Deutsche Telekom Board of Management aims to pay a dividend of EUR 0.62 for 2004
- Net revenue in the first nine months of 2004 grew in organic terms by approximately 6.3 percent year-on-year, reported net revenue increased by around 4 percent to approximately EUR 42.9 billion
- Adjusted Group EBITDA up by 6.1 percent to EUR 14.6 billion, organic growth in adjusted EBITDA at 7.6 percent
- Net income doubled from EUR 1.6 billion to EUR 3.2 billion, adjusted for special factors, it almost tripled from EUR 0.7 billion to EUR 1.9 billion
- Free cash flow before dividend payments decreased from EUR 7.4 billion to EUR 6.6 billion as a result of higher capital expenditure
- Net debt reduced by an additional EUR 5.8 billion to EUR 40.8 billion compared with EUR 46.6 billion at the end of 2003
- Further development of the dividend will depend on the future levels of net income
- Net income in 2004 will be around EUR 3.2 billion, exceeding the original target of EUR 2.5 billion
- Adjusted EBITDA in 2005 expected to be between EUR 1.2 billion and EUR 1.5 billion higher than the target for 2004 of at least EUR 19.2 billion
Deutsche Telekom continued its growth course in the third quarter of 2004 while substantially increasing profitability. Based on this positive trend in the first nine months of 2004, the Board of Management further substantiated its expectations for the full year and, in some cases, increased them considerably. Net income will be around EUR 3.2 billion, compared with the previous target of EUR 2.5 billion. Based on this expectation, the Board of Management is aiming to pay a dividend of EUR 0.62 for the 2004 financial year. This corresponds to a dividend yield based on the current share price of between 3.7 and 4.1 percent and a total dividend payment of between EUR 2.4 billion and EUR 2.6 billion. The final dividend will be dependent on the net income for 2004. The Board of Management, therefore, will present to the Supervisory Board, at its meeting to review the 2004 financial accounts, a dividend in the range of EUR 0.56 to EUR 0.62. "Deutsche Telekom regards the level of the dividend for 2004 as a minimum level for future years. It is the intention to adhere to the principle of providing an attractive return to the company's shareholders. The further development of the dividend will depend on the future levels of net income," said the Chairman of the Board of Management, Kai-Uwe Ricke.
The expectation for adjusted Group EBITDA for 2004 continues to be at least EUR 19.2 billion. Amounts exceeding this target will be invested in the further expansion of the growth areas of mobile communications and broadband.
In the 2005 financial year, adjusted EBITDA is to increase by between EUR 1.2 billion and EUR 1.5 billion compared with the target for the current financial year. This is compared with an expected year-on-year increase of at least EUR 0.9 billion in 2004.
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.
| Third quarter of 2004 millions of € | Third quarter of 2003 millions of € | Change % | Q1 - Q3 2004 millions of € | Q1-Q3 2003 millions of € | Change % | FY 2003 millions of € | |
| Net revenue | 14,524 | 14,077 | 3.2 | 42,922 | 41,288 | 4.0 | 55,838 |
| - Domestic | 8,535 | 8,553 | (0.2) | 25,560 | 25,689 | (0.5) | 34,691 |
| - International | 5,989 | 5,524 | 8.4 | 17,362 | 15,599 | 11.3 | 21,147 |
| Adjusted results from ordinary business activities | 1,433 | 630 | n.a. | 2,882 | 1,182 | n.a. | 1,122 |
| Results from ordinary business activities | 1,974 | 691 | n.a. | 4,726 | 1,783 | n.a. | 1,398 |
| Adjusted net income | 989 | 463 | n.a. | 1,944 | 738 | n.a. | 222 |
| Net income | 1,387 | 508 | n.a. | 3,211 | 1,617 | 98.6 | 1,253 |
| EBITDA excluding special factors | 5,264 | 4,711 | 11.7 | 14,632 | 13,785 | 6.1 | 18,288 |
| EBITDA | 5,805 | 4,683 | 24.0 | 16,476 | 14,297 | 15.2 | 18,475 |
| Net cash provided by operating activities | 3,680 | 4,784 | (23.1) | 10,808 | 11,044 | (2.1) | 14,316 |
| Free cash flow before dividend payments | 2,391 | 3,427 | (30.2) | 6,585 | 7,393 | (10.9) | 8,285 |
| Investments in property, plant and equipment and intangible assets (excluding goodwill) | (1,275) | (1,431) | 10.9 | (3,811) | (3,536) | (7.8) | (6,234) |
| Net debt at balance sheet date | - | - | - | 40,779 | 49,156 | (17.0) | 46,576 |
| Number of employees at balance sheet date | 247,891 | 249,974 | (0.8) | 248,519 |
Net revenue 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. EBITDA 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 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 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. Free cash flow 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 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. T-Com
| Third quarter of 2004 millions of € | Third quarter of 2003 millions of € | Change % | Q1-Q3 2004 millions of € | Q1-Q3 2003 millions of € | Change % | FY 2003 millions of € | |
| Total revenue | 6,806 | 7,104 | (4.2) | 20,663 | 21,747 | (5.0) | 29,206 |
| Net revenue | 6,007 | 6,152 | (2.4) | 18,114 | 18,716 | (3.2) | 25,116 |
| Results from ordinary business activities 4 | 1,455 | 1,255 | 15.9 | 4,259 | 3,569 | 19.3 | 4,690 |
| EBITDA 1 | 2,576 | 2,548 | 1.1 | 7,773 | 7,684 | 1.2 | 10,164 |
| Adjusted EBITDA 2 | 2,593 | 2,549 | 1.7 | 7,826 | 7,777 | 0.6 | 10,356 |
| Number of employees 3 | 125,914 | 138,331 | (9.0) | 125,799 | 141,620 | (11.2) | 139,548 |
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 "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 2) For detailed information, see "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 3) Average number of employees. 4) The Toll Collect joint venture has been managed by and reported under the T-Systems segment since April 1, 2004. For segment reporting purposes, the effects on the statement of income are no longer shown under T-Com, but under T-Systems. The figures for the previous year have been adjusted accordingly to facilitate comparison.
T-Com was again the largest contributor to revenue in the Deutsche Telekom Group with EUR 6.8 billion in the third quarter and EUR 20.7 billion in the first three quarters of 2004. On a like-for-like basis, i.e., excluding pro rata revenue generated by the cable companies that were sold as of March 1, 2003, T-Com's revenue decreased 4.3 percent year-on-year in the third quarter of 2004. The call-by-call and preselection plans offered by T‑Com's competitors continued to weigh on revenue performance in the German market. However, growth in the broadband area helped to slow down the trend toward declining revenue in business with third parties through the introduction of resale. Thus external revenue only decreased by 2.4 percent in the third quarter of 2004, compared with 2.7 percent in the first six months of the year. In the access business, revenue increased again due to pricing measures and growing T-DSL revenue. In contrast, call revenue was lower due to regulatory factors, market share losses and stronger demand from customers for more attractively priced optional rates. Revenue in Central and Eastern Europe in the third quarter of 2004 increased by 3 percent year-on-year to EUR 1.0 billion. This positive development is mainly attributable to a revenue increase of 6 percent at T‑Hrvatski Telekom in Croatia. Due to progressive deregulation and tougher competition, revenue generated in the conventional fixed network decreased in all companies, but this decline was offset by the growth in mobile communications and broadband. Thanks to a rigorous, comprehensive cost management and staff reductions, adjusted EBITDA increased by EUR 49 million in the first three quarters of 2004 to EUR 7.8 billion. The adjusted EBITDA margin increased by 2.1 percentage points to 37.9 percent. On a like-for-like basis, i.e., excluding the EBITDA contribution from the cable business activities in the first quarter of 2003, adjusted EBITDA increased by EUR 121 million or 1.6 percent. Year-on-year, adjusted EBITDA increased by 1.7 percent in the third quarter to EUR 2.6 billion. Through its active promotion of broadband in the mass market, T-Com succeeded in increasing the number of DSL customers by 489,000 in the third quarter alone to 5.4 million. This corresponds to an increase in the customer base of 42.4 percent compared with the same period in 2003. As a result of the active marketing of the "three times zero" offer, the number of DSL lines in operation in Germany increased by over 40.1 percent or 458,000 since June 30, 2004, bringing the total to 5.2 million. This figure also includes for the first time 85,000 DSL lines T-Com sold to competitors under its resale offers. T-Mobile
| Third quarter of 2004 millions of € | Third quarter of 2003 millions of € | Change % | Q1-Q3 2004 millions of € | Q1-Q3 2003 millions of € | Change % | FY 2003 millions of € | |
| Total revenue | 6,479 | 5,920 | 9.4 | 18,660 | 16,787 | 11.2 | 22,778 |
| Net revenue | 6,273 | 5,632 | 11.4 | 17,956 | 15,871 | 13.1 | 21,572 |
| Results from ordinary business activities 1 | 1,287 | 239 | n.a. | 3,289 | 637 | n.a. | 831 |
| EBITDA 1 | 2,798 | 1,748 | 60.1 | 7,685 | 5,350 | 43.6 | 7,016 |
| Adjusted EBITDA 2 | 2,162 | 1,748 | 23.7 | 5,769 | 5,005 | 15.3 | 6,671 |
| Number of employees 3 | 44,920 | 41,708 | 7.7 | 44,096 | 41,440 | 6.4 | 41,767 |
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 "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 2) For detailed information, see "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 3) Average number of employees.
T-Mobile also substantially increased revenue by 9.4 percent in the third quarter of 2004 to almost EUR 6.5 billion. Revenue grew by over 11 percent in the first three months to EUR 18.7 billion, mainly as a result of the continued strong growth of the customer base. The main growth driver was again T-Mobile USA, with a revenue increase of over 26 percent in the first nine months of 2004. The result from growth and increasing profitability was achieved with an increase in adjusted EBITDA by more than 23 percent to EUR 2.2 billion in the third quarter. This put the adjusted EBITDA margin in the third quarter at 33.4 percent, a year-on-year increase of almost four percentage points. In the third quarter of 2004, the main special factor with a positive effect of EUR 641 million on EBITDA was a further write-up of U.S. mobile communications licenses due to changes in market conditions. T-Mobile Deutschland made the biggest contribution to adjusted EBITDA with EUR 921 million. The adjusted EBITDA margin was 41.2 percent in the third quarter, which was 2.7 percentage points up on the previous quarter. This was partly attributable to the focus on fixed-term contract subscribers and marketing of the Relax rates. T-Mobile USA increased its adjusted EBITDA to EUR 657 million, achieving an adjusted EBITDA margin of 26.5 percent. T-Mobile UK also increased its adjusted EBITDA margin compared with the previous quarter to 34.7 percent based on EBITDA of EUR 384 million. The subsidiaries in the Czech Republic, Austria and the Netherlands contributed EUR 105 million, EUR 66 million and EUR 55 million, respectively, to the division 's EBITDA. Thus all companies in the T-Mobile group improved their margins compared with the previous quarter. T-Mobile has begun plans for an efficiency enhancement program at its European affiliates. The objective of the program is to save approximately EUR 1 billion in operating costs per year. Around half of the savings will be invested in growth in the form of new products and services. The number of mobile subscribers served by T-Mobile's majority-owned subsidiaries increased by around 1.6 million in the third quarter to 67.2 million. Of these, almost 1.3 million signed fixed-term subscription contracts. Year-on-year, the number of subscribers increased by 9.6 million, an increase of over 16 percent. T-Mobile USA increased its subscriber base by around 901,000 in the third quarter, bringing the total to over 16.3 million subscribers. This performance makes T-Mobile USA the second best among the nationwide mobile communications providers in the United States for the fourth consecutive quarter. T-Mobile added around 300,000 new subscribers in Germany in the third quarter. While the number of prepay customers decreased slightly, the number of fixed-term contract subscribers grew by 328,000, around 100,000 more than in the same period last year. The third quarter therefore recorded the largest net increase in fixed-term contracts in any one quarter of 2004 so far. The number of mobile subscribers in Germany increased to 27.4 million, a year-on-year increase of 7 percent. T-Mobile Deutschland was particularly successful in attracting customers for the Relax rates, for which marketing began in February 2004. 1.1 million customers had already opted for one of the Relax rates by the end of third quarter of 2004, after 650,000 at the end of the second quarter. The number of T-Mobile UK subscribers grew by 308,000 in the third quarter of 2004 to 15.2 million. At the end of September 2004 there were already 2.94 million fixed-term contract subscribers. T-Mobile CZ acquired around 55,000 new customers in the third quarter. Of these, 85 percent were fixed-term contract subscribers. T-Mobile Austria's customer base continued to remain constant at more than 2 million. T-Mobile Netherlands had around 2.3 million subscribers at the end of the third quarter, which is 29,000 subscribers up on the previous quarter. T-Systems
| Third quarter of 2004 millions of € | Third quarter of 2003 millions of € | Change % | Q1-Q3 2004 millions of € | Q1-Q3 2003 millions of € | Change % | FY 2003 millions of € | |
| Total revenue | 2,564 | 2,617 | (2.0) | 7,664 | 7,744 | (1.0) | 10,614 |
| Net revenue | 1,747 | 1,798 | (2.8) | 5,282 | 5,267 | 0.3 | 7,184 |
| Results from ordinary business activities | 39 | (34) | n.a. | (189) | (160) | (18.1) | (581) |
| EBITDA 1 | 392 | 389 | 0.8 | 1,011 | 1,076 | (6.0) | 1,412 |
| Adjusted EBITDA 2 | 397 | 393 | 1.0 | 1,059 | 1,016 | 4.2 | 1,415 |
| Number of employees 3 | 39,750 | 41,706 | (4.7) | 39,990 | 42,446 | (5.8) | 42,108 |
The Toll Collect joint venture has been managed by and reported under the T-Systems segment since April 1, 2004. For segment reporting purposes, the effects on the statement of income are no longer shown under T-Com, but under T-Systems. The figures for the previous year have been adjusted accordingly to facilitate comparison.
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 "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 2) For detailed information, please refer to "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 3) Average number of employees.
Total revenue decreased slightly by 1 percent in the first nine months of 2004. Adjusted for the deconsolidation effects related to the sale of investments, total revenue increased by 1 percent in the same period. Net revenue continued to increase in the third quarter: In the first three quarters, net revenue increased by 0.3 percent year-on-year, and by 3.3 percent after deconsolidation. Orders received increased year-on-year by 4 percent in the first nine months of the year to around EUR 9.2 billion. The improvement in T-Systems' operating performance is reflected in the year-on-year increase in adjusted EBITDA of 1 percent in the third quarter and 4.2 percent in the first nine months. The adjusted EBITDA margin increased from 15 percent in the third quarter of 2003 to 15.5 percent. T-Online 4
| Third quarter of 2004 millions of € | Third quarter of 2003 millions of € | Change % | Q1-Q3 2004 millions of € | Q1-Q3 2003 millions of € | Change % | FY 2003 millions of € | |
| Total revenue | 464 | 453 | 2.4 | 1,457 | 1,347 | 8.2 | 1,851 |
| Net revenue | 419 | 413 | 1.5 | 1,328 | 1,209 | 9.8 | 1,662 |
| Results from ordinary business activities | 24 | 103 | (76.7) | 106 | 126 | (15.9) | 104 |
| EBITDA 1 | 110 | 84 | 31.0 | 357 | 260 | 37.3 | 335 |
| Adjusted EBITDA 2 | 111 | 84 | 32.1 | 358 | 235 | 52.3 | 310 |
| Number of employees 3 | 2,981 | 2,646 | 12.7 | 2,948 | 2,644 | 11.5 | 2,637 |
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 "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 2) For detailed information, please refer to "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 3) Average number of employees. 4) The T-Online figures shown here were calculated in line with the provisions of German GAAP, as applied throughout the Deutsche Telekom Group, and do not correspond to the figures published by T-Online International AG in accordance with IFRS, as T-Online International AG and Deutsche Telekom AG do not apply the same accounting policies.
Revenue at T-Online increased year-on-year by 2.4 percent in the third quarter of 2004 to EUR 464 million due to the growth in the subscriber base (figures calculated on the basis of German GAAP). In the first nine months of 2004, this was an increase of 8 percent compared with the same period in the previous year. Compared with the third quarter of 2003, EBITDA increased by 31 percent to EUR 110 million. Adjusted for special factors, EBITDA rose from EUR 84 million to EUR 111 million in the same period. In the first nine months, EBITDA increased by 37.3 percent year-on-year to EUR 357 million. Besides the sustained revenue growth and the improved gross margin, T-Online's positive performance can mainly be attributed to the systematic exploitation of efficiency potential. The adjusted EBITDA margin was 23.9 percent, an increase of 5.4 percentage points compared with the third quarter of 2003. With more than 291,000 new additions in the third quarter of 2004, T-Online achieved record growth in the number of customers using DSL rates. This is mainly attributable to the success of the "three times zero" campaign. The number of DSL subscribers in the T-Online group increased from 2.4 million at year-end 2003 to 3.2 million at the end of the third quarter. In the "Germany" business segment, T-Online's subscriber base also grew year-on-year by around 38 percent to 2.9 million. The number of broadband subscribers in the international subsidiaries also grew year-on-year by around 41 percent in the first nine months of 2004. Group Headquarters & Shared Services
| Third quarter of 2004 millions of € | Third quarter of 2003 millions of € | Change % | Q1-Q3 2004 millions of € | Q1-Q3 2003 millions of € | Change % | FY 2003 millions of € | |
| Total revenue | 1,164 | 1,056 | 10.2 | 3,408 | 3,220 | 5.8 | 4,268 |
| Net revenue | 78 | 82 | (4.9) | 242 | 225 | 7.6 | 304 |
| Results from ordinary business activities | (799) | (878) | 9.0 | (2,794) | (2,330) | (19.9) | (4,071) |
| EBITDA 1 | 69 | (9) | n.a. | (175) | 215 | n.a. | (276) |
| Adjusted EBITDA 2 | 48 | 15 | n.a. | (298) | (5) | n.a. | (316) |
| Number of employees 3 | 34,795 | 26,261 | 32.5 | 35,337 | 23,868 | 48.1 | 25,203 |
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 "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations". 2) For detailed information, please refer to "Reconciliation of pro forma figures" at "www.telekom.de/investor-relations" . 3) Average number of employees.
The total revenue of Group Headquarters & Shared Services increased in the first three quarters of 2004 by around 5.8 percent year-on-year to EUR 3.4 billion. This increase was mainly due to the disclosure of the revenues from Vivento's call center business and the revenues of VTS reported since July 1. Adjusted EBITDA declined considerably in the first three quarters of 2004 compared with the prior-year period to around EUR minus 0.3 billion. This is primarily attributable to the much higher expenditure for Vivento as a result of the substantial expansion of its workforce, which grew by around 9,300 in comparison with the previous year. Revenues from the call center business and VTS offset this negative development, as did income from the large-scale project implemented with the Federal Employment Agency. Cost savings from successfully implemented measures to improve efficiency, for example, boosted EBITDA. Adjusted EBITDA in the third quarter increased substantially year-on-year from EUR 15 million to EUR 48 million. The development of unadjusted EBITDA in the first nine months of 2004 compared with the prior-year period is attributable to the decline in adjusted EBITDA and the lower volume of special factors. Special factors amounted to EUR 123 million in the first three quarters of 2004. Vivento continued its positive development once again in the third quarter of 2004. The implementation of the employment alliance, the successful establishment of the two business lines, and the employment-intensive large-scale projects are the cornerstones of a positive interim result. Following the establishment of an additional four sites in the third quarter of 2004, Vivento Customer Services GmbH & Co. KG (VCS), which was established in the first quarter of 2004, is now represented throughout Germany with 18 sites. Most of the expansion was in eastern Germany. VCS successfully entered, and thus generated business on, the external market. VCS was also able to continue its positive business development within the Group. In September 2004, the company had approximately 2,300 employees, around 900 of whom were contract and temporary staff from Vivento which it plans to make permanent. Vivento's second business line, Vivento Technical Services GmbH & Co. KG (VTS), which was established in the second quarter of 2004, also started business since July 1, 2004. At the same time, the Communication Networks unit of Network Projects & Services GmbH with some 350 employees was transferred from T-Com to VTS. Since then, VTS has continuously expanded its workforce on the basis of these highly qualified staff. In September 2004, the company had approximately 1,000 employees, around 600 of whom were contract and temporary staff from Vivento. Approximately 3,300 employees were transferred to Vivento in the third quarter of 2004. A total of about 29,800 employees have therefore been transferred to Vivento since it was first founded. Some 7,500 employees have left Vivento since January 1, 2004, almost 3,900 in the third quarter. The employment alliance enabled around 2,000 employees to be placed again within the Group as part of the return and reintegration process. About 11,200 employees have left Vivento since it was first founded. Vivento had around 19,400 employees at the end of the third quarter of 2004, including approximately 700 permanent staff, roughly 14,600 transferred employees, and about 4,000 employees in the two business lines. In September, around 6,500 Vivento staff were in temporary positions within the Group, and a further 3,700 outside the Group. For example, since July 1, 2004 around 3,000 civil servants from Vivento have been assisting the Federal Employment Agency (Bundesagentur für Arbeit) with the introduction of the restructured benefits for the long-term unemployed. Outlook Based on the figures for the third quarter of 2004, Deutsche Telekom has modified its estimates for key performance indicators and included more details than in previous statements. The expectation for adjusted Group EBITDA of at least EUR 19.2 billion remains unchanged. Free cash flow will increase to at least EUR 7 billion, capex is also expected to amount to approximately EUR 7 billion. Net income will be around EUR 3.2 billion, exceeding the original target of EUR 2.5 billion. Building on the good basis achieved in the previous quarters, Deutsche Telekom's aim is to satisfy its shareholders in the future and let them benefit from the Group's success. The Board of Management of Deutsche Telekom is aiming to pay a dividend of EUR 0.62 for the 2004 financial year. The final dividend will be dependent on the net income for 2004. The Board of Management, therefore, will present to the Supervisory Board, at its meeting to review the 2004 financial accounts, a dividend in the range of EUR 0.56 to EUR 0.62. Deutsche Telekom regards the level of the dividend for 2004 as a minimum level for future years. It is the intention to adhere to the principle of providing an attractive return to the company's shareholders. The further development of the dividend will depend on the future levels of net income. Deutsche Telekom expects EBITDA to increase by between EUR 1.2 billion and EUR 1.5 billion in the 2005 financial year compared with the target value for 2004. Free cash flow is expected to amount to between EUR 7.5 billion and EUR 8 billion. Additional investments of roughly EUR 2 billion will be made for the acquisition of the Cingular mobile network in California and Nevada, approximately the same amount again to procure additional spectrum capacity in the United States, and up to EUR 2.9 billion is planned for the merger of T-Online into Deutsche Telekom. Based on the total volume of investment as well as the total dividend payment amount, no significant change in the correlation between net debt and adjusted EBITDA is expected in 2005. Development of subscriber numbers
| 30.09.2004 | 30.09.2003 | Change | Change % 9 | 31.12.2003 | |
| Deutsche Telekom Group telephone lines (including ISDN channels) | 57.4 | 58.0 | (0.6) | (1.0) | 57.9 |
| DSL lines in operation | 5.4 | 3.8 | 1.6 | 42.1 | 4.1 |
| T-Com Fixed-network lines, including ISDN channels | 54.9 | 55.6 | (0.7) | (1.3) | 55.5 |
| of which: Germany 1 | 48.2 | 48.8 | (0.6) | (1.2) | 48.7 |
| · Standard lines | 26.4 | 27.6 | (1.2) | (4.3) | 27.2 |
| · ISDN channels | 21.8 | 21.2 | 0.6 | 2.8 | 21.5 |
| · T-DSL lines in operation | 5.2 | 3.7 | 1.5 | 40.5 | 4.0 |
| of which: Central and Eastern Europe | 6.7 | 6.8 | (0.1) | (1.5) | 6.8 |
| · MATÁV 2 | 3.5 | 3.5 | 0.0 | 0.0 | 3.5 |
| · Slovak Telecom | 1.3 | 1.4 | (0.1) | (7.1) | 1.4 |
| · T-Hrvatski Telekom 3 | 1.9 | 1.8 | 0.1 | 5.6 | 1.9 |
| Mobile subscribers | |||||
| T-Mobile Deutschland | 27.4 | 25.6 | 1.8 | 7.0 | 26.3 |
| T-Mobile UK 4 | 15.2 | 12.4 | 2.8 | 22.6 | 13.6 |
| T-Mobile USA. | 16.3 | 12.1 | 4.2 | 34.7 | 13.1 |
| T-Mobile Austria | 2.0 | 2.0 | 0 | 0 | 2.0 |
| T-Mobile Czech Republic | 4.1 | 3.7 | 0.4 | 10.8 | 3.9 |
| T-Mobile Netherlands | 2.3 | 1.8 | 0.5 | 27.8 | 2.0 |
| T-Mobile's majority-owned subsidiaries | 67.2 | 57.7 | 9.5 | 16.5 | 61.1 |
| T-Mobile Hungary 7 | 4.0 | 3.6 | 0.4 | 11.1 | 3.8 |
| T-Mobile Hrvatska 8 | 1.4 | 1.4 | 0 | 0.0 | 1.3 |
| Mobimak 5 | 0.7 | 0.5 | 0.2 | 40.0 | 0.5 |
| Deutsche Telekom Group majority-owned subsidiaries 6 | 73.4 | 63.1 | 10.3 | 16.3 | 66.7 |
| T-Online subscribers | 13.37 | 12.90 | 0.47 | 3.6 | 13.13 |
| of which: T-Online Deutschland | 11.31 | 10.57 | 0.74 | 7.0 | 10.79 |
| of which: rest of Europe | 2.06 | 2.33 | (0.27) | (11.6) | 2.35 |
Totals were calculated on the basis of precise figures and rounded to millions. 1) Telephone channels, including for internal use. 2) Subscriber-line figures are recorded including MATÁV's subsidiary Maktel. 3) Formerly Hrvatski telekomunikacije, rebranded as T-Hrvatski Telekom on October 1, 2004 4) Including Virgin Mobile 5) Mobile subscribers of Mobimak included for the first time as of March 31, 2004. Prior-year figures have been adjusted accordingly. 6) Number of subscribers of T‑Mobile's fully consolidated mobile communications companies, plus the majority shareholdings of MATÁV and Hrvatske telekomunikacije (HT). Mobimak subscribers included for the first time as of March 31, 2004. Prior-year figures have been adjusted accordingly. 7) The former Westel has been renamed T-Mobile Hungary as of May 3, 2004. 8) Formerly HT mobile, rebranded as T-Mobile Hrvatska on October 1, 2004. 9) Percentages calculated on the basis of figures shown
This notification contains forward-looking statements that reflect the current views of the Deutsche Telekom management with respect to future events. Forward-looking statements are based on current plans, estimates and projections, and therefore too much reliance should not be placed on them. 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 Form 20-F submitted to the U.S. Securities and Exchange Commission. 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 does not assume any obligation to update forward-looking statements to take new information or future events into account. In addition to the figures shown in accordance with German GAAP, Deutsche Telekom also shows so-called pro forma figures, e.g., EBITDA, adjusted EBITDA, net debt, and free cash flow. These pro forma financial measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with German GAAP. For a definition of these pro forma figures, please refer to the explanations under "Reconciliation to pro forma figures" on Deutsche Telekom's Investor Relations website at www.deutschetelekom.com.