Deutsche Telekom reports stable development in operations in the third quarter of 2012 at the same time as a considerable book loss

Nov 08, 2012

  • Guidance for the full year and dividend statement confirmed
  • Revenue remained at the prior-year level at EUR 14.7 billion
  • Free cash flow up 37 percent to EUR 2.3 billion
  • Adjusted net profit stable on a like-for-like basis
  • Non-cash special accounting factor following MetroPCS deal reduces reported net profit to minus EUR 6.9 billion
  • Debt reduced by EUR 2 billion in the quarter
  • Strong growth in Entertain users, VDSL lines and mobile contract customers in Germany
  • Customer numbers up at T-Mobile USA

Deutsche Telekom showed an extremely positive development in operations in the third quarter of 2012. On the other hand, a considerable book loss had to be reported following an accounting-relevant special factor. Revenue from operations amounted to EUR 14.7 billion, the same level as in the previous year. Adjusted EBITDA declined by 2.6 percent to EUR 4.8 billion. By contrast, free cash flow increased by 37.4 percent to EUR 2.3 billion. For the first nine months of the year, adjusted EBITDA decreased slightly by 0.9 percent to EUR 14.0 billion, while free cash flow increased by 13.2 percent to EUR 5.1 billion. The Group reiterated its guidance and dividend statement for the full year 2012.

Adjusted net profit totaled EUR 0.9 billion, 28.3 percent less than in the prior year. However, taking into account the fact that depreciation and amortization were discontinued in the United States in the prior year due to the agreement in place at the time with AT&T, adjusted net profit remained stable on a like-for-like basis. In unadjusted terms, there was a net loss in the third quarter of EUR 6.9 billion. This was due to the asset impairments, including on goodwill, at T-Mobile USA. This non-cash special accounting factor of EUR 7.4 billion resulted from an impairment test in connection with the agreement on the merger with MetroPCS.

"We made a forward-looking decision for our U.S. business in full awareness of the accounting consequences," said René Obermann, CEO of Deutsche Telekom. "Anyone seeing only the clear net loss is overlooking the fact that our operating business is completely on track. Unlike many of our competitors, we offer reliability."

CFO Timotheus Höttges explained the impact of the impairment test: "The only reason why we had to recognize the impairment loss was that IFRS requires us to take the MetroPCS share price as valuation basis. The impairment loss, however, is not attributable to a change in management's assessment of the development in operations in the United States. Any future increase in value of the larger and more powerful newly combined entity is not taken into account in the carrying amount determined at this point in time."

Deutsche Telekom reduced its net debt by more than 10 percent year-on-year to EUR 39 billion. In the third quarter of 2012 alone, debt repayment amounted to EUR 2 billion. In light of its solid balance sheet ratios and stable operating performance, Deutsche Telekom can benefit from excellent conditions on the debt markets. In October alone, it succeeded in placing bonds with a total volume of more than EUR 1 billion at very favorable conditions. Regardless of this, investments in the future remained high. At EUR 2.2 billion, cash capex increased by 1.0 percent against the prior-year quarter.

Germany – positive trends continue

In Germany, the positive trend among users of the Internet-based television service Entertain, mobile contract customers, and VDSL lines continued in the third quarter of 2012. The number of Entertain customers reached 1.9 million by the end of September, 39 percent more than in the prior-year period. Year-on-year growth in fast VDSL lines even reached 55 percent. At the same time, line losses in Deutsche Telekom's traditional fixed network decreased by 12 percent compared with the same quarter in the prior year. Mobile contract net additions reached 555,000 in the third quarter. 171,000 of these new customers were added in branded business under the Deutsche Telekom and Congstar brands, while the rest were added in the fast-growing, but much lower-revenue reseller segment (service providers).

At EUR 5.7 billion, revenue in the Germany operating segment was just 1.3 percent down on the prior-year level in the third quarter. At the same time, adjusted EBITDA declined 2.5 percent to EUR 2.4 billion due to increased market investments. The adjusted EBITDA margin therefore decreased slightly year-on-year, but at 41.9 percent, reached the high level of the second quarter.

The trend in mobile service revenues has improved over the course of the year. While declining by 1.8 percent and 1.0 percent respectively in the first two quarters of the year, the decrease was at just 0.5 percent in the third quarter. This is the first sign of success on the way to winning back market leadership in mobile service revenues. Mobile data revenues increased by 21.2 percent compared with the third quarter of 2011 to EUR 498 million.

Europe – good performance in a still challenging environment

The national companies included in the Europe operating segment recorded robust development overall in the third quarter of 2012, despite an increasingly challenging environment. Economic development deteriorated once again and regulatory interventions such as the reduction in mobile termination rates in 9 out of 13 countries had a negative impact on revenue development quarter-on-quarter. In combination with special taxes imposed in a number of countries, the negative impact on revenue in the third quarter amounted to more than EUR 100 million compared with the prior-year period. In Hungary, for example, telecommunications companies have been subject to an additional special levy since July. This is already the second special levy to hit earnings in the industry in Hungary.

Total revenue in the Europe segment declined 5.7 percent year-on-year to EUR 3.7 billion. At the same time, adjusted EBITDA decreased by 4.3 percent to EUR 1.3 billion. This results in an adjusted EDITDA margin for the third quarter of 2012 of 36.3 percent, 0.5 percentage points higher than one year before. Adjusted for the impact of exchange rate fluctuations, regulatory decisions in mobile communications and special levies, the decrease in revenue in the third quarter amounted to 3.1 percent and the drop in adjusted EBITDA to 1.7 percent.

Successful calling plans increased profit at T-Mobile Netherlands. The Dutch company increased its adjusted EBITDA margin to 34.6 percent – 6.3 percentage points higher than in the prior-year quarter. Romania also recorded an encouraging performance, with adjusted EBITDA up by 8.3 percent.

The mobile contract customer base for the whole segment increased by a million within a year, to 27.8 million. In the fixed-network segment, Internet-based television (IPTV) business performed well, with a 17.3 percent increase in the customer base. In Greece, OTE put a halt to losses in broadband customers, recording an increase of 3 percent.

United States – total number of customers increased

At T-Mobile USA, events were dominated by the announcement of the merger with MetroPCS and the appointment of the new CEO John Legere. The development of operations between July and September, however, showed a mixed picture, with encouraging trends and ongoing challenges.

T-Mobile USA recorded 160,000 net additions in the third quarter. This was thanks to the strong performance in the branded prepay segment, with 365,000 branded prepay net additions. The contract customer segment recorded a loss of 492,000 customers in the past quarter, which was better than in the second quarter, but is still unsatisfactory. The churn rate for branded contract customers stood at 2.3 percent, a year-on-year decline of 0.3 percentage points. Against the second quarter, it increased slightly. One reason for this was the launch of iPhone 5 by other mobile operators.

Revenue in the third quarter decreased by 5.9 percent year-on-year to USD 4.9 billion. Simultaneously, adjusted EBITDA decreased as expected by 14.2 percent to USD 1.2 billion as a result of increased spending on advertising. In euro terms, the strong development of the U.S. dollar exchange rate had a positive impact: Revenue increased by 6.3 percent and adjusted EBITDA declined by 3.0 percent.

Systems Solutions – continued growth in external revenues

In the third quarter of 2012, T-Systems used a new reporting logic for the first time. All internal IT activities in Germany, which had previously been distributed across the Germany, GHS, and T-Systems segments, were pooled within the Systems Solutions operating segment in the Telekom IT unit. As a milestone on the road to an efficient IT function, Telekom IT was launched as a cost center without margin charging as of July 1 of this year. This has a particularly substantial impact on earnings, since earnings attributable to revenues generated within the Group are eliminated. For better comparability, the prior-year figures were adjusted accordingly.

External revenues in the Systems Solutions operating segment increased by 0.8 percent in the third quarter to EUR 1.6 billion. Revenue development is negatively impacted by persistently high competitive and price pressure in the industry. As far as internal revenues are concerned, T-Systems aims to scale back Telekom IT revenue for the long term because this type of income translates directly into IT costs for the Deutsche Telekom Group. Seasonal effects in the project business and cost-cutting measures meant that Telekom IT's revenues decreased substantially. Total revenue in the Systems Solutions segment decreased by 10.7 percent in the third quarter to EUR 2.2 billion. The segment's adjusted EBIT margin stood at 1.2 percent in the past quarter, compared with -0.1 percent on a like-for-like basis in the third quarter of 2011. For the first nine months of 2012, this profitability indicator amounted to 0.6 percent, compared with -0.4 percent between January and September 2011.

Order entry declined by 5.8 percent compared with the prior-year quarter to EUR 1.6 billion.This reflects the ongoing trend towards smaller, cloud-based deals where the calculation of volumes is based on minimum purchase quantities. Contracts signed with the Catalan government, the chemicals company Clariant, and the oil company BP were some of the largest deals in the third quarter of 2012.

The Deutsche Telekom Group at a glance*:

 

 

Q3 2012

millions of EUR

Q3 2011

millions of EUR

Change

%

Q1-Q3 2012

millions of EUR

Q1-Q3 2011

millions of EUR

Change

%

FY 2011 millions of EUR
Net revenue14,65114,670(0.1)43,46243,742(0.6)58,653
Of which: domestic6,4386,550(1.7)19,18519,738(2.8)26,361
Of which: international8,2138,1201.124,27724,0041.132,292
Profit (loss) from operations (EBIT)(8,580)2,391n.a.(5,753)5,619n.a.5,586
Adjusted EBIT1,9672,656(25.9)5,6106,946(19.2)7,606
EBITDA4,8194,6523.613,18012,7573.320,022
Adjusted EBITDA4,7774,907(2.6)13,95114,074(0.9)18,685
Adjusted EBITDA margin32.6%33.4%(0.8p)32.1%32.2%(0.1p)31.8%
Net profit/  
(loss)
(6,900)1,069n.a.(6,048)1,897n.a.557
Adjusted net profit9261,291(28.3)2,3262,943(21.0)2,851
Free cash flowa2,3441,70637.45,1344,53413.26,421
Cash capexb2,1982,1771.05,9936,176(3.0)8,406
Net debt   39,00143,368(10.1)40,121
Number of employees at the reporting date   230,392237,815(3.1)235,132

Comments on the table:
a   Before dividend payments and investments in spectrum, and before the effects of the PTC and AT&T transactions.
b   Cash outflows for investments in property, plant, and equipment, and intangible assets (excluding goodwill).

Germany operating segment*:

 

Q3 2012

millions of EUR

Q3 2011

millions of EUR

Change

%

Q1-Q3 2012

millions of EUR

Q1-Q3 2011

millions of EUR

Change

%

FY 2011 millions of EUR
Total revenue5,7365,810(1.3)17,00517,396(2.2)23,206
Net revenue5,3945,453(1.1)15,99816,339(2.1)21,783
Profit (loss) from operations (EBIT)1,3021,356(4.0)3,4543,494(1.1)4,520
Adjusted EBIT1,3181,374(4.1)3,8064,051(6.0)5,209
EBITDA2,3852,445(2.5)6,7406,7020.68,864
Adjusted EBITDA2,4012,463(2.5)7,0927,259(2.3)9,553
Adjusted EBITDA margin41.9%42.4%(0.5p)41.7%41.7%(0.0p)41.1%
Number of employees(average)67,88270,499(3.7)68,99670,714(2.4)70,525

Comments on the table:
The activities and functions of the Digital Services growth area and of the Internet service provider STRATO (Consumers) that were previously reported under the Germany operating segment have been consolidated under Group Headquarters & Shared Services from January 1, 2012, and reported as part of the DBU (Digital Business Unit).

As of July 1, 2012, Deutsche Telekom reorganized the Group's IT infrastructure and pooled the existing units from the Germany operating segment and Group Headquarters & Shared Services into the Systems Solution operating segment as the new Telekom IT unit. The prior-year figures have been adjusted for better comparability.

Europe operating segment*:

 

Q3 2012

millions of EUR

Q3 2011

millions of EUR

Change

%

Q1-Q3 2012

millions of EUR

Q1-Q3 2011

millions of EUR

Change

%

FY 2011 millions of EUR
Total revenue3,6543,873(5.7)10,81311,352(4.7)15,124
Greece825930(11.3)2,4722,679(7.7)3,546
Romania260268(3.0)784799(1.9)1,072
Hungary363366(0.8)1,0311,088(5.2)1,438
Poland422438(3.7)1,2531,331(5.9)1,740
Czech Republic2732720.4787822(4.3)1,092
Croatia269296(9.1)753821(8.3)1,084
Netherlands413428(3.5)1,2531,282(2.3)1,747
Slovakia205223(8.1)613655(6.4)886
Austria219234(6.4)663690(3.9)924
Bulgaria86108(20.4)285306(6.9)413
Othera3773731.11,0821,0572.41,414
Net revenue3,4793,695(5.8)10,29510,836(5.0)14,431
Profit (loss) from operations (EBIT)61755112.01,5291,38110.7780
Adjusted EBIT6215885.61,5741,5491.62,066
EBITDA1,3241,351(2.0)3,6593,762(2.7)4,995
Adjusted EBITDA1,3281,388(4.3)3,7013,930(5.8)5,241
Greece310349(11.2)920979(6.0)1,300
Romania78728.32162017.5274
Hungary131143(8.4)368432(14.8)542
Poland1601562.6426476(10.5)629
Czech Republic13611617.2375391(4.1)509
Croatia133151(11.9)347377(8.0)508
Netherlands14312118.239133118.1505
Slovakia89102(12.7)259297(12.8)388
Austria6569(5.8)178197(9.6)253
Bulgaria3342(21.4)106118(10.2)158
Othera4968(27.9)118132(10.6)181
Adjusted EBITDA margin36.3%35.8%0.5p34.2%34.6%(0.4)p34.6%
Number of employees  
(average)
58,25959,229(1.6)58,08360,701(4.3)60,105

Comments on the table:
The contributions of the national companies generally correspond to their respective unconsolidated financial statements and do not take consolidation effects at operating segment level into account.

a Other: national companies of Albania, the F.Y.R.O. Macedonia, and Montenegro, as well as ICSS and Europe Headquarters.

United States operating segment*:

 Q3 2012
millions of EUR
Q3 2011
millions of EUR
Change
%
Q1-Q3 2012
millions of EUR
Q1-Q3 2011
millions of EUR
Change
%
FY 2011 millions of EUR
Total revenue3,9153,6836.311,57810,9635.614,811
Net revenue3,9133,6806.311,57310,9545.714,801
Profit (loss) from operations (EBIT)(10,108)976n.a.(9,368)2,245n.a.(710)
Adjusted EBIT3421,025(66.6)1,1822,325(49.2)1,721
EBITDA1,13397616.13,0742,70813.53,697
Adjusted EBITDA9941,025(3.0)3,0352,7888.93,831
Adjusted EBITDA margin25.4%27.8%(2.4p)26.2%25.4%0.8p25.9%
Number of employees(average)28,58634,005(15.9)30,36735,121(13.5)34,518

Systems Solutions operating segment*:

 

Q3 2012

millions of EUR

Q3 2011

millions of EUR

Change

%

Q1-Q3 2012

millions of EUR

Q1-Q3 2011

millions of EUR

Change

%

FY 2011 millions of EUR
Total revenue2,2452,513(10.7)7,1877,259(1.0)9,953
Net revenue1,6001,5870.84,8384,841(0.1)6,567
Order entry1,6141,713(5.8)5,1155,468(6.5)7,396
EBIT(39)(118)66.9(239)(228)(4.8)(290)
Adjusted EBIT27(2)n.a.43(31)n.a.23
Adjusted EBIT margin1.2%(0.1%)1.3p0.6%(0.4%)1.0p0.2%
EBITDA11949n.a.225265(15.1)379
Adjusted EBITDA18515519.450745212.2672
Adjusted EBITDA margin8.2%6.2%2.0p7.1%6.2%0.9p6.8%
Number of employees (average)52,81652,2481.152,65952,2500.852,241

Comment on the table:
As of July 1, 2012, Deutsche Telekom reorganized the Group's IT infrastructure and pooled the existing units from the Germany operating segment and Group Headquarters & Shared Services into the Systems Solution operating segment as the new Telekom IT unit. The prior-year figures have been adjusted for better comparability.

Group Headquarters & Shared Services*:

 Q3 2012
millions of EUR
Q3 2011
millions of EUR
Change
%
Q1-Q3 2012
millions of EUR
Q1-Q3 2011
millions of EUR
Change
%
FY 2011 millions of EUR
Total revenue727743(2.2)2,1762,219(1.9)2,977
Net revenue2652553.9758772(1.8)1,071
Profit (loss) from operations (EBIT)(362)(362)0.0(1,120)(1,269)11.71,274
Adjusted EBIT(352)(318)(10.7)(986)(945)(4.3)(1,424)
EBITDA(152)(156)2.6(511)(675)24.32,081
Adjusted EBITDA(142)(112)(26.8)(377)(351)(7.4)(617)
Number of employees (average)23,15623,0040.722,82123,058(1.0)22,980

Comments on the table:
As of July 1, 2012, Deutsche Telekom reorganized the Group's IT infrastructure and pooled the existing units from the Germany operating segment and Group Headquarters & Shared Services into the Systems Solution operating segment as the new Telekom IT unit. The prior-year figures have been adjusted for better comparability.

The activities and functions of the Digital Services growth area and of the Internet service provider STRATO (Consumers) that were previously reported under the Germany operating segment have been consolidated under Group Headquarters & Shared Services from January 1, 2012, and reported as part of the DBU (Digital Business Unit). The prior-year figures have been adjusted for better comparability.

*   Deutsche Telekom defines EBITDA as profit/loss from operations before depreciation, amortization, and impairment losses.

Development of customer numbers in the third quarter of 2012


Germany operating segment:

 

Sept. 30, 2012

thousands

Sept. 30, 2011

thousands

Change

thousands

Change

%

Fixed network    
Fixed-network lines22,62023,694(1,074)(4.5)
Retail broadband lines12,42412,2012231.8
TV1,9061,37553138.6
Unbundled local loop lines (ULLs)9,4539,570(117)(1.2)
Wholesale unbundled lines1,2831,198857.1
Wholesale bundled lines562757(195)(25.8)
Mobile communications    
Mobile customers35,99434,9051,0893.1

Europe operating segment:

 

Sept. 30, 2012

thousands

Sept. 30, 2011

thousands

Change

thousands

Change

%

Europe total
Fixed-network lines10,08910,751(662)(6.2)
Retail broadband lines4,6884,5301583.5
Unbundled local loop lines (ULLs)1,9251,72020511.9
Wholesale unbundled lines67481939.6
Wholesale bundled lines155156(1)(0.6
Mobile customers  61,536 59,4672,0653.5

Greece

Fixed-network lines

Broadband lines

Mobile customers

 

3,078

1,170

7,778

 

3,433

1,136

7,873

 

(355)

34

(95)

 

(10.3)

3.0

(1.2)

Romania

Fixed-network lines

Broadband lines

Mobile customers

 

2,443

1,114

6,470

 

2,523

1,052

6,540

 

(80)

62

(70)

 

(3.2)

5.9

(1.1)

Hungary

Fixed-network lines

Broadband lines

Mobile customers

 

1,419

868

4,820

 

1,506

832

4,790

 

(87)

36

30

 

(5.8)

4.3

0.6

Poland

Mobile customers

 

15,575

 

13,406

 

2,169

 

16.2

Czech Republic

Fixed-network lines

Broadband lines

Mobile customers

 

105

105

5,415

 

93

93

5,399

 

12

12

16

 

12.9

12.9

0.3

Croatia

Fixed-network lines

Broadband lines

Mobile customers

 

1,322

652

2,443

 

1,395

648

2,485

 

(73)

4

(42)

 

(5.2)

0.6

(1.7)

Netherlands

Fixed-network lines

Broadband lines

Mobile customers

 

288

280

4,761

 

297

287

4,935

 

(9)

(7)

(174)

 

(3.0)

(2.4)

(3.5)

Slovakia

Fixed-network lines

Broadband lines

Mobile customers

 

977

473

2,313

 

1,029

457

2,318

 

(52)

16

(5)

 

(5.1)

3.5

(0.2)

Austria

Mobile customers

 

4,076

 

3,934

 

142

 

3.6

Bulgaria

Mobile customers

 

4,441

 

4,166

 

275

 

6.6

Othera

Fixed-network lines

Broadband lines

Mobile customers

 

457

249

3,445

 

476

230

3,621

 

(19)

19

(176)

 

(4.0)

8.3

(4.9)

Comment on the table:
a Other: national companies of Albania, the F.Y.R.O. Macedonia, and Montenegro.

United States operating segment:

 Sept. 30, 2012
thousands
Sept. 30, 2011
thousands
Change
thousands
Change
%
Mobile customers33,32733,711(384)(1.1)


This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows, and personnel-related measures. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. Among the factors that might influence our ability to achieve our objectives are the progress of our workforce reduction initiative and other cost-saving measures, and the impact of other significant strategic, labor, or business initiatives, including acquisitions, dispositions, business combinations, and our network upgrade and expansion initiatives. In addition, stronger than expected competition, technological change, legal proceedings, and regulatory developments, among other factors, may have a material adverse effect on our costs and revenue development. Further, the economic downturn in our markets and changes in interest and currency exchange rates, may also have an impact on our business development and the availability of financing on favorable conditions. Changes to our expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect our results at the group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance may materially differ from the performance expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, we do not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.

In addition to figures prepared in accordance with IFRS, Deutsche Telekom alsopresents non-GAAP financial performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net income, free cash flow, gross debt, and net debt. These non-GAAP measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Non-GAAP financial performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

Safe Harbor Statement

Additional Information and Where to Find It

This document also relates to a proposed transaction between MetroPCS Communications, Inc.("MetroPCS") and Deutsche Telekom AG ("Deutsche Telekom") in connection with T-Mobile USA, Inc.("T-Mobile"). The proposed transaction will become the subject of a proxy statement to be filed by MetroPCS with the Securities and Exchange Commission (the "SEC"). This document is not a substitute for the proxy statement or any other document that MetroPCS may file with the SEC or send to its stockholders in connection with the proposed transaction. MetroPCS' investors and security holders are urged to read the proxy statement (including all amendments and supplements thereto) and all other relevant documents regarding the proposed transaction filed with the SEC or sent to MetroPCS' stockholders as they become available, because they will contain important information about the proposed transaction. All documents, when filed, will be available free of charge at the SEC's website (www.sec.gov). You may also obtain these documents by contacting MetroPCS' Investor Relations department at +1 (214) 570-4641, or via e-mail at investor_relations@metropcs.com. This communication does not constitute a solicitation of any vote or approval.

Participants in the Solicitation

MetroPCS and its directors and executive officers will be deemed to be participants in any solicitation of proxies in connection with the proposed transaction, and Deutsche Telekom and its directors and executive officers may be deemed to be participants in such solicitation. Information about MetroPCS' directors and executive officers is available in MetroPCS' proxy statement dated April 16, 2012, for its 2012 Annual Meeting of Stockholders. Other information regarding the participants in the proxy solicitation and a description of their direct and indirect interests, by security holdings or otherwise, will be contained in the proxy statement and other relevant materials to be filed with the SEC regarding the proposed transaction when they become available. Investors should read the proxy statement carefully when it becomes available before making any voting or investment decisions.

Cautionary Statement Regarding Forward-Looking Statements

This document includes "forward-looking statements" for the purpose of the "safe harbor" provisions within the meaning of the Private Securities Litigation Reform Act of 1995, as amended. Any statements made in this document that are not statements of historical fact, including statements about our beliefs, opinions, projections, and expectations, are forward-looking statements and should be evaluated as such. These forward-looking statements often include words such as "anticipate," "expect," "suggests," "plan," "believe," "intend," "estimates," "targets," "views," "projects," "should," "would," "could," "may," "become," "forecast," and other similar expressions.

All forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements, many of which are generally outside the control of MetroPCS, Deutsche Telekom, and T-Mobile and are difficult to predict. Examples of such risks and uncertainties include, but are not limited to, the possibility that the proposed transaction is delayed or does not close, including due to the failure to receive the required MetroPCS stockholder approvals or required regulatory approvals, the taking of governmental action (including the passage of legislation) to block the transaction, the failure to satisfy other closing conditions, the possibility that the expected synergies will not be realized, or will not be realized within the expected time period, the significant capital commitments of MetroPCS and T-Mobile, global economic conditions, disruptions to the credit and financial markets, fluctuations in exchange rates, competitive actions taken by other companies, natural disasters, difficulties in integrating the two companies, disruption from the transaction making it more difficult to maintain business and operational relationships, possible disruptions or intrusions of MetroPCS' or T-Mobile's network, billing, operational support, and customer care systems which may limit or disrupt their ability to provide service, actions taken or conditions imposed by governmental or other regulatory authorities, and the exposure to litigation. Additional factors that could cause results to differ materially from those described in the forward-looking statements can be found in the MetroPCS' 2011 Annual Report on Form 10-K and Quarterly Report on Form 10-Q for the quarter ended June 30, 2012, and other filings with the SEC available at the SEC's website (www.sec.gov).

The forward-looking statements speak only as to the date made, are based on current assumptions and expectations, and are subject to the factors above, among others, and involve risks, uncertainties, and assumptions, many of which are beyond our ability to control or ability to predict. Neither MetroPCS' investors and security holders nor any other person should place undue reliance on these forward-looking statements. Neither MetroPCS, Deutsche Telekom, nor any other party undertake any duty to update any forward-looking statement to reflect events after the date of this document, except as required by law.

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