T-Systems’ year-end results

Year-on-year:

4th Quarter

Quote from Klaus Werner, T-Systems’ Board Member and Chief Financial Officer: „We have improved our efficiency. The adjusted EBIT increased considerably. Efficiency will also remain a key topic in 2010”.

Systematic efficiency enhancement significantly improved margins at T Systems. Although the ongoing noticeable restraint exercised by customers led to a revenue decline, successful cost management improved adjusted earnings. In addition, a pleasing uptrend in new orders was posted in the fourth quarter, increasing by 15.3 percent to just under EUR 3.3 billion compared with the fourth quarter of 2008. In the full year, the level of new orders decreased by 9.1 percent to EUR 9.3 billion as a result of the financial and economic crisis.

New big deals clinched in the last quarter of 2009 included contracts with utility company Eskom and transport company Transnet in South Africa, where T-Systems also took over ICT service provider Arivia as part of the two big deals. Other big deals were concluded by T-Systems, for example, with the Dutch electronics company Philips and the British energy group BP.

Revenue at Systems Solutions decreased 5.8 percent year-on-year to EUR 8.8 billion in 2009. At 8.7 percent, the decline in intragroup revenue was disproportionately high, underlining T-Systems’ contribution to Deutsche Telekom’s cost-cutting efforts once again.

The substantial improvement in profitability was reflected in the significant increase in adjusted EBIT, which, at EUR 229 million, was more than triple the figure recorded in 2008. The growth rate was also very high in the fourth quarter at 52.1 percent. The adjusted EBIT margin totaled 2.6 percent for the full year, up from 0.7 percent the previous year. Between October and December 2009, this measure even increased to 3.1 percent. T-Systems must now systematically continue this course of increasing efficiency in a persistently difficult business environment in order to achieve the planned level of profitability that will put it on an equal footing with its competitors. This requires further cost discipline.

Systems Solutions operating segment*:

*Comments on the table:
The 160,000 or so business customers transferred from the Systems Solutions operating segment effective January 1, 2009 are shown as part of the fixed-network operations in the Germany operating segment. All prior-quarter and prior-year figures have been adjusted for better comparability.

This press release contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These also include statements on market potential, statements on finance guidance, as well as on the dividend outlook. They are generally identified by the terms "expect," "anticipate," "believe," "intend," "estimate," "aim for," "goal," "plan," "will," "strive for," "outlook" or similar expressions and often include information that relates to net revenue expectations or targets for adjusted EBITDA, profit or loss, earnings performance and other indicators, as well as personnel-related measures and workforce adjustments. 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, the restructuring of operating activities in Germany, 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, changes in the economic and business environments – for example, the current economic slump – in markets where we, our subsidiaries and affiliates operate, the enduring instability and volatility on the global financial markets, as well as exchange rate and interest rate fluctuations can also adversely affect our business development and the availability of capital at favorable terms. 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 rule, Deutsche Telekom does not predict the net effect of future special factors due to 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 information 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."

About T-Systems

Drawing on a global infrastructure of data centers and networks, T-Systems operates information and communication technology (ICT) systems for multinational corporations and public sector institutions.  T-Systems provides integrated solutions for the networked future of business and society. The company's some 45,300 employees combine industry expertise and ICT innovations to add significant value to customers’ core business all over the world.  T-Systems generated revenue of around EUR 8.8 billion in the 2009 financial year.

Deutsche Telekom AG
Corporate Communications
Tel.: +49 (0) 228 181-49 49
E-mail: presse@telekom.de

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