20-F 1 annual200920f.htm 2009 FORM 20-F annual200920f.htm

 
As filed with the Securities and Exchange Commission on February 25, 2010
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Form 20-F
x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2009
Commission file number 001-14540
Deutsche Telekom AG
(Exact Name of Registrant as Specified in its Charter)
Federal Republic of Germany
(Jurisdiction of Incorporation or Organization)
Friedrich-Ebert-Allee 140, 53113 Bonn, Germany
(Address of Registrant’s Principal Executive Offices)
Dr. Guillaume Maisondieu
Deutsche Telekom AG
Friedrich-Ebert-Allee 140, 53113 Bonn, Germany
+49-228-181-0
Guillaume.Maisondieu@telekom.de
(Name, Telephone, E-mail and/or Facsimile number and Address of Company Contact Person)
Securities registered or to be registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
American Depositary Shares, each representing
one Ordinary Share
New York Stock Exchange
Ordinary Shares, no par value
New York Stock Exchange*
Securities registered or to be registered pursuant to
Section 12(g) of the Act:
NONE
(Title of Class)
Securities for which there is a reporting obligation pursuant to
Section 15(d) of the Act:
NONE
(Title of Class)
Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report:
Ordinary Shares, no par value: 4,361,319,993 (as of December 31, 2009)
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.
Yes ý No o
If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Yeso No ý
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Yes ý No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.  
Large accelerated filer   ý
Accelerated filer o
Non-accelerated filer o
       Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:
o US GAAP
ý  International Financial Reporting Standards as issued by the International Accounting Standards Board
o Other
If “Other” has been checked in response to the previous question indicate by check mark which financial statement item the registrant has elected to follow.
Item 17 o  Item 18 o
If this is an annual report, indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o    Noý
*Not for trading, but only in connection with the registration of American Depositary Shares.

 
 
   
      PAGE
Item 1.
    Identity of Directors, Senior Management and Advisors  
Item 2.
  4
Item 3.
  4
    5
    7
Item 4.
  17
    17
    17
    18
      Significant Subsidiaries   22
    23
    24
    28
    30
    36
    42
    46
    48
    49
    50
    63
Item 4A.
  65
Item 5.
  66
    66
   74
   77
   85
   87
   91
   94
   101
   105
   109
   111
   119
Item 6.
 125
   125
   126
   132
   135
   145
   147
Item 7.
 151
   151
   152
Item 8.
 155
   155
   155
   155
   167
   167
     
Item 9.
 168
   168



 
Item 10.
  171
    171
    177
    178
    180
    180
    183
Item 11.
  184
    184
    184
    185
    186
Item 12.
  187
     American Depositary Shares  187
     
   
Item 13.
  189
Item 14.
  189
Item 15.
  189
Item 16A.
  191
Item 16B.
  191
Item 16C.
  191
Item 16D.
  192
Item 16E.
  192
Item 16F.
  192
Item 16G.
  193
   
Item 17.
  196
Item 18.
  196
    F-2
    F-3
    F-4
    F-5
    F-6
    F-8
    F-9
Item 19
 197
 


 


DEFINED TERMS
 
Deutsche Telekom AG is a private stock corporation organized under the laws of the Federal Republic of Germany (the “Federal Republic”). As used in this annual report on Form 20-F (“Annual Report”), unless the context otherwise requires, the term “Deutsche Telekom” refers to Deutsche Telekom AG, and the terms “we,” “us,” “our,” “Company” and “Group” refer to Deutsche Telekom and, as applicable, Deutsche Telekom and its direct and indirect subsidiaries as a group.
 
INTERNATIONAL FINANCIAL REPORTING STANDARDS
 
Unless otherwise indicated, the financial information contained in this Annual Report has been prepared in accordance with the requirements of the International Financial Reporting Standards (IFRS) as issued by the International Accounting Standards Board (IASB).
 
 
FORWARD-LOOKING STATEMENTS
 
This Annual Report contains forward-looking statements. Forward-looking statements are statements that are not historical facts. Examples of forward-looking statements include statements concerning:
 
·  
plans, objectives and expectations relating to future operations, products and services;
 
·  
our prospective share of new and existing markets;
 
·  
plans, objectives and expectations for our cost savings and workforce reduction programs and the impact of other significant strategic, labor or business initiatives, including acquisitions, dispositions and business combinations, and our network upgrade and expansion initiatives;
 
·  
the potential impact of regulatory actions on our financial condition and operations;
 
        ·    our shareholder remuneration policy and the payment of dividends and/or conduct of possible share repurchases;
 
·  
the possible outcomes and effects of litigation, investigations, contested regulatory proceedings and other disputes;
 
·  
future general telecommunications sector and macroeconomic growth rates; and
 
·  
our future revenues, expenditures and performance.
 
Forward-looking statements generally are identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “plan,” “will,” “will continue,” “seek,” “outlook,” “guidance” and similar expressions. The “Risk Factors” discussion in Item 3, the “Management Overview” and “Outlook” discussion in Item 5, the "Dividend Policy" discussion in Item 8 and the “Quantitative and Qualitative Disclosures about Market Risk” discussion in Item 11, in particular, contain numerous forward-looking statements, although such statements also appear elsewhere in this Annual Report.
 
Forward-looking statements are based on current plans, estimates and projections. You should consider them with caution. 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 others:
 
·  
changes in general economic and business conditions, including a continuous deterioration in the economic environment, in the markets in which we and our subsidiaries and associated companies operate;
 
·  
the level of demand for telecommunications services in the markets we serve, particularly for wireless telecommunications services, broadband access lines, voice and data traffic, new higher-value products and services, and new rate offerings;
 
·  
changes in government policies and new legislation;
 
 
·  
regulatory developments and changes, including with respect to the levels of tariffs, terms of interconnection, customer access and international settlement arrangements;
 
·  
our ability to secure and retain the licenses needed to offer new and existing services and the cost of these licenses and related network infrastructure build-outs, particularly with respect to advanced services;
 
·  
competitive forces, including pricing pressures, technological developments and alternative routing developments, all of which affect our ability to gain or retain market share and revenues in the face of competition from existing and new market entrants;
 
·  
the effects of our customer acquisition and retention initiatives, particularly in the fixed-line voice telephony business, the mobile telecommunications business and our interconnection business;
 
·  
the effects of industry consolidation on the markets in which we operate, particularly with respect to our mobile and leased lines businesses;
 
·  
the success of new business, operating and financial initiatives, many of which involve substantial start-up costs and are untested, and of new systems and applications, particularly with regard to the integration of service offerings;
 
·  
our ability to achieve cost savings and realize productivity improvements, particularly with respect to our workforce-reduction initiatives, while at the same time enhancing customer service quality;
 
·  
our ability to attract and retain qualified personnel, particularly in view of our cost reduction efforts;
 
·  
concerns over health risks associated with the use of wireless mobile devices and other health and safety risks related to radio frequency emissions;
 
·  
risks of infrastructure failures or damage due to external factors, including natural disasters, intentional wrongdoing, sabotage, acts of terrorism or similar events;
 
·  
the outcome of litigation, disputes and investigations in which we are involved or may become involved;
 
·  
risks and uncertainties relating to the benefits anticipated from our international expansion, including in the United States;
 
·  
risks and costs associated with integrating our acquired businesses and with selling or combining businesses or other assets;
 
·  
the progress of our domestic and international investments, joint ventures, partnerships and alliances;
 
·  
the effects of foreign exchange rate fluctuations, particularly in connection with subsidiaries operating outside the euro zone;
 
·  
instability and volatility in worldwide financial markets;
 
·  
the availability, terms and deployment of capital, particularly in view of our financing alternatives, actions of the rating agencies, developments in the banking sector and the impact of regulatory and competitive developments on our capital outlays; and
 
·  
the level of demand in the market for our debt obligations, and for the debt obligations of our subsidiaries and associated companies, and our shares, as well as for assets that we may decide to sell, which may affect our financing and acquisition strategies.
     
 
      Certain of these factors are discussed in more detail elsewhere in this Annual Report, including, without limitation, in Item 3, Item 4 and Item 5. We caution investors that the foregoing list of important factors is not exhaustive.
If these factors or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, our actual performance and future actions may materially differ from those expressed or implied by forward-looking statements. We can offer no assurance that our estimates or expectations will be achieved or that we will be able to achieve our policy aims. When reviewing forward-looking statements contained in this document, investors and others should carefully consider the foregoing factors, as well as other uncertainties and events and their potential impact on our operations and businesses.
 
Certain information in this Annual Report has been provided by external sources. Due to the rapid changes in our industry, it is possible that some of this information is no longer accurate. Assessments of market share in particular involve the use of information released or estimated by regulatory authorities, our competitors, third parties or us.
 
World Wide Web addresses contained in this Annual 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 Annual Report.
 
PART I
 
 
 
Not applicable.
 
 
ITEM 2. Offer Statistics and Expected Timetable
 
Not applicable.
 
 
ITEM 3. Key Information
 
 
SELECTED FINANCIAL DATA
 
The following table presents selected consolidated financial and operating information. This selected consolidated financial and operating information should be read together with “Item 5. Operating and Financial Review and Prospects” and our Consolidated Financial Statements and the notes thereto that are included elsewhere in this Annual Report.
 
The selected consolidated financial information as of and for each of the five years ended December 31, 2005 through 2009 are extracted or derived from our consolidated financial statements and the notes thereto, which have been audited by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft (“E&Y”) and PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft (“PwC”).
 
Selected Consolidated Financial Data of the Deutsche Telekom Group
   
% Change
2009/2008(1)(2)
   
2009
   
2008
   
2007
   
2006
   
2005
 
   
(billions of €, except as otherwise indicated)
 
Income Statement Data
                                   
Net revenues
    4.8       64.6       61.7       62.5       61.3       59.6  
Domestic
    (2.9 )     28.0       28.9       30.7       32.4       34.2  
International
    11.6       36.6       32.8       31.8       28.9       25.4  
Profit from operations
    (14.6 )     6.0       7.0       5.3       5.3       7.6  
Profit attributable to owners of the parent
    (76.2 )     0.4       1.5       0.6       3.2       5.6  
Statement of Financial Position
                                               
Total assets
    3.8       127.8       123.1       120.7       130.2       128.5  
Total financial liabilities (in accordance with the consolidated statement of financial position)
    9.9       51.2       46.6       42.9       46.5       46.7  
Shareholders’ equity
    (2.7 )     41.9       43.1       45.2       49.7       48.6  
Cash Flow Data(3)
                                               
Net cash from operating activities
    2.8       15.8       15.4       13.7       14.2       15.1  
Net cash used in investing activities
    24.0       (8.6 )     (11.4 )     (8.1 )     (14.3 )     (10.1 )
Net cash used in financing activities
    (65.4 )     (5.1 )     (3.1 )     (6.1 )     (2.1 )     (8.0 )
Ratios and Selected Data
                                               
Additions to intangible assets (including goodwill) and property, plant and equipment
    13.3       11.5       10.1       9.1       13.4       11.1  
Capital expenditures(3)
    (5.7)       (9.2 )     (8.7     (8.0 )     (11.8)       (9.3)  
Number of employees averaged over the year (full-time employees excluding trainees) (thousands)
    9.7       258       235       244       248       244  
Revenues per employee (thousands of euro)(4)
    (4.5 )     250.8       262.5       256.5       246.9       244.3  
Earnings per share/ADS—basic and diluted euro)(5)
    (76.5 )     0.08       0.34       0.13       0.74       1.31  
Weighted average number of ordinary shares outstanding (basic) (millions)
    0.0       4,340       4,340       4,339       4,353       4,335  
Total number of ordinary shares at the reporting date (millions)
    0.0       4,361       4,361       4,361       4,361       4,198  
Dividend per share/ADS (euro)(5)(6)
    0.0       0.78       0.78       0.78       0.72       0.72  
Dividend per share/ADS (U.S. dollar)(5)(6)(7)
    2.8       1.12       1.09       1.21       0.98       0.91  
                                                 
(1)
Percentage change based on figures expressed in millions.
(2)
In this Annual Report, increases in the size of negative numbers are expressed in percentage terms with negative percentage amounts, and decreases in the size of negative numbers are expressed with positive percentage amounts.
(3)
In accordance with the statement of cash flows.
(4)
Calculated on the basis of the average number of employees for the year, excluding trainees, apprentices and student interns.
(5)
ADS refers to the Deutsche Telekom’s American Depositary Shares, which are traded on the New York Stock Exchange, NYSE. One ADS corresponds to one ordinary share of Deutsche Telekom AG.
(6)
Dividends per share are presented on the basis of the year in respect of which they are declared, not the year in which they are paid. The proposed 2009 dividend per share amounts are subject to approval by the shareholders at the annual shareholders’ meeting.
(7)
Dividend amounts have been translated into U.S. dollars (using exchange rates published by the European Central Bank) for the relevant dividend payment date, which occurred during the second quarter of the following year, except for the 2009 amount, which has been translated using the applicable rate on December 31, 2009. As a result, the actual U.S. dollar amount at the time of payment may vary from the amount shown here.
 
 
Exchange Rates
 
Unless otherwise indicated, all amounts in this Annual Report are expressed in euros.
 
As used in this document, “euro,” “EUR” or “€” means the single unified currency that was introduced in 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” or “GBP” means the lawful currency of the United Kingdom.

So that you may more easily ascertain how the trends in our financial results might have appeared had they been expressed in U.S. dollars, the following table shows, for the periods indicated, the average, high and low exchange rates for euros, expressed in U.S. dollars per EUR 1.00, as published by the European Central Bank:
 
Year or Month
 
Average (1)
   
High
   
Low
 
   
(in $ per €)
 
2005
    1.2380              
2006
    1.2630              
2007
    1.3797              
2008
    1.4726              
2009
    1.3963              
2009
                   
August
    -       1.4410       1.4072  
September
    -       1.4783       1.4220  
October
    -       1.5020       1.4537  
November
    -       1.5083       1.4658  
December
    -       1.5120       1.4276  
2010
                       
January
    -       1.4563       1.3966  
February (through February 23)
    -    
   1.3984
   
  1.3519
 
                         
(1)
The average of the exchange rates on the last business day of each month during the relevant period.

 
On February 23, 2010, the exchange rate was USD 1.377 per EUR 1.00.
 
Our shares trade on German stock exchanges, including the Frankfurt Stock Exchange, in euros. Fluctuations in the exchange rate between the euro and the U.S. dollar will affect the U.S. dollar equivalent of the euro price of the shares on the German stock exchanges and, as a result, are likely to affect the market price of our ADSs on the New York Stock Exchange. When we declare cash dividends, they are declared in euros, and exchange rate fluctuations affect the U.S. dollar amounts you would receive if you are a holder of American Depositary Receipts (ADRs) evidencing ADSs upon conversion of cash dividends on the shares represented by your ADSs.
 
 
 
RISK FACTORS
 
In addition to the other information contained in this Annual Report, investors in our securities should carefully consider the risks described below. Our financial condition or results of operations, or the trading prices of our securities, could be materially adversely affected by any of these risks.
 
The following discussion contains a number of forward-looking statements. Please refer to the “Forward-Looking Statements” discussion at the front of this Annual Report for cautionary information.
 
An economic downturn, a substantial slowdown in economic growth or deterioration in consumer spending could adversely affect our customers’ purchases of our products and services in each of our operating segments, which could have a negative impact on our operating results and financial condition.
 
Our business is influenced by general economic conditions in Germany, Europe and the United States. The economic outlook for 2010 signals a slight recovery, including in our largest markets in Europe and the United States, but the global economic situation remains fragile.
 
A continuous deterioration in the economic environment could have an adverse effect on the level of demand by our individual customers for our products and services and the willingness of our business customers to invest in information and communications technology (ICT). This could, in turn, jeopardize the attainment of our growth targets, such as those relating to multimedia services in mobile telecommunications, or those relating to broadband products and services based on digital subscriber line (DSL) technology.
 

Because we operate in heavily regulated business environments, decisions that regulatory authorities impose on us restrict flexibility in managing our business and may force us to offer services to competitors, or reduce the prices we charge for our products and services, either of which could have a material negative impact on our revenues, profits and market shares.
 
We are subject to strict regulation in all of our fixed-line and mobile markets in Europe and the United States. Government agencies regularly intervene in the offerings and in the pricing of our fixed-line and mobile products and services. Regulation can impede our ability to grow and to react to the initiatives of competitors and technological change.
 
Amendments to the EU Telecommunications Framework entered into force on December 17, 2009. Whether the revised regulatory framework will increase or decrease the regulatory burden on us will depend on the manner in which revised directives are subsequently implemented in the EU Member States, and how the revised regulatory framework will be applied by the respective National Regulatory Authorities.
 
In June 2009, the European Commission also proposed a draft recommendation on regulated access to Next Generation Access Networks, or NGA, such as access to new and existing ducts, civil engineering structures and other elements which are not active and necessary for the roll-out of fiber-based telecommunications infrastructure. The objective of the recommendation is to regulate fiber-based telecommunications infrastructure and access. If this recommendation is implemented as currently drafted may cause a decrease in our revenues and may impact the extent and timing of our NGA build-out.
 
The German telecommunications regulatory framework implemented by the Federal Network Agency (Bundesnetzagentur) has an especially significant impact on our domestic business. So far, we have been exempted from regulation on the basis of a loss of significant market power in markets of relatively minor importance only, such as the market for fixed-line international calls.
 
Additionally, since we are offering mobile and fixed-line triple-play services (“triple-play” includes high-speed Internet access, communications services and entertainment offerings), media regulation may become increasingly important to our business. This regulation might restrict our ability to provide media services, including the delivery of content, and could also result in additional costs for technical implementation measures needed to comply with increased regulation.
 
 
Mobile Telecommunications Operations
 
Regulatory authorities supervise our mobile telecommunications operations in the countries in which we operate. We expect a tightening of regulatory control in the area of mobile telecommunications, with a probable negative effect on pricing and revenues, for example as a result of further reductions in international roaming charges for the wholesale and retail voice market, international data and SMS roaming charges, call termination charges and possible access regulation in some markets. In Europe, national regulatory authorities and various EU bodies have the power to regulate based on market investigations or reviews.
 
 
With respect to international roaming charges for the wholesale and retail voice market, a European Union-wide regulation, valid until June 2010, is presently in place. On July 1, 2009, a new EU roaming regulation came into force and expanded the existing regulation to non-voice roaming services until June 30, 2012. Besides additional reduction of wholesale and retail voice roaming tariffs, SMS roaming charges were reduced and furthermore, price caps for wholesale data roaming tariffs and additional transparency measures have been introduced. This expansion of existing regulation has an additional negative effect on our roaming revenues.
 
Mobile call termination charges are also subject to regulatory measures in countries with mobile telecommunications operations that can have a negative effect on revenues. Various reviews of call termination rates and court proceedings relating to regulatory measures are pending in several of those markets. The European Commission intends to further reduce the termination rates significantly and has therefore issued a recommendation that defines details for the calculation of termination rates by the National Regulatory Authorities. The recommendation neglects significant parts of the costs of mobile operators in the termination rate calculation. Despite these serious negative consequences for the mobile industry the recommendation was adopted in May 2009. If the European Commission were to further reduce termination rates, it may have an adverse effect on the profitability of our mobile-telecommunications operations in Europe.
 
Our operations in the United States are regulated primarily by the Federal Communications Commission (FCC) and by various other federal, state and local governmental agencies. These governmental agencies may also exercise jurisdiction over mobile telecommunications operators. The FCC is continually considering whether to establish new rules and policies, many of which, if implemented could impose significant costs and burdens on our business. The most significant areas of concern include whether the FCC makes available additional spectrum for next generation wireless offerings in a reasonable timeframe and ensures that existing spectrum holdings remain free and clear of any radio interference concerns. The FCC is also considering imposing new “net neutrality” regulations on wireless carriers that could, depending on how they are defined, restrict a carrier’s ability to manage its network. In addition, many state and local governments regulate various aspects of wireless operations, affecting our business practices and the carrier-customer relationship.  In particular, consumer regulation at the federal or state level can impact a variety of carrier practices in this area including for example early termination fees, trial periods, billing practices and marketing. Any state or federal regulation could have a potentially adverse effect on our mobile telecommunications business in the United States, as would any failure to comply with applicable regulations. Some U.S. states have taken actions to regulate various aspects of wireless operations including customer billing, termination of service arrangements and advertising. Any of those agencies could adopt regulations or take other actions that could adversely affect our business. If we fail to comply with applicable regulations, we may be subject to sanctions, which may have an adverse effect on our mobile telecommunications business in the United States.
 
 
Fixed-Network Operations
 
We believe that, for the foreseeable future, the Federal Network Agency is likely to consider us a provider with significant market power in various German markets for public voice telephony services in the fixed-line network and in other markets, including most of those in which we held monopoly rights in the past. Access and price regulation apply primarily to telecommunications services that are considered to involve an operator with "significant market power." As a result, we expect that the strict regulatory provisions of the German Telecommunications Act relating to providers with significant market power will continue to be applied to our activities in those markets. Considering that in many markets our competitors are unlikely to gain significant market power in the near future, we expect that we will have to compete in important markets with providers not subject to these regulatory obligations. Therefore, these competitors may be expected to have more flexibility than we have in terms of the types of services offered and customers served, pricing and the granting of network access.
 
We are required to offer an Internet Protocol (IP) Bitstream Access product in the wholesale-market and are therefore required to offer unbundled broadband access to competitors since April 2008. 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 but will expand the scope of regulation to include all wholesale bitstream access products, including also new VDSL wholesale services and including the transfer of traffic to a minimum of one point of presence (PoP) whereas until today, a carrier must connect to 73 PoP in order to provide BSA-based retail services on a nationwide basis. The final adoption of this market analysis and regulatory order is expected in the first quarter of 2010.
 
According to a regulatory order, we must grant access to competitors to ducts and street cabinets. The replication of VDSL products, in particular by our competitors using their own infrastructures, is therefore being made easier at our expense. This will have a negative impact on our revenue and results of operations, even if we offer our competitors a VDSL product on a voluntary basis. The Federal Network Agency specified the obligations concerning access to cable ducts, dark fiber and co-location within street cabinets on December 4, 2009. We applied for corresponding tariffs in mid-January 2010 and expect a decision in the first quarter of 2010 regarding prices relating to access to ducts and collocation within the street cabinets.
We are involved in a number of pending legal proceedings regarding decisions of the Federal Network Agency that concern access charges relating to the local loop. Unbundled local loop charges for monthly rental, as determined by the Federal Network Agency for the period from February 1999 to March 2001, were revoked. The Court criticized the Federal Network Agency’s calculation method for unbundled local loop costs. The Court ruling concerning unbundled local loop charges for the period from 1999 to 2001 became effective in October 2009. As a result, the Federal Network Agency must now decide again on our rate approval applications of 1999. Unbundled local loop charges for monthly rental as well as for one-off services, as determined by the Federal Network Agency for the period April 2001 to March 2003, were also revoked by the Cologne Administrative Court. These rulings are not yet effective due to pending claims of the Federal Network Agency and Deutsche Telekom at the German Federal Administrative Court. It is not possible at present to estimate whether these decisions will require Deutsche Telekom to make payments or price adjustments and if so, in what amount.
 
Our fixed-line subsidiaries in Southern and Eastern Europe are subject to regulatory provisions and risks that are similar to those affecting our fixed-line operations in Germany. For example, we are designated an operator with significant market power in most fixed-line markets in which we operate, including in Hungary, Slovakia, Croatia and Greece. The provision of telecommunications services in Greece is subject to regulation based on European Union legislation, competition law and ex-ante sector-specific regulation transposed in 2006 in the Greek Telecommunications Law. A second round of analysis of the markets for wholesale broadband access and wholesale (physical) network infrastructure access (including shared or fully unbundled access) at a fixed location was concluded by in the Greek NRA in July 2009. The Greek NRA defined the Hellenic Telecommunications Organization S.A., (" OTE") as having significant market power and imposed additional obligations.  The business impact of increased regulation on our subsidiaries in Southern and Eastern Europe will depend on the way in which national regulatory authorities use their powers, and the extent to which our competitors take advantage of regulatory decisions designed to foster increased competition.
 
For further information regarding the matters discussed above and other aspects of the regulatory environments to which our businesses are subject, see “Item 4. Information on the Company – Regulation” and “Item 8. Financial Information – Legal Proceedings.”
 
We face intense competition in all areas of our business, which could lead to reduced prices for our products and services and a decrease in market share in certain service areas, thereby adversely affecting our revenues and net profit.
 
Germany
 
In Germany, fixed-line network voice telephony service revenues and prices have continued to decline, primarily due to intense competition and adverse decisions imposed by the national regulation authorities, and also due to customers’ ongoing substitution of mobile telecommunications and VoIP services for fixed-line usage.
 
Due to competitive pressures from cable operators, mobile operators and fixed-line carriers, we continued to lose market share in 2009. We expect a further increase in competition from cable operators, in particular, offerings of product bundles for telephone and broadband access lines, which are increasingly offered in more regions throughout Germany. Furthermore, the switch of mobile operators’ focus from pure mobile services towards fixed-line offerings, regulatory actions by the Federal Network Agency and the increasing quality and acceptance of VoIP services will increase pressure on our market shares, revenues and margins.
 
Additional local and regional network operators are expanding their presence to include other major cities and regions. In the future, we could face even fiercer competition and lose further market share if our competitors were to combine their businesses.
 
Existing mobile substitution effects are intensified by the proliferation of MVNOs. Reduced prices for mobile telecommunications services (e.g., on the basis of lower flat rates without call-based charges and regulatory decisions regarding mobile telephony termination rates) could further increase pricing pressure on our fixed-line services. Furthermore, mobile operators are increasingly engaging in reselling DSL product bundles provided by other fixed-line operators, and this continues to have an adverse effect on our fixed-line network revenues.
 
The German markets for Internet access and portal services, especially within the broadband market, have been, and will continue to be, highly competitive and are increasingly saturated. Prices for broadband flat rates have been steadily declining. Our future competitive position in the broadband/fixed-network business in Germany will be affected by pricing, network speed and reliability, services offered, customer support and its ability to be technologically adept and innovative. The regulatory environment can also exert a significant influence on the level of competition. We expect that our competitors will continue to pursue new broadband customers aggressively. In the market for portal services and content, competition is also intense due to low barriers to entry. In addition, a weaker economy may increase pressure on our revenues and margins in these markets. Furthermore, recent regulatory decisions have required us to offer to our competitors an IP Bitstream Access product, which enables our competitors to expand their operations throughout Germany without building their own infrastructure.
 
Part of the challenge in the fixed-network business in Germany continues to be the improvement of our reputation for customer service while implementing cost-saving measures. If we do not continue to improve our customer service sustainably, there is a risk that we might not stop our overall continuing loss of fixed-network customers in the German market.
Competition in the German mobile telecommunications segment with established players such as Vodafone, E-Plus and O2 is intensive and can be expected to increase further in the future. Growing competition is also fostered by resellers and “no-frills” operators, offering discount rates without significant minimum-contract term obligations. With our “Congstar” brand, we also participate in this market, primarily as a measure to prevent churn from our established “T-Mobile” premium brand.
 
In terms of the mobile share of “total telecommunications minutes”, Germany consistently lags behind the European average. Although the number of “mobile minutes” is still growing in Germany, the respective growth rates are constantly declining since early 2008. This makes it all the more difficult to compensate price declines by higher usage.
 
As the German market for mobile telecommunications has become increasingly saturated (we believe the overall penetration rate to be well above 100%), the focus of competition has been shifting from customer acquisition to customer retention, and increasing the quality and value of existing customers. Accordingly, if we are unable to offer increased quality and better value to our customers, our market share and revenues may not grow as we have anticipated in our plans.
 
United States
 
In the United States, each of T-Mobile USA’s three main national competitors – AT&T, Verizon Wireless and Sprint/Nextel – is significantly larger than T-Mobile USA. Their scale could afford them significant structural and competitive advantages in this market. This situation presents T-Mobile USA with a long-term challenge to compete effectively in terms of pricing, products, coverage and the introduction of new technologies and services. Intense competition from various regional and other small national operators also exists in T-Mobile USA’s markets. Partly, these competitors operate on alternative business models within the traditional wireless space that pose potential to negatively affect T-Mobile USA’s ability to attract and retain customers, such as low-cost unlimited prepaid offerings (offered by, e.g., regional carriers Leap and MetroPCS, as well as Boost).
 
In addition to traditional competitors, the entrance and influence of non-wireless carriers, such as manufacturers, service providers and cable providers, could cause further pressure on the wireless industry and T-Mobile USA.
 
The incumbent wireless industry is experiencing disruptive innovation on many fronts. For example, Apple transformed the device market with the launch of the iPhone, and Clearwire hopes to transform the market with fixed mobile convergence.  As wireless networks open in response to consumer demand (and threatened legislative/regulatory actions) and diverse industries converge on the wireless communications industry, the era of limited choices (walled gardens controlled by incumbent wireless carriers) will increasingly shift to a new era of an abundance of options in devices, providers, and services.  This dynamic environment poses opportunity for companies who identify and recognize opportunities within the threats, although a significantly higher level of inherent risk comes with dynamism than with a stable industry landscape.
 
Despite the continued difficult economic context, the wireless industry is faring better than most industries (wireless spending is becoming less discretionary in the U.S.), but the industry is not immune from the cost-reduction efforts of consumers and changes in consumer credit-worthiness.  As the overall drop in customer growth intensifies, and price competition also in the Contract area becomes more perceptible, a comprehensive 3G coverage and attractive “smartphone” offerings will be key to T-Mobile USA’s sustained commercial success.
 
Since T-Mobile USA is a significant contributor to our overall revenues and customer growth, a further slowdown or decline in the business of T-Mobile USA could have a material adverse effect on the attainment of the growth targets and profitability of our Group as a whole.
 
Europe
 
Competition in the European mobile telecommunications markets run by our Europe operating segment is intense and can be expected to increase in the future. Growing competition results, in part, from the market entry of low cost carriers, such as mobile virtual network operators, or MVNOs, which use the networks of other operators at volume discounts, and from market consolidation. If prices for mobile telecommunications services continue to decline through competition and/or regulation more than anticipated and this decline is not compensated for by higher usage, planned objectives may not be achieved. In addition, mobile network operators’ expansion of product offerings into the fixed-line sector may result in a competitive disadvantage for our mobile telecommunications operations in countries in which we offer only mobile communications services. Moreover, technologies such as W-LAN, WiMax and Voice over Internet Protocol (VoIP), which can be used with existing hardware and platforms, could drive voice and data traffic from mobile networks, which could lead to significant price and revenue reductions.
 
As European markets have become increasingly saturated, the focus of competition has been shifting from customer acquisition to customer retention, and increasing the quality and value of existing customers. Accordingly, if we are unable to offer increased quality and better value to our customers, our market share and revenues may not grow as we have anticipated in our plans.
 
Southern and Eastern Europe
 
Through our investments in OTE, our subsidiary in Greece, and Magyar Telekom, our subsidiary in Hungary, and our subsidiaries Hrvatski Telekom and Slovak Telekom, we have market presence in various countries of the Southern and Eastern European region, offering integrated or either mobile or fixed-network telecommunications services.
 
All of our Southern and Eastern European companies face intense competition and difficult economic conditions. As in other operating segments, growing competition results, to a different extent in each regional market, from the market entry of alternative carriers (such as Cable TV operators) or low cost carriers (such as MVNOs), technology shifts (such as IP-based telecommunications networks) and from market consolidation.
 
In Greece, risk exists in the area of infrastructure roll-out, including VDSL and FTTX. The Greek government announcement an initiative to support a passive optical network across Greece that would provide open access to all fixed-network providers and, as a result, increase competition. The impact of this development on OTE and the related financial risk to us cannot be quantified at this point.
 
 
Systems Solutions
 
Our Systems Solutions business is subject to risks associated with the general and regional economies of its customers and the willingness and ability of its customers to invest in information and communications technology services and products. The ICT market is shaped by long sales cycles, severe competition and declining prices. The result is downward pressure on revenues and margins, which has been exacerbated by the global economic crisis.
 
Depending on the economic development and their impact on our customers in 2010, T-Systems will continue to be affected. For example, cost-cutting programs and postponement or cancellation of investments of our customers can have a negative impact on T-System’s revenues and margins. In this business environment, further cost reductions will force T-Systems to rely on the development of lower cost near- and off shore capacities in both IT Outsourcing and the System Integration business.
 
In addition, the international growth potential of T-Systems may be constrained by its limited brand recognition in some national markets, at least compared to that of competitors who may be more established there, particularly as this relates to maintaining and increasing business with multinational companies outside of Germany. Additionally the relatively small size of some international T-Systems units may require expensive additional management resources from Germany.
 
If T-Systems’ focus on multinational customers and its service offerings, such as dynamic SAP services or Cloud Computing are not successful, T-Systems may lose market share to its competitors, suffer reduced revenues and incur losses.
 
For more information, see “Item 4. Information on the Company – Description of Business.”
 
We may realize neither the expected level of demand for our products and services, nor the expected level or timing of revenues generated by those products and services, as a result of lack of market acceptance, technological change or delays from suppliers, which could adversely affect our cash flows.
 
There is a risk that we will not succeed in making customers sufficiently aware of existing and future value-added services or in creating customer acceptance of these services at the prices we would want to charge. There is also a risk that we will not identify trends correctly, or that we will not be able to bring new services to market as quickly or price-competitively as our competitors. These risks exist, in particular, with respect to our anticipated future growth drivers in the mobile telecommunications area, such as mobile data services or other advanced technologies (which are supported by advanced “smartphone” products such as the iPhone and the T-Mobile G1 phone), and in the fixed-line telecommunications area, such as triple-play services, which include telephone, Internet and television services.
 
Under the “Entertain” product name, we provide our customers in Germany with comprehensive triple-play offerings. The market acceptance for these new products and services could be negatively affected by an unwillingness to pay for additional features. Since the content and technology of the product are very complex, we may find it difficult to convey an understanding of the product’s benefits to our customers via our traditional sales channels. In addition, some of our competitors offer similar or pared-down products. These factors could lead to a potential reduction of the perceived value of “Entertain” to our customers with adverse effects on our pricing models, revenues and profit margins.
 
Further, as a result of rapid technological progress, and the trend towards technological convergence, there is a danger that new and established information and telecommunications technologies or products may not only fail to complement one another, but in some cases may even substitute for one another. An example of this is VoIP, a technology that is already established in the business customer market. VoIP has now reached the consumer market as well and, as a technology that competes directly with traditional fixed-line telephony services, VoIP has the potential to reduce further our market share and revenues in our fixed-line business. The introduction of mobile handsets with VoIP functionality may also adversely affect our pricing structures and market share in our mobile voice telephony business. If we do not appropriately anticipate the demand for new technologies, and adapt our strategies and cost structures accordingly, we may be unable to compete effectively, with the result that our business activities, financial condition and results may suffer.
 
For more information, see “Item 4. Information on the Company—Description of Business.”
 
Some of our investments (such as in new spectrum licenses) to develop future products and services may involve substantial cash outlays with no certainty of market acceptance or regulatory non-interference with license requirements.
 
In 2010, the German Federal Network Agency is set to auction off certain recently released radio frequencies. The terms and conditions for the award of new spectrum in the 800 MHz, 1.8 GHz, 2 GHz, and 2.6 GHz bands were published in October 2009. In the United Kingdom, current proposals call  for a combined auction of 800 MHz and 2.6 GHz spectrum in late 2010 with certain bidding restrictions, such as spectrum caps for incumbents and joint ventures, release of spectrum already held by mobile telecommunications companies and wholesale and coverage obligations. In the Netherlands, parliament began the discussion of new rules for the auction of 2.6 GHz spectrum in spring 2009, and it is officially still expected to take place in the first quarter of 2010. In Austria, an auction for 2.6 GHz spectrum is now expected to take place in the second quarter of 2010. Depending on the outcome of these auctions, a greater cash outlay than anticipated may be necessary to gain new spectrum in these countries, which would negatively affect our cash-flow generation goals.
 
There is a risk that the return on our investments, in particular in new spectrum licenses and network infrastructure, may negatively deviate from our plans. In addition to the negative impact on our cash flows, this could result in significant write-downs of the value of spectrum or other licenses or other network-related investments.
 
Should we face a continuously deteriorating economic climate, we may decide, or be required, to scale back capital expenditures. We believe that we have flexibility in terms of the amount and timing of our capital expenditure program, but a lasting reduction in capital expenditure levels below certain thresholds could affect our future growth, in particular in our mobile operations.
 
 Failure to achieve our planned reduction and restructuring of personnel or our human resources-related cost-savings goals could negatively affect our reputation and the achievement of our financial objectives and profitability.
 
Staff restructuring within the Deutsche Telekom Group in Germany continued on a socially conscious basis in 2009. It was implemented 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. We will also continue to restructure our workforce as required. If it is not possible to implement the corresponding measures to the extent planned or not at all, this may have negative effects on our financial targets and profitability.
 
Deutsche Telekom and employee representatives agreed to 3,000 job cuts at T-Systems by 2010. The agreement incorporates a series of measures, including help in searching for new jobs, a voluntary redundancy program and early retirement options. In the first quarter of 2010, T-Systems will examine the level of take-up for the voluntary offers. If the affected employees have not found alternative employment opportunities or accepted voluntary offers by then, they will be offered fixed-term employment in a transitional company. Should the desired workforce reduction targets not be met, compulsory redundancies, which could have a negative impact on our corporate reputation in Germany, cannot be ruled out.
 
The successful realization of our ongoing staff reduction program depends on a range of factors that are beyond our control, such as the continued successful sale of non-core businesses, general developments in the labor market, the demand for our retrained labor force, and the level of acceptance of the various severance offers and other voluntary reduction measures. If the planned staff reduction targets are not achieved, this would have a negative effect on our operating expenses and profitability.
 
For more information, see “Item 4. Information on the Company—Description of Business—Group Headquarters and Shared Services” and “Item 6. Directors, Senior Management and Employees—Employees and Labor Relations—Other Employees.”
 
As a result of dispositions of certain non-core businesses in Germany, there is an increased risk of return of civil servants transferred out of the Group, which could have a negative impact on our staff and cost reduction objectives.
Our employees who have civil servant status can, based on German civil service law, only be completely transferred to the buyer of a business from us in exceptional cases. Therefore, as a general matter, such transferred civil servants are placed on leave of absence while employed with the transferred business unit. Accordingly, in the event of termination of employment with the transferred business unit, there is a risk that such civil servants will return to the Deutsche Telekom Group. This risk of return can be reduced by an agreement on compensation payments, but it cannot be completely eliminated. As of December 31, 2009, the total number of civil servants that can avail themselves of this right of return to the Deutsche Telekom Group was 3,467, which represented a considerable decrease over the 2008 year-end figure, chiefly as a result of some 400 civil servants actually returning to the Deutsche Telekom Group from Strabag, Nokia Siemens Networks and the cable network operators.
 
If further Group units employing civil servants are disposed of, the risk of additional civil servants returning after the end of their temporary leave may again increase. For further information regarding civil servants and general human resources-related matters, see “Item 6. Directors, Senior Management and Employees—Employees and Labor Relations.”
 
Alleged health risks of wireless communications devices have led to litigation affecting markets with our mobile telecommunications operations subsidiaries, and could lead to decreased wireless communications usage or increased difficulty in obtaining sites for base stations and, as a result, adversely affect the financial condition and results of operations of our wireless services business.
 
Media reports have suggested that radio frequency emissions from wireless mobile devices and cell sites may raise various health concerns, including cancer, and may interfere with various electronic medical devices, including hearing aids and pacemakers. Research and studies are ongoing. The World Health Organization has indicated that it will publish its recommendations for public policy in its Radio Frequency Environmental Health Criteria in 2011. However, on the basis of current scientific knowledge, there are no known adverse effects on health from emissions at levels below internationally recognized health and safety standards. We cannot provide assurance that research in the future will not establish links between radio frequency emissions and health risks.
 
Whether or not such research or studies conclude there is a link between radio frequency emissions and health, popular concerns about radio frequency emissions may discourage the use of wireless devices and may result in significant restrictions on the location and operation of cell sites by our mobile telecommunications subsidiaries and the usage of T-Home’s wireless devices, telephones or products using wireless technology. Such restrictions on use could have material adverse effects on our results of operations.
 
T-Mobile USA is subject to current and potential litigation relating to these health concerns. Several class action and individual lawsuits have been filed in the United States against T-Mobile USA and several other wireless service operators and wireless telephone manufacturers, asserting product liability, breach of warranty and other claims relating to radio frequency transmissions to and from wireless mobile devices. The complaints seek substantial monetary damages as well as injunctive relief. To date, the cases filed against T-Mobile USA have been dismissed by the trial courts, although one class action case is pending on appeal. The defense of lawsuits alleging adverse health effects from wireless telephone use may divert management’s attention, and T-Mobile USA may be required to pay significant awards or settlements and incur significant expenses in defending these lawsuits.
 
We do not know whether legislators, regulators or private litigants will refrain from taking other actions adverse to us, based on the purported health-related risks associated with radio frequency emissions. Any such litigation, legislation or adverse actions may result in additional costs and loss of revenues in our mobile communications businesses. For more information, see “Item 8. Financial Information—Legal Proceedings.”
 
We continuously engage in large-scale programs to reshape our information technology (IT) infrastructure to adapt to changing customer needs and organizational requirements. Failure to effectively plan and monitor these activities could lead to misallocations of resources and impaired processes with negative consequences for our operations.
 
The “Next Generation IT (NG IT)” program was launched in 2008 as a Group-wide framework for all IT-related components of our transformation programs and the development of our future overall IT architecture. Its focus is on a common platform to support IT projects and services in the future. The close cooperation between IT and business areas plays a central role in this program. Flexibility, cost reduction, short response time to market changes and secure management of business information are the major challenges for our future IT landscape. In order to tackle these challenges, an architectural approach was developed to identify the necessary IT changes, taking into account developments in business processes, in the production environment and in customer and product management.
 
Due to the enormous complexity of the implementation of this IT initiative, malfunctions, connectivity issues, implementation delays, and other unforeseen problems, could result in costly process impairments and remediation, and possible extended down-times of IT processes, and therefore frustrate the attainment of our goals in terms of cost savings and quality improvements.
 
One of our most important IT programs deals with the long-term development and implementation of a comprehensive IP platform that will support both fixed-line and mobile telephony services. This means that the traditional platform will be completely replaced by an IP-based system. Upon implementing this joint IP platform, we will be subject to risks inherent in all IT systems connected to the Internet, such as hacker attacks, “spam calls” and other disruptions. These risks could lead to a temporary interruption of our IT resources and, as a result, impair the performance of our technical infrastructure.
 
System failures due to natural or man-made disruptions and loss of data could result in reduced user traffic and reduced revenues and could harm our reputation and results.
 
Our technical infrastructure (including our network infrastructure for fixed-line network services and mobile telecommunications services) and data may be damaged or disrupted by fire, lightning, flooding and other calamities, technology failures, human error, terrorist attacks, hacker attacks and malicious actions (e.g., theft or misuse of customer data), and other similar events. We attempt to mitigate these risks by employing a large number of measures, including a comprehensive monitoring of our telecommunications networks, backup systems and protective systems such as firewalls, virus scanners, and building security. In addition, we have implemented a global business continuity management system at our corporate headquarters. We cannot, however, be certain that these measures will be effective under all circumstances, and that disruptions (such as the network outage at T-Mobile Deutschland in April 2009 or the outage of a critical “Sidekick” user database in the U.S. in October 2009) or damages will not occur. Disruption or damage to our infrastructure may result in reduced user traffic and revenues, increased costs, and damage to our reputation.
 
Shortcomings in our supply and procurement process could negatively affect our product portfolio, revenues and profits.
 
As a fully integrated ICT service provider, we cooperate with a wide range of different suppliers for technical components and assemblies, as well as for software and other goods and information important to the conduct of our business. Although we do not believe that we are materially dependent on any single supplier, our contractors may want to extend delivery times, raise prices and limit supply due to their own shortages or changing business and product strategies. Furthermore, our vendors may be subject to litigation with respect to technology that is important for the conduct of our business. Especially in times of economic turmoil, supply chains, credit access and financial stability of our vendors may be negatively affected, which could disturb our commercial relationship with them.
 
If our commercial partners fail to deliver quality products and services in a timely manner, the ensuing disruptions in our chain of supply could negatively affect our product portfolio, cost structure, revenues and profits. We take a variety of measures to shelter ourselves from these risks, but we cannot be sure that these measures will be effective under all circumstances.
 
We are continuously involved in disputes and litigation with regulators, competition authorities, competitors and other parties. The ultimate outcome of such legal proceedings is generally uncertain. When finally concluded, they may have a material adverse effect on our results of operations and financial condition.
 
We are subject to numerous risks relating to legal and regulatory proceedings, in which we are currently a party or which could develop in the future. Litigation and regulatory proceedings, including patent infringement lawsuits, are inherently unpredictable. Legal or regulatory proceedings in which we are or come to be involved (or settlements thereof) may have a material adverse effect on our results of operations or financial condition. For information concerning some of the litigation in which we are involved, including with respect to Polska Telefonia Cyfrowa Sp.z o.o (“PTC”) and Toll Collect, see “Item 8. Financial Information—Legal Proceedings.” For information concerning our regulatory environment, see “Item 4. Information on the Company—Regulation.”
 
We face allegations of data misuse and flaws in our security systems. Despite diverse measures taken to protect customer data, damage to our reputation remains a significant risk, which may also affect our business.
 
The Bonn public prosecutor's office is still investigating the circumstances surrounding the illegal monitoring of phone calls and the theft of data relating to several million mobile customers. As a result of these events, we implemented several measures to further improve data security and transparency, including the creation of a new Management Board position relating to data privacy, compliance and legal affairs, which has the right to veto Management Board business decisions related to data privacy. A first voluntary annual progress report, prepared by the Group Privacy Officer, was published in April 2009 and submitted to the Federal Commissioner for Data Protection, our Supervisory Board and the public. A newly established Data Privacy Advisory Board advises our Management Board on all issues related to data privacy. The Advisory Board closely consults with leading data privacy experts from outside the Group with regard to the handling of customer and employee data, data privacy audits, IT security and the consequences of the introduction of new legal provisions. Data privacy contacts were nominated at each level of the organization to ensure an intense cooperation with our operating segments. Additionally, we established a dedicated website to keep the public informed of ongoing developments in this area. However, despite extensive testing by internal and external audits, there can be no assurance that the current investigations will not result in the imposition of additional remedial measures or that further breaches relating to our customer data will not materialize in the future.
 
Future sales of our shares by the Federal Republic or KfW Bankengruppe (“KfW”) may adversely affect the trading prices of our shares and ADSs.
 
The Federal Republic (which, together with KfW, owns approximately 31.7% of our outstanding shares) has previously indicated an intent to continue with its privatization policy. In this regard, we cannot predict if and when the Federal Republic will further reduce its holdings of its equity interest in Deutsche Telekom AG. The reduction in the Federal Republic’s direct or indirect holdings may involve KfW. For shareholders, there is a danger that the market offering of a significant volume of our shares by either the Federal Republic or KfW, or speculation to this effect on the markets, could have a negative impact on the price of our shares and ADSs.
 
Certain of KfW’s debt instruments are exchangeable into shares of Deutsche Telekom AG, which, upon exchange, could also have a negative impact on the price of our shares. KfW issued a class of exchangeable bonds on May 16, 2008 that matures in June 2013. Exchangeable bonds are debt securities that the holder may exchange for shares in another company during a predefined period and at a predefined price. When the exchange price is exceeded and when the holder exercises the exchange right, KfW will be obligated to exchange the bonds offered for Deutsche Telekom AG shares. When the exchangeable bonds mature in June 2013, KfW has the right to settle them in Deutsche Telekom AG shares. These exchangeable bonds in the aggregate amount of EUR 3.3 billion have a share exchange price of EUR 14.9341 per ordinary share. Accordingly, approximately 221 million shares may be delivered by KfW in exchange for the outstanding bonds maturing in June 2013. The delivery to debt holders by KfW of a significant amount of our shares could have a negative impact on the market price of our shares.
 
Exchange-rate, interest-rate and rating risks have had, and may continue to have, an adverse effect on our revenue and cost development.
 
We are exposed to currency risks related to our international business activities. Generally, our Central Treasury hedges currency risks that may have an impact on our cash flows (so called, known as a transaction risk), although there can be no guarantee that our hedging strategies will succeed. Currency risks may have a negative impact on our results of operations when amounts in local currencies are translated into euros, particularly in connection with U.S. dollar- and pound sterling-denominated results. For more information with respect to the impact of exchange rates and currency translation, see “Item 5. Operating and Financial Review and Prospects—Consolidated Results of Operations.”
 
We are also exposed to interest-rate risks, primarily in the Euro and U.S. dollar currencies. Interest-rate risks arise as a result of fluctuations in interest rates affecting the level of interest payments due on indebtedness at variable rates in each of these currencies. Once per year, our Management Board specifies ratios of fixed and variable debt in these two currencies. Our Central Treasury then takes measures, using derivative instruments and other measures, to implement the interest-risk management decisions of the Management Board. For more information about our hedging activities and interest-rate and market risks, see “Item 11. Quantitative and Qualitative Disclosures about Market Risk.”.
 
In 2009, Fitch changed our long-term rating from A- to BBB+ with a stable outlook. Moody’s Investor Service and Standard and Poor’s maintained our long-term rating at Baa1 and BBB+ respectively with a stable outlook. A further decrease in our credit ratings below certain thresholds by various rating agencies would result in an increase in the interest rates on certain of our bonds and medium-term notes due to step-up provisions and could raise the cost of our debt refinancing activities generally. For more information, see “Item 5. Operating and Financial Review and Prospects – Liquidity and Capital Resources – Capital Resources – Step-up Provisions.”
 
 We aim to solely place our financial investments at financial institutions that have high credit ratings.  As a result of international M&A transactions, the investment portfolio of newly acquired entities may not always meet this requirement.  In individual cases, we thus may face a risk of unplanned write offs.

      Risky financial exposures to financial institutions by subsidiaries in Southern and Eastern Europe in particular exist on account of transfer restrictions or shareholder resolutions. With our investment in OTE, exposures to credit risks associated with deposits with various, mostly regional banks in Southern and Eastern Europe became part of our exposure. The goal is to spread these exposures in order to achieve a higher degree of diversification.
 
As a result of a major restructuring program, we will bring together our domestic fixed-network business and our domestic mobile business within a new Germany company. Failure to achieve a smooth transition to “One Company” could negatively affect our business processes, operational systems and customer service.
 
On November 19, 2009, an extraordinary shareholders meeting approved the spin-off of the fixed-network business in Germany into “T-Mobile Deutschland GmbH”. The "new" company will be responsible for almost 27 million fixed-network lines – of which some 13 million support DSL – and more than 39 million mobile lines. In total, just under 85,000 employees will work in this company. With this move, we plan to be in a better position to offer integrated solutions and services for fixed network and mobile communications from a single source. In addition, we project to reinforce customer service, safeguard jobs, and tap the potential for additional revenue and cost synergies.
 
A successful completion of creating “One Company” in the course of the second quarter of 2010 will require major organizational efforts, and the realignment of numerous people, processes and IT-systems. If the planned targets are not achieved, there is a risk that the transition period will last longer than expected, and that our operational performance in Germany will be periodically disturbed.
 
 
Developments in the telecommunications sector have resulted, and may in the future result, in substantial write-downs of the carrying value of certain of our assets.
 
We review on a regular basis the value of each of our subsidiaries and their assets. In addition to our regular annual impairment reviews, whenever indications exist that goodwill, intangible assets or fixed assets may be impaired due to changes in the economic, regulatory, business or political environment, we consider the necessity of performing certain valuation tests, which may result in impairment charges. The recognition of impairments of intangible assets, property, plant and equipment and financial assets could cause us to take large, non-cash charges against net profit, which could lead to a reduction in the trading price of our shares and ADSs.
 
For more information, see “Item 5. Operating and Financial Review and Prospects—Critical Accounting Estimates.”
 
Potential breaches of compliance requirements or the identification of material weaknesses in our internal control over financial reporting may have an adverse impact on our corporate reputation, financial condition and the trading price of our securities.
 
In general, compliance requirements for publicly traded companies and, in particular, the investigation of potential breaches and corporate misconduct are increasing and leading to major financial implications for the companies concerned. At the same time, the legal framework governing the monitoring of companies is becoming more comprehensive, which increases the liability risks for executive bodies and associated costs.
 
While we believe that we have established an appropriate compliance organization to detect, assess, reduce and manage these risks, the global and diverse nature of our operations means that these risks and their related consequences will continue to exist. Although we intend to take prompt measures to remediate any identified shortcomings in our internal controls over financial reporting, activities of this kind may involve significant effort and expense, and disclosure of any failures, material weakness or other conditions, may result in a deterioration of our corporate image and negative market reactions.
 
For more information with regard to Section 404 of the Sarbanes-Oxley Act of 2002, see “Item 15.Controls and Procedures – (b) Management’s Annual Report on Internal Control over Financial Reporting.”
 
ITEM 4. Information on the Company
 
The legal and commercial name of our company is Deutsche Telekom AG. We are a private stock corporation organized under German law. Our registered office is located at Friedrich-Ebert-Allee 140, 53113 Bonn, Germany, and our telephone number is +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.
 
HISTORICAL BACKGROUND
 
We are an integrated telecommunications provider offering our customers around the world a comprehensive portfolio of state-of-the-art services in the areas of telecommunications and IT.
 
The provision of public telecommunications services in Germany was long a state monopoly, as formerly provided in the constitution of the Federal Republic. In 1989, the Federal Republic began to transform the postal, telephone and telegraph services administered by the former monopoly provider of such services into market-oriented businesses, and divided the former monopoly into three distinct entities along their lines of business, one of which was our predecessor, Deutsche Bundespost Telekom. At the same time, the Federal Republic also began the liberalization of the German telecommunications market. We were transformed into a private stock corporation effective January 1, 1995.
 
The operation of networks (including cable networks) for all telecommunications services, other than public fixed-line voice telephony, was opened to competition in Germany on August 1, 1996, when the new legal framework for the regulation of the telecommunications sector in Germany, the Telecommunications Act, became effective. As required by the Telecommunications Act, and mandated by the directives of the EU Commission, the telecommunications sector in Germany was further liberalized on January 1, 1998, through the opening of the public fixed-line voice telephony services to competition. Since then, we have faced intense competition and have been required, among other things, to offer competitors access to our fixed-line network at regulated interconnection rates. For more information on the regulatory effects on competition in our fixed-line business, see “—Regulation.”
 
Important events in the development of our business since January 1, 2009 have included:
 
·  
the announcement of a joint venture between T-Mobile UK and Orange UK in the United Kingdom;
 
·  
the creation of a more regional and integrated structure for third-party domestic carriers and service providers as well as our company, including the integration of our sales and customer service functions at our fixed-line and mobile operations in Germany; 
 
·  
the acquisition in 2009 of an additional 5% in the Greek telecommunications company OTE for EUR 0.7 billion; and
 
·  
the first-time full consolidation of OTE.
 
Additional information regarding the foregoing events and other developments is contained throughout this Item 4.
 
 
ORGANIZATIONAL STRUCTURE
 
Since July 1, 2009, our organizational structure has reflected the realigned management structure approved by our Supervisory Board on April 29, 2009. The new structure reflects a more regional focus, with a greater emphasis on integrating our fixed-network and mobile communications business. In addition, we centralized the responsibility for product development, IT and technology for our European operations.
 
This realignment resulted in a change to the structure of our operating segments from July 1, 2009. The business activities in four of these five operating segments are assigned by regions. In the fifth segment, the business activities are assigned by customers and products as described below. Since July 1, 2009, we have reported on the following five operating segments:
 
·  
Germany, which combines all fixed-network and mobile activities in Germany and also includes wholesale telecommunications services for third-party domestic carriers and service providers as well as our Group’s other operating segments;
 
·  
the United States, which comprises all mobile activities in the U.S. market;
 
·  
Europe, which 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 Solutions unit, which mainly provides wholesale telecommunications services for our Group’s other operating segments;
 
·  
Southern and Eastern Europe, which comprises all of our fixed-network and mobile communications operations in Hungary, Croatia, Slovakia, Greece, Romania, Bulgaria, Albania, the F.Y.R.O Macedonia, and Montenegro; and
 
·  
Systems Solutions, which bundles business with ICT products and solutions for large multinational corporations and public institutions under the T-Systems brand.
 
We also report on Group Headquarters and Shared Services, which includes our service headquarters and our subsidiaries that are not allocated to the operating segments.
 
Fixed-Network and Mobile Communications Services
Fixed-Network Services
 
Our fixed-network business includes all voice and data communications activities based on fixed-network and broadband technology. These product offerings are marketed as basic telephony services, or single-play, telephony and high-speed Internet access, or double-play, and packages comprising voice communication, high-speed Internet access and television with interactive television-based services, or triple-play. Our fixed-network business also includes the sale of terminal equipment and other hardware, as well as the sale of services to resellers.
 
Mobile Communications Services
 
Our mobile communications business offers digital mobile telephony voice services and data services, such as Short Message Service, or SMS, Multimedia Messaging Service, or MMS, mobile Internet and other data services, to retail and business customers. Terminal equipment and other hardware are sold in connection with the services offered. In addition, our mobile communications services are sold to resellers and to companies that buy network services and market them independently to third parties, such as MVNOs. Through our mobile communication subsidiaries, we also operate one of the largest carrier-owned networks of W-LAN (WiFi) HotSpots in Europe and the United States.
 
We offer mobile voice and data services on both a contract basis and a prepay basis. Our mobile communications customers generally purchase contract services on the basis of fixed monthly fees, and pay time-based airtime and per-message fees. Some contract service offerings include a specified amount of airtime, data volume or messages in the monthly fee. Prepay services are purchased on the basis of monetary increments that are recorded on the customers’ Subscriber Identity Module, or SIM, cards and then deducted, based on airtime or messaging usage fees, as the cards are used. Usage fees can vary according to the rate plan selected by the customer, the day and time when a call is made, the destination of the call, the location where the call originates and, in some cases, other terms applicable to the rate plan, such as whether the called party is also a customer of the same network. Furthermore, some contracts allow unlimited usage at a set monthly rate. We offer national and international roaming services to our customers through a number of roaming agreements with third-party operators, which allow customers to access mobile services while outside their home network service area. W-LAN services are sold on both a monthly subscription basis and through various usage-based plans. Our mobile communications subsidiaries provide their customers with access to our specific and third-party content services as well as to the open Internet. Content provided to customers is either at no additional charge, in which case the customer only has to pay the normal connection charges to view the content, or it is premium content, where a customer pays a specific charge through the customer’s mobile telephone bill to access the content. Our goal is to provide our mobile customers with an integrated portfolio of voice and data services, using the most appropriate technologies available depending on local market conditions.
 
We count our mobile communications customers by the number of SIM cards activated and not churned. Our customer figures include the SIM cards with which machines can communicate automatically with one another, or M2M cards. Our mobile communications subsidiaries count contract customers as customers for the length of their contracts, and count prepay customers as customers as long as they continue to use our services, and then for a prescribed period thereafter, which differs according to the particular market. Generally, at the end of this period, or in the case of payment default or voluntary disconnection, the customers are cancelled or “churned.” The churn rate for any given period represents the number of customers whose service was discontinued during that period, expressed as a percentage of the average number of customers during the period, based on beginning and period-end figures. Our competitors may calculate their churn rates using methods different from ours. In addition, because we use different calculation methodologies in different jurisdictions, our own churn figures are not comparable across all of our national operations. Our churn methodologies are described in greater detail in the discussion of our operating segments below.
 
Sales Channels
 
Our Germany and Southern and Eastern Europe operating segments offer their fixed-line and mobile products and services through a broad range of direct and indirect sales channels. The direct distribution channels include our:
·  
retail outlets, including our Telekom shops in Germany, and throughout Southern and Eastern Europe such as OTEShops, Germanos and Cosmote shops in Greece and T-Home Shops in Hungary;
 
·  
toll-free service hotlines that allow potential and current customers to obtain information about, and place orders for, our various products and services;
 
·  
various Internet websites, which provide a variety of online ordering options; and
 
·  
sales force, organized into various units that focus on our retail customers, small- and medium-sized business customers, domestic carrier services customers and services offered to network operators and other third-party providers.
 
        Indirect distribution channels include national retailers and independent distributors, such as Internet and IT equipment retailers.
 
In addition, our mobile communications subsidiaries in Europe and the United States use various direct and indirect distribution channels to market their voice and data products and services to their customers. In the United States, the United Kingdom, Austria, Poland , the Netherlands and Czech Republic, our mobile communications subsidiaries sell their products and services to retail customers through networks of direct retail stores, including some franchise-like exclusive dealer operations. Other direct sales channels include a direct sales force dedicated to business customers and sales through toll-free service hotlines and local websites, which are used for customer-relationship management as well as for sales transactions. In addition, third-party distributors, who typically market the products and services of multiple mobile network operators, play a significant role in distribution. Our mobile telecommunications subsidiaries use a variety of incentives to encourage third-party vendors to sell our products and services, such as payment of associated marketing expenses and commissions.
 
Mobile telecommunications resellers and MVNOs are also an important distribution channel for our mobile communications products and services, especially in Germany and the United Kingdom. In the United States, MVNOs are currently a growing distribution channel for T-Mobile USA products and services. In general, mobile telecommunications resellers and MVNOs purchase minutes and data at wholesale rates and mobile devices at a discount from network operators, resell packaged services and mobile devices under their own brands through their own distribution channels, charge their customers at retail rates that they set independently and provide customer service and technical support.
 
For more information on our marketing sales channels in our Systems Solutions operating segment, see Systems Solutions.
 
Seasonality
 
In general, our operations are not affected by any major seasonal variations.
 
However, certain seasonal factors are noticeable in our mobile operations in our Germany, the United States, Europe and Southern and Eastern Europe operating segments.  Our mobile operations in our Germany, Europe and United States operating segments generally experience an increase in sales of products and services occurring during the fourth calendar quarter, due to holiday purchases. As a result, performance during the fourth quarter can have a significant influence on full-year performance. In addition, our mobile operations in our Europe, Southern and Eastern Europe operating segments generally experience an increase in visitor roaming revenues during the third calendar quarter, due to the number of tourists who spend part of their summer vacations in this area.
 
The revenues of our Systems Solutions operating segment may be subject to quarterly fluctuations depending on sales cycles (currently ranging between 6 and 18 months) and the purchasing patterns and resources of its customers, which are subject to general economic conditions and, therefore, difficult to predict. Accordingly, revenues received in a particular quarter by our Systems Solutions operating segment may not be indicative of future revenues to be received in any subsequent quarter.
 
Suppliers
 
Although we do not believe we are dependent on any single supplier due to our multiple-supplier strategy, there may be occasions when a particular product from a certain supplier is delayed or back-ordered. We believe that we have reduced our technological risks and the risk of delays in the supply of equipment and other technologies, both by contracting with multiple suppliers having significant market share in the network infrastructure, IT services and mobile device businesses, and by negotiating contractual penalties to be enforced in the event a supplier does not meet its obligations with respect to timeliness and quality. However, these penalty provisions may not fully mitigate the harm to our business caused by any such contractual breaches.
 
The principal types of equipment purchased by our fixed-network operations in our Germany and Southern and Eastern Europe operating segments are network components, such as switching systems, transmission systems, access network components, and customer premises equipment, such as telephones, fax machines, broadband modems and similar items. The major suppliers to our fixed-network operations are Siemens AG, Deutsche Post DHL, Alcatel-Lucent Deutschland AG, Grey Global Group (MediaCom), AVM Computersysteme, Cisco Systems Inc., Corning Cable Systems GmbH & Co. KG, and IBM.
 
Our mobile operations mainly purchase IT and network components, as well as mobile devices for purposes of resale, from a number of different suppliers.
 
The principal goods and services purchased by our Systems Solutions operating segment are computer hardware for client servers and mainframes, operating systems and applications software, network capacity, network services, telecommunications network components and IT consulting services.
 
Dependence on Patents, Licenses and Industrial, Commercial or Financial Contracts
 
We do not believe that we are materially dependent on any particular patent or other intellectual property rights. In addition, we do not believe that we are dependent on any individual third-party customer or on any industrial, commercial or financial contracts.
 
Our mobile communications subsidiaries own a large number of registered patents and generally have a number of patent applications outstanding at any given time for technical innovations in the area of mobile telecommunications applications as a consequence of our continuous development activities. Patent protection activity is focused on countries where we have mobile operations. In addition, to enable us to offer mobile telecommunications services in the different jurisdictions in which we operate, we require, and therefore are dependent on, telecommunications licenses from the relevant authorities in each of these jurisdictions. For further information, see “—Regulation.”
 
 For a description of patent infringement litigation relating to certain DSL-related technology that is relevant to our fixed-network business in our Germany operating segment, “Item 8. Financial Information—Legal Proceedings—Other Proceedings.”
 
Our Systems Solutions operating segment is subject to third-party software licenses in connection with the services it provides to its customers. Any breach, violation or misuse of third-party software licenses could result in additional costs with respect to the particular projects that are the subject of such licenses.
 
Our Systems Solutions operating segment intends to become less dependent on other Deutsche Telekom Group companies and to improve its market position with respect to external customers. In 2009, other Deutsche Telekom Group companies accounted for approximately 30.9% of Systems Solutions’ total revenues, compared to 23.2% in 2008 and 25.1% in 2007. No other customer accounted for a significant portion of Systems Solutions’ total revenues in 2009.
 
 
Significant Subsidiaries
 
The following table shows the significant subsidiaries that we owned, directly or indirectly, as of December 31, 2009.
Name and registered office
 
% Held
 
T-Mobile USA, Inc., Bellevue, Washington, United States
    100.00  
T-Systems International GmbH, Frankfurt/Main, Germany
    100.00  
T-Mobile Deutschland GmbH, Bonn, Germany
    100.00  
Hellenic Telecommunications Organization S.A. (OTE), Athens, Greece
    30.00  
T-Mobile Holdings Ltd., Hatfield, United Kingdom
    100.00  
Magyar Telekom Nyrt., Budapest, Hungary
    59.20  
T-Mobile Netherlands Holding B.V., The Hague, Netherlands
    100.00  
PTC, Polska Telefonia Cyfrowa Sp.z o.o., Warsaw, Poland
    97.00  
T-Mobile Czech Republic a.s., Prague, Czech Republic
    60.77  
HT-Hrvatske telekomunikacije d.d., Zagreb, Croatia
    51.00  
T-Mobile Austria Holding GmbH, Vienna, Austria
    100.00  
Slovak Telekom a.s., Bratislava, Slovakia
    51.00  
         
 
 
 
A list of our subsidiaries as of December 31, 2009, is filed as Exhibit 8.1 to this Annual Report.

 
The following table presents total revenues (the sum of external (net) revenues and intersegment revenues), net revenues and intersegment revenues of our segments for the years indicated.
 
millions of €
Year
 
Net revenue
   
Inter­segment revenue
   
Total revenue
   
 
 
Germany
2009
    23,813       1,610       25,423        
 
2008
    24,754       1,646       26,400        
 
2007
    26,134       1,982       28,116        
United States
2009
    15,457       14       15,471        
 
2008
    14,942       15       14,957        
 
2007
    14,050       25       14,075        
Europe
2009
    9,486       548       10,034        
 
2008
    10,798       556       11,354        
 
2007
    10,675       559       11,234        
Southern and Eastern Europe
2009
    9,510       175       9,685        
 
2008
    4,497       148       4,645        
 
2007
    4,458       142       4,600        
Systems Solutions
2009
    6,083       2,715       8,798        
 
2008
    6,368       2,975       9,343        
 
2007
    6,911       3,660       10,571        
Group Head­quarters and Shared Services
2009
    253       2,157       2,410        
 
2008
    307       2,474       2,781        
 
2007
    288       2,855       3,143        
Total
2009
    64,602       7,219       71,821        
 
2008
    61,666       7,814       69,480        
 
2007
    62,516       9,223       71,739        
Reconciliation
2009
    -       (7,219 )     (7,219 )      
 
2008
    -       (7,814 )     (7,814 )      
 
2007
    -       (9,223 )     (9,223 )      
Group
2009
    64,602       -       64,602        
 
2008
    61,666       -       61,666        
 
2007
    62,516       -       62,516        
                                 
 
For more information regarding our revenues on a segment and geographical basis, see “Item 5. Operating and Financial Review and Prospects—Segment Analysis.” 

 
 
The following table reflects the number of fixed-network and broadband lines in operation and mobile customers in Germany.
 
   
As of Dec. 31,
2009
millions
   
As of Dec. 31,
2008
millions
   
% Change
Dec. 31, 2009/
Dec 31, 2008
   
As of Dec. 31,
2007
millions
   
% Change
Dec. 31, 2008/
Dec. 31, 2007
 
Fixed Network Germany
                             
Fixed-network lines(1)
    26.2       28.3       (7.4 )     30.8       (8.1 )
Retail broadband lines(1)
    11.5       10.6       8.5       9.0       17.8  
Wholesale bundled access lines(2)
    1.6       2.5       (36.0 )     3.5       (28.6 )
ULLs(3)
    9.1       8.3       9.6       6.4       29.7  
Wholesale unbundled access lines(4)
    0.6       0.2    
n.a.
   
0.0
   
n.a.
 
                                         
Mobile communications Germany
                                       
Mobile customers(5)
    39.1       39.1       0.0       36.0       8.6  
n.a.—not applicable
 
                                       
 
Totals were calculated on the basis of precise figures and rounded to millions. Percentages are calculated on the basis of figures shown.
(1)
Lines in operation, including IP-based lines and congstar, but excluding internal use and public telecommunications systems. Congstar is our broadband and mobile brand aimed at younger, more price sensitive customers.
(2)
Wholesale bundled access lines: Sale of broadband lines based on DSL technology to alternative providers outside Deutsche Telekom, including bundled IP Bitstream Access, or IP-BSA. In the case of IP-BSA, we lease DSL lines to our competitors and transport the datastream carried over the lines.
(3)
Unbundled local loop lines (ULL): Wholesale service that can be leased by alternative telecommunications operators without upstream technical equipment in order to offer their own customers a telephone or DSL line.
(4)
Wholesale unbundled access lines: Wholesale service not bundled with an analog telephone line. Allows competitors to offer an all-IP product range, for example IP- BSA Stand Alone.
(5)
Total number of contract and prepay customers at year-end for the periods presented based on the number of activated SIM cards.  One SIM card corresponds to one customer. Due to various rulings on the expiry of prepaid credit and the limited validity of prepaid cards, T-Mobile Deutschland changed its terms of contract and therefore its deactivation policy in the first quarter of 2007 in favor of its prepay customers. These customers can now use their prepaid credit longer than before. As a result of the change in the terms of contract, prepaid contracts no longer end automatically, but run for an unlimited duration and can be terminated by the customer at any time and by T-Mobile with one month's notice. T-Mobile Deutschland reserves the right to make use of this right of termination and to deactivate cards in the system.

The Germany operating segment comprises our fixed network and mobile operations in Germany. Since January 1, 2009, fixed network has been responsible for the small- and medium-sized business customers that were previously included in our System Solutions operating segment. Our Germany operating segment also includes certain of our telecommunications facilities operations, including the operation, management and servicing of our radio transmission sites in Germany. For more information on our related network infrastructure, including our access and transmission networks and service platforms, see “—Description of Property, Plant and Equipment.”
 
We intend to use convergence products that bring together mobile communications, Internet and the fixed network in the context of connected life and work to enhance our product portfolio and increase the number of high-value customer relationships over the long term.
 


 
Fixed Network
 
Network Communications
 
Through our fixed network business, we offer network access, including analog, universal/ISDN and IP Access, as well as calling services to individual, business and wholesale customers.
 
Analog access lines, which we market under the name “Standard”, permit the customer to use a single telecommunications channel for voice, data or facsimile transmission. The number of analog access lines decreased year on year, from 22.2 million in 2007 to 20.0 million in 2008 and 18.3 million in 2009. ISDN/Universal access lines, which we market under the name “Universal”, permit a customer to use simultaneously two telecommunication channels to provide multiple products and services, including voice, data and facsimile transmission. The number of ISDN/Universal access lines decreased year-on-year, from 8.6 million in 2007 to 8.3 million in 2008 and 7.9 million in 2009. IP-Based access lines provide services such as telecommunication, IPTV and data transfer, as well as other services to retail customers at home and elsewhere.
 
The number of fixed-network access line losses in Germany decreased, as expected, in 2009. The number of line losses includes fixed-network lines previously operated by us but now operated as IP-based lines by other service providers using the unbundled local loop line (ULL). In addition, the decrease in the number of fixed-network access lines is mainly attributable to customers switching to alternative cable, local network and mobile operators. In 2009, line losses also resulted from the technology driven migration of Wholesale bundled customers to the all-IP network. We expect the number of fixed-network access lines in operation to continue to decrease in the future due to increased competition, fixed-to-mobile substitution, as well as increased migration to IP-based products.
 
Through the network access product offerings described above, we provide comprehensive national and international calling services and dial-up Internet access, and also offer services such as three-way calling, call-waiting and caller ID. In addition, our portfolio of integrated products, called “Complete Packages” (Komplettpakete), includes an access line and a variety of flat-rates and services for telephony and Internet access. Our Complete Packages with a national voice flat-rate component have led to an increase in unbilled calling minutes by customers using those plans. The trend towards flat-rate components in Complete Packages continued to increase in 2009 and we believe that this trend will continue in the future. Consequently, we expect calling revenues in the future to decrease due to the decreasing proportion of billed minutes as a result of customer acceptance of Complete Packages, continued loss of fixed-network access lines and fixed-to-mobile substitution.
 
IP/Internet
 
Broadband services allow customers to access the Internet and Internet-related services at significantly higher speeds than traditional dial-up services. Broadband access is used to refer to ADSL (asymmetric digital subscriber line), ADSL2 and ADSL2+ (advanced ADSL) and VDSL (very high-speed digital subscriber line) technologies, for which the downstream data rate is greater than 128 Kbit/s. We believe that broadband growth in Germany, particularly in the retail market, is largely dependent on the acceptance of double-play and triple-play products and services and improved customer services.
 
We offer broadband and IP services based on ADSL, ADSL2+ and VDSL technologies, which combine a high-speed data download transmission speed with a lower upload transmission speed, primarily to retail customers. We also offer our Complete Packages with a flat-rate component including offerings for voice communication and high-speed data access. The total number of retail broadband lines operated by us increased in 2009, due to the offer of Complete Packages with additional features and options. For example, we offer our Complete Packages with television services under the brand “Entertain”. Our Entertain products are offered in a basic version, which includes voice, data and television services, and an enhanced version, which includes a variety of additional services, including HDTV, timeshift, Program Manager and TV-archive. In addition, we introduced a new Entertain product in 2009 known as “Entertain pure”, which comprises a telephone and TV connection without Internet access. The number of Entertain lines in operation, which are included within the number of retail broadband lines in the table above, increased to 806,000 by the end of 2009 from 352,000 in 2008. In 2009, we also launched a new LIGA total! product range. With Entertain, customers can now watch all first- and second-division Bundesliga soccer matches on television for an additional charge. We expect that our Entertain product portfolio will continue to expand with the inclusion of new features and new rates in response to customer demand. A topic for 2010 will be the further development of Entertain products available to the retail market through a combination of broadband lines and attractive content and features, including flat-rate packages.
 
Our broadband product portfolio also includes a variety of Internet website services provided by the Scout-Group as well as the "Load" product portfolio, which includes video, game, software and music offerings available for download.
 
Wholesale Services
 
Through our wholesale services business, we provide products and services, including access, interconnection, IP and network services, to third-party domestic carriers and service providers as well as other Group companies in accordance with regulatory guidelines stipulated by the Federal Network Agency. Network operators and service providers implement their own business models based on our wholesale services, such as unbundled local loop (ULL) lines, bitstream access or resale, including the Wholesale Internet Access (WIA) and WIA Gate product options. We expect that the results of regulatory decisions will continue to have an effect on demand for our wholesale products.
 
Unbundled local loop lines (ULL), can be leased by third-parties to provide their customers with telephone and Internet services or DSL-based products. In 2009, the number of ULLs rose compared to the end of 2008, mainly as a result of the migration of competitors to all-IP lines. We expect that the number of ULLs in operation will increase in the future. However, the rate of growth is expected to decrease. In 2008, we were required by the Federal Network Agency to offer wholesale unbundled access line products. Wholesale unbundled access lines in operation increased to 0.6 million in 2009 compared to 0.2 million lines in 2008.
 
Through our wholesale bundled product, we lease DSL lines combined with one of our standard access lines to third-party providers and then transport the data from our network to the third-party’s network. In 2008, we introduced regulatorily mandated Wholesale bundled and unbundled products, including transport services and symmetric DSL access, or SDSL. We also sell broadband access to competitors through our Wholesale bundled products, which enable third-party operators to offer an integrated service combining access and IP services to their retail customers under their own brands. The growth in ULLs in 2009 mentioned above primarily came at the expense of our Wholesale bundled products. The number of wholesale bundled access lines in operation decreased from 3.5 million in 2007 to 2.5 million in 2008 and 1.6 million in 2009.
 
Our interconnection wholesale services primarily consist of call origination and the transit and termination of switched voice traffic. The terms under which we interconnect our telephone network with the networks of other domestic carriers and service providers are either bilaterally negotiated or imposed by the Federal Network Agency. At December 31, 2009, we had 117 national bilateral interconnection agreements and 45 national interconnection orders issued by the Federal Network Agency. The Federal Network Agency mandated interconnection prices from December 1, 2008 until June 30, 2011.
 
We provide additional wholesale services, including:
 
·  
IP-Services: Internet transport services for broadband and fixed network service providers, such as virtual ISP services, as well as transport services for carrier interconnection;
 
·  
Network Services: leased lines, which can be used both for the transmission of data and for voice traffic and are tailored to fit the specific needs of carriers and mobile network operators; and
 
·  
Carrier Services Networks, which combine leased lines with network management services.
 
Other Services
 
Other services primarily includes:
 
·  
value-added telephone services, which include toll-free numbers and shared-cost numbers, such as 0180, T-VoteCall for customer-relationship management, directory-assistance numbers, the provision and administration of directory databases and public payphones as well as premium-rate services (which use the 0190 and 0900 exchanges);
 
·  
our terminal equipment business, through which we distribute, for purchase or lease, an extensive range of telecommunications equipment that is either manufactured by third-parties for us or sold under third-party brand names;
 
·  
data communications solutions, such as Telekom Design Networks, platform management, Internet solutions and IP-related services as well as dedicated customer line products connecting two customer networks (located up to 50 kilometers apart) with transmission speeds of up to one Gbit/s;
 
·  
support services and publishing services, which include the sale of marketing and advertising services to small- and medium-sized companies via our telephone directories, such as DasTelefonbuch, GelbeSeiten, and DasÖrtliche; and
 
·  
the sale of products and services through our Telekom Shop outlets and services for energy-based products used to reliably operate telecommunications systems.
 
 
Mobile Communications
 
Through T-Mobile Deutschland, we offer mobile telecommunications services to individual and business customers in Germany. The following table summarizes certain information regarding our customers and the German mobile communications market.
 
Customers (millions) (1)
   
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
      39.1       39.1       36.0  
  M2M       1.0       0.9       0.7  
Contract
      17.2       17.0       16.1  
Prepay
      21.9       22.1       19.9  
                             
Monthly churn rate
   
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
      1.5 %     1.0 %     1.1 %
Contract  (2)
      1.2 %     1.1 %     1.2 %
Prepay  (3)
      1.7 %     0.9 %     1.0 %
(1)
Total number of contract and prepay customers at year-end for the periods presented based on the number of activated SIM cards.  One SIM card corresponds to one customer.
(2)
In general, a contract customer of T-Mobile Deutschland is churned either after voluntary termination upon the lapse of the customer’s contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations.
(3)
Due to various rulings on the expiry of prepaid credit and the limited validity of prepaid cards, T-Mobile Deutschland changed its terms of contract and therefore its deactivation policy in the first quarter of 2007 in favor of its prepay customers. These customers can now use their prepaid credit longer than before. As a result of the change in the terms of contract, prepaid contracts no longer end automatically, but run for an unlimited duration and can be terminated by the customer at any time and by T-Mobile Deutschland with one month's notice. T-Mobile Deutschland reserves the right to make use of this right of termination and to deactivate cards in the system.

T-Mobile Deutschland offers mobile telecommunications services, including voice, SMS, MMS, Mobile Internet and other data services to consumer and business customers in Germany.
At December 31, 2009, T-Mobile Deutschland had approximately 39.1 million customers, including approximately 1.0 million M2M cards in use. With an overall penetration rate of well over 100%, the focus in our German mobile operations has been on the higher-value contract customer business. In 2009, the share of contract customers in our overall customer base was 44% of the total customer base.
 
T-Mobile Deutschland’s total average churn rate for 2009 was 1.5% per month, compared to an average churn rate of 1.0% per month in 2008, mainly due to an increase in prepay churn rates. The average contract customer churn rate was 1.2% per month in 2009, which is a slight increase compared to 1.1% per month in 2008. The average prepay churn rate during 2009 was 1.7% per month, compared to the average prepay churn rate of 0.9% per month during 2008. T-Mobile Deutschland’s total average churn rate for 2008 was 1.0% per month, compared to an average churn rate of 1.1% per month in 2007, due to a decrease in both contract and prepay churn rates. The average contract customer churn rate was 1.1% per month in 2008, which is a slight decrease compared to 1.2% per month in 2007. The average prepay churn rate during 2008 was 0.9% per month, compared to the average prepay churn rate of 1.0% per month during 2007, which was primarily caused by a change in the churn policy in 2007.
 
Competition
Our fixed-network operations in Germany face intense competition based primarily on price in the market for fixed-line network voice telephony and broadband services.  Competitors include cable operators, such as Kabel Deutschland GmbH & Co. KG, other fixed-line carriers, such as Vodafone, Versatel AG or NetCologne Gesellschaft für Telekommunikation mbH, and mobile operators. Average consumer prices for telecommunications services in the fixed-network and in mobile communications in Germany were once again lower than in the prior year. The price index for fixed-network and Internet telephony was down 2.3 percent, while rates for mobile telephony were 2.5 percent lower. Aside from pure call charges, prices for mobile data services also decreased.
 
However, continued competition in these markets resulted in higher service levels being provided for these product packages, for example, increased broadband access widths and higher number of flat-rate minutes. The increased use of complete packages with a flat-rate component and a decrease in the overall prices for these packages by our competitors have intensified the downward pricing pressure on our own products, services and pricing packages. In particular, competition through bundled offers from other fixed-line carriers has intensified. Competition from local network operators, on the basis of ULLs or the competitor’s own infrastructure is increasing, particularly from entities owned by large European telecommunications companies, such as HanseNet (a subsidiary of Telefonica).We expect that competition from cable operators will also continue to increase. Depending on the degree to which alternative technologies, such as VoIP, cable broadband and the Internet, gain market acceptance, the usage of our network may be adversely affected.
The growing appeal of cable TV lines is due to the very large bandwidths that are already available – in some cases up to 100 Mbit/s – at attractive prices.
 
Competitors have invested in their own infrastructure. Given the significant competitive advantage that high-speed networks offer in the broadband access market, we expect that our competitors will continue to invest in their own network infrastructure to offer their own IP-based products to compete with our products and services.
 
The impact of mobile substitution on our fixed-network operations in Germany is also increasing, in part because of the increased market entry of Mobile Virtual Network Operators (MVNOs). In addition, as prices for mobile telephony decline, local and other calling services, as well as access services, face increasing competition from mobile telephone operators, due to mobile substitution. These factors, combined with the continued implementation of regulatory policies intended to foster greater competition, are expected to yield similar trends in the future.
 
T-Mobile Deutschland faces intense competition from mobile network operators Vodafone, E-Plus and O2. We believe that T-Mobile Deutschland maintained its market leadership position, in terms of number of customers, at December 31, 2009. The German mobile communications market is saturated in terms of customers with a penetration rate of well over 100 percent. T-Mobile Deutschland will focus mainly on value-driven growth, sustainable customer growth and customer retention in the higher-value contract customer business.
 
 
The United States operating segment offers mobile voice and data telecommunications services to individual and business customers in the United States through T-Mobile USA.
 
Customers (millions) (1)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    33.8       32.8       28.7  
Contract
    26.8       26.8       23.9  
Prepay
    7.0       6.0       4.8  
                       
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    3.2 %     2.9 %     2.8 %
Contract
    2.3 %     2.1 %     1.9 %
Prepay
    7.0 %     6.9 %     7.2 %
 
(1) Total number of contract and prepay customers at year-end for the periods presented based on the number of activated SIM cards.  One SIM card corresponds to one customer.
 
         At December 31, 2009, T-Mobile USA had approximately 33.8 million customers, an increase of 1.0 million customers during the year. Of the total customers at December 31, 2009, approximately 79 percent, were contract customers (including machine-to-machine customers), compared to approximately 82 percent at December 31, 2008.  The number of contract customers decreased as a proportion of the customer base due to a decline in the number of T-Mobile USA branded customers (wireless customers excluding MVNO and machine-to-machine customers), offset by growth in wholesale customers.
 
At December 31, 2008, T-Mobile USA had approximately 32.8 million customers, compared to approximately 28.7 million at December 31, 2007. Included in the increase of 4.1 million customers in 2008 were 1.1 million customers related to our acquisition of SunCom Wireless in February 2008. Of the total customers at December 31, 2008, approximately 26.8 million, or 82 percent, were contract customers, compared to approximately 23.9 million, or 83 percent, at December 31, 2007, and approximately 6.0 million were prepay customers at December 31, 2008, compared to approximately 4.8 million at December 31, 2007.
 
T-Mobile USA’s average churn rate for 2009 was 3.2 percent per month, up from 2.9 percent in 2008. The contract customer churn rate increased to 2.3 percent in 2009, from 2.1 percent in 2008. This was due in part to competitive intensity, including competition based on handset innovation. T-Mobile USA’s average churn rate for 2008 was 2.9 percent per month, up from 2.8 percent in 2007. The contract customer churn rate increased to 2.1 percent in 2008, from 1.9 percent in 2007. This was largely due to the second anniversary of the introduction of two-year customer contracts in the second quarter of 2006, and competitive intensity particularly in the second half of the year.
28

Competitive differences, differences in features and services due to the use of multiple wireless technologies, and general differences in consumer behavior between the United States and Europe factor into the higher industry churn rates in the United States compared to Europe. However, the churn rate of T-Mobile USA’s operations is higher than the U.S. industry average due in part to the higher proportion of prepay customers in T-Mobile USA’s customer base relative to most of its U.S. competitors, competitive intensity particularly relating to handset innovation and due to the greater focus on individual consumers than other U.S. carriers (who have a larger focus on lower-churn enterprise and government customers). Prepay customers in the United States typically churn at substantially higher rates than contract customers.
 
Generally, a contract customer of T-Mobile USA is churned either after voluntary termination or after forced contract termination due to the customer’s failure to fulfill contractual obligations. A prepay customer in the United States is churned after a period of 90 days of inactivity (i.e., the customer has neither originated nor received a voice communication, and has not originated a data communication in that period).
 
Through the acquisition of SunCom Wireless Holdings, Inc. on February 22, 2008, T-Mobile USA expanded its network in the southeastern United States, Puerto Rico and the U.S. Virgin Islands.
 
During 2009, T-Mobile USA invested in network infrastructure in certain markets to utilize the Advanced Wireless Services spectrum in the 1700 MHz and 2100 MHz frequency bands it acquired in 2006. By the end of 2009, T-Mobile USA’s 3G network covered over 205 million people compared to 107 million people at the end of 2008.
 
Marketing and Sales
 
The United States operating segment comprises all of Deutsche Telekom’s wireless activities in the U.S. market and offers mobile voice and data services to consumers and business customers through T-Mobile USA. Mobile devices and accessories are usually sold in connection with the services offered. In late 2009, T-Mobile USA introduced its Even More rate plans, which feature unlimited nationwide voice, text, and data services. In addition, T-Mobile USA offers its customers a number of service options, including rate plans with and without contracts, the ability to pay in advance or in arrears, and rate plans with and without subsidized handsets.
 
T-Mobile USA uses a mix of direct and indirect distribution channels to market its mobile voice and mobile data products and services to its customers. T-Mobile USA sells its products and services to retail customers through a network of direct retail stores. Additionally, T-Mobile USA has a direct sales force dedicated to business customers and sales through customer service and the T-Mobile USA website. In addition, third-party distributors, who may market the products and services of one or multiple mobile network operators, play a significant role in distribution. T-Mobile USA uses a variety of incentives to encourage third-party vendors to sell T-Mobile products and services, such as payment of associated marketing expenses and commissions.
 
Wholesale entities such as MVNOs and machine-to-machine operators are a growing distribution channel for T-Mobile USA unbranded products and services. In general, wholesale entities purchase minutes and data at wholesale rates, resell packaged services and mobile devices under their own brands through their own distribution channels, charge their customers at retail rates that they set independently, and provide customer service and technical support.
 
T-Mobile USA provides its customers with access to T-Mobile USA specific and third-party content services as well as to the open Internet. Content provided to customers is either at no additional charge, in which case the customer only has to pay the normal connection charges to view the content, or it is premium content, where a customer pays a specific charge, e.g., a charge is added to the customer’s mobile telephone bill to access the content.
 
Competition
 
General
The United States operating segment faces intense competition in the United States mobile telecommunications market from the three other large national mobile providers, Verizon, AT&T and Sprint, and from MVNOs and two growing regional operators offering low-priced unlimited services. In addition to competitive factors, the three largest national mobile providers have been involved in more significant acquisition activity in the last five years than T-Mobile USA.
 
Verizon, AT&T and Sprint have potential advantages through size, scale and bundling with other non-wireless communication services. These advantages could allow them to deliver services in a more cost-efficient manner and disproportionately increase their customer base, thereby negatively affecting T-Mobile USA’s competitive position.
 
Furthermore, AT&T has had a competitive advantage in the past two years with the exclusive distribution of the Apple iPhone.  Verizon and AT&T, in particular, achieved proportionately higher net customer additions in 2009, which combined with pressure from the regional unlimited discount operators, resulted in T-Mobile USA’s slight decline in market share in 2009.
The United States mobile telecommunications market is quite different in a number of respects from the European mobile telecommunications markets. For example, there is no single communications standard. In addition, licenses used to provide wireless services do not cover the entire country and different frequency ranges may be required within a nationwide footprint. It can therefore be difficult for network operators to obtain the spectrum needed in some localities to expand customer base, upgrade the quality of service and add new services, particularly in densely-populated urban areas. Low population density in other areas can cause problems with network efficiency and result in geographic areas with no or limited coverage. For these and other reasons, penetration levels for mobile telecommunications services in the United States are generally lower than penetration levels in western European countries, although the difference continues to decrease over time. Mobile telecommunications operators in the United States generally continue to invest heavily in their networks in order to generate customer and revenue growth. Slowing wireless industry customer growth expectations indicate that the market is maturing, with focus moving towards data services growth.
 
Usage and pricing practices in the United States mobile market also differ significantly from typical usage and pricing in European markets. Average voice usage per customer per month is generally much higher in the United States than in Europe primarily due to lower priced plans for usage and the increasing popularity of unlimited plans, resulting in a higher number of postpay plans in the United States. Contract pricing in the United States is typically in the form of a fixed monthly charge at various price points for specified bundles of features and services, which permit usage up to prescribed limits with no incremental charges. Usage in excess of the limits results in incremental charges. The majority of prepay service is priced solely on a usage basis, similar to Europe, but the percentage of prepay customers is significantly smaller in the United States than Europe. Typically, both inbound and outbound usage counts against the contract usage limits, and both are subject to incremental charges for excess contract usage and prepaid usage. Monthly average revenue per user (ARPU) is typically higher in the United States than in Europe. However, average revenue per minute of use is substantially lower in the United States than in Europe. Furthermore, in the United States unlimited voice and data services offerings have expanded, eliminating incremental usage charges at certain price points. In late 2009, T-Mobile USA introduced its Even More rate plans, which feature unlimited nationwide voice, text, and data services.  These plans also allow customers the option of being on a service contract and receiving a subsidized handset, or a no-contract option at lower rates but without a discounted handset. The no-contract plan also includes the option of no-interest handset financing over a period of up to 20 months.
 
The differences between the United States and European mobile telecommunications markets result in different competitive pressures. Like the European market, handset lineup and the perceived value of bundles of voice, messaging, and data services are key competitive factors in the United States.  In addition, 3G network coverage and quality in the United States has recently become a more important factor than in the past. To the extent that the competitive environment requires T-Mobile USA to decrease prices, or increase service and product offerings, there could be significant adverse impacts to revenues, costs and customer retention.
 
 
United Kingdom
 
T-Mobile UK offers mobile telecommunications services to individual and business customers in the United Kingdom.
 
Customers (millions)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    17.2       16.8       17.3  
Contract
    4.1       4.1       3.9  
Prepay
    13.1       12.7       13.4  
Thereof : Virgin Mobile
    4.3       4.8       5.2  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    2.6 %     3.4 %     3.2 %
Contract
    2.1 %     2.1 %     2.0 %
Prepay
    2.8 %     4.0 %     3.8 %
                         
In 2009, T-Mobile UK’s total customer base increased compared to 2008. The number of prepay customers (not including Virgin Mobile customers) increased by 0.8 million, which was mainly caused by focusing on SIM card only sales. At December 31, 2008, T-Mobile UK had approximately 16.8 million customers, compared to approximately 17.3 million at December 31, 2007.
 
The number of Virgin Mobile Telecoms Limited, or Virgin Mobile, customers decreased by 0.5 million year on year. Customers of Virgin Mobile, an MVNO, are included in T-Mobile UK’s reported customer base as prepay customers because it is currently impossible for T-Mobile UK to differentiate between Virgin Mobile customers as contract customers or prepay customers. As an MVNO, Virgin Mobile purchases airtime minutes and basic mobile services from T-Mobile UK and resells these minutes and services under the “Virgin Mobile” brand name.
 
Of the total number of T-Mobile UK customers at December 31, 2008 and 2007, approximately 4.8 million and 5.2 million, respectively, were customers of Virgin Mobile. M2M cards are also included in the T-Mobile UK customer base. M2M cards account for one percent of the overall customer base.
 
On November 5, 2009, we and France Télécom entered into an agreement to merge their mobile units in the UK. The closing of the transaction is expected during the course of 2010, depending on the approval of the respective authorities. The outcome of the merger will be a 50:50 joint venture with a balanced governance structure. Through this merger, we and France Télécom are creating a company in the UK mobile market that will serve a combined customer base of approximately 32.7 million customers (as of the end of third quarter 2009 and including Virgin Mobile customers). The transaction also has synergy potential through costs savings that we expect to realize through integration and scale and includes the Orange broadband activities.
 
Under the terms of the joint venture agreement, if a third party were to take a controlling stake in Deutsche Telekom, France Télécom would be relieved of all restrictions imposed on the shareholders relating to the transfer of their shares for a period of one year. However, even in this situation, transferring shares to competitors would remain prohibited.
 
In December 2007, “3” (a brand name of Hutchison 3G UK Limited) and T-Mobile UK entered into a network sharing agreement to consolidate their 3G Radio Access Networks to provide customers with enhanced network coverage and faster access to high-speed mobile services at a lower cost. In early 2008, the joint venture they established, Mobile Broadband Network Limited, or MBNL, introduced its first integrated cell site using the new network consolidation technology. With the continued strong cooperation with our joint venture partner, Hutchison 3G, MBNL has significantly advanced the progress of its network roll out. We expect considerable further progress in the expansion of the 3G network in 2010 to provide the UK's largest 3G network  to our customers in terms of number of sites.
 
During 2009, T-Mobile UK’s average monthly churn rate (not including Virgin Mobile customers) was 2.6%, compared to 3.4% in 2008. This decrease in churn rate was predominantly caused by the decrease in T-Mobile UK’s prepay churn rate of 2.8% per month in 2009, compared to 4.0% per month in 2008. This positive development was caused mainly by improved prepay retention programs. The contract churn rate remained unchanged.
 
During 2008, T-Mobile UK’s average monthly churn rate (not including Virgin Mobile customers) was 3.4%, compared to 3.2% in 2007. The increase in churn was predominantly caused by an increase in T-Mobile UK’s prepay churn rate of 4.0% per month in 2008, compared to 3.8% per month in 2007, which was mainly caused by an intense focus on the contract customer base. The contract churn rate was 2.1% per month in 2008, which slightly increased compared to 2007
 
Generally, a contract customer of T-Mobile UK is churned either after the voluntary termination upon the lapse of a contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations. A prepay customer in the United Kingdom is churned after a period of 180 days of inactivity, i.e., the customer has neither originated nor received a voice or data communication in that period. Virgin Mobile reports to T-Mobile UK the number of customers using a churn policy whereby a customer is churned after a period of 180 days of inactivity.
 
In the UK, T-Mobile UK faces intense competition from mobile network operators Vodafone, O2, Orange and “3”. In addition, in the retail market, T-Mobile UK competes against resellers and MVNOs.
 
 
Poland
 
Through PTC, we offer mobile telecommunications services to individual and business customers in Poland. We hold a 97% interest in PTC.
 
Customers (millions)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    13.5       13.3       13.0  
Contract
    6.7       6.3       5.4  
Prepay
    6.8       6.9       7.6  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    2.7 %     3.1 %     3.1 %
Contract
    0.8 %     0.6 %     0.7 %
Prepay
    4.6 %     5.2 %     4.6 %
                         
In 2009, the customer base of PTC increased compared with 2008 due to a positive development in the number of contract customers, as a result of successful retention campaigns.
 
The monthly churn decreased in 2009 compared with 2008. This reduction was due to a high prepay churn in 2008 as a result of disconnections of SIM cards that were being used improperly at that time.
 
PTC’s average churn rate during 2008 and 2007 was 3.1% per month. The average contract churn rate during 2008 was 0.6% per month, which represents a decrease from 0.7% per month in 2007, primarily due to intensive retention campaigns. The average prepay churn rate increased from 4.6% per month in 2007 to 5.2% per month in 2008, primarily due to disconnections of improperly used SIM cards.
 
In general, a contract customer of PTC is churned either after the voluntary termination upon the lapse of a contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations. PTC’s prepay churn policy generally states that a customer can originate calls or data traffic and receive data or voice communications during the relevant validity period. The length of the validity period can be up to 12 months depending on the recharge amount (account validity). The validity period can be extended by additional top-up credits. If a customer exceeds the account validity date, the customer will receive a grace period depending on the applicable tariff. During the grace period, the customer can only receive voice and data communications. The grace period is either 3 months or 12 months depending on the tariff plan. If the prepay account has not been topped-up during this grace period, the customer is churned.
 
PTC includes in its customer base machine-to-machine cards. M2M cards account for 1.4% of the overall customer base in 2009.
 
In Poland, PTC faces competition from network operators Polkomtel, Centertel and P4 and in addition from MVNOs.
 
For information regarding a dispute concerning our investment in PTC, including challenges to our ownership of PTC shares, see “Item 8. Financial Information—Legal Proceedings.”
 
 
The Netherlands
 
Through T-Mobile Netherlands, we offer mobile telecommunications and broadband fixed-line services to individual and business customers in The Netherlands.
 
Customers (millions)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    4.6       5.3       4.9  
Contract
    2.4       2.3       2.1  
Prepay
    2.2       3.0       2.8  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    3.8 %     2.5 %     2.8 %
Contract
    1.5 %     1.6 %     1.4 %
Prepay
    5.6 %     3.1 %     4.1 %
                         
At T-Mobile Netherlands, the overall customer base decreased in 2009 compared with 2008. This decline was attributable to a reduction in the prepay customer base as a result of an increase in prepay churn. The contract customer base increased in 2009, despite a highly competitive market situation in The Netherlands.
 
In 2009, the overall churn rate increased sharply as a result of an increase in the prepay churn rate. The increase of prepay churn was caused by an initiative resulting from the Orange customer migration. Prepay customers of Orange Nederland N.V. who had been migrated to the T-Mobile Netherlands customer base in the middle of 2009, but who did not show any activity within 180 days after the migration, were churned by the end of 2009. This led to a significant decrease of customer base in the prepay segment. The churn rate in the contact customer segment decreased in 2009 compared with 2008 as a result of enhanced initiatives for customer retention.
 
T-Mobile Netherlands’ average churn rate for 2008 (including Orange Nederland for a full year) was 2.5% per month, compared to an average churn rate of 2.8% per month in 2007. This decrease in 2008 was due to a decrease in prepay churn rate.
 
In general, a contract customer of T-Mobile Netherlands is churned either after the voluntary termination upon the lapse of a contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations. If a prepay customer of T-Mobile Netherlands has neither originated nor received voice or data activity (or received only SMS/MMS messages) for a period of 180 days, the customer is churned and removed from the customer base.
 
In the Dutch retail market, in addition to competition from the mobile network operators KPN Mobile and Vodafone, T-Mobile Netherlands competes with an increasing number of MVNOs.
 
 
Czech Republic
 
Through T-Mobile Czech Republic, we offer mobile telecommunications services to individual and business customers in the Czech Republic and since December 2009 fixed line services. We hold an interest of approximately 61% in T-Mobile Czech Republic.
 
Customers (millions)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    5.5       5.4       5.3  
Contract
    2.7       2.5       2.2  
Prepay
    2.8       2.9       3.0  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    1.4 %     1.4 %     1.4 %
Contract
    0.5 %     0.5 %     0.6 %
Prepay
    2.2 %     2.1 %     1.9 %
                         
In 2009, the overall customer base of T-Mobile Czech Republic slightly increased compared with 2008. As a result of our strategy to focus on high value contract customers, the contract customer base increased year-over-year, while the prepay customer base slightly decreased.
 
The slight increase in the prepay churn rate in 2009 was the result of a stable level of prepay disconnections relative to a smaller average customer base due to lower prepay customer gross additions.
 
T-Mobile Czech Republic’s average churn rate during 2008 was 1.4% per month, which is approximately the same as in 2007. The average contract churn rate during 2008 was 0.5% per month, compared to the average contract churn rate of 0.6% per month during 2007. The average prepay churn rate during 2008 was 2.1% per month, compared to the average prepay churn rate of 1.9% per month during 2007. The year-over-year changes of contract and prepay churn are caused by an ongoing trend of migration to prepay segment instead of deactivation the customer in contract segment, which allows T-Mobile Czech Republic to save part of contract customers in prepay segment. Nevertheless it is also increasing the prepay churn.
 
At T-Mobile Czech Republic, generally, a contract customer is churned either after the voluntary termination upon the lapse of a contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations. In the absence of re-charging, a prepay customer is churned 30 days after completing a period of 12 months without charged voice or data communications activity.
 
In the Czech Republic, T-Mobile Czech Republic faces competition from Telefónica O2 Czech Republic (formerly Eurotel Praha), Vodafone Czech Republic (formerly Oskar Mobil) and since mid-2008 MobilKom under its brand “U:Fon”.
 
 
Austria
 
Through T-Mobile Austria, we offer mobile telecommunications services to individual and business customers in Austria.
 
Customers (millions)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    3.4       3.4       3.3  
Contract
    2.3       2.3       2.1  
Prepay
    1.1       1.1       1.1  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    1.8 %     1.8 %     2.0 %
Contract
    1.1 %     1.0 %     1.2 %
Prepay
    3.5 %     3.3 %     3.4 %
                         
In 2009, the customer base of T-Mobile Austria remained unchanged compared with 2008, both in the contract and the prepay customer segment. This result was achieved despite intense competition in the Austrian mobile communication market. M2M cards account for one percent of T-Mobile Austria’s overall prepay customer base at the end of 2009.
 
The overall churn rate at T-Mobile Austria remained stable in 2009 compared with 2008, despite a slight churn rate increase in prepay and contract. This effect was attributable to a slightly higher average contract customer share in the overall average customer base in 2009 compared with 2008. The prepay churn rate increased as a result of intense competition in the Austrian mobile communication market.
 
T-Mobile Austria’s average churn rate during 2008 slightly decreased to 1.8% per month (tele.ring’s average churn rate was 2.1% per month during 2008), as compared to the average churn rate of 2.0% per month during 2007. The average churn rate for contract customers during 2008 decreased to 1.0% per month compared to 1.2% per month in 2007 (tele.ring’s average contract churn rate was 1.2% per month during 2008) due to increased retention measures. The average prepay churn rate during 2008 was 3.3% per month, compared to the average prepay churn rate of 3.4% per month during 2007.
 
In general, a contract customer is churned either after the voluntary termination upon the lapse of a contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations. Since the beginning of September 2007, T-Mobile Austria has generally churned prepay customers if they had 13 months and two weeks without any charged data or voice communication.
 
tele.ring, which we manage as a separate brand within T-Mobile Austria, generally churned prepay customers after three months without any charged data or voice communication. Beginning in January 2010, the churn policy of T-Mobile Austria for prepay customers will also be used for tele.ring prepay customers. The alignment of the churn policies will result in a higher reported subscriber base and thus, a lower amount of average revenue per customer.
 
In Austria, T-Mobile Austria primarily faces competition from mobilkom austria, Orange (formerly ONE) and “3”.
 
Southern and Eastern Europe
 
Our Southern and Eastern Europe (SEE) operating segment includes the fixed-network and mobile communications subsidiaries of T-Hrvatski Telekom, Slovak Telekom, Magyar Telekom, Makedonski Telekom, Crnogorski Telekom and the OTE group: OTE, COSMOTE, Romtelecom, COSMOTE Romania, Globul (Bulgaria) and AMC (Albania).
   
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Fixed-network lines (1)
    11.9       12.8       13.6  
Retail broadband lines
    3.5       3.0       2.1  
Wholesale bundled lines (2)
    0.2       0.3       0.4  
ULLs (3)
    1.1       0.7       0.3  
Mobile customers (4)
    34.6       31.6       26.2  
                         
 
OTE has been consolidated since February 2009. Prior-year figures in all tables have been adjusted accordingly on a pro forma basis.
(1)
Lines in operation excluding internal use and public telecommunications, including IP-based lines.
(2)
Wholesale bundled lines: sale of broadband lines based on DSL technology to alternative providers outside Deutsche Telekom, including bundled IP-Bitstream Access (IP-BSA). In the case of IP-BSA, we lease DSL lines to the competitor and transport the datastream carried over these lines.
(3)
Unbundled local loop line: Deutsche Telekom wholesale service that can be leased by alternative telecommunications operators without upstream technical equipment in order to offer their own customers a telephone or DSL line.
(4)
One mobile communications card corresponds to one customer.
 
Hungary
We hold a 59.2% interest in Magyar Telekom, the leading full-service telecommunications provider in terms of customers and revenues in Hungary. The following table summarizes our key customer information for Hungary.
 
Fixed network
                 
Lines (millions)(1)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Broadband access lines
    0.8       0.8       0.7  
Fixed network access lines
    1.8       2.0       2.2  
                         
Mobile communications
                       
Customers (millions)(2)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    5.1       5.4       4.9  
Contract
    2.3       2.1       1.8  
Prepay
    2.8       3.3       3.1  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    2.1 %     1.3 %     1.3  
Contract (3)
    1.1 %     0.9 %     0.8  
Prepay (4)
    2.8 %     1.6 %     1.8  
                         
(1)
Lines in operation, including IP-based lines, but excluding internal use and public telecommunications systems. Broadband include bundled and unbundled resale and retail services.
(2)
Total number of contract and prepay customers at year-end for the periods presented based on the number of activated SIM cards.  One SIM card corresponds to one customer.
(3)
A contract customer of T-Mobile Hungary is churned either after the voluntary termination upon the lapse of his contracted loyalty period or after forced contract termination due to the customer’s failure to fulfill payment obligations.
(4)
In the absence of re-charging, a prepay customer is suspended after a period of 12 to 16 months depending on the amount charged on the prepay card.
 
Magyar Telekom offers telecommunications services, such as fixed-line and mobile telephone services, data communications services, wholesale services, IP/Internet services, multimedia broadcast services and other services for customers throughout Hungary. Magyar Telekom’s systems integration and IT operations are reported under our operating segment Systems Solutions.
 
In 2009, the number of Magyar Telekom's fixed-network access lines in operation decreased compared to 2008 and 2007 mainly due to ongoing fixed-mobile substitution. The positive development of the broadband market and high demand for broadband solutions influenced Magyar Telekom's number of broadband access lines in operation. Broadband access lines in operation increased in 2009 to 789,000, compared to 761,000 at December 31, 2008 and 715,000 at December 31, 2007. 
 
In September 2008, Magyar Telekom decided to roll-out a fiber-optic network that would enable it to offer innovative products, including television services. Magyar Telekom’s multimedia services business primarily consists of its cable television business.  The number of Magyar Telekom’s cable television customers decreased to 407,000 at December 31, 2009 from 423,000 at December 31, 2008 and 419,000 at December 31, 2007, mainly driven by the entry of new competing technologies. As part of Magyar Telekom’s strategy to provide international network and carrier services in southeastern Europe, Magyar Telekom currently offers wholesale services in Romania, Bulgaria and the Ukraine.
 
T-Mobile Hungary, the mobile brand of Magyar Telekom, offers mobile telecommunications services to individual and business customers in Hungary. At December 31, 2009, the number of T-Mobile Hungary’s customers declined compared with 2008 due mainly to the impact of the economic crisis and the churn of inactive SIM cards. Growth in the number of contract customers, as a result of attractive tariff packages, sales commission schemes and loyalty programs, partially offset the decline in prepay customers.
 
T-Mobile Hungary’s average churn rate during 2009 was 2.1% per month, which represents an increase from 2008. The average contract churn rate in 2009 was approximately 1.1% per month, compared to approximately 0.9% per month in 2008 due to continued competitive pressure in the Hungarian market. The corresponding prepay customer churn rate was approximately 2.8% in 2009 compared to approximately 1.6% in 2008 due to increased churn of inactive customers and cancellations related to the economic crisis.
 
Croatia
We own 51% of T-Hrvatski Telekom, the leading full-service telecommunications provider in the Croatia in terms of revenues. The following table summarizes our key customer information for Croatia.
Fixed network
                 
Lines (millions) (1)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Broadband access lines
    0.6       0.5       0.3  
Fixed network access lines
    1.5       1.6       1.6  
                         
Mobile communications
                       
Customers (millions) (2)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    2.9       2.7       2.4  
Contract
    0.9       0.8       0.7  
Prepay
    1.9       1.9       1.7  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    1.9 %     1.4 %     1.3 %
Contract (3)
    0.8 %     0.7 %     0.7 %
Prepay (4)
    2.3 %     1.7 %     1.5 %
                         
(1)
Lines in operation, including IP-based lines, but excluding internal use and public telecommunications systems. Broadband access lines include bundled and unbundled resale and retail services.
(2)
Total number of contract and prepay customers at year-end for the periods presented based on the number of activated SIM cards. One SIM card corresponds to one customer.
(3)
A contract customer is churned either after the voluntary termination upon the lapse of his contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations.
(4)
A prepay customer is churned after a period of 270 days without recharging.
 
T-Hrvatski Telekom offers access and local, long-distance and international fixed-line telephone services, data communications services, IP/Internet services, including IPTV, and wholesale services and mobile telecommunications services through T-Mobile Hrvatska d.o.o., or T-Mobile Croatia, to individual and business customers in Croatia. As of January 1, 2010, T-Hrvatski Telekom merged its fixed network and mobile communication businesses to improve customer service and operational efficiencies.
 
T-Hrvatski Telekom operates a digitalized fixed-line telecommunications network and started the commercial roll-out of a fiber network in 2008. In 2009, the number of T-Hrvatski Telekom’s fixed network access lines in operation decreased slightly compared to 2008 and 2007. The number of broadband access lines provided by T-Hrvatski Telekom continued to increase in 2009. The number of broadband access lines in operation at December 31, 2009 was 555,000 compared to 473,000 at December 31, 2008 and 345,000 at December 31, 2007. The fixed-line business continues to be characterized by increasing competition, particularly the broadband business, as a result of the unbundled local loop. However, mobile substitution is the main competitive challenge in Croatia.
 
Through its wholly-owned subsidiary, T-Mobile Croatia, T-Hrvatski Telekom offers mobile telecommunications services to individual and business customers in Croatia. At December 31, 2009, T-Mobile Croatia had approximately 2.8 million customers, an increase compared to 2008. Of the total customers at December 31, 2009, approximately 0.9 million were contract customers, a slight increase over 2008 primarily as a result of attractive tariffs.  The number of prepay customers slightly increased in 2009 compared with 2008.
 
T-Mobile Croatia’s average monthly churn rate during 2009 increased to 1.9% from 1.4% per month in 2008, primarily as a result of increased contract and prepay churn. The average contract churn rate was 0.8% per month in 2009, a slight increase compared with 2008 primarily as a result of increasing competition.  The average prepay churn rate during 2009 was 2.3% per month compared with 1.7% per month in 2008, mainly as a result of increased competition in the lower-margin prepay segment.
Slovakia
We hold a 51% interest in Slovak Telekom, a leading full-service telecommunications provider in the Slovak Republic. The following table summarizes our key customer information for Slovakia.
Fixed network
                 
Lines (millions) (1)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Broadband access lines
    0.4       0.3       0.3  
Fixed network access lines
    1.1       1.1       1.1  
                         
Mobile communications
                       
Customers (millions) (2)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    2.4       2.3       2.4  
Contract
    1.4       1.4       1.2  
Prepay
    1.0       1.0       1.2  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    1.4 %     1.8 %     1.5 %
Contract (3)
    1.0 %     0.8 %     0.8 %
Prepay (4)
    2.0 %     3.0 %     2.1 %
(1)
Lines in operation, including IP-based lines, but excluding internal use and public telecommunications systems. Broadband access lines include bundled and unbundled resale and retail services.
(2)
Total number of contract and prepay customers at year-end for the periods presented based on the number of activated SIM cards.  One SIM card corresponds to one customer.
(3)
A contract customer is churned either after the voluntary termination upon the lapse of his contract or after forced contract termination due to the customer’s failure to fulfill contractual obligations.
(4)
A prepay customer is churned after a period of 12 months without re-charging since the most recent use.
   Slovak Telekom offers access and local, long-distance and international fixed-line telephone services, data communications services, wholesale services, and IP/Internet services. In January 2010, Slovak Telekom officially launched satellite TV services. Through its wholly-owned subsidiary, T-Mobile Slovensko, Slovak Telekom offers mobile telecommunications services to individual and business customers in Slovakia. In December 2009, the Boards of Directors of Slovak Telekom and T-Mobile Slovensko approved a plan to combine the fixed-line and mobile businesses into one integrated company in 2010 with the objective of improving customer service and internal efficiency.
Slovak Telekom’s total number of fixed-network access lines decreased slightly in 2009 by 2.2% compared to 2008. The decrease in traditional fixed network lines was partially offset by an increase in the number of All-IP access lines compared to previous year. Slovak Telekom’s total number of fixed-network access lines decreased in 2008 by 1.3% compared to 2007, despite a substantial increase in demand for All-IP access lines. In 2009, Slovak Telekom continued to increase its triple-play services offering and believes that triple-play is one of the main drivers for the success of its broadband business. The number of broadband access lines in operation in Slovak Telekom’s network continued to increase in 2009. The number of broadband access lines in operation at December 31, 2009 was 391,000 compared with 339,000 at December 31, 2008 and 261,000 at December 31, 2007. Mobile substitution remains one of the main competitive challenges for Slovak Telekom’s fixed-network business.
 
At December 31, 2009, T-Mobile Slovensko had approximately 2.4 million customers, compared with 2.3 million at December 31, 2008 and 2.4 million at December 31, 2007. The slight increase in the number of customers in 2009 compared to 2008 was primarily a result of overall market growth. T-Mobile Slovensko’s average churn rate during 2009 was 1.4% per month, which represents a decrease from 1.8% in 2008, primarily as a result of the decline in prepay churn, which was partially offset by an increase in contract churn. The average prepay churn decreased from 3.0% per month in 2009 to 2.0% per month in 2008, primarily as a result of less competition.  The average contract churn rate increased from 0.8% per month to 1.0% per month in 2009, primarily as a result of increasing competition.
 
Greece
 
We currently own 30% plus one share in OTE and control additional shares through a shareholders’ agreement with the Hellenic Republic or HR, pursuant to which we have assumed management control of OTE. We have consolidated OTE since February 2009. The Hellenic Republic also has a put option with respect to its current holdings in OTE. For more information, see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital Resources—Contractual Obligations and Other Commitments—Contractual Cash Obligations.” In addition to its presence in Greece, OTE also has subsidiaries in Romania, Bulgaria and Albania.
The following table summarizes our key customer information for Greece.
 
Fixed network
                 
Lines (millions) (1)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Broadband access lines
    1.1       1.0       0.8  
Fixed network access lines
    4.2       4.6       5.0  
                         
Mobile communications
                       
Customers (millions) (2)
 
As of December 31, 2009
   
As of December 31, 2008
   
As of December 31, 2007
 
Total
    9.2       7.9       6.3  
Contract
    2.3       2.2       2.0  
Prepay
    6.9       5.7       4.2  
                         
Monthly churn rate
 
For the year ended
December 31, 2009
   
For the year ended
December 31, 2008
   
For the year ended
December 31, 2007
 
Total
    3.2 %  
n.a.
   
n.a.
 
Contract (3)
    2.0 %  
n.a.
   
n.a.
 
Prepay (4)
    3.6 %  
n.a.
   
n.a.
 
n.a.—not applicable
                       
(1)
Lines in operation, including IP-based lines, but excluding internal use and public telecommunications systems. Broadband access lines include bundled and unbundled resale and retail services.