Group strategy and Group management.

Deutsche Telekom’s long-term aim is to become a leader for connected life and work. Using this slogan, the Group is positioning itself in the growth areas of our age and focusing on the main trends: the digitization of many areas of life, the fragmentation of the living and working environment, the personalization of products and services, growing mobility, as well as increasing globalization and cross-border value creation. Deutsche Telekom is acting on these trends by focusing its investments on the infrastructure of the next generation, developing and marketing innovative products and services, systematically positioning itself as a service company, and using opportunities for growth abroad. With its “Focus, fix and grow” strategy, Deutsche Telekom remains stable even in times of economic turmoil and will continue pursuing the four successful, strategic areas of action in 2009:

• Improve competitiveness in Germany and in Central and Eastern Europe.
• Grow abroad with mobile communications.
• Mobilize the Internet.
• Roll out network-centric ICT.

Improve competitiveness. Deutsche Telekom is successfully meeting the continuing stiff competitive pressure in Germany and in the Central and Eastern European markets. In 2008, for example, the Group substantially reinforced its strong position in the German DSL market, with the total number of DSL lines rising to 13.3 million, an increase of 6.4 percent year-on-year. This positive development is the result of the targeted expansion of the broadband infrastructure, the introduction of innovative products, and improved customer service. This strategy will continue in 2009. In the fixed network, the Group is providing a growing number of towns and cities with ADSL2+ and the even faster VDSL. Cooperation projects were arranged with around 300 municipalities for DSL expansion in 2008 alone. This was in addition to 100 municipalities where broadband supply could be realized without the support of the local authorities.

The high-performance broadband infrastructure is the basis for products such as Entertain, which is marketed by T-Home. T-Home already dominates the German Internet-based television market with this service. The richness and exclusivity of the content, coupled with interactive television-related services, easily sets the product apart from the competition. Additional HD content and high-end formats such as live Bundesliga soccer games are further incentives to buy. Improving customer service at all points of customer contact is a core component of Deutsche Telekom’s strategy. In this area, there are important achievements to report: The Telekom Shops received top marks from the German Technical Control Board (TÜV) for overall customer satisfaction with the service provided, while the Stiftung Warentest consumer testing organization rated T-Home the best provider of DSL lines and related customer service in the 11/2008 issue of its magazine. To meet rising service requirements efficiently and in line with customers’ needs, Deutsche Telekom is also modernizing and consolidating its call center structure to 33 locations.

Deutsche Telekom is also relying on the continuous acceleration of its mobile communications networks (GPRS/EDGE, as well as UMTS/HSDPA and HSUPA) and has concluded the world’s first successful tests of the Long Term Evolution (LTE) technology as part of the Next Generation Mobile Network (NGMN) alliance.

On the cost side, Deutsche Telekom is continuing to work systematically on aligning its structures. The Save for Service cost-cutting program launched in 2006 is running very successfully. Deutsche Telekom maintains its target of achieving long-term savings of no less than EUR 4.7 billion a year through 2010. At the end of 2008, annual savings totaled approximately EUR 4 billion.