Board of Management position on the counter-motions.
On item 2 - Appropriation of net income
The Board of Management sees no reason to use the net income in any other way. In view of the Group's earnings situation in the 2006 financial year in particular and the expectations of the capital market, the Board of Management considers the distribution of a dividend of EUR 0.72 per share preferable to a lower dividend combined with a higher carryforward to the next year. The income after taxes for 2006 calculated in the single-entity financial statements in accordance with the provisions of the German Commercial Code (HGB) does not allow any direct conclusions to be drawn about the earnings situation of the Deutsche Telekom Group as presented in accordance with International Financial Reporting Standards (IFRS). The 2006 single-entity financial statements included a range of obligations that were not attributable in economic terms to that period, for example, such as the recognition of accruals for civil servants to be retired early in the future.
Equally, any conclusion about the earnings situation of the Deutsche Telekom Group based on the loss carryforwards is not particularly solid, either. A comparison of the development of loss carryfowards in 2005 and 2006, an increase of EUR 0.6 billion, and the Group's positive income before income taxes (EUR 2.6 billion) show clearly that no direct association can be made here.
The elaborations of individual shareholders in their counter-motions regarding the valuation risks pertaining to Deutsche Telekom AG's intangible assets are not entirely correct. In the risk report, the Board of Management states that the values of property, plant and equipment and of intangible assets are regularly tested for impairment. Furthermore, it is pointed out that, should a need for adjustment be identified, the results could be reduced by a considerable amount depending on the level of adjustment required. No need for adjustment was identified as of December 31, 2006, however.
With around 150,000 participants, the further training programs for our employees are a central element of human resources activities at Deutsche Telekom. We feel our commitment to date in the area of employee training for appropriate and balanced, particularly in view of the level of the dividend.
On items 3 and 4 on the agenda - approval of the Board of Management’s and the Supervisory Board’s actions
The restructuring and reorientation of the Board of Management is a signal for the new strategic and operational direction of the company as announced by the Board of Management on March 1, 2007. The bundling of responsibility for Sales & Service in Germany allows us to move in a single direction with the operational measures we have to take in our German business. The aim is to manage the company to sustained business success in a difficult market situation. The comprehensive measures being taken within the company lay the foundations for this.
As part of its strategy, Deutsche Telekom has also initiated a range of measures for its business activities within Germany to considerably improve its customer care and thus the company's image among its customers. These measures include the expansion of the sales network of T-Punkt outlets, clear improvements in terms of the availability of call centers and the meeting of deadlines for customer orders, as well as increasing the proportion of customer enquiries resolved upon first contact with Deutsche Telekom. In addition, innovative products are to be launched on the market that satisfy customer requirements even better with the best possible value for money, such as IP-TV based on the transmission standards VDSL and ADSL2+ in the fixed network. On top of this, the Group's brand system is being considerably simplified to improve the way we address our customers.
Of course, losing market shares is not in the interest of our company. The management is therefore working hard to reduce the number of customers being lost. At the same time, however, it can be seen that regulatory policy is designed to induce a loss of market shares by Deutsche Telekom. The company is trying on the one hand to stem these losses, and on the other to develop new markets to compensate for the losses. These include in particular broadband business, which is a major focal point of operational management and our marketing and quality drives in Germany.
Both T-Com and T-Online worked the market intensively in the first half of 2006 and focused their respective offers on the needs of their customers. It was only possible to improve the offer of telephony and Internet products from a single source and therefore improve our approach to the market once the merger of T-Com and T-Online had become effective, after it had been delayed by rescission suits brought by several T-Online shareholders.
Thanks to the 3x3 complete packages for surfing, telephony and IPTV launched in September of last year, our company is taking a significant share of the growth on this important future market. By the end of the year, the amount of 3x3 complete packages sold increased to 3.6 million; more than two thirds of the packages were sold in the double play (telephone and Internet) area. This demonstrates that we were successful in attracting new customer groups for broadband Internet. In the fourth quarter of 2006 alone, we recorded 880,000 new broadband lines, the highest ever quarterly DSL growth in Germany since market launch.
Deutsche Telekom has set itself the important target of offering excellent service that is perceived by the customer as appropriate and fulfilling their needs.
Deutsche Telekom has initiated a range of measures to improve its customer service. We very much regret the problems with Deutsche Telekom's products, services or invoices as addressed in individual counter-motions and see this as confirming our efforts to improve our customer service.
The establishment of specialized service units in the areas of Technical Customer Service, Call Centers and Technical Infrastructure as part of "Telekom Service" play a key role in the portfolio of measures we are implementing. By focusing on these task areas, we are aiming to professionalize our activities with improved quality of service and increased efficiency. There are good examples within the Deutsche Telekom Group for the success of this approach, such as T-Punkt Vertriebsgesellschaft mbH, our retail unit, that is operating very successfully on the market as a result of the measures initiated and has also increased its level of service. In this area alone, we will also create new jobs by the end of 2007 with the expansion of our network of stores from 600 to 800.
Telekom-Service, with the goal of improving service, increasing efficiency and securing jobs within the Group in the long term, is completely separate from the measures taken within Vivento. At the Vivento units, business areas are bundled with tasks that, for the most part, do not form part of Deutsche Telekom's core business.
Our portfolio of service measures has already received positive reviews in many media reports and is seen as the right step to strengthen Deutsche Telekom's business within Germany for the long term. With regard to the development of the share price, it should also be remembered that the European telecommunications sector performed much worse than the market in general in recent years, which is due in part to the difficult regulatory environment and the intense competition.
Deutsche Telekom's real estate strategy is geared to using the real estate of the Group in as economically efficient a way as possible. This is in the interests of all shareholders. As part of this strategy, all properties are examined by Corporate Real Estate Management together with Sireo Real Estate Asset Management GmbH to determine their possible use. While bearing in mind this target, Deutsche Telekom always tries to reconcile its interests with those of third parties. Nevertheless, in the interests of its shareholders, the company is focusing its measures in the area of real estate in particular, such as disposals or renovation, according to business criteria.
Insofar as the storage of IP addresses by the company has been addressed by shareholders, it remains that Deutsche Telekom AG only stores IP addresses for seven days. This applies both to T-Online and to T-Com as a wholesale provider for other Internet access providers. Addresses are stored for seven days solely to protect the Internet access platform and to combat abuse (spam, viruses, Trojans and other damaging codes) on the Internet.
On item 6 – Acquisition of own shares
The authorization to acquire the use its own shares as proposed to the shareholders' meeting does not entitle Deutsche Telekom to trade in its own shares. The law explicitly forbids trading in one's own shares. The authorization is intended merely to give Deutsche Telekom the ability, in the interests of the company and its shareholders insofar as it appears appropriate, to acquire its own shares and to use them for the purposes stated in the authorization and explained in the report by the Board of Management. In the 2006 financial year, for example, Deutsche Telekom used this instrument of buying back its own shares to avoid a sustained dilution of the stakes held by Deutsche Telekom's "old" shareholders resulting from the issue of new shares as part of the merger of T-Online International AG into Deutsche Telekom AG.
The Board of Management stands by its motions for resolution on the agenda.
Bonn, April 2007
Deutsche Telekom AG
Board of Management
