q36k2009.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 November 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 Rule12g3-2(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 nine-month period ended September 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.
 
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.

 
1

 
 
Deutsche Telekom at a glance.
                   
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008 millions of
 
Net revenue
    16,262       15,454       5.2       48,402       45,557       6.2       61,666  
   Domestic
    7,201       7,158       0.6       20,961       21,596       (2.9 )     28,885  
   International
    9,061       8,296       9.2       27,441       23,961       14.5       32,781  
Profit from operations
    2,498       2,313       8.0       4,754       6,479       (26.6 )     7,040  
Profit (loss) from financial activities
    (802 )     (679 )     (18.1 )     (2,559 )     (2,332 )     (9.7 )     (3,588 )
Profit before income taxes
    1,696       1,634       3.8       2,195       4,147       (47.1 )     3,452  
Depreciation, amortization and impairment losses
    (2,896 )     (2,581 )     (12.2 )     (10,609 )     (7,936 )     (33.7 )     (10,975 )
Net profit
    959       895       7.2       356       2,213       (83.9 )     1,483  
Earnings per share/ADSa, basic/diluted
(€)
    0.22       0.21       4.8       0.08       0.51       (84.3 )     0.34  
Cash capexb
    (2,131 )     (2,137 )     0.3       (6,953 )     (5,766 )     (20.6 )     (8,707 )
Net cash from operating activities
    5,343       4,285       24.7       11,821       11,298       4.6       15,368  
                                                         
Number of employees at balance sheet date
   
Sept. 30, 2009
   
June 30, 2009
   
Change
Sept. 30, 2009/ June 30, 2009 %
   
Dec. 31, 2008
   
Change
Sept. 30, 2009/
Dec. 31, 2008
%
   
Sept. 30, 2008
   
Change
Sept. 30, 2009/
Sept. 30, 2008
%
 
Deutsche Telekom Group
  259,973     261,373     (0.5 )     227,747       14.1       230,079       13.0  
Non-civil servants
  229,377     229,990     (0.3 )     195,634       17.2       196,940       16.5  
Civil servants (domestic)
  30,596     31,383     (2.5 )     32,113       (4.7 )     33,139       (7.7 )
                                                   
Number of fixed-network and mobile customers.
   
Sept. 30, 2009
   
June 30, 2009
   
Change
Sept. 30, 2009/
June 30, 2009
%
   
Dec. 31, 2008
   
Change
Sept. 30, 2009/
Dec. 31, 2008
%
   
Sept. 30, 2008
   
Change
Sept. 30, 2009/
Sept. 30, 2008
%
 
Fixed-network linesc,d
(millions)
    38.9       39.6       (1.8 )     41.1       (5.4 )     42.0       (7.4 )
Retail broadband linese,d
(millions)
    14.7       14.5       1.4       13.6       8.1       12.9       14.0  
Mobile customersf
(millions)
    150.9       149.8       0.7       147.6       2.2       144.7       4.3  
                                                         
 
 
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 and business customers.
 
d
The fixed-network and mobile communications operations of the OTE group, which have been fully included since the beginning of February 2009, are shown in the Southern and Eastern Europe operating segment effective July 1, 2009. Prior-year figures have been adjusted on a pro forma basis.
 
e
Broadband lines in operation.
 
f
Number of customers of the fully consolidated mobile communications companies of the Germany, Europe (including Virgin Mobile), United States, and Southern and Eastern Europe segments. Effective July 1, 2009, the mobile communications business of COSMOTE (entity of the OTE group) in Greece, Romania, Bulgaria and Albania is included in the Southern and Eastern Europe operating segment. Prior-year figures have been adjusted on a pro forma basis.
 
 
2

 

 
Developments in the Group.
 
Net revenue of the Group increased by 6.2 percent year-on-year in the first nine months of 2009 to EUR 48.4 billion.
 
Domestic net revenue was EUR 21.0 billion, EUR 0.6 billion lower than in the first nine months of 2008. International net revenue increased year-on-year by EUR 3.5 billion to EUR 27.4 billion. The proportion of net revenue generated outside Germany increased from 52.6 percent to 56.7 percent.
 
Net profit amounted to EUR 0.4 billion in the first nine months of 2009, compared with a net profit of EUR 2.2 billion in the first three quarters of 2008.
 
Corporate governance.
 
The Supervisory Board and Board of Management of Deutsche Telekom AG declared on August 28, 2009 that, in the period since submission of the most recent declaration of conformity pursuant to § 161 of the German Stock Corporation Act on December 4, 2008, Deutsche Telekom AG has complied with the recommendations of the Government Commission of the German Corporate Governance Code, published by the Federal Ministry of Justice on August 8, 2008 in the official section of the electronic Federal Gazette (Bundesanzeiger), without exception.
 
The Supervisory Board and Board of Management of Deutsche Telekom AG declared further on August 28, 2009 that Deutsche Telekom AG complies with the recommendations of the Government Commission of the German Corporate Governance Code, published by the Federal Ministry of Justice in the official section of the electronic Federal Gazette (Bundesanzeiger) on August 5, 2009, without exception.
 
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.
 

 
 

 
3

 

Highlights.
 
Events in the third quarter of 2009.
 
Group.
 
    Deutsche Telekom and France Télécom plan to merge T-Mobile UK and Orange UK to create a new mobile champion in the United Kingdom.
 
On September 8, 2009, Deutsche Telekom AG and France Télécom SA announced that they had entered into exclusive negotiations to merge T-Mobile UK and Orange UK into a joint venture which would become the largest mobile carrier in the United Kingdom. By integrating Orange Broadband, the joint venture will also have the capability to offer convergence solutions to its customers.
 
The board of directors and the management of the new joint venture company will have balanced representation from Deutsche Telekom and France Télécom. The T-Mobile UK and Orange UK brands will be maintained for 18 months after the completion of the transaction. Prior to the signing, both Deutsche Telekom and France Télécom will undertake confirmatory due diligence and the definitive documentation will be drawn up. The entire transaction is subject to approval by the relevant competition authorities in particular.
 
    Save for Service target exceeded again
 
The Save for Service cost-cutting program announced in 2006 which aims to realize potential savings of between EUR 4.2 and EUR 4.7 billion until 2010 exceeded the cumulative savings of EUR 4.9 billion recorded effective June 30, 2009 once again by EUR 0.5 billion, bringing cumulative savings up to EUR 5.4 billion effective September 30, 2009.
 
    Issuances in the third quarter of 2009.
 
Deutsche Telekom AG made a private placement in the amount of EUR 350 million with a 12-year term via its financing subsidiary, Deutsche Telekom International Finance B.V.
 
    Competitive workforce: Cutbacks, reorganization and development.
 
In the Group’s domestic operations, socially responsible measures were used for further staff reduction in the third quarter 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.
 
On September 1, 2009, some 3,600 young people started their vocational training with Deutsche Telekom AG. Deutsche Telekom is currently training around 11,000 young people, including several hundred students in cooperative degree programs. This year, the number of first semester places has doubled to 400, further expanding the foundation for recruiting junior professionals.
 
Furthermore, around 3,300 staff have already been recruited as part of the approximately 3,500 planned new hires for 2009 – around 1,100 of which are professionals and approximately 2,200 junior staff.
 
    Deutsche Telekom launches new sustainability drive. Top ranking in sustainability indexes.
 
Deutsche Telekom launched a new campaign under the motto “Big changes start small!” for the protection of the environment and society on September 5, 2009. The focus of this campaign is on presenting Deutsche Telekom products and services which help customers to act responsibly and to make their lives easier at the same time. The topics covered by the campaign include online billing, child protection software, cell phone return, energy-efficient telephones, fair procurement, smart metering, and environmentally friendly download portals.
 
In the company evaluation carried out by the Zurich-based agency SAM Research AG, Deutsche Telekom has qualified once again for the most renowned sustainability indexes, the Dow Jones Sustainability Index World and Dow Jones Sustainability STOXX. This year, Deutsche Telekom was evaluated for the first time in the mobile communications sector and was immediately awarded the coveted title of sector leader. In 2009, Deutsche Telekom came in second in the sustainability performance evaluation in the overall telecommunications sector (mobile communications and fixed network).
 
 
4

 
Germany.
 
    Deutsche Telekom expands cooperation with municipalities.
 
Deutsche Telekom is substantially expanding its cooperation with municipal authorities for broadband roll-out. The Company has decided to conclude a significantly greater number of publicly tendered contracts/cooperation agreements this year than previously planned. Deutsche Telekom is thus supporting the German government’s aim to push ahead with broadband expansion in Germany and to roll out modern telecommunications infrastructure in rural areas. Around 750 cooperation agreements are scheduled to be concluded with municipalities.
 
    Continuous expansion of the terminal portfolio and new, innovative applications.
 
T-Mobile was the first European license holder to launch the latest generation of mobile mailboxes at the beginning of August 2009. Mobilbox Pro allows users to have voice messages displayed and save time by choosing the order of message retrieval. It was also at the beginning of August 2009 that T-Mobile introduced the follow-up model of the successful T-Mobile G1 – the Mobile G2 Touch. In addition, the T-Mobile Pulse is exclusively available from T-Mobile.
 
Since August 2009, T-Mobile has been the only network operator in Germany to transmit the 1st and 2nd Bundesliga soccer matches live on cell phones with LIGA total! In addition, the T-Mobile TV service has been improved and extended to include new channels.
 
Specially tailored rate plans and network access services enable T-Mobile to strengthen its position in the machine-to-machine (M2M) technology area. The T-Energy smart metering platform developed by Deutsche Telekom will support energy utilities with implementing the German Energy Management Act (Energiewirtschaftsgesetz).
 
United States.
 
    Roll-out of 3G network.
 
T-Mobile USA continues to invest in the UMTS/HSDPA (3G) network, which covered 167 million people as of the end of September 2009, up from 113 million at the end of June. The 3G network remains on track to cover approximately 200 million people nationwide by the end of 2009, and will be enabled for 7.2 Mbit/s. An HSPA+ network trial with a top data speed of 21 Mbit/s was launched in Philadelphia in September 2009.
 
    Strong improvements in 3G converged devices line-up.
 
With the launches in the third quarter of 2009 of the T-Mobile® myTouch® 3G, T-Mobile® Dash 3G, and HTC Touch Pro2TM, T-Mobile USA continues to significantly increase its 3G converged device line-up in 2009.
 
    RadioShack distribution commenced.
 
In August 2009 T-Mobile USA’s products and services started being offered in more than 4,000 RadioShack stores across the United States and Puerto Rico, almost doubling T-Mobile USA’s national retail distribution network.
 
    Continued independent recognition of T-Mobile USA’s industry-leading customer service.
 
In the third quarter of 2009, T-Mobile USA achieved the highest ranking in a tie (with Verizon Wireless) for the J.D. Power and Associates 2009 Wireless Customer Care Performance Study – Volume 2. Since 2004, T-Mobile USA has received the highest ranking, including two ties, in nine of the last 10 Customer Care Performance Studies conducted by J.D. Power and Associates.
 
T-Mobile USA received the highest ranking in the third quarter of 2009 among national wireless carriers in the J.D. Power and Associates 2009 Wireless Retail Sales Satisfaction Study – Volume 2.
 
 
5

 
Europe.
 
    Strategic arrangements safeguard Deutsche Telekom’s status as the leading provider for connected life and work.
 
T-Mobile and Sierra Wireless have agreed to cooperate in the area of machine-to-machine (M2M) communication to develop portfolios of solutions for the growing M2M market in Europe.
 
T-Mobile and NAVIGON are intensifying their strategic partnership. Following the joint introduction of innovative navigation solutions for the iPhone as well as for Android and Windows Mobile-based smartphones, the two companies have developed a M2M telematic solution that enables customers to retrieve comprehensive information, tips, and advice about routes and destinations across Europe. T-Mobile exclusively markets this navigation solution on a Europe-wide basis in cooperation with NAVIGON.
 
 
    Modernization and continued expansion of network infrastructure.
 
T-Mobile Austria has implemented the world’s first test of mobile multi-user broadband services on an LTE-based next generation mobile network (NGMN) in the city of Innsbruck. Implemented in cooperation with Huawei, the project is the largest European test network covering 60 radio cells that have been in operation since the beginning of July 2009. In the trials, new NGMN mobile handsets were used that reached speeds of up to 50 Mbit/s per device.
 
In the Netherlands, the mobile virtual network operator (MVNO) Tele2 took first steps  to switch its host network over to T-Mobile Netherlands. On September 1, 2009, Tele2 started migrating its customers to T-Mobile’s mobile communications network. Tele2 customers now have access to mobile broadband services for the first time.
 
In August 2009, T-Mobile CZ and Nokia Siemens Networks signed an agreement on the roll-out of a 3G network. The HSPA-based network is scheduled to be launched in Prague at the end of 2009.
 
Southern and Eastern Europe.
 
 
    Expansion of IPTV and TV services in Greece.
 
On July 31, 2009, Hellas Sat (part of the OTE group) and Greece signed a license agreement for satellite TV services. This license enables the OTE group to offer pay TV services via the Hellas Sat 2 satellites, expanding its TV offering for customers in Greece.
 
Conn-x TV, OTE’s IPTV service, has been available in more than 40 Greek towns and cities since September 2009. With Conn-x TV, subscribers can enjoy 40 thematic television channels, video on demand, and three exclusive sports channels.
 
 
    Magyar Telekom reaches agreement with trade unions.
 
In September 2009, Magyar Telekom reached an agreement with the trade unions on wage development, headcount reduction, and lowering additional employee allowances for 2010. The agreement also includes arrangements for future additional severance payments which are gradually to be reduced to one third of the current level in the period from 2011 to 2014. By the end of 2010, total severance expenses related to the headcount reduction will reach HUF 7 billion (EUR 26 million as of the reporting date), the majority of which will be incurred before the end of 2009.
 
6

 
Systems Solutions.
 
 
    Deutsche Telekom acquires hosting business of SAP AG in Europe.
 
T-Systems will take over SAP’s hosting customers in Europe, as recently agreed between Deutsche Telekom’s corporate customer arm and the software giant. In the future, T-Systems will support the software applications of almost 90 SAP customers in its data centers.
 
 
    Nobel Biocare relies on T-Systems for global telecommunications.
 
Nobel Biocare Holding AG has entrusted T-Systems with setting up and operating its international corporate network, helping the global market leader in innovative restorative and aesthetic dental solutions to enhance its transnational telecommunications at 40 locations, thus controlling its production capacity.
 
 
    Course set for further staff restructuring at T-Systems.
 
At the end of 2008, the management of T-Systems adopted a workforce restructuring program. In August 2009, the company reached an agreement with the central works council and employee representatives on the joint steps to be taken. T-Systems will shed just under 3,000 jobs in 2009 and 2010. Essentially, this will affect the business areas of Systems Integration (development and maintenance of software applications) and ICT Operations (operation of networks as well as data centers and storage systems). The goal is to make the transition as socially compatible as possible. Protection from compulsory redundancy up to mid-2012 has been agreed for the employees of T-Systems. At Systems Integration and ICT Operations, this protection will not become effective before completion of the restructuring measures required in these two units. The restructuring program will start at Systems Integration. T-Systems will have evaluated by the end of 2009 to what extent the employees in this unit made use of voluntary offers. If staff who are affected by the changes have not found alternative employment by then, they will be able – for a limited period – to move to a transitional company which T-Systems will be setting up together with Vivento, Deutsche Telekom’s personnel service provider, in line with the legally prescribed procedure. Employees who transfer to this transitional company will have their contracts with T-Systems terminated and will receive support from Vivento in their search for new jobs. A similar approach will be taken at ICT Operations after the end of the first quarter of 2010.
 

 
7

 

Regulatory Situation
 
 
    Rates regulation for IP-Bitstream Access.
 
On September 14, 2009, the Federal Network Agency set new rates for the “IP-Bitstream Access” wholesale product. The Stand Alone version, for which end customers no longer need a separate telephone line in addition to their DSL line, was priced at EUR 18.32 per month with retroactive effect as of July 1, 2009. As of this date, Deutsche Telekom had already voluntarily offered IP-BSA customers a discounted price of EUR 18.62 per month for the provision of an IP-BSA Stand Alone line. The approval will expire on November 30, 2010. Before that date, the Federal Network Agency will conduct a new market analysis and then issue a new regulatory order for IP-Bitstream Access.
 
 
    Terms and conditions for the award of new spectrum.
 
The Federal Network Agency published the terms and conditions and the auction rules 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. The commenting phase has since closed. Consultation with the Advisory Council of the Federal Network Agency took place on October 12, 2009. The final terms and conditions and the auction rules were published in the Official Gazette on October 21, 2009. The registration period for the auction will end January 21, 2010.
 
    Market analysis and regulatory order on bitsteam access.
 
According to the key elements of the draft market analysis and regulatory order on bitstream access published on October 21, 2009, the Federal Network Agency intends to rely on ex-post regulation, to allocate the new VDSL wholesale services to the regulated market for bitstream access, and to maintain the delineation of markets on a national basis. The draft requires the Wholesale Internet Access-Gate product also to be subjected to (ex post) regulation. The final version will be published and will enter into force in late 2009 or early 2010.
 
 
 
 
 
 

 
8

 

Group organization.
 
Since July 1, 2009, Deutsche Telekom’s organizational structure has reflected the realigned management structure approved by the Supervisory Board on April 29, 2009. The new structure increases regional market responsibility in the combined fixed-network and mobile communications business. The realignment also resulted in a change to the structure of the operating segments from July 1, 2009. Since July 1, 2009, Deutsche Telekom has reported on five operating segments Germany, United States, Europe, Southern and Eastern Europe, and Systems Solutions as well as on Group Headquarters & Shared Services.
 
The business activities in four of these five operating segments are assigned by regions and in the fifth by customers and products.
 
The Germany operating segment comprises all fixed-network and mobile activities in Germany. In addition, the operating segment provides wholesale telecommunications services for the Group’s other operating segments. The United States operating segment combines all mobile activities in the U.S. market. The Europe operating segment covers all activities of the mobile communications companies in the United Kingdom, Poland, the Netherlands, the Czech Republic and Austria, as well as the International Carrier Sales and Services unit, which provides wholesale telecommunications services for the Group’s other operating segments. The Southern and Eastern Europe operating segment comprises all fixed-network and mobile communications operations of the national companies in Hungary, Croatia, Slovakia, Greece, Romania, Bulgaria, Albania, Macedonia, and Montenegro.
 
Fixed-network business includes all voice and data communications activities based on fixed-network and broadband technology. This includes the sale of terminal equipment and other hardware, as well as the sale of services to resellers.
 
The mobile communications business offers mobile voice and data services to consumers and business customers. Mobile terminals and other hardware are sold in connection with the services offered. In addition, T-Mobile services are sold to resellers and to companies that buy network services and market them independently to third parties (MVNOs).
 
The Systems Solutions operating segment bundles business with ICT products and solutions for large multinational corporations under the T-Systems brand. The operating segment offers its customers information and communication technology (ICT) from a single source. It develops and operates infrastructure and industry solutions for multinational corporations and public institutions. The products and services offered range from standard products and IP-based high-performance networks through to complete ICT solutions.
 
Group Headquarters & Shared Services comprises Service Headquarters and those subsidiaries of Deutsche Telekom AG that are not allocated to the operating segments.
 
Around 160,000 business customers of the Systems Solutions operating segment (called the Business Customers operating segment until December 31, 2008), which were transferred to the Broadband/Fixed Network operating segment as of January 1, 2009, have been included in the Germany operating segment since July 1, 2009.
 
All of the information presented here has been incorporated into the following tables, and prior-year and comparative figures have been adjusted accordingly.
 
 
 

 
9

 

Development of business in the Group.
 
    Net revenue.
 
In the first nine months of the 2009 financial year, Deutsche Telekom generated a year-on-year revenue increase of EUR 2.8 billion or 6.2 percent. The first-time full consolidation of the OTE group was the primary driver behind the rise, contributing EUR 3.9 billion. Adjusted for the effects of changes in the consolidated group (EUR 4.0 billion) and positive exchange rate effects (EUR 0.2 billion), net revenue was below the prior-year level.
 
Revenue in Deutsche Telekom’s operating segments developed as follows:
 
The Germany operating segment recorded a 3.9-percent decrease in revenue year-on-year to EUR 19.0 billion, mainly due to line losses resulting from increased competition in the fixed network and regulatory pricing measures relating to fixed-network and mobile communications.
 
The EUR 1.2 billion revenue increase in the United States operating segment in the first nine months of the financial year was primarily the result of positive exchange rate effects from the translation of U.S. dollars to euros. Adjusted for exchange rate effects revenue decreased slightly, due in particular to lower revenue per customer.
 
Revenue from the Europe operating segment declined by EUR 1.0 billion or 11.7 percent year-on-year to EUR 7.6 billion. EUR 0.8 billion of this decline was caused by exchange rate effects from the translation of pounds sterling, Polish zlotys and Czech korunas to euros. The strained macroeconomic situation and strong competitive pressure continue to impact negatively on revenue.
 
Revenue in the Southern and Eastern Europe operating segment increased by EUR 3.6 billion year-on-year mainly as a result of the first-time full consolidation of OTE. By contrast, revenue in Hungary decreased by EUR 0.3 billion, EUR 0.2 billion of which was due to negative exchange rate effects.
 
The Systems Solutions operating segment recorded a revenue decrease of EUR 0.3 billion or 5.0 percent, largely due to lower revenues in the Systems Integration and Telecommunications units as a result of increased competition.
 
                     
   
Q1 2009
millions of €
   
Q2 2009
millions of €
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of €
 
Net revenue
    15,902       16,238       16,262       15,454       5.2       48,402       45,557       6.2       61,666  
Germanya
    6,331       6,220       6,471       6,601       (2.0 )     19,022       19,792       (3.9 )     26,400  
United Statesa
    4,137       3,918       3,758       3,657       2.8       11,813       10,616       11.3       14,957  
Europea
    2,436       2,573       2,552       2,940       (13.2 )     7,561       8,559       (11.7 )     11,354  
Southern and Eastern Europe a
    1,964       2,516       2,616       1,265    
n.a.
      7,096       3,499    
n.a.
      4,645  
Systems Solutionsa
    2,106       2,179       2,125       2,293       (7.3 )     6,410       6,744       (5.0 )     9,343  
Group Headquarters & Shared Servicesa
    618       612       593       748       (20.7 )     1,823       2,179       (16.3 )     2,781  
Intersegment revenueb
    (1,690 )     (1,780 )     (1,853 )     (2,050 )     9.6       (5,323 )     (5,832 )     8.7       (7,814 )
                                                                         
 
a
Total revenue (including revenue between operating segments).
 
b
Elimination of revenue between operating segments.
 
 
10

     Contribution of the operating segments to net revenue (after elimination of revenue between segments).
   
Q1-Q3 2009
millions of €
   
Proportion of net revenue of the Group %
   
Q1-Q3 2008
millions of €
   
Proportion of net revenue of the Group %
   
Change
millions of €
   
Change %
   
FY 2008
millions of
 
Net revenue
    48,402       100.0       45,557       100.0       2,845       6.2       61,666  
Germany
    17,828       36.8       18,583       40.8       (755 )     (4.1 )     24,754  
United States
    11,802       24.4       10,606       23.3       1,196       11.3       14,942  
Europe
    7,145       14.8       8,142       17.9       (997 )     (12.2 )     10,798  
Southern and Eastern Europe
    6,965       14.4       3,382       7.4       3,583    
n.a.
      4,497  
Systems Solutions
    4,465       9.2       4,595       10.1       (130 )     (2.8 )     6,368  
Group Headquarters & Shared Services
    197       0.4       249       0.5       (52 )     (20.9 )     307  
                                                         
 
With 36.8 percent, the Germany operating segment provided the largest contribution to the net revenue of the Group in the first nine months of 2009. The Southern and Eastern Europe operating segment’s share of net revenue increased considerably due to the first-time full consolidation of OTE. The increase in the contribution of the United States operating segment was due to positive exchange rate effects. The contribution of the Europe and Systems Solutions operating segments to net revenue decreased year-on-year in the first nine months of 2009. This was the result of both lower revenue and, in the Europe operating segment, negative exchange rate effects.
  
    Breakdown of revenue by region.
The proportion of net revenue generated outside Germany in the first nine months of 2009 increased by 4.1 percentage points compared with the prior-year period to reach 56.7 percent, largely due to revenue growth in the regions of Europe and North America. In the Europe region, revenue increased mainly due to the full consolidation of OTE. In North America, revenue was positively impacted by exchange rate effects.
   
Q1 2009
millions of €
   
Q2 2009
millions of €
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of €
 
Net revenue
    15,902       16,238       16,262       15,454       5.2       48,402       45,557       6.2       61,666  
Domestic
    6,943       6,817       7,201       7,158       0.6       20,961       21,596       (2.9 )     28,885  
International
    8,959       9,421       9,061       8,296       9.2       27,441       23,961       14.5       32,781  
Proportion generated internationally
(%)
    56.3       58.0       55.7       53.7               56.7       52.6               53.2  
Europe (excluding Germany)
    4,684       5,363       5,188       4,510       15.0       15,235       12,972       17.4       17,324  
North America
    4,148       3,928       3,780       3,642       3.8       11,856       10,599       11.9       14,931  
Other
    127       130       93       144       (35.4 )     350       390       (10.3 )     526  
 
    Cost of sales.
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008 millions of
 
Cost of sales
    (9,224 )     (8,248 )     (11.8 )     (26,876 )     (24,912 )     (7.9 )     (34,592 )
 
The EUR 2.0 billion increase in cost of sales year-on-year is mainly attributable to the first-time full consolidation of OTE, which contributed EUR 2.3 billion to the Group’s cost of sales in the first nine months of the financial year. Furthermore, higher sales of higher value products and the roll-out of the 2G and 3G networks increased costs in the United States operating segment. Exchange rate effects of EUR 0.6 billion also increased cost of sales in the United States operating segment.
 
Sales-related declines in cost of sales, above all in the Germany, Europe and Systems Solutions operating segments and at Group Headquarters & Shared Services, impacted the Group by a total of EUR 0.5 billion. Positive exchange rate effects of EUR 0.5 billion in the Europe operating segment and EUR 0.1 billion in the Southern and Eastern Europe operating segment arising from the translation of pounds sterling, Polish zlotys, Czech korunas and Hungarian forints to euros also reduced the cost of sales.
 
11

   
    Selling expenses.
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Selling expenses
    (3,697 )     (3,948 )     6.4       (11,752 )     (11,467 )     (2.5 )     (15,952 )
                                                         
 
Selling expenses increased by EUR 0.3 billion compared with the same period in the prior year. The first-time full consolidation of OTE contributed EUR 0.9 billion to this increase; exchange rate effects also had a negative impact of EUR 0.2 billion. In the Germany operating segment, cost cuts in sales and in the accounts receivable department reduced selling expenses by EUR 0.6 billion. The Group’s marketing expenses decreased by EUR 0.2 billion.
   
    General and administrative expenses.
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of
 
General and administrative expenses
    (983 )     (1,230 )     20.1       (3,588 )     (3,563 )     (0.7 )     (4,821 )
                                                         
 
General and administrative expenses in the Group remained at the prior-year level. The effect from the first-time full consolidation of OTE of EUR 0.3 billion was offset by savings measures. Exchange rate effects played a minor role in this development.
 
   Other operating income / expenses.
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008 millions of
 
Other operating income
    391       600       (34.8 )     1,031       1,613       (36.1 )     1,971  
Other operating expenses
    (251 )     (315 )     20.3       (2,463 )     (749 )  
n.a.
      (1,232 )
                                                         
 
Other operating income decreased by EUR 0.6 billion compared with the first nine months of 2008. The decline was mainly attributable to lower income from disposals. In the previous year, this item included a gain on the disposal of Media&Broadcast.
 
Other operating expenses rose by EUR 1.7 billion compared with the first nine months 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 that was recorded in the first quarter of 2009. For further details, please refer to the "Depreciation, amortization and impairment losses" section.
 
    Profit from operations.
Profit from operations of the Deutsche Telekom Group decreased by EUR 1.7 billion year-on-year to EUR 4.8 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 former operating segment Mobile Communications Europe. While profit from operations in the Europe and Systems Solutions operating segments in particular decreased, the United States and Southern and Eastern Europe operating segments both reported a year-on-year increase. OTE contributed EUR 0.4 billion to Group profit from operations in the first nine months of 2009.
 
The Germany operating segment recorded a 0.8-percent decrease in profit from operations compared with the prior-year period. The decrease in revenues was largely compensated by cost savings. Profit from operations increased slightly in the United States operating segment. In local currency, profit from operations decreased primarily as a result of the decline in revenues per customer.
 
An impairment loss of EUR 1.8 billion was recognized on goodwill of the cash generating unit T-Mobile UK in the Europe operating segment in the first quarter of 2009, mainly as a consequence of the significant economic slowdown, tough competition, and regulatory decisions in the United Kingdom. Furthermore, revenue decreases at T-Mobile UK and T-Mobile CZ and exchange rate effects of EUR 0.2 billion had a negative impact on profit from operations.
 
12

 
Profit from operations generated in the Systems Solutions operating segment in the prior-year period was impacted in particular by the gain on the disposal of Media&Broadcast.
                     
   
Q1 2009
millions of €
   
Q2 2009
millions of €
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of €
 
Profit from operations in the Group
    244       2,012       2,498       2,313       8.0       4,754       6,479       (26.6 )     7,040  
Germany
    1,325       1,274       1,409       1,528       (7.8 )     4,008       4,040       (0.8 )     4,624  
United States
    530       654       595       570       4.4       1,779       1,656       7.4       2,299  
Europe
    (1,786 )     226       349       201       73.6       (1,211 )     486    
n.a.
      496  
Southern and Eastern Europe
    504       237       462       371       24.5       1,203       920       30.8       915  
Systems Solutions
    11       27       16       (11 )  
n.a.
      54       407       (86.7 )     81  
Group Headquarters & Shared Services
    (309 )     (344 )     (311 )     (319 )     2.5       (964 )     (900 )     (7.1 )     (1,266 )
Reconciliation
    (31 )     (62 )     (22 )     (27 )     18.5       (115 )     (130 )     11.5       (109 )
                                                                         
 
    Profit (loss) from financial activities.
                   
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Profit (loss) from financial activities
    (802 )     (679 )     (18.1 )     (2,559 )     (2,332 )     (9.7 )     (3,588 )
Finance costs
    (668 )     (556 )     (20.1 )     (1,935 )     (1,898 )     (1.9 )     (2,487 )
Interest income
    68       81       (16.0 )     259       239       8.4       408  
Interest expense
    (736 )     (637 )     (15.5 )     (2,194 )     (2,137 )     (2.7 )     (2,895 )
Share of profit (loss) of associates and joint ventures accounted for using the equity method
    7       60       (88.3 )     21       76       (72.4 )     (388 )
Other financial income (expense)
    (141 )     (183 )     23.0       (645 )     (510 )     (26.5 )     (713 )
                                                         
The increase of EUR 0.2 billion in the loss from financial activities compared with the prior-year period is mainly attributable to an increase in other financial expense.
 
Finance costs were subject to two offsetting effects. On the one hand, interest expense increased in the first nine months of 2009 due to the first-time full consolidation of OTE in the consolidated financial statements. On the other hand, the downgrade of Deutsche Telekom’s rating in 2008 and the resulting adjustments to carrying amounts for a number of bonds with rating-linked coupons had a one-time impact on interest expense in the prior-year period.
 
The EUR 0.1 billion increase in other financial expense compared with the prior-year period is mainly attributable to higher interest rate expenses on provisions and liabilities.
 
 
13

   
    Personnel.
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Personnel costs
    (3,544 )     (3,286 )     (7.9 )     (10,497 )     (10,063 )     (4.3 )     (14,078 )
                                                         
Average number of employees
    260,497       235,970       10.4       256,734       236,752       8.4       234,887  
                                                         
 
   
 
Sept. 30, 2009
   
Dec. 31, 2008
   
Change
   
Change %
   
Sept. 30, 2008
 
Number of employees at balance sheet date
    259,973       227,747       32,226       14.1       230,079  
Domestic
    130,429       131,713       (1,284 )     (1.0 )     135,701  
International
    129,544       96,034       33,510       34.9       94,378  
                                         
Non-civil servants
    229,377       195,634       33,743       17.2       196,940  
Civil servants (domestic)
    30,596       32,113       (1,517 )     (4.7 )     33,139  
                                         
Trainees and student interns at balance sheet date
    10,575       11,668       (1,093 )     (9.4 )     11,605  
                                         
Personnel costs increased by EUR 0.4 billion year-on-year in the first nine months of 2009. The decrease resulting from personnel reductions in Germany was more than offset by the first-time full consolidation of OTE and retail distribution growth at T-Mobile USA. These factors had a corresponding effect on the average number of employees. The increase in the number of employees at the balance sheet date was primarily caused by OTE.
 
    Depreciation, amortization and impairment losses.
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008 millions of
 
Amortization and impairment of intangible assets
    (865 )     (783 )     (10.5 )     (4,340 )     (2,332 )     (86.1 )     (3,397 )
Of which: UMTS licenses
    (193 )     (217 )     11.1       (616 )     (655 )     6.0       (868 )
Of which: U.S. mobile communications licenses
    -       -       -       -       (21 )  
n.a.
      (21 )
Of which: goodwill
    (11 )     -    
n.a.
      (1,817 )     -    
n.a.
      (289 )
Depreciation and impairment of property, plant and equipment
    (2,031 )     (1,798 )     (13.0 )     (6,269 )     (5,604 )     (11.9 )     (7,578 )
Total depreciation, amortization and impairment losses
    (2,896 )     (2,581 )     (12.2 )     (10,609 )     (7,936 )     (33.7 )     (10,975 )
                                                         
Depreciation, amortization and impairment losses in the Group increased year-on-year due to the first-time full consolidation of OTE and to an impairment loss amounting to EUR 1.8 billion that was recognized on the goodwill of the cash generating unit T-Mobile UK in the first quarter of 2009. Events or circumstances that resulted in this 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 new regulation of roaming and termination charges had a negative impact on revenue at the time of the impairment. Increased termination charges for the use of third-party mobile communications networks and high customer acquisition and retention expenses raised the cost base.
 
14

   
Profit before income taxes.
Profit before income taxes for the first nine months of 2009 was EUR 2.2 billion, a decrease by EUR 2.0 billion compared to the prior-year period. Profit before income taxes was impacted in particular by the impairment loss recognized on goodwill at the cash generating unit T-Mobile UK amounting to EUR 1.8 billion which was reflected in the profit from operations of the former operating segment Mobile Communications Europe.
 
   Income taxes.
                   
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Change %
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
Change %
   
FY 2008
millions of
 
Income taxes
    (551 )     (553 )     0.4       (1,378 )     (1,459 )     5.6       (1,428 )
                                                         
 
Despite significantly lower profit/loss before income taxes, income tax expense only decreased slightly compared with the prior-year period. This relatively small decrease in income tax expense is attributable to an impairment of goodwill in the first quarter of 2009 that has no tax effect.
 
    Net profit.
Deutsche Telekom generated a net profit of EUR 0.4 billion in the first nine months of 2009, compared with a net profit of EUR 2.2 billion in the prior-year period due to the aforementioned effects.

 
15

 

Liquidity and Capital Resources
 
   
Q3 2009
millions of €
   
Q3 2008
millions of €
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
FY 2008
millions of €
 
Net cash from operating activities
    5,343       4,285       11,821       11,298       15,368  
Net cash used in investing activities
    (2,454 )     (2,509 )     (5,992 )     (8,946 )     (11,384 )
Net cash used in financing activities
    (2,561 )     (616 )     (2,751 )     (1,478 )     (3,097 )
Effect of exchange rate changes on cash and cash equivalents
    (21 )     (3 )     39       37       (61 )
  Changes in cash and cash equivalents associated with assets held for sale     (63           (63 )            
Net increase (decrease) in cash and cash equivalents
    244       1,157       3,054       911       826  
Cash and cash equivalents, at the beginning of the period
    5,836       1,954       3,026       2,200       2,200  
   Cash and cash equivalents, at end of the period
    6,080       3,111       6,080       3,111       3,026  
 
    Net cash from operating activities.
Net cash from operating activities amounted to EUR 11.8 billion in the reporting period, an increase of EUR 0.5 billion over the prior year period. While cash generated from operations improved by EUR 0.8 billion, net interest paid increased by EUR 0.3 billion. The increase in cash generated from operations is the result of several factors, some of which offset each other. Consolidated profit from operations decreased by EUR 1.9 billion year on year. This decrease was caused in part by an increase of year on year EUR 2.7 million depreciation, amortization and impairment losses, which do not affect cash flow, and the gains on disposals of fully consolidated companies in the amount of EUR 0.4 billion. The change in assets carried as working capital increased by EUR 0.9 billion, mainly as a result of inflows of EUR 0.8 billion from the sale of receivables (factoring). By contrast, the changes in provisions and other liabilities carried as working capital decreased by EUR 1.2 billion year-on-year, mainly due to higher cash outflows for restructuring measures and increased utilization of provisions for personnel costs and provisions for litigation risks and dealers' commissions. In addition, income tax payments increased by EUR 0.4 billion year-on-year, in particular as a result of the first-time full consolidation of OTE from February 2009. The increase in net interest paid is also largely attributable to this effect.
 
    Net cash used in investing activities.
Net cash used in investing activities totaled EUR 6.0 billion as compared with EUR 8.9 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 as part of the first-time full consolidation of OTE, whereas the prior-year period 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, to a lesser extent, the United Kingdom.
 
The net cash effect for investments in fully consolidated companies increased by EUR 0.3 billion. Whereas cash outflows amounting to EUR 1.0 billion for the acquisition of SunCom and cash inflows of EUR 0.7 billion from the sale of Media&Broadcast were recorded in the first three quarters of 2008, the first nine months of 2009 saw cash outflows of EUR 0.7 billion largely for the acquisition of additional shares in OTE in connection with the put option exercised on July 31, 2009 by the Hellenic Republic 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 2.8 billion in the first three quarters of 2009, compared with EUR 1.5 billion in the prior-year period.
 
This change was mostly attributable to EUR 0.9 billion lower year-on-year net proceeds from the issue of non-current financial liabilities. In addition, dividend payments increased by EUR 0.4 billion compared with 2008, in particular as a result of the first-time full consolidation of OTE in February 2009 and higher dividend payments at Slovak Telekom. The considerable decrease in issuance and repayment of current financial liabilities year-on-year is primarily attributable to the issuance of commercial paper in the first nine months of 2009 to finance short-term liquidity needs compared with the many drawdowns on credit lines in the prior-year period.
 
The issue of financial liabilities in first nine months of 2009 consisted in particular of a Eurobond for EUR 2.0 billion, medium-term notes for EUR 2.0 billion, a U.S. dollar bond for EUR 1.1 billion, and promissory notes for EUR 0.2 billion. Medium-term notes for an amount of EUR 2.2 billion, a U.S. dollar bond for an amount of EUR 0.7 billion, commercial paper in a net amount of EUR 0.5 billion, and promissory notes and other loans for EUR 0.2 billion were repaid during the same period.
 
 
16

 
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.
Q3 2009 
millions of €
   
Q3 2008
millions of €
   
Q1-Q3 2009
millions of €
   
Q1-Q3 2008
millions of €
   
FY 2008
millions of €
 
         
   Capital expenditures
    2,131       2,137       6,953       5,766       8,707  
   Investments in subsidiaries and non-current financial assets
    746       121       910       3,832       4,291  
   Proceeds from disposal of non-current assets and investments
    (82 )     (2 )     (452 )     (1,085 )     (1,252 )
Other
    (341 )     253       (1,419 )     433       (362 )
Net cash used for investing activities
    2,454       2,509       5,992       8,946       11,384  
                                         
                                         
 
Total financial fiabilities
The following table summarizes our total financial liabilities as of September 30, 2009 and 2008, and December 31, 2008:
 
   
September 30, 2009
millions of €
   
December 31, 2008
millions of €
   
Change
millions of €
   
Change %
   
September 30, 2008
millions of €
 
Bonds
    40,572       34,302       6,270       18.3       35,691  
Liabilities to banks
    4,617       4,222       395       9.4       4,409  
Liabilities to non-banks from promissory notes
    1,037       887       150       16.9       848  
Liabilities from derivatives
    1,120       1,088       32       2.9       894  
Lease liabilities
    1,943       2,009       (66 )     (3.3 )     2,029  
Other financial liabilities
    4,178       4,086       92       2.3       2,704  
Total
    53,467       46,594       6,873       14.8       46,575  
 
Total financial liabilities increased as of September 30, 2009, as compared with December 31, 2008, primarily as a result of the first-time full consolidation of OTE and the issuance of bonds of EUR 3.1 billion (EUR 2.0 billion, USD 1.5 billion) Medium Term Notes of EUR 2.0 billion (EUR 1.0 billion, CHF 0.4 billion, GBP 0.7 billion). This was partially offset by redemptions of EUR 3.7 billion. Additionally financial liabilities decreased by EUR 0.3 billion due to changes in foreign exchange rates.

 
17

 

Segment reporting.
 
Since July 1, 2009, Deutsche Telekom's organizational structure has reflected the realigned management structure approved by the Supervisory Board on April 29, 2009. The new structure increases regional market responsibility in the combined fixed-network and mobile communications business. The realignment also resulted in a change to the structure of the operating segments from July 1, 2009. Since July 1, 2009, Deutsche Telekom has reported on five operating segments Germany, United States, Europe, Southern and Eastern Europe, and Systems Solutions as well as on Group Headquarters & Shared Services.
 
The business activities in four of these five operating segments are assigned by regions and in the fifth by customers and products.
 
The Germany operating segment comprises all fixed-network and mobile activities in Germany. In addition, the operating segment provides wholesale telecommunications services for the Group’s other operating segments. The United States operating segment combines all mobile activities in the U.S. market. The Europe operating segment covers all activities of the mobile communications companies in the United Kingdom, Poland, the Netherlands, the Czech Republic and Austria, as well as the International Carrier Sales and Services unit, which provides wholesale telecommunications services for the Group’s other operating segments.  The Southern and Eastern Europe operating segment comprises fixed-network and mobile communications operations of the national companies in Hungary, Croatia, Slovakia, Greece, Romania, Bulgaria, Albania, Macedonia, and Montenegro.
 
Fixed-network business includes all voice and data communications activities based on fixed-network and broadband technology. This includes the sale of terminal equipment and other hardware, as well as the sale of services to resellers.
 
The mobile communications business offers mobile voice and data services to consumers and business customers. Handsets and other hardware are sold in connection with the services offered. In addition, T-Mobile services are sold to resellers and to companies that buy network services and market them independently to third parties (MVNOs).
 
The Systems Solutions operating segment bundles business with ICT products and solutions for large multinational corporations (corporate customers) under the T-Systems brand. The operating segment offers its customers information and communication technology (ICT) from a single source. It develops and operates infrastructure and industry solutions for its corporate customers. Products and services offered to medium-sized enterprises range from standard products and high-performance networks based on the Internet Protocol (IP) to complete ICT solutions.
 
Group Headquarters & Shared Services comprises Service Headquarters and those subsidiaries of Deutsche Telekom AG that are not allocated to the operating segments.
 
Around 160,000 business customers of the Systems Solutions operating segment (called the Business Customers operating segment until December 31, 2008), which were transferred to the Broadband/Fixed Network operating segment as of January 1, 2009, have been included in the Germany operating segment since July 1, 2009.
 
All of the information presented here has been incorporated into the following tables, and prior-year and comparative figures have been adjusted accordingly.
 
The following tables give an overall summary of Deutsche Telekom's operating segments and Group Headquarters & Shared Services for the third quarters and the first nine 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.
 
 
18

 
 
    Segment information in the quarters.
 
Q3 2009
Q3 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 €
 
Germany
      6,008       463       6,471       1,409       (1,037 )     -       29,600       23  
          6,160       441       6,601       1,528       (1,017 )     (2 )     31,156       17  
United States
      3,755       3       3,758       595       (492 )     (2 )     32,693       18  
          3,653       4       3,657       570       (447 )     -       32,763       15  
Europe
      2,405       147       2,552       349       (389 )     -       16,321       0  
          2,791       149       2,940       201       (548 )     -       20,671       14  
Southern and Eastern Europe
      2,564       52       2,616       462       (608 )     (12 )     21,784       52  
          1,215       50       1,265       371       (211 )     (1 )     8,811       66  
Systems Solutions
      1,467       658       2,125       16       (167 )     -       6,720       54  
          1,553       740       2,293       (11 )     (190 )     (1 )     7,072       26  
Group Headquarters & Shared Services
      63       530       593       (311 )     (166 )     (33 )     10,345       0  
    82       666       748       (319 )     (156 )     (11 )     10,681       2,683  
Total
      16,262       1,853       18,115       2,520       (2,859 )     (47 )     117,463       147  
          15,454       2,050       17,504       2,340       (2,569 )     (15 )     111,154       2,821  
Reconciliation
      -       (1,853 )     (1,853 )     (22 )     11       (1 )     (3,294 )     13  
          -       (2,050 )     (2,050 )     (27 )     1       2       (2,884 )     (1 )
Group
      16,262       -       16,262       2,498       (2,848 )     (48 )     114,169       160  
          15,454       -       15,454       2,313       (2,568 )     (13 )     108,270       2,820  
                                                                     
 
 
19

   
    Segment information in the first nine months.
  Q1 – Q3 2009 Q1 – Q3 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 €
 
Germany
      17,828       1,194       19,022       4,008       (3,131 )     (7 )     29,600       23  
          18,583       1,209       19,792       4,040       (3,119 )     (2 )     31,156       17  
United States
      11,802       11       11,813       1,779       (1,545 )     (2 )     32,693       18  
          10,606       10       10,616       1,656       (1,316 )     (21 )     32,763       15  
Europe
      7,145       416       7,561       (1,211 )     (1,282 )     (1,803 )     16,321       0  
          8,142       417       8,559       486       (1,718 )     -       20,671       14  
Southern and Eastern Europe
      6,965       131       7,096       1,203       (1,677 )     (26 )     21,784       52  
          3,382       117       3,499       920       (648 )     (4 )     8,811       66  
Systems Solutions
      4,465       1,945       6,410       54       (517 )     0       6,720       54  
          4,595       2,149       6,744       407       (565 )     (9 )     7,072       26  
Group Headquarters & Shared Services
      197       1,626       1,823       (964 )     (486 )     (162 )     10,345       0  
    249       1,930       2,179       (900 )     (467 )     (91 )     10,681       2,683  
Total
      48,402       5,323       53,725       4,869       (8,638 )     (2,000 )     117,463       147  
          45,557       5,832       51,389       6,609       (7,833 )     (127 )     111,154       2,821  
Reconciliation
      -       (5,323 )     (5,323 )     (115 )     30       (1 )     (3,294 )     13  
          -       (5,832 )     (5,832 )     (130 )     24       -       (2,884 )     (1 )
Group
      48,402