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Deutsche Telekom well positioned for further growth in the United States


October 6, 2006

T-Mobile USA doubles its mobile communications frequency spectrum in the top 100 markets - low spectrum costs in Auction 66 - Telekom 2010 program supported - Group’s revenue and profit guidance for 2006 and 2007 unchanged.

Deutsche Telekom AG’s American mobile communications subsidiary T-Mobile USA is ideally positioned to continue expanding its business. The company acquired a large amount of additional spectrum for data and voice services in the Auction 66. T-Mobile USA acquired a total of 120 licenses in various regional classes around the country for a total of USD 4.2 billion, or around EUR 3.3 billion. The costs for T-Mobile USA in Dollars per MHz of spectrum per person of population (POP) of USD 0.63 were considerably lower than in most of the prior frequency auctions in the United States. T-Mobile USA has more than doubled its average frequency coverage in the top 100 U.S. markets from 25.9 MHz to 52.2 MHz. This creates additional room for future customer growth and for the expansion of voice and data services.

“The auction and the resulting acquisition of additional spectrum here in the USA is an important step forward for us. And not just for T-Mobile USA but for the Deutsche Telekom Group as a whole, which benefits from the growth of its U.S. business. We are aiming to maximize revenue market share in the U.S. and make T-Mobile USA the largest single company within the Group,” said Kai-Uwe Ricke, CEO of Deutsche Telekom, in a press conference in New York.

The roll-out for the 3G network is scheduled to start in the fourth quarter of 2006 and most of the work will be completed in 2007 and 2008. T-Mobile USA is budgeting around EUR 2.1 billion for this work from 2006 to 2009. The increase in investment by T-Mobile USA in its network infrastructure will be lower, however, because some investments in the existing network can be reduced as the roll-out of the new network progresses. The total costs of the acquisition of frequency and the construction of the new network will therefore be at the lower end of analysts’ expectations voiced before the spectrum auction. The results of the auction do not lead to any change in the Deutsche Telekom Group’s announced revenue and profit guidance for 2006 and 2007.

T-Mobile USA is preparing for continued strong growth in the American mobile communications market where the current penetration rate of around 73 percent is considerably lower than in Western European markets. Ex-perts expect voice traffic in the U.S. market to continue to grow two or three-fold in the coming years until 2015, driven in part by continued fixed-mobile substitution. In addition, mobile data business in the United States is also expected to grow considerably. It already accounted for around 11 percent of T-Mobile’s average revenue per user in the second quarter of 2006, roughly 3 percentage points higher than in the same quarter of last year.

The acquisition of spectrum in the United States supports the “Telekom 2010” program. Part of this Group-wide program is for Deutsche Telekom’s market share in the U.S. mobile communications business to be maximized and to build up the U.S. subsidiary to become the largest single company in the Group. T-Mobile USA has continuously expanded its business to around 23.3 million customers since its acquisition by Deutsche Telekom on June 30, 2001. In the first half of 2006, the company contributed EUR 6.7 billion, around 22 percent of the Group’s revenue and 43 percent of the revenue of the mobile communications segment, as compared with 16 and 35 percent respectively in 2004. The contribution to adjusted EBITDA has also in¬creased over the past years from 10 percent of the relevant figure for the Group in 2004 to 19 in the first half of 2006. For the T-Mobile group, these figures are 24 and 40 percent respectively.

T-Mobile USA’s high level of service and quality orientation also contributed to this success. In recent years, the company has again and again come out on top of the JD Power Awards, the most important barometer for the image of mobile communications companies among consumers. While T-Mobile USA can benefit in its network construction from the expertise gained in Europe in the roll-out and operation of 3G infrastructures and can realize price advantages in its investments in network systems as a result of being part of one of the largest mobile communications groups in the world, the transfer of the American service culture to Germany will also be driven ahead. The proportion of customer enquiries resolved upon first contact with Deutsche Telekom is to be increased to 80 percent by 2008 as part of the “Telekom 2010” program

This release contains or may contain forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” “outlook” or similar expressions and include generally any information designated as “guidance” or that relates to targets for revenue, adjusted EBITDA or other performance measures. Forward-looking statements are based on current plans, estimates and projections. You should consider them 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 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 and business combinations. In addition, stronger than expected competition, technological change, litiga¬tion and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. 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 estimates or targets will be achieved. 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 be significant to the company’s results. Among the EBITDA adjustments in 2006 and 2007 will be the costs of the group’s workforce adjustment initiative, which Deutsche Telekom estimates will result in costs and charges of approximately EUR 3.3 billion over the next three years. In addition to figures prepared in accordance with IAS/IFRS, Deutsche Telekom presents so-called non-GAAP financial performance measures, e.g., EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBT, 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 IAS/IFRS. Non-GAAP financial performance measures are not subject to IAS/IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways. For an explanation of these terms, please refer to “Reconciliation to pro-forma figures” in our Group Report for the fist quarter 2006 or under the “Publications” heading on Deutsche Telekom’s Investor Relations webpage at


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