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Deutsche Telekom details the new structure of operations in Germany

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Deutsche Telekom's new structure, with a stronger regional and integrated focus, is taking shape: on Wednesday evening, the Supervisory Board of Deutsche Telekom AG approved the Board of Management's proposals on the restructuring of operations in Germany. Board of Management Chairman René Obermann will present the basic elements of this restructuring at today’s shareholders’ meeting in Cologne. Under these proposals, fixed and mobile communications business in Germany will be combined into just one business. "Mobile and fixed-network services will in the future be planned, built, managed, and marketed from a single mold," said Obermann to shareholders.

Mr. Obermann had positive information to report to the shareholders' meeting concerning the Group's strategic goals, with business in Germany developing well and international business being reinforced as a result of investment in the Greek telecommunications group OTE. Success with mobile Internet services also confirms Group strategy: After the consistent restructuring towards network-centric ICT products, T-Systems is showing an upturn for the first time in years, said Mr. Obermann. "The headwinds are battering us, too," he continued. "However, our company is relatively stable in the face of the worst economic downturn for 80 years."

Through the restructuring of business in Germany, Deutsche Telekom is now continuing the course it established in fall 2006 under Mr. Obermann's initiative, with integrated sales and customer service in Germany. The new structure should – subject to approval by the shareholders and financial authorities – be achieved in two stages:

  • T-Mobile International AG is to be merged into Deutsche Telekom AG. T-Mobile Deutschland GmbH will thus become a direct subsidiary of Deutsche Telekom AG.
  • Following this, the two units T-Home and T-Mobile Deutschland GmbH are to be combined into one company, which will be a wholly-owned subsidiary of Deutsche Telekom AG.

An extraordinary shareholders’ meeting will be called this year in order to gain the approval of shareholders. The new structure will be subsequently and promptly implemented. The three service companies (Deutsche Telekom Kundenservice GmbH, Deutsche Telekom Technischer Service GmbH, and Deutsche Telekom Netzproduktion GmbH) and Telekom Shop Gesellschaft mbH will then become wholly-owned subsidiaries of the new company controlling German operations. Further details of this restructuring are being developed under the One Company project, headed by Thomas Dannenfeldt as the Board of Management Representative. "Customers benefit under the new structure as their business will no longer be processed separately in the fixed and mobile areas, but they will in the future receive integrated offers and services from a single source," emphasized Mr. Obermann. The fixed and mobile networks are converging – this can be seen, for instance, in laptops that use both networks for Internet access. The iPhone is another example, which accesses the Internet using the fixed network if WLAN is available. Deutsche Telekom intends to offer its customers in Germany even more integrated services that make connected life and work possible. "This requires efficient man-agement by one unit," Deutsche Telekom's CEO continued.

Standardized customer care means that the Group can tap additional reve-nue. For example, it will be easier to offer suitable mobile services to customers who have so far only used fixed-network products. Furthermore, the restructuring will enable Deutsche Telekom to save process and IT costs as, for example, the company will only require one IT system for cus-tomer management in the future.

Common principles were agreed with the employee representatives prior to the restructuring in order to safeguard cooperation in terms of the implementation. As a result, the bundling of fixed and mobile communication in Germany does not entail a new staff reduction program. Until the new structure is implemented, the organizational units T-Home, Sales & Service and T-Mobile Deutschland GmbH will continue with their committees in their current form.

The following changes to management have been made: In the T-Home Board of Management, Thomas Berlemann is additionally taking over Sales from Philipp Humm as of May 1, 2009. From May 1, 2009, Friedrich Fuß will be responsible for Technical Service. From July 1, 2009, Bruno Jacobfeuerborn will head up Technology.

There will be a change in management at T-Mobile Deutschland GmbH, with Christian P. Illek taking over Marketing from May 1, 2009, in addition to his existing tasks at T-Home. On July 1, 2009, Thomas Dannenfeldt and Bruno Jacobfeuerborn will come on board as Managing Director of Finance and Managing Director of Technology respectively. Mr. Berlemann will continue to be responsible for Customer Service; the Supervisory Board of T-Mobile Deutschland GmbH has also been requested to appoint Mr. Berlemann to this body in the role of Head of Sales as Mr. Humm's successor.

Five managers are moving to new positions outside of the T-Mobile Deutschland management. Jiri Drvojancansky and Philipp Humm (Chief Regional Officer Europe) are moving to the Europe department under Hamid Akhavan as of May 1, 2009. Effective May 1, 2009, Raphael Kübler takes over as Head of Group Controlling in the Finance department on Deutsche Telekom AG's Board of Management headed by Timotheus Höttges. Günther Ottendorfer (Technical Director for Mobile Communications Technology in Europe) and Steffen Roehn (Chief Information Officer), who will be responsible for IT across the entire Group, are moving to Operations headed by Hamid Akhavan.

Shareholders' meeting to decide dividend Alongside the Group's strategic future structure, the shareholders' meeting will be taking a closer look back at the 2008 financial year. Holders of Deutsche Telekom stock will also decide on the dividend to be paid out for the 2008 financial year. The Board of Management and the Supervisory Board are proposing a dividend payout of EUR 0.78 per share. The dividend shall be paid out promptly following the shareholders' meeting, in all likelihood as of May 4, 2009.

The dividend on Deutsche Telekom shares is not subject to taxation, in other words no capital gains tax or solidarity surcharge is deducted from it. This is because dividends are paid out in full from the tax contribution ac-count (§ 27 KStG, Corporation Tax Act). The dividend is therefore entirely tax-free for all shareholders in Germany. Likewise, international share-holders are paid the dividend without the deduction of any German taxes. Whether or not the dividend is eligible for taxation outside Germany is determined by the regulations in the country of the shareholder's residence.

This year, for the first time, the Deutsche Telekom shareholders' meeting is a climate neutral event. The emissions totaling 677 metric tons of CO2 associated with it are being offset by investments in a climate protection project in Brazil.

In the Outlook section, this press release contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. Forward-looking statements are based on current plans, estimates, and projections. 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, including those described in the sections “Forward-Looking Statements” and “Risk Factors” of the Company’s Form 20-F annual report filed with the U.S. Securities and Exchange Commission. Among the relevant factors are the progress of Deutsche Telekom’s workforce reduction initiative and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, business combinations, and cost reduction measures. In addition, regulatory decisions, stronger than expected competition, technological change, litigation and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. Furthermore, an economic downturn in Europe or North America and changes in exchange and interest rates could also affect our business development and the availability of capital under favorable conditions. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom’s actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets will be met. Deutsche Telekom does not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise. Deutsche Telekom does not reconcile its adjusted EBITDA guidance to a GAAP measure because it would require unreasonable effort to do so. As a general matter, Deutsche Telekom does not predict the net effect of future special factors because of their uncertainty. Special factors and interest, taxes, depreciation, and amortization (including impairment losses) can have a significant effect on Deutsche Telekom’s results. In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents non-GAAP financial performance measures, including EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBT, adjusted net profit, 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. For further informa-tion relevant to the interpretation of these terms, please refer to the chapter “Reconciliation of pro forma figures” posted on Deutsche Telekom’s website (www.telekom.com) under the link “Investor Relations.”

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