Edgar Filing: DEUTSCHE TELEKOM AG

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 6-K

REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934

For the month of May 2006

DEUTSCHE TELEKOM AG

(Translation of registrant’s name into English)

Friedrich-Ebert-Allee 140

53113 Bonn

Germany

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.

Form 20-F ý Form 40-F o

Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes o No ý

This report is deemed submitted and not filed pursuant to the rules and regulations of the Securities and Exchange Commission.

	Deutsche Telekom at a glance.

(a) For detailed information and calculations, please refer to “Reconciliation of pro forma figures,” page 47 et seq.

Excellence.

Following the successful completion of our debt reduction and restructuring efforts, which lasted from 2002 through 2005, Deutsche Telekom entered a new stage of its development in 2006, focusing on growth and value enhancement. The Company is systematically pursuing its strategic goal, which reads: “We aim to shape the information and telecommunications sector as Europe’s largest integrated telecommunications company and the leading service provider in the industry.” With the Excellence Program launched in 2005 the Company began a transformation program for the implementation of the Group’s organic strategy. The program consists of three core elements that play a critical role in the achievement of the Company’s goals:

• Growth programs for the three strategic business areas Mobile Communications, Broadband/Fixed Network, and Business Customers;

• Group-wide initiatives to tap the potential of intelligent integration; and

• Long-term changes in the corporate culture toward an even stronger focus on customers’ needs.

Growth programs.

Mobile Communications focuses on maintaining its level of growth. Simple, attractive calling plans, segment-specific options and services tailored to various customer groups will help here. For example, the T-Mobile@Home option, which was launched in early 2006, enables customers to make mobile calls to German fixed-network lines at low rates within a radius of up to 2 kilometres from a preselected address. More than 500,000 customers chose to take advantage of this option in the first quarter of 2006. The further expansion of mobile data services is also supporting continued growth. In total, T-Mobile has already sold more than 530,000 web’n’walk-compatible devices, proving that the future of mobile Internet lies in fully mobile access. Moreover, the Save for Growth program, which was very successful in 2005, will be continued. The program uses long-term cost savings to create capacity for further investments in growth.

In the Broadband/Fixed Network strategic business area, T-Com has set itself the goal of defending its core business and stabilizing its market share in terms of call minutes. Rate innovations and a highly simplified product range will be significant factors here. In addition, the growth market for broadband lines will be further developed with the help of the “Conquer the home” initiative. Deutsche Telekom is currently building a high-speed network of up to 50 Mbit/s (megabits per second) in 10 major German cities, which will lay the foundation for new combined, particularly high-bandwidth products that bundle voice telephony, broadband Internet access and TV entertainment (triple play). The Company has secured the basis for offering attractive content by acquiring the IP transmission rights to Bundesliga soccer games. In addition, integrated convergence products consisting of fixed-network and mobile elements are also to be offered.

The measures undertaken in the Business Customers segment address both telecommunications and information technology (IT). In the area’s core business, telecommunication services, the goal is to regain market share among large and mid-sized customers. In the European IT market, Deutsche Telekom is generating long-term growth by offering standardized IT services and solutions for small and medium-sized companies and by expanding its IT outsourcing business among new and existing key accounts. To further develop its portfolio, T-Systems acquired the IT services provider gedas from Volkswagen AG, which will give it a significantly stronger presence in the global automotive market.

Group-wide initiatives.

As an integrated telecommunications provider, the Deutsche Telekom Group is well positioned to develop convergent solutions that meet customers’ needs for simplicity and service. T-One – an integrated terminal device that enables both fixed-network and mobile telephony and was unveiled at CeBIT in March 2006 – fulfills these requirements and has met with considerable public interest.

Following the merger with T-Online a Group-wide customer relationship management (CRM) system is to be implemented with the aim of increasing customer satisfaction and better utilizing the potential of cross-selling. The Group is also working to continue the highly successful customer promises initiated in 2005. Additional promises that underscore Deutsche Telekom’s performance are in the works and will be implemented soon.

Further increasing efficiency is another goal that the entire Group is steadfastly pursuing. Efforts include measures undertaken in the areas of IT network infrastructure and real estate-related costs, as well as steps to improve the personnel cost ratio. Implementation of the announced staff restructuring began on schedule. As part of the improvement of central functions, it was decided that the number of staff working at Group Headquarters be reduced to 850.

Performance and service culture.

Improved customer orientation is the focus of the lasting cultural changes taking place within the Company. The “Five days with the customer” program, which was launched in 2005 and under which all of the Group’s top managers must spend at least 5 days in direct contact with customers, will continue in 2006. The STEP up! program, an executive development program that defines and realizes uniform competency profiles and performance management processes across the Group, was developed in recognition of the distinctive function of executives as role models. In addition, all newly hired employees complete an introductory program that will also bring them into direct contact with customers.

	Contents.

	• Developments in the Group
	• Highlights
	• Business developments
	• Overall economic situation / industry situation
	• Group
	• Strategic business areas
	• Mobile Communications
	• Broadband/Fixed Network
	• Business Customers
	• Group Headquarters & Shared Services
	• Outlook
	• Highlights after the balance sheet date (March 31, 2006)
	• Development of revenue and profit
	• Risk situation
	• Reconciliation of pro forma figures
	• EBITDA and EBITDA adjusted for special factors
	• Special factors
	• Free cash flow
	• Gross and net debt
	• T-Share price performance
	• Corporate governance
	• Consolidated financial statements
	• Accounting in accordance with IFRS
	• Changes in the composition of the Group
	• Selected notes to the consolidated income statement
	• Other disclosures
	• Selected notes to the consolidated balance sheet
	• Selected notes to the consolidated cash flow statement
	• Segment reporting
	• Investor Relations calendar

Developments in the Group.

• Net revenue increased by 3.9 percent from EUR 14.3 billion in the first quarter of 2005 to EUR 14.8 billion.

• Group EBITDA(1) adjusted for special factors increased by 2.7 percent year-on-year, from EUR 4.8 billion to EUR 5.0 billion; Group EBITDA increased by 1.4 percent from EUR 4.8 billion to EUR 4.9 billion.

• Profit before income taxes up 11.3 percent year-on-year from EUR 1.6 billion to EUR 1.8 billion.

• Net profit increased by 9.7 percent from EUR 1.0 billion to EUR 1.1 billion; adjusted for special factors, net profit remained at the prior-year level of EUR 1.0 billion.

• Free cash flow(2) before dividend payments increased by EUR 1.7 billion to EUR 0.8 billion

• Net debt(3) decreased from EUR 43.0 billion to EUR 37.8 billion compared with the first quarter of 2005. This represents a decrease of EUR 0.9 billion as against December 31, 2005.

Continued strong customer growth in the fixed network and mobile communications in the first quarter of 2006:

• The number of mobile customers rose by 1.1 million to a total of 87.7 million.

• Strong growth in the number of broadband lines to 9.2 million, mainly as a result of resale marketing. Of the 0.7 million new lines in the first quarter of 2006, 0.6 million were generated in Germany from resale to third parties.

• Business Customers recorded new orders totalling EUR 2.9 billion.

(1) For a detailed explanation of the special factors affecting EBITDA, adjusted EBITDA, the adjusted EBITDA margin and special factors affecting net profit/loss after income taxes and the adjusted net profit, please refer to “Reconciliation of pro forma figures,” page 47 et seq.

(2) Deutsche Telekom defines free cash flow as cash generated from operations less interest paid and cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill). For calculation of free cash flow, please refer to “Reconciliation of pro forma figures,” page 50.

(3) For detailed information, please refer to “Reconciliation of pro forma figures,” page 51.

At a glance

					Q1 2006		Q1 2005		Change		Change		FY 2005
					millions of €		millions of €		millions of €		%		millions of €

	Net revenue				14,842		14,288		554		3.9		59,604
	Domestic				8,208		8,511		(303	)	(3.6	)	34,183
	International				6,634		5,777		857		14.8		25,421
	EBIT (profit from operations)				2,318		2,287		31		1.4		7,622
	Special factors affecting EBIT(a)				(92	)	(20	)	(72	)	n.a.		(2,546	)
	Adjusted EBIT (profit from operations)(a)				2,410		2,307		103		4.5		10,168
	Adjusted EBIT margin(a)		(%)		16.2		16.1						17.1
	Loss from financial activities				(568	)	(715	)	147		20.6		(1,410	)
	Profit before income taxes				1,750		1,572		178		11.3		6,212
	Depreciation, amortization and impairment losses				(2,570	)	(2,534	)	(36	)	(1.4	)	(12,497	)
	of property, plant and equipment				(1,953	)	(1,921	)	(32	)	(1.7	)	(8,070	)
	of intangible assets				(617	)	(613	)	(4	)	(0.7	)	(4,427	)
	EBITDAb				4,888		4,821		67		1.4		20,119
	Special factors affecting EBITDA(a),(b)				(82	)	(20	)	(62	)	n.a.		(610	)
	Adjusted EBITDA(a),(b)				4,970		4,841		129		2.7		20,729
	Adjusted EBITDA margin(a),(b)		(%)		33.5		33.9						34.8
	Net profit				1,079		984		95		9.7		5,584
	Special factors(a)				116		8		108		n.a.		921
	Adjusted net profit(a)				963		976		(13	)	(1.3	)	4,663

	Earnings per share/ADS(c), basic/diluted			(€)	0.25		0.23		0.02		8.7		1.31

	Cash capex(d)				(2,044	)	(3,091	)	1,047		33.9		(9,269	)
	Net cash from operating activities				2,796		2,176		620		28.5		14,998
	Free cash flow (before dividend payments)(e)				752		(915	)	1,667		n.a.		5,729

	Equity ratio(f)		(%)		38.5		35.8						36.4
	Net debt(e)				37,789		42,997		(5,208	)	(12.1	)	38,639

					Mar. 31, 2006		Dec. 31, 2005		Change Mar. 31, 2006/ Dec. 31, 2005		Mar. 31, 2005		Change Mar. 31, 2006/ Mar. 31, 2005
									%				%
Number of	Deutsche Telekom Group				248,982		243,695		2.2		243,784		2.1
employees at	Non-civil servants				204,818		197,741		3.6		197,123		3.9
balance sheet	Civil servants				44,164		45,954		(3.9	)	46,661		(5.4	)
date
Number of	Telephone lines(g)	(millions)			53.9		54.8		(1.6	)	56.6		(4.8	)
fixed-network and mobile	Broadband lines (in operation)(g)	(millions)			9.2		8.5		8.2		6.7		37.3
customers	Mobile customers(h)	(millions)			87.7		86.6		1.3		79.0		11.0

(a) For a detailed explanation of the special factors affecting EBITDA, adjusted EBITDA, the adjusted EBITDA margin as well as special factors affecting profit or loss and the adjusted net profit, please refer to “Reconciliation of pro forma figures,” page 47 et seq.

(b) Deutsche Telekom defines EBITDA as profit/loss from operations excluding depreciation, amortization and impairment losses.

(d) Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill) as shown in the cash flow statement.

(e) For detailed information, please refer to “Reconciliation of pro forma figures,” page 50 et seq.

(f) Based on shareholders’ equity excluding amounts earmarked for dividend payment, which are treated as short-term debt.

(g) Telephone lines of the Group (including ISDN channels), including for internal use.

(h) Number of customers of the fully consolidated mobile communications companies of the Mobile Communications strategic business area. For a discussion of 2006 changes made in our mobile customer counting methodologies, please see page 21 et seq.

	Highlights.

	Events in the first quarter of 2006.

Group	Deutsche Telekom again ranks no. 1 six times in “connect” reader survey. • In the May 2006 issue, the readers of the trade journal “connect” ranked the companies of the Deutsche Telekom Group no. 1 in six out of a total of nine categories. T-Com took first place in the fixed-network telephony and DSL line provider categories for the ninth time. T-Mobile was named mobile communications provider of the year for the seventh year running. The XtraCard also took first place as prepaid card of the year. Moreover, T-Mobile ranked no. 1 in the mobile business service category. T-Online was once again honored as the best Internet service provider. Lufthansa and Deutsche Telekom agree on future worldwide cooperation. • Deutsche Lufthansa AG and Deutsche Telekom AG have agreed a strategic partnership with the aim of intensifying the use of the products and services of both companies, and of the companies within their groups, to the benefit of their respective customers. The focus of the partnership is on developing attractive offers for business customers of both companies. A major part of the partnership is the marketing cooperation between Miles & More and the companies of the Deutsche Telekom Group. From July 2006, for example, T-Mobile customers will be able to earn bonus miles for their mobile phone calls and receive attractive bonus miles packages when they choose certain calling plan or data options. Staff restructuring at Deutsche Telekom AG gets underway. • As announced in 2005, Deutsche Telekom AG launched the necessary personnel restructuring program. The heart of the program is the use of tools that avoid compulsory redundancies and are based on the principle of voluntary action by both employees and the employer. To reduce personnel, Deutsche Telekom AG introduced a special redundancy payment program (“Abfindung spezial”) limited to the period from March 1 through August 31, 2006. Under the program, employees whose pay is regulated by a collective agreement and who are aged between 40 and 55 can receive a voluntary redundancy payment of up to EUR 225,000. Another program (“Rente minus 2”) enables employees who have already reached retirement age or will do so within the next two years to leave the Company early and receive voluntary redundancy pay. Both DeTeImmobilien and T-Systems are promoting workforce restructuring throughout the Group in Germany with their own limited-time severance models. To further promote workforce rebalancing within the Group, Deutsche Telekom AG is offering its employees special benefits for switching jobs, such as income protection provisions. The program is set to run until August 31, 2006. Successful bond issuance in U.S. dollars and euros. • Deutsche Telekom took advantage of the favorable market environment in the first quarter of 2006 to successfully launch a series of bonds with low risk premiums. Its medium-term notes, which totaled EUR 1 billion, and the issue of a three-tranche U.S. dollar bond of USD 2.5 billion met with lively interest from investors both in Europe and the United States. Celcom pays USD 0.2 billion to Deutsche Telekom. • Following the successful arbitration proceedings brought before the International Court of Arbitration between DeTeAsia Holding GmbH, a wholly owned subsidiary of Deutsche Telekom AG, and Celcom (Malaysia) Bhd., the mobile communications arm of Telekom Malaysia Bhd., Celcom fulfilled its financial obligations in February 2006 and paid Deutsche Telekom USD 0.2 billion, including accrued interest.

Mobile Communications	T-Mobile USA honored once again, this time for excellent network quality. • According to a study carried out by J.D. Power dated March 16, 2006, T-Mobile and Verizon Wireless have the best networks in the United States. Both providers are leaders in three of the six regions. Continuous improvement of the network is in line with T-Mobile’s strategy to become the most highly regarded mobile carrier. In addition to customer service, which has won T-Mobile numerous awards, network quality is a key issue.
	T-Mobile brings FIFA World Cup to mobile phones. • T -Mobile is bringing the soccer event of the year directly to mobile phones as a TV program. When the opening game of the FIFA World Cup 2006™ kicks off on June 9, 2006 in Munich, T-Mobile customers will be able to watch the exciting event live via the MobileTV service. Throughout the four weeks of the FIFA World Cup, customers will be able to follow numerous matches live on their mobile phones via a mobile TV channel offered by T-Mobile. To receive the live broadcasts, customers must have UMTS network coverage plus a UMTS-enabled mobile phone that supports this service. The Mobile TV service will use streaming to transmit images and sound.
	HSDPA launched. • Since CeBIT 2006, high-speed UMTS (Universal Mobile Telecommunication System) based on HSDPA (High Speed Downlink Packet Access) technology has been speeding up mobile data transmission in large parts of T-Mobile’s UMTS network to 1.8 Mbit/s (megabits per second). At the same time, EDGE (Enhanced Data rates for GSM Evolution) will enable mobile data transfers at up to four times the speed of ISDN throughout Germany’s nationwide GPRS (General Packet Radio Service) network. T-Mobile@home: Attractively priced calls from home almost at fixed-network rates. • On January 16, 2006, T-Mobile launched yet another attractive offer for mobile voice communications. With T-Mobile@home, T-Mobile customers in Germany can make mobile calls from either home or their office to fixed-network lines in Germany at low rates. What makes the option so special is that this rate is not limited to the confines of the customer’s home or office but applies within a 2-kilometer radius of the chosen location. Customers also receive a fixed-network number with a local area code for T-Mobile@home. They can be reached at this number within the defined T-Mobile@home area at customary fixed-network rates and conditions.
Broadband/ Fixed Network	Cooperation with Microsoft on development of IPTV. • The Deutsche Telekom Group will in future offer its customers television via VDSL plus supplementary interactive services and comprehensive entertainment services, using Microsoft TV IPTV edition software as a technical platform. The platform facilitates new interactive services like digital personal video recording, in addition to reception of linear TV channels in both standard and HDTV quality. Viewers will also be able to access attractive content packages that include selected feature films, TV series or documentaries from on-demand collections using their remote control. T-Online presented a prototype from its future range of services called T-Home to the public at CeBIT 2006. IPTV is to be launched on the basis of the new VDSL network, which is currently being developed by T-Com to enable bandwidths of up to 50 Mbit/s.
	DSL Net Rental-Proceedings initiated by Federal Network Agency and Federal Cartel Office. • The DSL Net Rental product is the subject of two separate proceedings. The Federal Network Agency opened proceedings for ex post price controls on March 22, 2006. The Federal Cartel Office submitted a formal request for information to Deutsche Telekom on March 20, 2006. Both these investigations are concerned with the allegation of predatory competition at the expense of smaller Internet service providers and infrastructure-based local loop operators. Deutsche Telekom believes these complaints are unfounded. A motion under civil law for an injunction against Deutsche Telekom in this matter has since

	been rejected.

Business Customers	Acquisition of gedas completed successfully. • Having signed all of the contracts involved and closed the transaction, T-Systems Enterprise Services GmbH took over the shares in gedas from Volkswagen AG on March 31, 2006. This paves the way for the integration of gedas activities into the Business Customers strategic business area of Deutsche Telekom AG. By acquiring gedas, T-Systems is expanding its core expertise as a service provider for information and communication technology (ICT) in the automotive sector. With some 5,500 employees, two-thirds of whom are outside Germany, gedas will strengthen T-Systems’ expertise in the automotive industry and support the company’s internationalization strategy. The gedas brand will be absorbed into the T-Systems brand by January 1, 2007. With the acquisition, T-Systems has gained the VW group as a corporate customer, with a framework agreement that runs for seven years and covers IT services valued at EUR 2.5 billion.
	DaimlerChrysler extends framework agreement through 2008. • The automotive group DaimlerChrysler has extended its global framework agreement with T-Systems to the end of 2008. It brings together seven service agreements and forms the framework for all information and communications technology services provided by the Deutsche Telekom subsidiary. T-Systems operates mainframe computers and client-server architectures for the German-American automotive group. In addition, it develops and maintains business-critical applications in areas like customer support, vehicle development, production, sales and corporate management. At many locations the employees of DaimlerChrysler receive globally standardized services for their workstations. T-Systems also manages the automotive group’s corporate network in Germany as well as its contingency network in Asia. HypoVereinsbank and ITS form strategic partnership. • HypoVereinsbank and International Transaction Services GmbH (ITS) have formed a strategic partnership. In the future, HypoVereinsbank will execute major portions of its securities transactions for the retail investor business via ITS, a joint venture of HSBC Trinkaus & Burkhardt and T-Systems. The securities transactions for the retail business are to be moved to ITS’ system platform and ITS is to provide major services relating to securities transactions for the bank’s retail business by the end of 2007. The execution of securities transactions for institutional customers and the bank’s own investment banking activities are initially to be migrated to a platform provided by ITS. Execution will continue to be handled by the Financial Markets Service Bank (FMSB).

	Business developments Overall economic situation/industry situation.

Global economic development	The global economy has been looking strong once again since the start of 2006, with global economic growth slowing only very slightly, but spreading geographically. Economic and monetary policy has become more restrictive in some countries, but like the effects of the sharp rise in oil prices, this has not had a long-term impact on growth drivers. Apart from China, the United States, Russia and the fast-growing emerging economies that drove global economic growth in 2005, other countries have seen improvements in their economic indicators this year, in particular the euro zone, the United Kingdom and Japan, so that a strong increase in output worldwide is expected for the first months of this year. According to estimates by the Kiel Institute for the World Economy (IfW), output in industrialized countries is likely to increase at a rate of 3 percent in 2006, even faster than in 2005 and faster than previously expected (2.6 percent). The U.S. economy also lost only very little momentum in the first quarter of 2006. Gross domestic product (GDP) was up 4.8 percent compared with the same quarter of 2005, i.e., the highest growth rate since the third quarter of 2003. The strong economic momentum in China and the emerging markets of Eastern Asia is also unlikely to subside much in the near future. According to the forecasts, economic growth in the euro zone will pick up in spring 2006. GDP growth will be bolstered by rising industrial output and sharp increases in capital spending. Consumption is expected to increase by 0.4 percent in the first quarter of 2006 and 0.5 percent each in the second and third quarters. The UK economy is also picking up speed as a result of increasing consumer demand. Economic momentum remains high in the new EU member states, driven by strong growth in domestic demand, rising exports, particularly to euro zone countries, and a moderate rise in prices. Despite the considerable rise in energy prices, the consumer price trend is still relatively stable overall in the industrialized countries. Economic recovery in Germany gained considerable momentum in spring 2006. The German economy is currently in a strong upswing, exports continue to rise and even domestic demand is increasing noticeably for the first time in five years. Several leading indicators like the ifo index, the orders situation in industry and demand from abroad suggest that the German economy started 2006 with lots of momentum. In addition, the consumer climate has improved, not least due to the slight improvement in the labor market situation. IfW has raised its forecasts for real GDP growth for 2006 from 1.5 percent to 2.1 percent. Inflation expectations have also been raised slightly, and wage increases have remained moderate thus far. However, there remains a considerable risk that political events might drive oil prices sharply higher and that these higher prices may have a cooling effect on global consumption and capital spending.
Telecommunications market	Since the German telecommunications sector was fully deregulated at the beginning of 1998, Deutsche Telekom has had to cope with increasingly intense competition. The battle for customers initially focused predominantly on voice telephony call minutes, but now also encompasses access charges. Among the primary forces driving this process are increasing competition from attractive bundled products offered by local loop operators and the continuing substitution of traditional fixed-network telephony by mobile communications. The telecommunications sector remains one of the key drivers of the German economy as a whole. According to the activity report published by the Federal Network Agency, total industry revenue amounted to EUR 68.3 billion in 2005, up by around 2.2 percent on the previous year. This growth was driven in particular by the growing popularity of mobile communications, as well as Internet use and the increase in the number of broadband lines.

	Business developments in the Group.

Net revenue	Deutsche Telekom continued its growth course in the first quarter of 2006 with net revenue rising to EUR 14.8 billion. This represents an increase of EUR 0.6 billion or 3.9 percent compared with the same period in the previous year. Exchange rate effects, primarily from the translation of USD, accounted for EUR 0.3 billion of this revenue growth. The Mobile Communications strategic business area continues to be the main revenue driver in the Group in the first quarter of 2006. Sustained customer growth at T-Mobile USA resulted in substantial revenue gains of more than 12 percent. In spite of the positive development at T-Online, net revenue in the Broadband/Fixed Network strategic business area was down in the first quarter of 2006. T-Online recorded revenue growth particularly as a result of marketing a package consisting of DSL access and rates. T-Com, on the other hand, recorded a drop in revenue in particular as a result of lower call revenues and the loss of narrowband lines. Revenue in the Business Customers strategic business area also declined. The slight revenue growth in the Business Services unit, which was partly attributable to the successful implementation of the IT strategy for small and medium-sized enterprises, was offset by higher revenue shortfalls in the Enterprise Services unit.

		Q1 2006		Q1 2005		Change		Change		FY 2005
		millions of €		millions of €		millions of €		%		millions of €

	Net revenue	14,842		14,288		554		3.9		59,604
	Mobile Communications(a)	7,575		6,746		829		12.3		29,452
	Broadband/Fixed Network(a)	6,156		6,555		(399	)	(6.1	)	26,035
	Business Customers(a)	3,011		3,106		(95	)	(3.1	)	12,850
	Group Headquarters & Shared Services(a)	871		853		18		2.1		3,505
	Inter-segment revenue(b)	(2,771	)	(2,972	)	201		6.8		(12,238	)

(a) Total revenue (including revenue between strategic business areas).

(b) Elimination of revenue between strategic business areas.

Contribution of the strategic business areas to net revenue (after		Q1 2006	Proportion of net revenue of the Group	Q1 2005	Proportion of net revenue of the Group	Change		Change		FY 2005
consolidation of revenue		millions of €	%	millions of €	%	millions of €		%		millions of €
between strategic
business areas)	Net revenue	14,842	100.0	14,288	100.0	554		3.9		59,604
	Mobile Communications	7,405	49.9	6,531	45.7	874		13.4		28,531
	Broadband/Fixed Network	5,207	35.1	5,458	38.2	(251	)	(4.6	)	21,731
	Business Customers	2,152	14.5	2,234	15.6	(82	)	(3.7	)	9,058
	Group Headquarters & Shared Services	78	0.5	65	0.5	13		20.0		284

	The Mobile Communications strategic business area now accounts for almost 50 percent of the Group’s net revenue and has again increased this proportion substantially. The proportion of net revenue generated by the Broadband/Fixed Network and Business Customers strategic business areas fell to approximately 35 percent and almost 15 percent, respectively.

Revenue generated outside Germany	Boosted by sustained revenue growth at T-Mobile USA, international revenue in the first quarter of 2006 was up almost 15 percent on the same period in the previous year. The proportion generated outside Germany rose by more than 4 percentage points from the first quarter of 2005 to approximately 45 percent.

			Q1 2006		Q1 2005		Change		Change		FY 2005
			millions of €		millions of €		millions of €		%		millions of €

	Net revenue		14,842		14,288		554		3.9		59,604
	Domestic		8,208		8,511		(303	)	(3.6	)	34,183
	International		6,634		5,777		857		14.8		25,421
	Proportion generated internationally	(%)	44.7		40.4						42.6
	Europe (excluding Germany)		3,234		3,115		119		3.8		13,272
	North America		3,332		2,592		740		28.5		11,858
	Other		68		70		(2	)	(2.9	)	291

Profit before income taxes	The Group increased its profit before income taxes by EUR 0.2 billion year-on-year to EUR 1.8 billion in the first quarter of 2006. This equates to growth of over 11 percent. The main factor in this increase, besides the improvement in finance costs, was the positive development of profit from financial activities, which was largely attributable to the enforcement of an arbitral award in connection with the sale of Celcom interests in 2003. The sale proceeds of EUR 0.2 billion were ultimately received in the first quarter of 2006.

Net profit	Net profit increased by EUR 0.1 billion in the first quarter of 2006 to EUR 1.1 billion. This represents an increase of just under 10 percent compared with the previous year. The improvement is mainly attributable to the higher profit before income taxes despite an increase in tax expense. The special factors affecting net profit totaled EUR 0.1 billion in the first quarter of 2006 as compared with EUR 8 million in the same quarter of the previous year. At EUR 1.0 billion, net profit adjusted for these special factors was almost at the same level as in the prior-year quarter.

EBIT
			Q1 2006		Q1 2005		Change		Change		FY 2005
			millions of €		millions of €		millions of €		%		millions of €

	EBIT(a) in the Group		2,318		2,287		31		1.4		7,622
	Mobile Communications		1,055		966		89		9.2		3,005
	Broadband/Fixed Network		1,262		1,434		(172	)	(12.0	)	5,142
	Business Customers		99		174		(75	)	(43.1	)	409
	Group Headquarters & Shared Services		(94	)	(267	)	173		64.8		(840	)
	Reconciliation		(4	)	(20	)	16		80.0		(94	)

(a) EBIT is profit/loss from operations as shown in the income statement.

EBIT was up slightly year-on-year in the first quarter of 2006, boosted in particular by the contributions made by Mobile Communications and Group Headquarters & Shared Services. By contrast, EBIT in the Broadband/Fixed Network and Business Customers strategic business areas fell, mainly due to the decline in revenue.

EBITDA	EBITDA in the first quarter of 2006 amounted to EUR 4.9 billion, an increase of EUR 0.1 billion year-on-year. The Mobile Communications strategic business area was the main source of growth. EBITDA at Group Headquarters & Shared Services also improved. By contrast, Broadband/Fixed Network and Business Customers registered a decline in EBITDA.

Adjusted EBITDA	Special factors of EUR 0.1 billion negatively affected EBITDA in the first quarter of 2006. These principally relate to one-time expenses recognized in the income statement in connection with DSL campaigns and expenses for voluntary redundancies and restructuring. Negative special factors totaling EUR 20 million were recorded in the previous year, primarily as a result of voluntary redundancy payments and restructuring expenses. Adjusted for these special factors, EBITDA rose by EUR 0.1 billion to EUR 5.0 billion. While adjusted EDITDA increased at Mobile Communications and Group Headquarters & Shared Services, it decreased in the Broadband/Fixed Network and Business Customers strategic business areas. The marked increase at Mobile Communications is mainly attributable to the significant boost in revenue from a growing customer base. At Group Headquarters & Shared Services, real estate sales made a particularly substantial contribution to earnings. By contrast, adjusted EBITDA was reduced by revenue shortfalls at Broadband/Fixed Network and Business Customers.

		Q1 2006		Q1 2005		Change		Change		FY 2005
		millions of €		millions of €		millions of €		%		millions of €

	Adjusted EBITDA(a)	4,970		4,841		129		2.7		20,729
	Mobile Communications	2,280		2,111		169		8.0		9,772
	Broadband/Fixed Network	2,277		2,444		(167	)	(6.8	)	9,859
	Business Customers	341		392		(51	)	(13.0	)	1,586
	Group Headquarters & Shared Services	87		(72	)	159		n.a.		(335	)
	Reconciliation	(15	)	(34	)	19		55.9		(153	)

(a) Deutsche Telekom defines EBITDA as profit/loss from operations excluding depreciation, amortization and impairment losses. For a detailed explanation of the special factors affecting EBITDA, adjusted EBITDA, and the adjusted EBITDA margin, please refer to “Reconciliation of pro forma figures,” page 47 et seq.

Free cash flow	The positive development of the free cash flow is attributable in particular to an improvement in working capital — within cash generated from operations – and to lower capital expenditure, which in the prior year was heavily influenced by network infrastructure acquisitions by T-Mobile USA. An offsetting effect resulted from the slight increase in net interest payments.

		Q1 2006		Q1 2005		Change		Change		FY 2005
		millions of €		millions of €		millions of €		%		millions of €

	Cash generated from operations	3,305		2,576		729		28.3		17,929
	Interest paid	(509	)	(400	)	(109	)	(27.3	)	(2,931	)
	Net cash from operating activities	2,796		2,176		620		28.5		14,998
	Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill)	(2,044	)	(3,091	)	1,047		33.9		(9,269	)
	Free cash flow before dividend payments(a)	752		(915	)	1,667		n.a.		5,729

	(a) For detailed information and calculations, please refer to “Reconciliation of pro forma figures,” page 50.

Net debt	The Group further reduced its net debt from the December 31, 2005 level, aided considerably by a positive cash flow and the proceeds from real estate sales. These effects were partly offset by the acquisition of the IT service provider gedas. Net debt was reduced year-on-year by EUR 5.2 billion.

		Mar. 31, 2006	Dec. 31, 2005	Change		Change		Mar. 31, 2005
		millions of €	millions of €	millions of €		%		millions of €

	Bonds	39,696	37,255	2,441		6.6		42,275
	Liabilities to banks	2,447	2,227	220		9.9		3,121
	Liabilities to non-banks from promissory notes	641	645	(4	)	(0.6	)	656
	Liabilities from derivatives	549	678	(129	)	(19.0	)	1,143
	Lease liabilities	2,374	2,373	1		0.04		2,459
	Liabilities arising from ABS transactions	1,331	1,363	(32	)	(2.3	)	1,487
	Other financial liabilities	185	106	79		74.5		69
	Gross debt	47,223	44,647	2,576		5.8		51,210
	Cash and cash equivalents	8,343	4,975	3,368		67.7		6,260
	Available-for-sale/held-for-trading financial assets	123	148	(25	)	(16.9	)	934
	Derivatives	395	445	(50	)	(11.2	)	523
	Other financial assets	573	440	133		30.2		496
	Net debt(a)	37,789	38,639	(850	)	(2.2	)	42,997

(a) For detailed information and calculations, please refer to “Reconciliation of pro forma figures,” page 51.

	Strategic business areas.

Mobile Communications	The Mobile Communications strategic business area bundles all activities of T-Mobile International AG & Co. KG. T-Mobile is represented in Germany, the United States, the United Kingdom, the Netherlands, Austria, the Czech Republic, Hungary, Slovakia, Croatia, Macedonia and Montenegro. It also holds a minority interest in a Polish company. All T-Mobile companies offer digital mobile voice and data services to consumers and business customers. T-Mobile also sells hardware and other terminal devices in connection with the services offered. In addition, T-Mobile services are sold to resellers and to companies that buy network services and market them independently to third parties (mobile virtual network operators, or MVNOs).

			Q1 2006(a)	Q1 2005(a)
			millions of €	millions of €
	Net revenue		7,575	6,746
	T-Mobile Deutschland		2,004	2,074
	T-Mobile USA		3,354	2,598
	T-Mobile UK		1,032	988
	Adjusted EBITDA		2,280	2,111
	Adjusted EBITDA margin	(%)	30.1	31.3

	Number of employees (average)		51,511	48,914

	Mobile customers	(millions)	87.7	79.0

	(a) For a detailed explanation of the calculations and definitions of the various amounts, please refer to page 21 et seq.

Broadband/ Fixed Network	The Broadband/Fixed Network strategic business area, consisting of the T-Com and T-Online business units, offers consumers and small business customers state-of-the-art infrastructure for traditional fixed-network services (T-Com), broadband Internet access (T-Com and T-Online), and customer-oriented multimedia services based on attractive Internet content (T-Online). Broadband/Fixed Network (T-Com) also does business with national and international network operators and with resellers (wholesale including resale) and provides upstream services for Deutsche Telekom’s other strategic business areas.

				Q1 2006(a)	Q1 2005(a)
				millions of €	millions of €
	Net revenue			6,156	6,555
	T-Com			5,857	6,220
	T-Online			585	509
	Adjusted EBITDA			2,277	2,444
	Adjusted EBITDA margin	(%)		37.0	37.3

	Number of employees (average)			110,202	112,871

	Broadband lines		(millions)	9.2	6.7
	Narrowband lines		(millions)	40.6	42.4
	Internet customers with a billing relationship		(millions)	14.2	13.6

	(a) For a detailed explanation of the calculations and definitions of the various amounts, please refer to page 25 et seq.

Business Customers	The Business Customers strategic business area offers its customers products and services from a single source along the entire information and communications technology value chain. It is divided into two business units: T-Systems Enterprise Services, which supports around 60 multinational corporations and large public authorities, and T-Systems Business Services, which serves around 160,000 small, medium-sized and large business customers. T-Systems, Deutsche Telekom’s business customer brand, is represented in over 20 countries by subsidiaries, primarily in Germany and Western Europe (France, Spain, Italy, the United Kingdom, Austria, Switzerland, Belgium, and the Netherlands).

			Q1 2006(a)	Q1 2005(a)
			millions of €	millions of €
	Net revenue		3,011	3,106
	Enterprise Services		1,944	2,041
	Business Services		1,067	1,065
	Adjusted EBITDA		341	392
	Adjusted EBITDA margin	(%)	11.3	12.6

	Number of employees (average)		51,738	51,314

	New orders		2,880	3,080

(a) For a detailed explanation of the calculations and definitions of the various amounts, please refer to page 34 et seq.

Mobile Communications.

	Mar. 31, 2006	Dec. 31, 2005	Change Mar. 31, 2006/ Dec. 31, 2005		Mar. 31, 2005	Change Mar. 31, 2006/ Mar. 31, 2005
	millions	millions	%		millions	%

Mobile customers (total)(a)	87.7	86.6	1.3		79.0	11.0
T-Mobile Deutschland(b)	30.2	29.5	2.4		27.6	9.4
T-Mobile USA	22.7	21.7	4.6		18.3	24.0
T-Mobile UK(c)	16.4	17.2	(4.7	)	16.1	1.9
T-Mobile Netherlands	2.3	2.3	0.0		2.2	4.5
T-Mobile Austria	2.1	2.1	0.0		2.0	5.0
T-Mobile CZ (Czech Republic)	4.6	4.6	0.0		4.4	4.5
T-Mobile Hungary	4.2	4.2	0.0		4.1	2.4
T-Mobile Hrvatska (Croatia)	2.0	1.9	5.3		1.6	25.0
T-Mobile Slovensko (Slovakia)	2.0	2.0	0.0		1.9	5.3
Other(d)	1.1	1.1	0.0		1.0	10.0

		(a) The total was calculated on the basis of precise figures and rounded to millions. Percentages calculated on the basis of figures shown. Organic customer growth is reported for better comparability: The customers of MONET (Montenegro) were also included in the customer base for the same quarter in the previous year although this company has only been consolidated since the second quarter of 2005. From the first quarter of 2006, T-Mobile counts as customers the mobile communications cards with which machines can communicate automatically with one another (M2M): One mobile communications card corresponds to one customer. Prior-year comparatives have not been adjusted. (b) The year-on-year change in the customer base in Germany comprises 284,000 net additions and 440,000 SIM cards with which machines can communicate automatically with one another (M2M) and which have been counted as customers since the first quarter of 2006. This brings T-Mobile Deutschland’s reporting in line with that of the other companies. Prior-year comparatives have not been adjusted. (c) Including Virgin Mobile. The number of customers is reported based on the unified standard as of the first quarter of 2006. Until December 31, 2005, Virgin customers were only removed from the customer base if no usage had been recorded for more than 365 days. Stricter rules that have always applied to T-Mobile UK also apply to Virgin from January 1, 2006. Only those people who have used their mobile phone in the last 180 days are now counted as customers. Prior-year comparatives have not been adjusted. (d) “Other” includes MobiMak (Macedonia) and MONET (Montenegro).

Mobile Communications: Customer development and selected KPIs		Customer figures in the Mobile Communications strategic business area are continuing their unequivocal growth course. The number of customers served by T-Mobile companies in the first quarter of 2006 rose by 1.1 million, while the number of fixed-term contract customers increased by as much as 1.3 million. Fixed-term contract customers now account for over 49 percent of the entire customer base. The pleasingly strong development of package rates such as Relax and Flext, which are now used by 6.3 million customers, had a particularly positive impact. This represents a year-on-year increase of 60 percent, which brings the proportion of customers with package rates to 30 percent of all fixed-term contract customers at the end of the first quarter of 2006.

		In the last twelve months, the T-Mobile group expanded its customer base by 8.6 million net additions, i.e., an increase of 11 percent. T-Mobile USA was the main growth driver in the first quarter of 2006 with over 1 million net additions. T-Mobile USA increased its customer base by almost 4.5 million within a year to 22.7 million at the reporting date. This clearly shows that T-Mobile USA is continuing its growth course. ARPU(4) rose by EUR 2 to EUR 41 over the same quarter in the previous year, largely due to exchange rate effects. Data services revenue per customer developed particularly well, doubling over the same period in the previous year. The share of revenue generated by data services passed the 10 percent mark for the first time. This was principally due to T-Mobile USA’s successful marketing of high-quality data services which are now being used by over 1.2 million customers – a year-on-year net increase of 107,000 customers in the first quarter of 2006. Together with BlackBerry devices and the T-Mobile Sidekick, these data services can now also be used with T-Mobile MDA and SDA devices which were recently introduced to the U.S. market.

		In the first quarter of 2006, T-Mobile Deutschland passed the 30 million customer mark. Apart from 284,000 net additions, 440,000 SIM cards that are in use in M2M applications were counted as customers for the first time in this reporting period. M2M stands for machine to machine and is used for mobile – partly or fully automated – data communications, such as between machines and their control unit. T-Mobile Deutschland is continuing to enjoy success with its Relax rates. Another important growth driver was the T-Mobile@home calling plan introduced in January 2006. By the end of the reporting period, over 500,000 customers had opted for this offer for mobile telephony almost at fixed-network rates in their own homes. The decline in ARPU to EUR 20 is mainly attributable to the continued intense price competition in Germany and to the reduction in mobile termination charges in December 2005.

		T-Mobile UK succeeded in attracting 379,000 new customers in the United Kingdom. The large proportion of new customers on fixed-term contracts demonstrates the success of the Flext calling plan introduced at the beginning of March 2006, for example. The total number of customers in this segment rose by a record 266,000. The reported drop of 0.8 million customers can be attributed to the change in how Virgin customers are recorded. Whereas previously all customers who used their mobile phone in the last 365 days were counted, in the first quarter of 2006 T-Mobile UK extended the stricter rule that it had previously applied in its own reporting to include Virgin customers. Now only those who used their mobile telephone in the last 180 days are counted as customers. This effect more than offsets the strong customer acquisition in the market in the first quarter of 2006. This change is effective January 1, 2006. Historical data have not been adjusted for these purposes. T-Mobile UK has also changed the way it records M2M cards and wholesale customers, who were previously reported uniformly as fixed-term contract customers. As of the first quarter of 2006, wholesale customers are classified as either fixed-term contract or pay-as-you-go customers, depending on the type of their contract. T-Mobile UK now follows the same approach as all other T-Mobile companies in that it reports M2M cards as pay-as-you-go customers. As a result, as of January 1, 2006 458,000 customers in the fixed-term contract database were reclassified as pay-as-you-go customers. T-Mobile UK stabilized its ARPU at EUR 26 compared with the same period in 2005.

		Growth also continued unabated in the rest of Western Europe and in Eastern Europe. While new additions in Eastern Europe doubled year-on-year, Western Europe experienced an even faster increase.

(4) ARPU (average revenue per user) is used to measure monthly revenue from services per customer. ARPU is calculated as follows: revenue generated by customers for services (i.e., voice services, including incoming and outgoing calls, and data services) plus roaming revenue, monthly charges, and revenue from visitor roaming, divided by the average number of customers in the month. Revenue from services excludes the following: revenue from terminal equipment, revenue from customer activation, revenue from virtual network operators, and other revenue not generated directly by T-Mobile customers.

Mobile Communications:
Development of operations

			Q1 2006		Q1 2005		Change		Change		FY 2005
			millions of €		millions of €		millions of €		%		millions of €

Total revenue(a)			7,575		6,746		829		12.3		29,452
of which: T-Mobile Deutschland			2,004		2,074		(70	)	(3.4	)	8,621
of which: T-Mobile USA			3,354		2,598		756		29.1		11,887
of which: T-Mobile UK			1,032		988		44		4.5		4,153
of which: T-Mobile Netherlands			271		256		15		5.9		1,064
of which: T-Mobile Austria			217		222		(5	)	(2.3	)	885
of which: T-Mobile CZ			240		217		23		10.6		938
of which: T-Mobile Hungary			257		256		1		0.4		1,090
of which: T-Mobile Hrvatska			116		101		15		14.9		512
of which: T-Mobile Slovensko			100		86		14		16.3		378
of which: Other(b)			42		31		11		35.5		174
EBIT (profit from operations)			1,055		966		89		9.2		3,005
EBIT margin	(%)		13.9		14.3						10.2

Depreciation, amortization and impairment losses			(1,225	)	(1,136	)	(89	)	(7.8	)	(6,696	)
EBITDA(c)			2,280		2,102		178		8.5		9,701
Special factors affecting EBITDA(c)			0		(9	)(d)	9		n.a.		(71	)(e)
Adjusted EBITDA(c)			2,280		2,111		169		8.0		9,772
Adjusted EBITDA margin(c)		(%)	30.1		31.3						33.2

Cash capex(f)			(1,092	)	(2,505	)	1,413		56.4		(5,603	)

Number of employees(g)			51,511		48,914		2,597		5.3		49,479

(a) The amounts stated for the national companies correspond to their respective unconsolidated financial statements (single-entity financial statements adjusted for uniform group accounting policies and reporting currency) without taking into consideration consolidation effects at the level of the strategic business area.

(b) “Other” includes the revenues generated by MobiMak (Macedonia) and MONET (Montenegro). MONET has been fully consolidated since the second quarter of 2005.

(c) Deutsche Telekom defines EBITDA as profit/loss from operations excluding depreciation, amortization and impairment losses. For a detailed explanation of the special factors affecting EBITDA, adjusted EBITDA, and the adjusted EBITDA margin, please refer to “Reconciliation of pro forma figures,” page 47 et seq.

(d) Expenses at T-Mobile Austria for Save for Growth (EUR 7 million), expenses at T-Mobile Deutschland for Vivento (EUR 2 million).

(e) Expenses for Save for Growth at T-Mobile Deutschland (EUR 33 million), T-Mobile UK (EUR 23 million), T-Mobile Austria (EUR 7 million), T-Mobile Netherlands (EUR 2 million), T-Mobile International AG & Co. KG (EUR 3 million); expenses at T-Mobile Deutschland for Vivento (EUR 3 million).

(f) Investments in property, plant and equipment, and intangible assets (excluding goodwill) as shown in the cash flow statement.

(g) Average number of employees.

Mobile Communications: Total revenue		In the first three months of 2006, T-Mobile boosted its revenue by 12.3 percent or EUR 0.8 billion year-on-year. Once again, the main driver of this growth was T-Mobile USA, whose revenues rose by 29.1 percent. The companies in Croatia, the Czech Republic, and Slovakia also recorded a substantial increase in revenue with double-digit growth rates. With the exception of Germany and Austria, all companies increased their ARPU-relevant revenue. T-Mobile UK posted gains of over 7 percent in revenues relevant to ARPU, benefiting in particular from its extremely successful acquisition of fixed-term contract customers. The decline in revenue in Germany and Austria is largely attributable to the reduction in mobile termination charges in December last year and continued high price pressure.

Mobile Communications: EBITDA		EBITDA in the Mobile Communications strategic business area rose by EUR 0.2 billion in the first three months of 2006 to EUR 2.3 billion. T-Mobile recorded EBITDA growth of 8.5 percent in the first three months of the 2006 financial year. The EBITDA margin reached 30.1 percent. At EUR 0.9 billion, T-Mobile USA recorded higher EBITDA than T-Mobile Deutschland (EUR 0.8 billion) for the first time in the first quarter of 2006. The EBITDA margin in the first quarter of 2006 was 27 percent in the United States, 39 percent in Germany, and 16 percent in the United Kingdom. The smaller margin in the United Kingdom can be attributed to the costs incurred by the successful launch of new calling plans and the correspondingly high customer growth, particularly among contract customers.

Mobile Communications: EBIT		EBIT (profit from operations) increased by EUR 0.1 billion in the first three months of 2006 to EUR 1.1 billion. Depreciation, amortization, and impairment losses were up EUR 0.1 billion on account of the larger asset base and the corresponding increase in depreciation, amortization, and impairment losses.

Mobile Communications: Personnel		In the first three months of 2006, the average number of employees in the Mobile Communications strategic business area increased by 2,597 year-on-year to 51,511. The higher figure in the first quarter of 2006 is primarily attributable to the recruitment of new staff at T-Mobile USA as a result of this company’s growth. In Europe, the number of employees remained constant because the workforce reductions in Germany were balanced out by workforce expansion in the United Kingdom.

Broadband/Fixed Network.

	Mar. 31, 2006	Dec. 31, 2005	Change Mar. 31, 2006/ Dec. 31, 2005		Mar. 31, 2005	Change Mar. 31, 2006/ Mar. 31, 2005
	millions	millions	%		millions	%

Broadband(a)
Broadband lines (total)(b)	9.2	8.5	8.2		6.7	37.3
Germany(c)	8.6	7.9	8.9		6.4	34.4
of which: resale(d)	2.2	1.6	37.5		0.5	n.a.
Central and Eastern Europe (CEE)	0.6	0.5	20.0		0.3	n.a.
Broadband rates (Germany and Western Europe)(e)	5.6	5.1	9.8		3.9	43.6
of which: Germany	4.9	4.5	8.9		3.5	40.0

Narrowband(a)
Narrowband lines (total)	40.6	41.2	(1.5	)	42.4	(4.2	)
Germany(f)	34.7	35.2	(1.4	)	36.4	(4.7	)
Standard analog lines	25.2	25.5	(1.2	)	26.1	(3.4	)
ISDN lines	9.6	9.8	(2.0	)	10.3	(6.8	)
Central and Eastern Europe (CEE)	5.9	6.0	(1.7	)	6.0	(1.7	)
Magyar Telekom(g)	3.1	3.2	(3.1	)	3.1	0.0
Slovak Telekom	1.2	1.2	0.0		1.2	0.0
T-Hrvatski Telekom	1.6	1.7	(5.9	)	1.7	(5.9	)
Narrowband rates (Germany and Western Europe)(e)	3.9	4.2	(7.1	)	4.9	(20.4	)
of which: Germany	3.8	4.1	(7.3	)	4.7	(19.1	)

Internet customers with a billing relationship (total)(h) (Germany and Western Europe)(e)	14.2	14.0	1.4		13.6	4.4
PAYG(i), broadband/narrowband < 30 days (Germany and Western Europe)(e)	0.6	0.6	0.0		0.8	(25.0	)
of which: Germany	0.5	0.5	0.0		0.7	(28.6	)

Broadband and narrowband lines (Germany and Central and Eastern Europe) are the responsibility of the T-Com business unit. Since January 31, 2005, broadband lines (in Germany) have mainly been marketed by the T-Online business unit.

Customers with broadband and narrowband rates, all Internet customers with a billing relationship as well as PAYG <30 days (broadband/narrowband) in Germany and Western Europe are the responsibility of the T-Online business unit.

(a) The total was calculated on the basis of precise figures and rounded to millions. Percentages calculated on the basis of figures shown.

(b) Lines in operation.

(c) Since January 31, 2005, broadband lines based on DSL technology for consumers have mainly been marketed by T-Online. Broadband lines excluding internal use.

(d) Definition of resale: sale of broadband lines based on DSL technology to alternative providers outside the Deutsche Telekom Group.

(e) Customers with a billing relationship. Western Europe includes ya.com and Club Internet.

(f) Telephone lines excluding internal use and public telecommunications, including wholesale services.

(g) Subscriber-line figures are recorded including Magyar Telekom’s subsidiary MakTel and Telekom Montenegro. Prior-year comparatives have not been adjusted.

(h) Total calculated on the basis of customers (broadband and narrowband rates) with a billing relationship and PAYG < 30 days and PAYG > 30 days.

(i) PAYG: Pay as you go.

T-Com: Customer development and selected KPIs		The broadband market continues to grow. In the first quarter of 2006, the total number of broadband lines provided by T-Com increased by 735,000 to 9.2 million. In Germany, around 8.6 million DSL lines provided by T-Com were in operation at the end of March 2006. An increase of 643,000 DSL lines within the first three months of the year meant that T-Com exceeded the first quarter of the previous year, but trailed the figure for the prior quarter for seasonal reasons. T-Com is participating in the growing demand for broadband Internet access, particularly through DSL resale to third parties, which is attributable in part to ongoing migration from retail to resale customers. The total number of DSL resale lines for third parties outside the Deutsche Telekom Group increased in the first quarter of 2006 by 560,000 to 2.2 million.

		To systematically expand broadband coverage in Germany, T-Com will continue to focus on further improving geographical coverage and increasing transmission rates going forward. For example, the existing T-DSL service will be extended by T-DSL 16000 in May 2006. T-Com is thus creating optimum conditions for particularly data-intensive applications. At the same time as expanding line performance, T-Com is systematically increasing line availability. T-Com’s introduction of a flat rate for T-DSL via satellite (maximum speeds of up to 1,024 kbit/s for downloads and up to 56 or 64 kbit/s for uploads) at CeBIT 2006 has clearly enhanced the attractiveness of satellite-based broadband connections. T-Com believes that the WiMAX wireless technology offers the potential to increase the availability of broadband Internet access in areas which were previously only covered by the fixed network. Due to the positive experiences of the pilot project in the Bonn area, T-Com has decided to participate in the tendering procedure for WiMAX spectrum. The marketing of broadband lines at T-Com’s subsidiaries in Central and Eastern Europe continued its success story. In the first three months of 2006, the number of broadband lines rose by 92,000 to 633,000. The customer base therefore more than doubled year-on-year. Growth at the Croatian subsidiary T-Hrvatski Telekom was particularly significant, where the number of DSL lines in operation more than quadrupled year-on-year to reach 132,000. Slovak Telekom also recorded substantial growth in the broadband business at the end of the first quarter of 2006, with 119,000 DSL lines in operation. In Hungary, Magyar Telekom successfully expanded broadband growth and increased the number of customers by around 70 percent year-on-year to 382,000 at the end of the first quarter of 2006. In the narrowband sector, T-Com again recorded a decrease in the number of lines in Germany as a result of customer churn in favor of fixed-network competitors and fixed-mobile substitution effects. Compared with the prior-year quarter, the number of T-Com narrowband lines decreased by 4.7 percent to 34.7 million. At 9.6 million, the total number of T-ISDN lines decreased by a disproportionately high 6.8 percent. This trend can be attributed in part to the new integrated voice and Internet products offered by competitors and to DSL users switching from T-ISDN to a T-Net line. The number of analog lines amounted to 25.2 million at the end of the reporting period. This represents a year-on-year decrease of 3.6 percent. The declining trend in the volume of call minutes persisted as a result of the loss of lines. The continuing reduction in the number of lines operated by T-Com and the increasing substitution of minutes by Voice over IP and mobile communications are mainly responsible for the decline in call minutes in T-Com’s network. In contrast, T-Com increased its customer retention for local, national, and fixed-to-mobile calls as against the fourth quarter of 2005 by successfully marketing rate options, and held its ground against call-by-call and preselection. The number of customers using rate options grew to just under 14.5 million as of the end of the first quarter of 2006. T-Com was particularly successful, for example, with the CountrySelect optional calling plan currently used by 620,000 customers and the fixed-to-mobile calling plan introduced on December 1, 2005, which is already being used by 461,000 customers.

		In the first quarter of 2006, T-Com continued with the implementation of its Re-Invent growth program as part of Deutsche Telekom’s Excellence Program. As part of its goal to increase its customer focus, for example, T-Com introduced innovative voice-controlled call management at its call centers. To increase the efficiency of call center services for consumer sales, the bundling of tasks at 60 larger call center units, rather than the previous 96, is planned for mid-2006. A further step in the sustainable expansion of customer

		relations is the transfer of the direct sales channel Telekom Direkt from Group Headquarters & Shared Services to T-Com.

T-Online: Customer development and selected KPIs		In the first quarter of 2006, T-Online significantly expanded its DSL rate customer base. The number of customers rose by half a million new additions to 5.6 million. In Germany, 413,000 new customers opted for a DSL rate from T-Online in the first quarter of 2006. Compared with the first quarter of 2005, the DSL rate customer base increased by 1.3 million to 4.87 million, representing growth of more than 38 percent. T-Online also recorded continued strong customer growth in DSL rates in the rest of Europe. With around 311,000 new customers in the twelve months to the end March 2006, the number of DSL rate customers in France and Spain rose to 724,000, an increase of around 75 percent. The key driver of the successful expansion of the customer base is T-Online’s positioning as a full-service DSL provider. In Germany, T-Online customers are already profiting from the benefits of high-speed Internet access combined with DSL telephony and attractive entertainment services such as video on demand. In the first quarter of 2006, T-Online systematiccally expanded its product and service portfolio. For example, T-Online introduced “T-Online dsl flat profi,” a DSL flat rate for business customer access that is specially tailored to the requirements of professional users. In addition, T-Online has prepared for the bandwidths of T-Com’s new T-DSL 16000 line option, for which marketing is scheduled to start in mid-May 2006. In the entertainment area, T-Online is continuing to focus on alliances with strong partners and the development of new formats that offer users optimum entertainment services. With more than 100,000 downloads per month, T-Online’s video-on-demand service is proving a hit with customers. T-Online presented a sample of its future product portfolio at CeBIT 2006 in the shape of T-Home: In addition to receiving digital television programs via broadband access (IPTV) and selectable special-interest channels, the entertainment offering is set to be expanded with services such as an electronic program guide or time-shifted television. In the first quarter of 2006, T-Online drove forward the development of its future T-Home product. The entertainment component will be expanded as planned to include IPTV. Partnerships such as the cooperation with ProSiebenSat.1 Media AG concluded in March 2006 will enable T-Online to integrate major channels into its service – additional partnerships with TV channels will be agreed before the market launch. Deutsche Telekom AG’s cooperation with Microsoft lays the foundation for successfully positioning IPTV on the German market. A key component is the IPTV platform Microsoft TV, which offers customers innovative interactive services, for example, and enables them to conveniently access attractive on-demand programs using their remote control. T-Com’s new VDSL network, which will initially be available in ten major German cities, enables transmission bandwidths of up to 50 Mbit/s. Accordingly, the T-Home service, one of the main elements of the future triple play strategy, will be marketed in these new VDSL areas. In the rest of Europe, T-Online also stepped up the development of a product portfolio consisting of high-speed Internet access and attractive communication and digital entertainment services in the first quarter of 2006. The two T-Online subsidiaries in France and Spain will use the Microsoft TV IPTV platform as the technical basis for the introduction of IPTV. Another pillar of T-Online’s corporate strategy is to position separate brands to develop attractive growth markets for specific customer groups (verticals). These include in particular the successful Musicload and Gamesload download platforms. Thus, Musicload again steadily increased download figures in the first quarter of 2006. The number of music downloads grew by half a million year-on-year to 3.8 million, confirming Musicload’s leadership in the digital distribution of music in Germany.

Broadband/
Fixed Network: Development of operations

			Q1 2006		Q1 2005		Change		Change		FY 2005
			millions of €		millions of €		millions of €		%		millions of €

Total revenue			6,156		6,555		(399	)	(6.1	)	26,035
T-Com			5,857		6,220		(363	)	(5.8	)	24,695
T-Online			585		509		76		14.9		2,088
EBIT (profit from operations)			1,262		1,434		(172	)	(12.0	)	5,142
EBIT margin	(%)		20.5		21.9						19,8

Depreciation, amortization and impairment losses			(969	)	(1,010	)	41		4.1		(4,034	)
EBITDA(a)			2,231		2,444		(213	)	(8.7	)	9,176
Special factors affecting EBITDA(a)			(46	)	0		(46	)	n.a.		(683	)
Adjusted EBITDA(a)			2,277		2,444		(167	)	(6.8	)	9,859
T-Com			2,272		2,362		(90	)	(3.8	)	9,628
T-Online			43		88		(45	)	(51.1	)	324
Adjusted EBITDA margin(a)		(%)	37.0		37.3						37,9
T-Com			38.8		38.0						39.0
T-Online			7.4		17.3						15.5
Cash capex(b)			(689	)	(396	)	(293	)	(74.0	)	(2,481	)

Number of employees(c)			110,202		112,871		(2,669	)	(2.4	)	112,872
T-Com(d)			106,814		109,787		(2,973	)	(2.7	)	109,643
T-Online			3,388		3,084		304		9.9		3,229

(b) Investments in property, plant and equipment, and intangible assets (excluding goodwill) as shown in the cash flow statement.

(d) Due to the transfer of the Telekom Direkt sales unit to T-Com, T-Com’s workforce increased by almost 160 employees. Prior-year comparatives have not been adjusted.

Broadband/ Fixed Network: Total revenue		The total revenue of the Broadband/Fixed Network strategic business area for the first three months of 2006 decreased by 6.1 percent compared with the prior-year quarter. This development was principally attributable to the 5.8 percent decline in revenue at T-Com in the first quarter. T-Online increased its revenue by 14.9 percent to EUR 0.6 billion in the same period. Compared with prior quarters, wholesale business within the Broadband/Fixed Network strategic business area increased once again. This is due in particular to the DSL lines that T-Online purchases from T-Com and markets to consumers.

T-Com: Total revenue		At EUR 5.9 billion, T-Com’s total revenue in the first quarter of 2006 declined by 5.8 percent or EUR 0.4 billion year-on-year. This decrease is mainly attributable to lower call revenues, a further reduction in the number of narrowband lines, and declines in interconnection services in Germany. This revenue shortfall was partly offset by volume growth in DSL resale to third parties outside the Deutsche Telekom Group and in leased subscriber lines. In Germany, revenue decreased by 6.5 percent to EUR 5.2 billion in the first quarter of 2006. In Central and Eastern Europe, revenue increased partly for consolidation reasons by 0.3 percent to around EUR 0.6 billion. Network communications(5) revenue in Germany fell by EUR 0.3 billion to just under EUR 2.9 billion as a result of the continuing loss of lines, the reduced number of call minutes and a lower average per-minute price due to the further penetration of calling plans, and the fact that the reduction in termination charges for fixed-to-mobile calls was passed on to end customers. The increase in Voice over IP and mobile communications use also had a negative impact. Thus, volume and price factors reduced call revenues by EUR 0.2 billion year-on-year to EUR 0.9 billion. Narrowband line revenues decreased by 1.6 percent or EUR 31 million to just under EUR 2.0 billion as a result of customer churn in favor of fixed-network competitors and increased substitution by mobile communications. The increased marketing of rate options as a component of access line products, introduced to retain customers, did not fully offset this decline. Revenues from terminal equipment increased by more than 16 percent year-on-year to EUR 0.1 billion in the first three months of this year. As part of the DSL full-service marketing strategy, T-Online procures the corresponding terminal equipment services from T-Com, which bills these in full as wholesale services. In the area of value-added services, the revenue decrease was mainly caused by the reduced market for the Premium Rate Services product and a migration of traffic from services billed online to services billed offline as a result of regulation. Revenue in the reporting period thus declined by around 14 percent year-on-year to EUR 0.2 billion. Revenue from data communications decreased in the first quarter of 2006 by 6.7 percent year-on-year to EUR 0.3 billion. This was caused by price and volume reductions for wholesale services provided for the Business Customers strategic business area. Revenue development in wholesale services was marked by contrasting effects. In the first quarter of 2006, total wholesale revenue increased by 0.7 percent year-on-year to EUR 1.2 billion. The significant volume-driven growth in revenue from leased subscriber lines had a positive effect, despite the 9.8 percent rate reduction that was imposed by the German regulatory authorities and which took effect on April 1, 2005. It was also supported by rising revenues generated with the DSL resale product for third parties outside the Deutsche Telekom Group. By contrast, revenue from interconnection calls decreased due to increasing direct network interconnection between competitors and from interconnection lines due to effects relating to other periods. Wholesale originating services for Internet service providers also had a negative impact on revenue. The narrowband sector recorded volume-related declines due to the continuing migration to broadband. In the broadband sector, price adjustments resulted in a reduction in revenue. The decrease in prices and volumes in the International Carrier Services and Solutions (ICSS) business also contributed to a revenue decline. Broadband retail line revenues – previously reported in the network communications cluster— are now reported in the new IP/Internet revenue cluster. Revenue in this area declined in the first months of the year

		by 16.2 percent year-on-year to just under EUR 0.3 billion. This development is attributable to the increased marketing of T-Online DSL full-service packages, i.e., DSL lines in connection with the Internet service provider (ISP) component, which has been increased since January 31, 2005. Together with the migration to third-party DSL resale services, this has resulted in a decline in T-Com’s DSL retail lines since mid-2005. Revenue growth in the broadband business is mainly visible in the resale sector, which is included in wholesale revenues. Revenue from fixed-network business in Central and Eastern Europe in the first quarter of 2006 remained at the prior-year level of EUR 0.6 billion, due partly to the initial consolidation of Telekom Montenegro (Telekom Crne Gore A.D.) at Magyar Telekom in the second quarter of 2005. The traditional fixed-network business continues to be dominated by intense competition. This is particularly evident in stronger substitution by mobile communications as compared with Germany. It is compounded by increased competition in the consumer business as a result of call-by-call, preselection, and cable providers. The decline in revenue in the traditional fixed-network business was partially offset by successful growth in the broadband sector in the first quarter of 2006.

		(5) Since January 2006, the revenues generated by the T-Com business unit of the Broadband/Fixed Network strategic business area have been managed in accordance with new revenue clusters. These revenues are classified primarily as network communications, wholesale services, IP/Internet and other. Revenue from DSL retail lines, based on T-Com, was reported in the network communications revenue cluster until the first quarter of 2006 and will be recorded under IP/Internet revenues starting in 2006. The prior-year figures have been adjusted accordingly.

T-Com: Net revenue		Net revenue decreased by 6.3 percent compared with the first quarter of the previous year to EUR 4.7 billion. Intersegment revenue declined by EUR 48 million quarter-on-quarter to EUR 1.2 billion. This decrease is the result of offsetting effects consisting of a reduction of almost EUR 140 million in business with the Business Customers strategic business area and an increase in wholesale services provided for T-Online, amounting to almost EUR 98 million.

T-Online: Total revenue		T-Online generated total revenue of EUR 0.6 billion in the reporting period, representing a year-on-year increase of 14.9 percent over the first quarter of 2005. In Germany, penetration of the DSL broadband market and the successful marketing of DSL full-service packages led to further revenue growth. T-Online increased the DSL rate customer base by around 1.3 million customers as against March 31, 2005. In the Rest of Europe segment, revenue also grew due to the 311,000 new DSL rate customers. The share of T-Online’s total revenue generated abroad increased at the same time.

Broadband/ Fixed Network: EBITDA, adjusted EBITDA		In the first quarter of 2006, the Broadband/Fixed Network strategic business area generated adjusted EBITDA of approximately EUR 2.3 billion. This represents a decrease of 6.8 percent. Unadjusted EBITDA declined by 8.7 percent to EUR 2.2 billion. It should be noted in particular that customer acquisition costs, which were previously capitalized, have been recognized as expenses by T-Online for the first time.

T-Com: EBITDA, adjusted EBITDA		T-Com’s adjusted EBITDA was about EUR 2.3 billion in the first quarter of 2006. In view of the EUR 0.4 billion decline in revenue, the decline in adjusted EBITDA by only EUR 0.1 billion or 3.8 percent is disproportionately low. T-Com increased the adjusted EBITDA margin from 38.0 percent in the first quarter of 2005 to 38.8 percent in the first quarter of 2006 as a result of cost savings. This includes positive effects from cost reductions for rentals, including from leased-out office space and the more efficient use of space. In addition, revenue-driven costs for merchandise and telecommunications services were reduced. Volume and price factors at Billing & Collection and IT also had a positive impact, as did the optimization of receivables management. In addition, other operating income resulting from the transfer of the Telekom Direkt operational unit from Group Headquarters & Shared Services to the management control of T-Com to improve sales support for customers also had a positive impact. T-Com generated adjusted EBITDA of around EUR 2.0 billion in Germany in the reporting period, a margin of 38.4 percent. Compared with the prior-year period, adjusted EBITDA declined by EUR 0.1 billion, while the margin increased by 1 percentage point. Adjusted EBITDA in the Eastern European subsidiaries declined by 3 percent to EUR 0.3 billion.

T-Online: EBITDA, adjusted EBITDA		T-Online’s adjusted EBITDA amounted to EUR 43 million. It should be noted that as of the first quarter of 2006, the provision of modems for customers is reported as customer acquisition costs in the income statement. This effect alone resulted in a reduction in adjusted EBITDA by around EUR 45 million in the first quarter. In addition, in the first quarter of 2006 T-Online again made investments in the form of targeted advertising and sales measures to enhance customer acquisition rates, which led to higher customer acquisition and marketing costs. While these efforts caused a pronounced increase in customer numbers in Germany, France and Spain, they also caused a decline in EBITDA.

Broadband/ Fixed Network: EBIT		EBIT (profit from operations) in the first quarter of 2006 decreased to EUR 1.3 billion, a decline of 12 percent compared with the prior-year period.

Broadband/ Fixed Network: Personnel		At 110,202, the average number of employees in the Broadband/Fixed Network strategic business area in the first three months of 2006 was 2.4 percent lower than the corresponding prior-year figure. The average number of employees at T-Com decreased by almost 3,000. Two thirds of this decline related to the Eastern European subsidiaries, while one third was in Germany. In the first quarter, T-Com employed an average total of around 22,000 staff in Eastern Europe and around 85,000 in Germany. T-Online increased its average workforce by around 300 quarter-on-quarter to approximately 3,400 in the first quarter of 2006. In April 2006, Thomas Edig took over the position of member of the T-Com Board of Management responsible for Human Resources and will push ahead with the planned personnel restructuring program and the reorientation of T-Com toward customer service.

Business Customers.

							Mar. 31, 2006	Dec. 31, 2005	Change Mar. 31, 2006/ Dec. 31, 2005		Mar. 31, 2005	Change Mar. 31, 2006/ Mar. 31, 2005
									%			%
Enterprise Services(a)
Computing & Desktop Services
Number of servers managed and serviced						(units)	38,419	38,392	0.1		36,360	5.7
Number of workstations managed and serviced				(millions)			1.36	1.35	0.7		1.26	7.9
Systems Integration
Hours billed(b)			(millions)				2.9	11.5	—		2.8	3.6
Utilization rate(c)					(%)		79.8	79.1	0.7	p	77.3	2.5	p

Business Services(a)
Voice revenue(b)	(millions of €)						430	1,848	—		455	(5.5	)
Data revenue (legacy/IP)(b) (millions of €)							564	2,346	—		579	(2.6	)
IT revenue(b)		(millions of €)					135	405	—		81	66.7

(a) The total was calculated on the basis of precise figures and rounded to millions. Percentages calculated on the basis of figures shown.

(b) Cumulative figures at the balance sheet date.

Business Customers:
Selected KPIs

The Business Customers strategic business area made a modest start to the 2006 financial year. New orders amounted to EUR 2,880 million in the first quarter of 2006 as compared with EUR 3,080 million in the same period last year. Customer relationships, on the other hand, continued to strengthen through new or expanded customer projects, reflecting the consistent implementation of the Focus on Growth program. In the Computing & Desktop Services area, the number of workstations managed and serviced grew by 7.9 percent, while the number of servers managed and serviced rose by 5.7 percent. The Systems Integration area recorded a further increase in capacity utilization, again reflecting the consistent implementation of the growth program. T-Systems recorded a clear boost of around 67 percent in IT sales to small, medium-sized and large enterprises. Sales of telecommunications services based on the Internet Protocol (IP) to this customer segment also started well, but are not yet strong enough to offset the decline in traditional data communications services.

Business Customers: Development of operations

		Q1 2006		Q1 2005		Change		Change		FY 2005
		millions of €		millions of €		millions of €		%		millions of €

Total revenue		3,011		3,106		(95	)	(3.1	)	12,850
Enterprise Services		1,944		2,041		(97	)	(4.8	)	8,370
Business Services		1,067		1,065		2		0.2		4,480
EBIT (profit from operations)		99		174		(75	)	(43.1	)	409
Special factors affecting EBIT		(28	)	(1	)	(27	)	n.a.		(290	)
Adjusted EBIT		127		175		(48	)	(27.4	)	699
Adjusted EBIT margin	(%)	4.2		5.6				(1.4	)p	5.4

Depreciation, amortization and impairment losses		(214	)	(217	)	3		1.4		(896	)
EBITDA(a)		313		391		(78	)	(19.9	)	1,305
Special factors affecting EBITDA(a)		(28	)	(1	)	(27	)	n.a.		(281	)
Adjusted EBITDA(a)		341		<