsidiaries of the Deutsche Telekom Group 59.8 51.2 8.6 16.8
T-Online subscribersof which:T-Online Deutschlandof which: Rest of Europe 12.4710.162.31 11.249.212.03 1.230.950.28 10.910.313.2
  1. Telephone channels, including for internal use.
  2. Fixed-network lines including ISDN.
  3. Subscriber-line figures are recorded including MATÁV's subsidiary Maktel for the first time. The figures for the previous year have been adjusted accordingly.
  4. Including Virgin Mobile.
  5. Including T-Mobile USA Inc. and Powertel Inc.
  6. Fully consolidated since the fourth quarter of 2002, presented on a pro forma basis to facilitate comparison.

1) Telephone channels, including for internal use.
2) Fixed-network lines including ISDN.
3) Subscriber-line figures are recorded including MATÁV's subsidiary Maktel for the first time. The figures for the previous year have been adjusted accordingly.
4) Including Virgin Mobile.
5) Including T-Mobile USA Inc. and Powertel Inc.
6) Fully consolidated since the fourth quarter of 2002, presented on a pro forma basis to facilitate comparison.


Switch to cost-of-sales method
Deutsche Telekom prepared the report for the first quarter of 2003 using 
the cost-of-sales method, as opposed to the total-cost method used for reporting in previous years. In addition, some modifications were made in the revenue allocation to the four Group divisions. Detailed explanations of the changes and modified data for the individual quarters of the previous year can be found under the heading Investor Relations on 
Deutsche Telekom's website: www.telekom.de. These modifications have no influence on the Group's revenue or presentation of net income. 

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