q26k2009.htm




 
 
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 

 
Form 6-K
 
 
 
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
 
 
For the month of August 2009
 
Commission file number 001-14540
 
 
Deutsche Telekom AG
(Translation of Registrant’s Name into English)
 
 
Friedrich-Ebert-Allee 140,
53113 Bonn,
Germany
(Address of Principal Executive Offices)
 
 
 
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
 
Form 20-F x Form 40-F o
 
 
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
 
Yes o No x
 
 
This Report on Form 6-K is incorporated by reference into the registration statement on Form F-3, File No. 333-157796, and the registration statements on Form S-8, File No. 333-13570 and File No. 333-106591, and into each respective prospectus that forms a part of those registration statements.

 
 

 

Defined Terms and Contact Information
 
The term “Report” refers to this Report on Form 6-K for the three-month period ended June 30, 2009. Deutsche Telekom AG is a stock corporation organized under the laws of the Federal Republic of Germany. As used in this Report, unless the context otherwise requires, the term “Deutsche Telekom” refers to Deutsche Telekom AG and the terms “we,” “us,” “our,” “Group” and “the Company” refer to Deutsche Telekom and, as applicable, Deutsche Telekom and its direct and indirect subsidiaries as a group. Our registered office is at Friedrich-Ebert-Allee 140, 53113 Bonn, Germany, telephone number +49-228-181-0. Our agent for service of process in the United States is Deutsche Telekom, Inc., 14 Wall Street, Suite 6B, New York, NY 10005.
 
Forward-Looking Statements
 
This Report contains forward-looking statements that reflect the current views of our management with respect to future events and results, including statements contained under “Outlook” as well as dividend guidance and other information relating to expectations or targets for revenue or other performance measures. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “will,” “will continue,” “seeks,” “targets,” “goals,” “outlook”, “should” and similar expressions. Forward-looking statements are based on current plans, estimates and projections, and therefore you should not place too much reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. These factors include, among other factors: the development of demand for our fixed and mobile telecommunications services, particularly for new, higher value service offerings; changes in general economic and business conditions, including the significant economic decline currently underway in the markets in which we and our subsidiaries and associated companies operate; ongoing instability and volatility in worldwide financial markets; competitive forces, including pricing pressures, technological changes and alternative routing developments; regulatory actions and the outcome of disputes in which the Company is involved or may become involved; the pace and cost of the rollout of new services, which may be affected by the ability of suppliers to deliver equipment and other circumstances beyond our control; public concerns over health risks putatively associated with wireless frequency transmissions; risks associated with integrating our acquisitions; the development of asset values in Germany and elsewhere; the progress of our debt reduction and liquidity improvement initiatives; the development of our cost control and efficiency enhancement initiatives, including the areas of procurement and personnel reductions; risks and uncertainties relating to benefits anticipated from our international expansion, particularly in the United States; the progress of our domestic and international investments, joint ventures and alliances; our ability to gain or retain market share in the face of competition; our ability to secure and retain the licenses needed to offer services; the effects of price reduction measures and our customer acquisition and retention initiatives; the availability, term and deployment of capital, particularly in view of our debt refinancing needs; actions of the rating agencies and the impact of regulatory and competitive developments on our capital outlays; the progress of our workforce adjustment initiatives and outcome of labor negotiations; changes in currency exchange rates and interest rates; and the reorganization of our fixed-line and mobile operations in Germany. Additionally, we periodically assess our goodwill and other long-term intangibles and tangible assets for indications of impairment by monitoring, among other things, changes in competitive conditions, expectations of growth in the industry, and changes in market and other factors, any of which could result in a risk of additional impairment charges. If these or other risks and uncertainties (including those described in “Forward-Looking Statements,” “Item 3. Key Information – Risk Factors” and elsewhere in our most recent Annual Report on Form 20-F for the year ended December 31, 2008 filed with the U.S. Securities and Exchange Commission) materialize, or if the assumptions underlying any of these statements prove incorrect, our actual results may be materially different from those expressed or implied by such statements.
 
World Wide Web addresses contained in this Report are for explanatory purposes only and they (and the content contained therein) do not form a part of, and are not incorporated by reference into, this Report.

 
1

 

Currencies and Exchange Rates
 
Unless otherwise indicated, all amounts in this Report have been expressed in euros.
 
As used in this document, “euro,” “EUR” or “€” means the single unified currency that was introduced in the Federal Republic of Germany (the “Federal Republic”) and ten other participating Member States of the European Union on January 1, 1999. “U.S. dollar,” “USD” or “$” means the lawful currency of the United States. “Pound sterling” means the lawful currency of the United Kingdom.
 
Amounts appearing in this Report that have been translated into euros from other currencies were translated in accordance with the principles described in the notes to the audited consolidated financial statements contained in our Annual Report on Form 20-F for the year ended December 31, 2008.
 
International Financial Reporting Standards (IFRS)
 
You should read the following discussion, which has been prepared in accordance with the requirements of the International Financial Reporting Standards, as issued by the International Accounting Standards Board (IASB), in conjunction with the annual consolidated financial statements, including the notes to those financial statements, contained in our Annual Report on Form 20-F for the year ended December 31, 2008 filed with the United States Securities and Exchange Commission.




 
2

 

Deutsche Telekom at a glance.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Net revenue
    16,238       15,125       7.4       32,140       30,103       6.8       61,666  
    Domestic
    6,817       7,184       (5.1 )     13,760       14,438       (4.7 )     28,885  
    International
    9,421       7,941       18.6       18,380       15,665       17.3       32,781  
Profit from operations
    2,012       1,868       7.7       2,256       4,166       (45.8 )     7,040  
Profit (loss) from financial activities
    (1,015 )     (976 )     (4.0 )     (1,757 )     (1,653 )     (6.3 )     (3,588 )
Profit before income taxes
    997       892       11.8       499       2,513       (80.1 )     3,452  
    Depreciation, amortization and
    impairment losses
    (3,015 )     (2,698 )     (11.7 )     (7,713 )     (5,355 )     (44.0 )     (10,975 )
Net profit (loss)
    521       394       32.2       (603 )     1,318    
n.a.
      1,483  
Earnings per share/ADSa, basic/diluted
(€)
    0.12       0.09       33.3       (0.14 )     0.30    
n.a.
      0.34  
Cash capexb
    (2,211 )     (1,837 )     (20.4 )     (4,822 )     (3,629 )     (32.9 )     (8,707 )
Net cash from operating activities
    3,512       3,682       (4.6 )     6,478       7,013       (7.6 )     15,368  

 
Number of employees at balance sheet date.
 
 
June 30, 2009
   
Mar. 31, 2009
   
Change
June 30, 2009/
Mar. 31, 2009
%
   
Dec. 31, 2008
   
Change
June 30, 2009/
Dec. 31, 2008 %
   
June 30, 2008
   
Change
June 30, 2009/
June 30, 2008
%
 
Deutsche Telekom Group
  261,373       260,798       0.2       227,747       14.8       235,794       10.8  
    Non-civil servants
  229,990       228,928       0.5       195,634       17.6       202,151       13.8  
    Civil servants (Germany)
  31,383       31,870       (1.5 )     32,113       (2.3 )     33,643       (6.7 )
                                                       
 
 
Number of fixed-network and mobile customers.
 
 
 
   
June 30, 2009
   
Mar. 31, 2009
   
Change
June 30, 2009/
Mar. 31, 2009 %
   
Dec. 31, 2008
   
Change
June 30, 2009/
Dec. 31, 2008
%
   
June 30, 2008
   
Change
June 30, 2009/
June 30, 2008
%
 
Fixed-network linesc,d
(millions)
    39.6       40.3       (1.7 )     41.1       (3.6 )     42.8       (7.5 )
Broadband linesd,e
(millions)
    17.2       17.0       1.2       16.7       3.0       16.0       7.5  
Mobile customersf
(millions)
    149.8       148.4       0.9       147.6       1.5       141.8       5.6  
                                                         
a
One ADS (American Depositary Share) corresponds to one ordinary share of Deutsche Telekom AG.
b
Investments in property, plant and equipment, and intangible assets (excluding goodwill) as shown in the cash flow statement.
c
Lines in operation. Telephone lines excluding internal use and public telecommunications, including wholesale services. Approximately 160,000 business customers have been included in the Broadband/Fixed Network operating segment since January 1, 2009. The presentation of the number of lines has been adjusted to reflect the business model of the Broadband/Fixed Network operating segment. Internal use by the Systems Solutions segment is no longer included in the presentation of the number of lines. Prior-year figures have been adjusted accordingly.
d
From February 2009, the fixed-network business of OTE Greece and Romtelecom (Romania) is included in the Broadband/Fixed-Network operating segment. Prior-year figures have been adjusted on a pro forma basis.
e
Broadband lines in operation, including Germany and Southern and Eastern Europe.
f
Number of customers of the fully consolidated mobile communications companies of the Mobile Communications Europe (including Virgin Mobile) and Mobile Communications USA segments. From February 2009, the mobile communications business of COSMOTE (a subsidiary of the OTE group) in Greece, Romania, Bulgaria and Albania is included in the Mobile Communications Europe operating segment. Prior-year figures have been adjusted on a pro forma basis.


 
3

 


Developments in the Group.
 
Net revenue of the Group increased by 6.8 percent year-on-year in the first half of 2009 to EUR 32.1 billion.
 
Domestic net revenue amounted to EUR 13.8 billion, less than in the first half of 2008. International net revenue increased year-on-year from EUR 15.7 billion to EUR 18.4 billion and the proportion of net revenue generated outside Germany increased from 52.0 percent to 57.2 percent.
 
Net loss amounted to EUR 0.6 billion in the first half of 2009, compared with a net profit of EUR 1.3 billion in the first half of 2008.
 
 


 
4

 



Corporate governance.
 
In the Declaration of Conformity released on December 4, 2008 pursuant to § 161 of the German Stock Corporation Act, the Supervisory Board and Board of Management of Deutsche Telekom AG declared that, in the period since submission of the previous declaration of conformity, Deutsche Telekom AG had complied, without exception, with the recommendations of the Government Commission for the German Corporate Governance Code published on July 20, 2007 and, without exception, with the recommendations published on August 8, 2008.
 
Deutsche Telekom AG shares are listed as American Depositary Shares (ADSs) on the New York Stock Exchange (NYSE). As a result, Deutsche Telekom is subject to NYSE listing rules as well as to U.S. capital market legislation, in particular the Sarbanes-Oxley Act of 2002 and associated regulations of the Securities and Exchange Commission (SEC) for listed foreign entities. A general summary of the main differences between German corporate governance rules and those of the NYSE that apply to listed companies is included in Deutsche Telekom's Annual Report on Form 20-F for the 2008 financial year.
 
 
 


 
5

 
 
 
Highlights.
 
Events in the second quarter of 2009.
 
Group.
 
    Deutsche Telekom specifies details of new structure.
 
On April 29, 2009, the Supervisory Board of Deutsche Telekom AG approved a more regional and integrated structure for the Company.  This restructuring of the business in Germany is a continuation of activities started in the fall of 2006 with the integration of the sales and customer service functions in Germany.  Subject to approval by the shareholders and financial authorities, there are two stages in the implementation of the new structure:
 
    T-Mobile International AG was merged into Deutsche Telekom AG effective July 6, 2009. T-Mobile Deutschland GmbH has thus become a direct subsidiary of Deutsche Telekom AG.
 
    T-Home and T-Mobile Deutschland GmbH are to be combined to form a single company which will be a wholly-owned subsidiary of Deutsche Telekom AG.
 
An extraordinary shareholders’ meeting will be called in late fall of this year in order to gain the approval of shareholders, after which the new structure will quickly be implemented. The three service companies (Deutsche Telekom Kundenservice GmbH, Deutsche Telekom Technischer Service GmbH, and Deutsche Telekom Netzproduktion GmbH) and Telekom Shop Vertriebsgesellschaft mbH will then become wholly-owned subsidiaries of the new company for German operations.
 
 
    Issuances in the second quarter of 2009.
 
Deutsche Telekom issued a benchmark bond through its financing arm Deutsche Telekom International Finance B.V. in the second quarter of 2009 - a U.S. dollar bond for USD 1.5 billion on June 22, 2009. The five-year tranche has a coupon of 4.875 percent, the ten-year tranche a coupon of 6 percent.
 
In addition, several medium-term notes were issued in the second quarter of 2009. On April 9, 2009, Deutsche Telekom issued a 13-year medium-term note in the amount of GBP 700 million (pounds sterling) with a coupon of 6.5 percent through Deutsche Telekom International Finance B.V. On April 22, 2009, Deutsche Telekom AG also issued a five-year medium-term note in the amount of CHF 400 million (Swiss francs) with a coupon of 3.75 percent. Furthermore, euro medium-term notes with a total volume of EUR 600 million and terms of five to eight years were issued through Deutsche Telekom International Finance B.V.
 
 
    Rating change by Fitch.
 
On April 23, 2009, Fitch Ratings lowered Deutsche Telekom's long-term rating by one notch from A- to BBB+. The outlook changed from negative to stable. The short-term rating was confirmed at F-2.
 
 
    Staff reduction, restructuring and recruitment to make the workforce competitive.
 
In the Group's German companies, socially responsible measures were used to reduce staff numbers further in the first half of 2009, essentially by means of voluntary redundancies, partial and early retirement, and employment opportunities for civil servants and employees offered by Vivento, especially in the public sector. As part of the 3,500 or so planned new hires, 1,900 staff have already been recruited, of which 740 are professionals and 1,160 junior staff.
 
 
    2009 collective negotiations for Telekom Shop Vertriebsgesellschaft.
 
In the fourth round of negotiations, Telekom Shop Vertriebsgesellschaft (TSG) and the service trade union ver.di reached an accord on a collective agreement for the 5,000 or so employees of TSG on June 9, 2009. After a three-month salary freeze, salaries for all employees subject to collective agreements will increase by 2.5 percent from August 2009 and by another 1.8 percent from May 2010. For May to July 2009, the percentage increases will be realized through a one-time payment calculated from each individual’s annual target salary. The new collective agreement has a term of 24 months. Junior sales assistants will receive an additional 1 percent raise from August 2009, i.e., 3.5 percent overall. From May 2010, they will also receive approximately 1 percent on top of the 1.8 percent raise. The specific provision for junior sales assistants sends out a clear signal for TSG employees in the entry-level wage group, which now accounts for almost one third of the sales force.
 
 
    Deutsche Telekom leads the table.
 
In a readers' survey by Europe's largest trade journal, connect, Deutsche Telekom came out on top in seven categories: mobile network operator, triple play, DSL and telephone, mobile data flat rate, mobile portals, mobile discount and prepaid cards. T-Mobile, for instance, was rated the best network for the tenth time in a row. Deutsche Telekom's IPTV service came out winner in comparative tests by Computer Bild magazine and Stiftung Warentest, the German consumer testing organization, for example. A survey by the Internet portal PC Welt of around 1,600 users found  that T-Home has the best customer service of all DSL providers. The criteria included telephone hotline quality, e-mail support, fault clearance service and cost. T-Home was awarded a score of 2.2, the best mark received by any provider, for its customer service (1 being the highest mark possible).
 
 
 
6

 
 
Mobile Communications Europe.
 
    COSMOTE takes over Zapp in Romania.
 
The COSMOTE group has signed an agreement in Bucharest for the takeover of Telemobil S.A. (Zapp). The enterprise value, and therefore the value of the Zapp shares, is estimated at around EUR 61 million. COSMOTE will also take over the financial and other liabilities of Zapp, estimated at EUR 146 million and mainly relating to the roll-out of the 3G and CDMA networks. Zapp is the oldest mobile communications provider in the Romanian market. The 3G network currently covers 23 cities in Romania. Zapp generated revenue of EUR 61 million in 2008 with over 374,000 contract customers. The transaction is subject to approval from the relevant Romanian authorities.
 
 
    Integrative product innovations help Deutsche Telekom’s role as a leading provider of products for connected life and work.
 
The Family calling plan launched in the German market in May 2009 is the first to integrate mobile communications and fixed-network. It is ideally tailored to families as a target group and offers a good value flat rate. Family members with up to four cell phones and a fixed-network line can make unlimited calls to each other.
 
In Croatia, T-Mobile and T-Com jointly launched the Full Internet Tariff product in May 2009, which integrates fixed-network DSL and access to the mobile Internet through HotSpots, giving customers unlimited access to the Internet.
 
 
    Systematic and necessary expansion and modernization of network infrastructure to support  innovative products.
 
Having acquired a UMTS license in December 2008, T-Mobile Macedonia began to offer its customers 3G applications in June 2009. In the first phase, larger cities have access to the 3G network.
 
T-Mobile Austria was the first Austrian mobile communications operator to test the next-generation mobile network (NGMN) in a showcase project using Long-Term Evolution (LTE), in cooperation with Huawei.
 
    High-performance and intelligent terminal equipment make connected life and work an experience.
 
In June 2009, T-Mobile exclusively launched the successor model of the thriving Apple iPhone 3G – the iPhone 3G S – in Germany, the Netherlands and Austria. The iPhone 3G S is expected to go on sale in other countries, including countries in which COSMOTE mobile communications companies operate, in the third quarter of 2009.
 
Since the beginning of June 2009 the T-Mobile Jukebox has given music lovers in Germany and Austria access to around two million songs. As all copy protection has been removed, T-Mobile customers can now download the songs without worrying about digital rights management. T-Mobile reached agreements to this effect with virtually all major record companies and key independent labels.
· 
 
Broadband/Fixed Network.
 
    Super-fast Internet connection for business customers.
 
With CompanyConnect 10M, Deutsche Telekom is providing its business customers throughout Germany with a professional Internet link over existing copper lines that features symmetrical transmission rates of up to 10 Mbit/s. This is around five times faster that the fastest previous CompanyConnect connection using copper lines. CompanyConnect 10M is ideal for business customers in regions that are not served by fiber networks, for example.
 
 
    Successful launch of the terminal equipment service package.
 
The service package, which was launched in Germany in April 2009, has been well received by customers. For a low monthly flat rate customers receive the latest terminal equipment and a comprehensive service package, including software updates, remote maintenance and installation support. Deutsche Kundenservice GmbH (DT KS), the Telekom shops and the Telekom online shop have recorded more than 20,000 bookings per week.
 
 
    Deutsche Telekom greatly expands content range.
 
Videoload has been offering VideoloadFree since the beginning of June 2009, a free service that is financed by automated, dynamically integrated advertising.
 
The market leader Softwareload has been available to customers in Switzerland and Austria since April 2009.
 
The internet portal wer-kennt-wen.de, one of the largest social networking sites on the German-speaking Internet, began offering its more than six million community members music to download in cooperation with Musicload in June 2009.
 
 
Systems Solutions.
 
    MAN concludes service agreement with T-Systems.
 
MAN AG signed a seven-year agreement with T-Systems in June 2009 to transfer IT services from MAN IT Services GmbH to T-Systems from July 1, 2009. T-Systems will be responsible for central services, such as networks and computing centers. T-Systems will operate the MAN group’s computing centers and the corporate network. The wide area network connects 400 sites in 23 countries. Deutsche Telekom’s corporate customer subsidiary has been engaged to consolidate the IT infrastructure. To this end, T-Systems is transferring all services into two separate high-security computing centers in Munich, which will from now on provide the MAN group with all IT services, as required. T-Systems’ Dynamic Services will adjust bandwidths, computing power and data storage capacity to MAN’s business development.
 
 
 
7

 
 
    T-Systems wins contract from Brenntag Asia Pacific.
 
Brenntag, one of the world's leading chemical distribution enterprises, has commissioned T-Systems to develop its international network. To expand its footprint, Brenntag will use information and communication technology services from the Deutsche Telekom subsidiary in Singapore, Thailand, India, Australia, Taiwan, Malaysia, Indonesia, Vietnam and the Philippines for the next three years. The IT-based corporate network will manage Brenntag's communication activities in the Asia-Pacific region. Under the new agreement, Brenntag Asia Pacific is also procuring SAP services dynamically and on demand. T-Systems will also operate Brenntag's software systems, in line with its core business.
 
 
    T-Systems takes over the Spanish IT service provider Metrolico.
 
T-Systems is boosting its business in Spain and Portugal with its acquisition of the Spanish IT service provider Metrolico from Lico Corporation. Deutsche Telekom’s systems arm is planning to reach third place among the ICT service providers on the Iberian peninsula by 2010. The acquisition is a milestone along that path. Metrolico has an excellent position in the Iberian market in the fields of infrastructure management, maintenance and technical support. A major focus of Metrolico’s business activities lies in the Spanish financial sector.
 


 
8

 

Regulatory situation.

 
Regulatory order on IP bitstream access.
 
Following the Federal Administrative Court’s repeal of the regulatory order on IP bitstream access, the Federal Network Agency (Agency)  issued a new regulatory order on June 3, 2009. Deutsche Telekom considers this order unlawful and has filed a suit against it. At the request of the Federal Network Agency, Deutsche Telekom had submitted cost records to the Agency as evidence for the prices currently in force for IP bitstream access. On June 6, 2009, the Agency initiated rate approval proceedings that will be ruled on within ten weeks.
 
Cross-connect cabinets.
 
In March 2009, Deutsche Telekom was required by the Federal Network Agency to grant the carrier EFN eifel-net access to the unbundled local loop (ULL) in areas with low bandwidth coverage through a new cross-connect cabinet to be erected between the street cabinet and the main distribution frame. On June 15, 2009, the Agency fixed the rates for access to the cross-connect cabinet. Deutsche Telekom has filed a suit and an application for expedited proceedings for a suspension of enforcement against this obligation and the rate ruling with the Cologne Administrative Court.
 
 
Further expansion of the DSL network.
 
As a result of economic developments and regulatory decisions by the Federal Network Agency, Deutsche Telekom has had to reduce its overall capital expenditure on broadband expansion for this year by EUR 100 million to EUR 200 million. In particular, the cutting of key wholesale rates such as the rate for ULLs means that the Deutsche Telekom Group now has less capital at its disposal for investment purposes. At the same time, demand from municipalities has risen sharply year-on-year, also as a result of the Federal Government’s broadband initiative. So far this year, it Deutsche Telekom has entered into 426 agreements with local authorities, i.e., in six months as many as in the whole of 2008.
 
 
Key elements and notes paper published by the Federal Network Agency.
 
With reference to the broadband strategy approved by the Federal Government in February 2009, the Federal Network Agency published two consultation papers on May 13, 2009: (1) Key elements for progressing modern telecommunications networks and creating powerful broadband infrastructures, and (2) Notes on the consistent regulation of rates as required under § 27 (2) of the Telecommunications Act (TKG). Deutsche Telekom has submitted a statement of opinion on each of these papers, calling for more restrained regulation so that the change in the intensity of competition and the investment risks associated with the infrastructure can be appropriately taken into consideration. Deutsche Telekom specifically criticizes the fact that the Federal Network Agency is failing to create legal certainty and planning reliability with regard to the future handling of new networks, does not adequately provide for contract concepts on the sharing of risk, and on the whole is looking to maintain strict cost regulation. Furthermore, Deutsche Telekom is calling on the Agency to apply less stringent rate regulation standards to achieve the consistency goal. The Agency will first publish and then evaluate the statements submitted by market participants.
 
 
Infrastructure atlas.
 
As part of its broadband strategy, the Federal Government has also commissioned the Federal Network Agency to draw up an infrastructure atlas to include all privately and publicly sponsored infrastructures in Germany that can be shared for broadband expansion. The atlas will help to leverage synergies in infrastructure roll-out to reach the goals of the broadband strategy. Deutsche Telekom will support this initiative on a voluntary basis by supplying relevant infrastructure data. Provisions governing access, use, and liability in connection with the infrastructure atlas still need to be clarified, however.
 
 
Terms and conditions governing the assignment of frequencies.
 
On June 3, 2009, the Federal Network Agency published its draft of the terms and conditions governing the award of spectrum in the 800 MHz, 1.8 GHz, 2 GHz, and 2.6 GHz bands in the Official Gazette and invited public comments until July 17, 2009. Among other things, the terms and conditions provide for incremental service obligations in the area of the digital dividend, making it impossible to rapidly fill "blank spots" on the German map and thus making the spectrum unattractive from a business point of view. In its comment, Deutsche Telekom spoke out in favor of a needs-based adjustment of the service obligations. In addition, the Federal Network Agency published draft rules on carrying out proceedings for the award of spectrum (auction rules) on July 27, 2009 and invited comments to be submitted until August 26, 2009.
 
International roaming.
 
The European Parliament and the Council of Ministers have extended the regulation of international roaming. Consumer rates will gradually be reduced to EUR 0.35 (plus VAT) for outgoing calls and to EUR 0.11 (plus VAT) for incoming calls by 2011. The rates have to be billed to the second, though in the case of outgoing calls this applies after the first 30 seconds. The wholesale price for data roaming will initially be reduced to EUR 1 per megabyte, then to EUR 0.80 in 2010 and EUR 0.50 in 2011. Text message prices were reduced to EUR 0.11 (plus VAT) from July 1, 2009.
 

 
9

 

Group strategy.
 
    "Focus, fix and grow" – Deutsche Telekom’s strategy is being systematically implemented.
 
Deutsche Telekom aims to position itself as a market leader for connected life and work. This vision pursues important trends, such as the digitization of many spheres of life, the fragmentation of living and working environments, the personalization of products and services, further growing mobility, ongoing globalization, and international value creation. The Deutsche Telekom Group is meeting these trends and the current macroeconomic and competitive challenges head on with its "Focus, fix and grow" strategy. The four strategic action areas remain unchanged:
 
    Improve competitiveness in Germany and in Southern and Eastern Europe
 
    Grow abroad with mobile communications
 
    Mobilize the Internet
 
    Roll out network-centric ICT
 
    Improve competitiveness.
 
Deutsche Telekom is responding to the challenges in Germany and in the markets of Southern and Eastern Europe with a forward-looking approach. The strategic development of broadband infrastructure, innovative products, continuous improvements in the cost structure and a more integrated structure form the basis for long-term business success.
 
In Germany, Deutsche Telekom already supplies around 1,000 towns and cities with ADSL2+ and, in the 50 largest cities, it also offers services via its VDSL infrastructure. As it continues to expand the infrastructure, the Deutsche Telekom Group is increasingly looking to cooperation models with local authorities and competitors. This year, 426 such models have already been agreed with municipalities to connect around 63,000 more households to the broadband network. Deutsche Telekom is also opening up its VDSL network to competitors, without being obliged to do so by the regulator, and is planning to work with other municipalities to expand fiber optic technology in 13 German cities.
 
The high-performance broadband infrastructure forms the basis for attractive products and high-quality customer service. Entertain, the next generation television service, now also enables access to personal e-mail accounts and was recently extended to include various web services. LIGA total!, an exclusive Bundesliga soccer package, will be on offer from August. Also, since April 2009 Deutsche Telekom has been offering a number of terminal devices, like the Entertain set-top box, not just for purchase but also for a fixed monthly service charge. At the same time, the Deutsche Telekom Group's Save for Service program is continuing to improve cost structures. The target for 2010 was to realize savings of between EUR 4.2 and EUR 4.7 billion per annum. Deutsche Telekom met this target ahead of schedule on June 30, 2009 with cumulative savings of EUR 4.9 billion.
 
The fixed-network and mobile business will be merged to further strengthen the position in the German market and enable the Group to offer integrated products and services from a single source. Similar changes have also been initiated in Southern and Eastern Europe. For instance, T-Hrvatski Telekom in Croatia is undergoing a strategic and organizational realignment. T-Com and T-Mobile operations in Croatia are being consolidated and merged into a single business unit. For T-Hrvatski Telekom, the purpose of the restructuring is to improve customer service and internal efficiency and thus to strengthen its position as market leader.
 
    Grow abroad with mobile communications.
 
The proportion of net revenue generated abroad has grown rapidly over the last few years. The German home market only accounted for 42.8 percent of all revenue in the first half of 2009. This trend was reinforced by the consolidation of Greek Hellenic Telecommunications S.A. (OTE). Deutsche Telekom and OTE have a joint footprint spanning almost all of Central, Southern and Eastern Europe. The cooperation holds growth potential for both companies and promises procurement and investment synergies, and better cost efficiency.
 
For Deutsche Telekom, the stake in OTE is a logical further step in its international growth strategy. Deutsche Telekom intends to continue to leverage international economies of scale and synergies and grow further internationally on that basis. This will involve both consolidation in markets in which the Group already has a presence, where this is possible and expedient, and commitments in neighboring markets. For example, COSMOTE, a subsidiary of the Greek group OTE, signed an agreement at the end of June 2009 on the takeover of the Romanian company Telemobil S.A. (Zapp). The company has a CDMA license and a 3G license and serves more than 374,000 contract customers, generating revenue of EUR 61 million in 2008. The transaction is subject to approval from the relevant Romanian authorities.
 
    Mobilize the Internet.
 
Mobile use of the Internet is the overriding trend in the telecommunications industry. Users can network privately and professionally and access digital content at all times, wherever they may be. Deutsche Telekom is very well positioned in this growth market, not least thanks to a wide range of innovative terminal equipment at attractive prices, intuitive, device-independent user interfaces and a high-performance infrastructure. The number of mobile Internet users served by the Western European companies and in the Czech Republic and Poland rose to over 18 million.
 
In June 2009, Deutsche Telekom exclusively launched the new iPhone 3G S in the German, Austrian and Dutch markets. The latest generation of the Apple smartphone sets itself apart not only with its familiar simple operation, but also with innovative features, greater processing power, more RAM and faster transmission rates. The T-Mobile G1 also gets top marks. A Simpson Carpenter survey on customer satisfaction in the United Kingdom found that 90 percent of G1 users are very satisfied with the device and the associated calling plans. The latest version of Deutsche Telekom’s web’n’walk platform extends the outstanding user experience of iPhone and Android to other mobile handsets. So-called widgets give direct access to the most popular services on the Internet.
 
In addition to Internet content, Deutsche Telekom enables easy access to personal image and audio data as well as the latest music and TV content. T-Home and T-Mobile customers can access their content on their television set, mobile handset or computer at any time, with the same user interface for all devices. Deutsche Telekoms mobile customers also have access to more than two million songs without copy protection through the T-Mobile Jukebox. In addition, T-Mobile launched its reworked mobile TV service in Germany and Austria in the second quarter of 2009. The new platform provides better picture quality and is more user-friendly.
 
As a leading broadband provider, Deutsche Telekom will continue to benefit from growth in the mobile data business through its own innovative developments and strategic collaborations, all based on its superior infrastructure. Deutsche Telekom is therefore focusing on constantly increasing the speed of its mobile networks and is already successfully testing the fourth generation mobile communications standard (LTE).
 
 
 
10

 
 
    Roll out network-centric ICT.
 
The trend toward convergence of IT, telecommunications services and applications to create an ICT environment continues apace. T-Systems seized on this development early on and built its strategy around providing customized ICT projects and solutions for corporate customers. Numerous multinational groups, such as Shell and Linde, have already put their faith in the knowledge and solution expertise of T-Systems in outsourcing their information and communication technology.
 
In the second quarter of 2009, T-Systems once again won a number of major international contracts, including for the provision of dynamic SAP services for the Swiss group Interroll, for operating information and communication technology for Mexico’s largest development bank Banobras, and for harmonizing Sanitec’s IT systems in Germany and France. In addition, on July 1, 2009, T-Systems took over MAN’s German and Austrian computing centers and global network connecting 400 sites in 23 countries. From now on, MAN will procure all of its computer, storage and network services as required from T-Systems. The contract is worth EUR 400 million  and has a term of seven years.
 
In May of this year, T-Systems also strengthened its position in Spain and Portugal by acquiring the Spanish IT service provider Metrolico. T-Systems and Metrolico complement each other in the industry and now have a presence in all key strategic sectors in Spain: T-Systems plays a leading role in the public and automotive sectors, while Metrolico's business areas include the financial sector.
 


 
11

 

 
Development of business in the Group.
 
    Net revenue.
 
In the first half of financial year 2009, Deutsche Telekom generated a year-on-year revenue increase of EUR 2.0 billion or 6.8 percent, primarily as a result of EUR 2.4 billion from the first-time full consolidation of OTE and positive exchange rate effects totaling EUR 0.3 billion.
 
The Mobile Communications Europe operating segment recorded a 3.9-percent increase in revenue year-on-year to EUR 10.6 billion. This increase was also largely due to the full consolidation of OTE, which contributed EUR 1.2 billion to the operating segment’s revenue. Revenue for the first half of 2009 was negatively affected by exchange rate effects amounting to EUR 0.6 billion, which resulted essentially from the translation of pounds sterling, Polish zlotys, Hungarian forints and Czech korunas to euros. General economic conditions and the continuing high level of competitive pressure also had a negative effect on revenue.
 
Revenue from the Mobile Communications USA operating segment increased EUR 1.1 billion year-on-year to EUR 8.1 billion in the first half of the year. This revenue growth was primarily the result of exchange rate effects totaling EUR 1.0 billion from the translation of U.S. dollars to euros. Average revenue per customer declined, however, due to a proportion of the customer base towards lower ARPU products.
 
Revenue from the Broadband/Fixed Network operating segment increased EUR 0.7 billion year-on-year to EUR 11.9 billion. The positive effect of EUR 1.4 billion from the full consolidation of OTE for the first time was partially offset by lower revenues in Germany of EUR 0.6 billion, due to line losses and a decrease in usage-related charges, and a decrease in revenues in Eastern Europe due to intense competition in the traditional fixed-network business.
 
The Systems Solutions operating segment generated revenue of EUR 4.3 billion. Revenue declined by EUR 0.2 billion year-on-year, primarily as a result of lower intragroup revenue. International revenue increased.
 
   
Q1 2009 millions of €
   
Q2
2009
millions of €
   
Q2
2008
millions of €
   
Change %
   
H1 2009
millions of  €
   
H1
2008
millions of €
   
Change %
   
FY
2008
millions of
 
Net revenue
    15,902       16,238       15,125       7.4       32,140       30,103       6.8       61,666  
Mobile Communications Europea,b
    5,077       5,500       5,187       6.0       10,577       10,179       3.9       20,663  
Mobile Communications USAa
    4,137       3,918       3,498       12.0       8,055       6,959       15.7       14,957  
Broadband/Fixed Networka,b, c
    5,882       6,063       5,561       9.0       11,945       11,238       6.3       22,501  
Systems Solutionsa,c
    2,106       2,179       2,251       (3.2 )     4,285       4,451       (3.7 )     9,343  
Group Headquarters & Shared Servicesa,b
    878       877       915       (4.2 )     1,755       1,799       (2.4 )     3,573  
Intersegment revenued
    (2,178 )     (2,299 )     (2,287 )     (0.5 )     (4,477 )     (4,523 )     1.0       (9,371 )
                                                                 
a
Total revenue (including revenue between operating segments).
b
Including first-time full consolidation of OTE from the beginning of February 2009 in the Mobile Communications Europe, Broadband/Fixed Network and Group Headquarters & Shared Services operating segments. For detailed information, please refer to the interim consolidated financial statements.
c
As of January 1, 2009, approximately 160,000 business customers in Germany were transferred from the Systems Solutions operating segment (until December 31, 2008 called the Business Customers operating segment) to the Broadband/Fixed Network operating segment. Prior-year figures have been adjusted accordingly.
d
Elimination of revenue between operating segments.
 
 
    Contribution of the operating segments to net revenue (after elimination of revenue between segments).
 
   
H1 2009
millions of €
   
Proportion of net revenue of the Group %
   
H1 2008
millions of €
   
Proportion of net revenue of the Group %
   
Change
millions of €
   
Change %
   
FY 2008
millions of
 
Net revenue
    32,140       100.0       30,103       100.0       2,037       6.8       61,666  
Mobile Communications Europea
    10,201       31.8       9,850       32.7       351       3.6       19,978  
Mobile Communications USA
    8,047       25.0       6,953       23.1       1,094       15.7       14,942  
Broadband/Fixed Networka, b
    10,618       33.0       9,954       33.1       664       6.7       19,779  
Systems Solutionsb
    2,998       9.3       3,042       10.1       (44 )     (1.4 )     6,368  
Group Headquarters & Shared Servicesa
    276       0.9       304       1.0       (28 )     (9.2 )     599  
                                                         
a
Including first-time full consolidation of OTE from the beginning of February 2009 in the Mobile Communications Europe, Broadband/Fixed Network and Group Headquarters & Shared Services operating segments. For detailed information, please refer to the interim consolidated financial statements.
b
As of January 1, 2009, approximately 160,000 business customers in Germany were transferred from the Systems Solutions operating segment (until December 31, 2008 called the Business Customers operating segment) to the Broadband/Fixed Network operating segment. Prior-year figures have been adjusted accordingly.
 
The Broadband/Fixed Network operating segment remained the largest contributor to net revenue in the first half of 2009, with a proportion of 33.0 percent. The Mobile Communications USA operating segment increased its share of net revenue year-on-year, whereas the proportions generated by the other operating segments declined.
 
 
 
12

 
   
    Breakdown of revenue by region.
 
The proportion of net revenue generated outside Germany in the first half of 2009 increased by 5.2 percentage points compared with the prior-year period to reach 57.2 percent, largely due to the first time full consolidation of OTE, positive exchange rate effects at T-Mobile USA and sales growth in Europe and North America.
 
   
Q1 2009
millions of €
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Net revenue
    15,902       16,238       15,125       7.4       32,140       30,103       6.8       61,666  
Domestic
    6,943       6,817       7,184       (5.1 )     13,760       14,438       (4.7 )     28,885  
International
    8,959       9,421       7,941       18.6       18,380       15,665       17.3       32,781  
Proportion generated internationally
(%)
    56.3       58.0       52.5               57.2       52.0               53.2  
Europe (excluding Germany)
    4,684       5,363       4,318       24.2       10,047       8,462       18.7       17,324  
North America
    4,148       3,928       3,497       12.3       8,076       6,957       16.1       14,931  
Other
    127       130       126       3.2       257       246       4.5       526  
                                                                 

    Cost of sales.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Cost of sales
    (8,746 )     (8,342 )     (4.8 )     (17,652 )     (16,664 )     (5.9 )     (34,592 )
                                                         
 
The cost of sales increased year-on-year, primarily as a consequence of the full consolidation of OTE (EUR 1.5 billion) for the first time in the first half of 2009.
 
The Mobile Communications USA operating segment also recorded an increase in cost of sales, EUR 0.5 billion of which related to exchange rate effects and EUR 0.2 billion to increased cost of sales in connection with higher customer numbers and network expansion. By contrast, a decrease in the cost of sales was recorded by the operating segments Mobile Communications Europe, Broadband/Fixed Network, partially offsetting the increase caused by the first time full consolidation of OTE, and Systems Solutions.
 
 
    Selling expenses.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Selling expenses
    (4,059 )     (3,810 )     (6.5 )     (8,055 )     (7,519 )     (7.1 )     (15,952 )
                                                         
 
Selling expenses increased by EUR 0.5 billion, mainly as a result of the full consolidation of OTE for the first time. Exchange rate effects, especially from the translation of U.S. dollars to euros, also increased selling expenses by EUR 0.2 billion.
 
 
    General and administrative expenses.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
General and administrative expenses
    (1,469 )     (1,230 )     (19.4 )     (2,605 )     (2,333 )     (11.7 )     (4,821 )
                                                         
 
The increase in general and administrative expenses is mainly attributable to the full consolidation of OTE for the first time in the first half of 2009.
 
 
 
13

 
 
    Other operating income / expenses.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Other operating income
    253       258       (1.9 )     640       1,013       (36.8 )     1,971  
Other operating expenses
    (205 )     (133 )     (54.1 )     (2,212 )     (434 )  
n.a.
      (1,232 )
                                                         
 
Other operating income decreased by EUR 0.4 billion compared with the first half of 2008. The decline was mainly attributable to lower income from disposals. In the previous year, this item included income from the gain on the disposal of Media&Broadcast.
 
In the current reporting period, this item also includes income recognized in the first quarter of 2009 as a result of the reclassification of real estate from assets held for sale to non-current assets.
 
Other operating expenses rose by EUR 1.8 billion compared with the first half of 2008. This increase was mainly attributable to an impairment loss on the goodwill of the cash generating unit T-Mobile UK amounting to EUR 1.8 billion recorded in the first quarter of 2009. For further details, please refer to the "Depreciation, amortization and impairment losses" section.
 
    Profit from operations.
 
   
Q1 2009
millions of €
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions  of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Profit from operations in the Group
    244       2,012       1,868       7.7       2,256       4,166       (45.8 )     7,040  
Mobile Communications Europea
    (1,166 )     917       861       6.5       (249 )     1,620    
n.a.
      3,188  
Mobile Communications USA
    530       654       584       12.0       1,184       1,086       9.0       2,299  
Broadband/Fixed Networka,b
    1,170       760       819       (7.2 )     1,930       1,708       13.0       2,759  
Systems Solutionsb
    11       27       (65 )  
 n.a.
      38       418       (90.9 )     81  
Group Headquarters & Shared Servicesa
    (269 )     (280 )     (305 )     8.2       (549 )     (582 )     5.7       (1,198 )
Reconciliation
    (32 )     (66 )     (26 )  
n.a.
      (98 )     (84 )     (16.7 )     (89 )
                                                                 
a
Including first-time full consolidation of OTE from February 2009 in the Mobile Communications Europe, Broadband/Fixed Network and Group Headquarters & Shared Services operating segments. For detailed information, please refer to the interim consolidated financial statements.
 As of January 1, 2009, approximately 160,000 business customers in Germany were transferred from the Systems Solutions operating segment (until December 31, 2008 called the Business Customers operating segment) to the Broadband/Fixed Network operating segment. Prior-year figures have been adjusted accordingly.
 
Profit from operations of the Deutsche Telekom Group decreased by EUR 1.9 billion year-on-year to EUR 2.3 billion due to an impairment loss recognized in the first quarter of 2009 on goodwill of the cash generating unit T-Mobile UK in the Mobile Communications Europe operating segment. While profit from operations in the Mobile Communications Europe and Systems Solutions operating segments decreased, the Broadband/Fixed Network and Mobile Communications USA operating segments each reported a year-on-year increase. OTE contributed EUR 0.2 billion to Group profit from operations in the first half of 2009.
 
An impairment loss of EUR 1.8 billion was recognized on goodwill of the cash generating unit T-Mobile UK in the Mobile Communications Europe operating segment in the first quarter of 2009, mainly a consequence of the significant economic slowdown and tough competition in the United Kingdom. Volume-driven lower roaming revenues and new regulation of roaming and termination charges had a negative impact on revenue. Increased termination charges for the use of third-party mobile communications networks and high customer acquisition and retention expenses raised the cost base.
 
Also, in the Mobile Communications Europe operating segment exchange rate effects mainly in the United Kingdom, Poland, Hungary and the Czech Republic, higher customer acquisition and retention costs in the Netherlands and Austria, for example, as well as the economic environment had a negative effect on profit from operations. The full consolidation of OTE for the first time, on the other hand, had a positive impact on the operating segment.
 
In the Mobile Communications USA operating segment, profit from operations increased slightly, primarily as a result of positive exchange rate effects, which were partially offset by a decline in revenues per contract customer.
 
The Broadband/Fixed Network operating segment reported an increase in profit from operations, principally as a result of the full consolidation of OTE for the first time.
 
Profit from operations in the Systems Solutions operating segment in the prior-year period was affected in particular by the gain on the disposal of Media&Broadcast.
 
  
 
14

 
   
    Profit/loss from financial activities.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Profit (loss) from financial activities
    (1,015 )     (976 )     (4.0 )     (1,757 )     (1,653 )     (6.3 )     (3,588 )
Finance costs
    (635 )     (770 )     17.5       (1,267 )     (1,342 )     5.6       (2,487 )
Interest income
    91       87       4.6       191       158       20.9       408  
Interest expense
    (726 )     (857 )     15.3       (1,458 )     (1,500 )     2.8       (2,895 )
Share of profit (loss) of associates and joint ventures accounted for using the equity method
    9       5       80.0       14       16       (12.5 )     (388 )
Other financial income (expense)
    (389 )     (211 )     (84.4 )     (504 )     (327 )     (54.1 )     (713 )
                                                         
 
The increase of EUR 0.1 billion in the loss from financial activities compared with the first half of 2008 is mainly attributable to the increase in other financial expense. Finance costs were subject to two offsetting effects.
 
On the one hand, interest expense increased due to the full consolidation of OTE in the consolidated financial statements for the first time in the first half of 2009. On the other hand, the downgrade of Deutsche Telekom’s rating in the first half of 2008 and the resulting adjustment to carrying amounts for a number of bonds with rating-linked coupons had an impact on interest expense in the prior year period.
 
The EUR 0.2 billion increase in other financial expense compared with the first half of 2008 is mainly attributable to negative interest rate effects on provisions and liabilities.
 
 
 
15

 
 
    Personnel.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Personnel costs
    (3,643 )     (3,457 )     (5.4 )     (6,953 )     (6,777 )     (2.6 )     (14,078 )
                                                         
Average number of employees
    260,380       236,183       10.2       254,853       237,143       7.5       234,887  
                                                         
 
   
June 30, 2009
   
Dec. 31, 2008
   
Change
   
Change %
   
June 30, 2008
 
Number of employees at balance sheet date
    261,373       227,747       33,626       14.8       235,794  
Germany
    130,452       131,713       (1,261 )     (1.0 )     142,358  
International
    130,921       96,034       34,887       36.3       93,436  
                                         
Non-civil servants
    229,990       195,634       34,356       17.6       202,151  
Civil servants (Germany)
    31,383       32,113       (730 )     (2.3 )     33,643  
                                         
Trainees and student interns at balance sheet date
    8,640       11,668       (3,028 )     (26.0 )     9,164  
 
Personnel costs increased in the first half of 2009 by EUR 0.2 billion year-on-year. The decrease resulting from personnel reductions in Germany was more than offset by the full consolidation of OTE for the first time and the continued workforce expansion at T-Mobile USA.
 
These factors had a corresponding effect on the development in the average number of employees and the number at the balance sheet date.
 
    Depreciation, amortization and impairment losses.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Amortization and impairment of intangible assets
    (884 )     (773 )     (14.4 )     (3,475 )     (1,549 )  
n.a.
      (3,397 )
Of which: UMTS licenses
    (214 )     (217 )     1.4       (423 )     (438 )     3.4       (868 )
Of which: U.S. mobile communications licenses
    -       (7 )  
n.a.
      -       (21 )  
n.a.
      (21 )
Of which: goodwill
    (3 )     -    
n.a.
      (1,806 )     -    
n.a.
      (289 )
Depreciation and impairment of property, plant and equipment
    (2,131 )     (1,925 )     (10.7 )     (4,238 )     (3,806 )     (11.4 )     (7,578 )
Total depreciation, amortization and impairment losses
    (3,015 )     (2,698 )     (11.7 )     (7,713 )     (5,355 )     (44.0 )     (10,975 )
                                                         
 
Depreciation, amortization and impairment losses in the Group increased in the first half of 2009 due to the full consolidation of OTE for the first time and to an impairment loss recognized on the goodwill of the cash generating unit T-Mobile UK amounting to EUR 1.8 billion in the first quarter of 2009.
 
Events or circumstances that resulted in an impairment loss to be recognized at the cash-generating unit T-Mobile UK in the Mobile Communications Europe operating segment primarily include the major economic slowdown and more intense competition in the United Kingdom. Lower roaming revenues and newly introduced regulation of roaming and termination charges had a negative impact on revenue. Increased termination charges for the use of third-party mobile communications networks and high customer acquisition and retention expenses raised the cost base.
 
 
 
16

 
 
    Profit/loss before income taxes.
 
Profit before income taxes for the first half of 2009 was EUR 0.5 billion, down EUR 2.0 billion compared to the prior-year period. This item was impacted in particular by the impairment of goodwill at the cash generating unit T-Mobile UK amounting to EUR 1.8 billion, which was reflected in the loss from operations of the Mobile Communications Europe operating segment.
 
 
    Income taxes.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
Change %
   
H1 2009
millions of €
   
H1 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Income taxes
    (401 )     (344 )     (16.6 )     (827 )     (906 )     8.7       (1,428 )
                                                         
 
Despite significantly lower profit/loss before income taxes, income tax expense only decreased slightly compared with the first half of 2008. This relatively small decrease in income tax expense is attributable to an impairment of goodwill in the fisrt quarter of 2009 that had no tax effect.
 
    Net loss.
 
Deutsche Telekom generated a net loss of EUR 0.6 billion in the first half of 2009, compared with a net profit of EUR 1.3 billion in the prior-year period due to the aforementioned effects.
 

 
17

 
 
Liquidity and Capital Resources.
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
H1 2009
millions of €
   
H1 2008
millions of €
   
FY 2008
millions of
 
Net cash from operating activities
    3,512       3,682       6,478       7,013       15,368  
Net cash used in investing activities
    (2,029 )     (4,214 )     (3,538 )     (6,437 )     (11,384 )
Net cash from (used in) financing activities
    197       193       (190 )     (862 )     (3,097 )
Effect of exchange rate changes on cash and cash equivalents
    43       22       60       40       (61 )
Net increase (decrease) in cash and cash equivalents
    1,723       (317 )     2,810       (246 )     826  
Cash and cash equivalents, at the beginning of the period
    4,113       2,271       3,026       2,200       2,200  
Cash and cash equivalents, at end of the period
    5,836       1,954       5,836       1,954       3,026  
                                         
 
    Net cash from operating activities.
 
Net cash from operating activities amounted to EUR 6.5 billion in the reporting period, compared with EUR 7.0 billion in the prior-year period. This decrease was mainly attributable to the development of working capital which, in the first six months of 2009, was mainly affected by higher cash outflows for restructuring measures year-on-year. In addition, interest payments and income tax payments increased year-on-year, in particular as a result of the first-time full consolidation of OTE from February 2009.
 
    Net cash used in investing activities.
 
Net cash used in investing activities totaled EUR 3.5 billion as compared with EUR 6.4 billion in the same period of the previous year. This development was mainly due to the addition of OTE’s cash and cash equivalents amounting to EUR 1.6 billion in the first half of 2009 as part of the first-time full consolidation of OTE, whereas the first half of 2008 saw outflows for the acquisition of shares in OTE amounting to EUR 2.6 billion. Cash outflows for intangible assets and property, plant and equipment, however, increased by EUR 1.2 billion, primarily as a result of the network roll-out in the United States and the United Kingdom.
 
Net cash outflows for acquisitions and disposals decreased by EUR 0.2 billion. Whereas cash outflows amounting to EUR 1.0 billion for the purchase of SunCom and cash inflows of EUR 0.8 billion from the sale of Media&Broadcast and Bild.T-Online were recorded in the first half of 2008, the first six months of 2009 saw cash outflows of only EUR 0.1 billion for the disposal of CAP Customer Advantage Program GmbH and cash inflows of EUR 0.1 billion from the sale of Cosmofon.
 
    Net cash used in financing activities.
 
Net cash used in financing activities amounted to EUR 0.2 billion in the first half of 2009, compared with EUR 0.9 billion in the prior-year period.
 
This change was mostly attributable to EUR 0.7 billion higher year-on-year net proceeds from the issue of non-current financial liabilities and EUR 0.1 billion lower net repayments of current financial liabilities. Dividend payments at subsidiaries were EUR 0.2 billion higher in the first half of 2009 than in the prior-year period.
 
The issue of financial liabilities in the first half of 2009 consisted in particular of the issue of a Eurobond for EUR 2.0 billion, medium-term notes for EUR 1.6 billion, a U.S. dollar bond for EUR 1.1 billion, and promissory notes for EUR 0.2 billion. Commercial paper with a net volume of EUR 1.5 billion was also issued. Medium-term notes for an amount of EUR 1.7 billion and a U.S. dollar bond issue of EUR 0.7 billion were repaid during the same period.
 
 
    Capital expenditures and investments
 
The following table provides information concerning capital expenditures and investments in subsidiaries, associated companies and related companies, as well as proceeds from the sale of non-current assets and investments.
 
 
   
Q2 2009
millions of €
   
Q2 2008
millions of €
   
H1 2009
millions of €
   
H1 2008
millions of €
   
FY 2008
millions of
 
Capital expenditures
    2,211      
1,837
     
4,822
     
3,629
     
8,707
 
Investments in subsidiaries and non-current financial assets
    84      
2,661
     
164
     
3,711
     
4,291
 
Proceeds from disposal of non-current assets and investments
    (263 )    
            (159)
     
(370)
     
(1,083)
     
(1,252)
 
Other
   
  (3)
     
            (125)
     
(1,078)
     
180
     
(362)
 
Net cash used in investing activities
   
  2,029
     
4,214
     
3,538
     
6,437
     
11,384
 

 
 
18

 
   
    Total Financial Liabilities
 
The following table summarizes our total financial liabilities as of June 30, 2009 and 2008, and December 31, 2008:
 
 
As of June 30, 2009
 
As of December 31,2008
 
Change
% Change
As of June 30, 2008
               
                 
Bonds
43,157
   
34,302
 
 8,855
 25.8
32,249
Liabilities to banks
4,806
   
4,222
 
 584
 13.8
7,415
Promissory notes
1,029
   
887
 
 142
 16.0
738
Liabilities from derivatives
806
   
1,088
 
 (282)
 (25.9)
1,366
Lease liabilities
1,965
   
2,009
 
 (44)
 (2.2)
2,056
Other financial liabilities
5,103
   
4,086
 
 1,017
 24.9
2,677
Total
56,866
   
46,594
 
 10,272
 22.0
46,501
 
Total financial liabilities increased as of June 30, 2009, as compared with December 31, 2008, primarily as a result of the full consolidation of OTE and the issuance of EUR 3.1 billion equivalent of bonds (EUR 2.0 billion, USD 1.5 billion), EUR 1.6 billion equivalent of medium term notes (EUR 0.6 billion, CHF 0.4 billion, GBP 0.7 billion) and commercial paper of EUR 2.0 billion. This was partially offset by redemptions  of EUR 3.0 billion. Additionally, financial liabilities increased by EUR 0.1 billion due to changes in foreign exchange rates.
 
 
 
19

 
 
Segment reporting.
 
The following tables give an overall summary of Deutsche Telekom's operating segments for the second quarter and the first six months of the years 2009 and 2008, as well as for the full 2008 financial year. Segment reporting further includes a reconciliation of the total profit/loss of the segments to the Group's profit/loss for the respective periods.
 

 
    Segment information in the quarters.
 
 
Q2 2009
Q2 2008
   
Net revenue
millions of €
   
Intersegment revenue
millions of €
   
Total revenue
millions of €
   
Profit (loss) from operations millions of €
   
Depreciation and amortization
millions of €
   
Impairment losses
millions of €
   
Segment
assets millions of  €
   
Investments accounted for using the equity method
millions of €
 
Mobile Communications Europe
      5,307       193       5,500       917       (990 )     (2 )     34,900       12  
          5,015       172       5,187       861       (941 )     0       33,941       1  
Mobile Communications USA
      3,914       4       3,918       654       (522 )     0       34,118       17  
          3,496       2       3,498       584       (423 )     (7 )     29,670       12  
Broadband/Fixed Networka
      5,383       680       6,063       760       (1,103 )     (12 )     32,142       71  
          4,922       639       5,561       819       (888 )     (2 )     26,969       82  
Systems Solutionsa
      1,502       677       2,179       27       (173 )     0       6,873       50  
          1,538       713       2,251       (65 )     (188 )     (7 )     6,968       17  
Group Headquarters & Shared Services
      132       745       877       (280 )     (198 )     (26 )     13,236       0  
    154       761       915       (305 )     (175 )     (75 )     11,930       2,520  
Total
      16,238       2,299       18,537       2,078       (2,986 )     (40 )     121,269       150  
          15,125       2,287       17,412       1,894       (2,615 )     (91 )     109,478       2,632  
Reconciliation
      -       (2,299 )     (2,299 )     (66 )     12       (1 )     (3,834 )     0  
          -       (2,287 )     (2,287 )     (26 )     10       (2 )     (3,263 )     0  
Group
      16,238       -       16,238       2,012       (2,974 )     (41 )     117,435       150  
          15,125       -       15,125       1,868       (2,605 )     (93 )     106,215       2,632  
                                                                     
a
As of January 1, 2009, approximately 160,000 business customers in Germany were transferred from the Systems Solutions operating segment (until December 31, 2008 called the Business Customers operating segment) to the Broadband/Fixed Network operating segment. Prior-year figures have been adjusted accordingly.
 
 
 
20

 
   
    Half-year segment information.
 
 
H1 2009
H1 2008
   
Net revenue
millions of €
   
Intersegment revenue millions of €
   
Total revenue
millions of €
   
Profit (loss) from operations
millions of €
   
Depreciation and amortization
millions of €
   
Impairment losses
millions of €
   
Segment
assets
millions of €
   
Investments accounted for using the equity method
millions of €
 
Mobile Communications Europe
      10,201       376       10,577       (249 )     (1,898 )     (1,805 )     34,900       12  
          9,850       329       10,179       1,620       (1,881 )     0       33,941       1  
Mobile Communications USA
      8,047       8       8,055       1,184       (1,053 )     0       34,118       17  
          6,953       6       6,959       1,086       (869 )     (21 )     29,670       12  
Broadband/Fixed Networka
      10,618       1,327       11,945       1,930       (2,101 )     (19 )     32,142       71  
          9,954       1,284       11,238       1,708       (1,793 )     (4 )     26,969       82  
Systems Solutionsa
      2,998       1,287       4,285       38       (350 )     0       6,873       50  
          3,042       1,409       4,451       418       (375 )     (8 )     6,968       17  
Group Headquarters & Shared Services
      276       1,479       1,755       (549 )     (378 )     (129 )     13,236       0  
    304       1,495       1,799       (582 )     (347 )     (80 )     11,930       2,520  
Total
      32,140       4,477       36,617       2,354       (5,780 )     (1,953 )     121,269       150  
          30,103       4,523       34,626       4,250       (5,265 )     (113 )     109,478       2,632  
Reconciliation
      -       (4,477 )     (4,477 )     (98 )     20       0       (3,834 )     0  
          -       (4,523 )     (4,523 )     (84 )     24       (1 )     (3,263 )     0  
Group
      32,140       -       32,140       2,256       (5,760 )     (1,953 )     117,435