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Table of Contents

Filed by Deutsche Telekom AG

pursuant to Rule 425 under the Securities Act of 1933

Subject Company:    T-Online International

AG Exchange Act File Number 82-5125


This document is a convenience translation of the German language original.
In case of discrepancy between the English and German versions, the German version shall prevail.


Joint

Merger Report

prepared by the Boards of Management of

Deutsche Telekom AG, Bonn

and

T-Online International AG, Darmstadt


concerning the merger of

T-Online International AG

with and into

Deutsche Telekom AG



CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

This merger report contains numerous statements that are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward looking statements are identified by the words "will," "expects," "projects," "plans," "sees," "intends," "seeks," "goal," "target," "assumes," "estimates," "improvement," "development," "trend," "tendency," "probably," "likely" and similar expressions. The following statements in particular are "forward-looking statements":


except to the extent that those statements expressly relate to the years 2003 or 2004.

In addition, the statements made in Section VIII.3, VIII.4, and VIII.5 of the merger report with regard to discount rates, risk-free rates, beta factors and market risk premia and the statements made in the merger report with regard to "earnings values," "net earnings values," "equity values" and "enterprise values" may be forward-looking statements.

These statements are based on current plans, estimates and projections and are subject to numerous and highly significant risks and uncertainties, and therefore you should not place undue reliance on them. You should not assume that the future development of our businesses will conform to the forward-looking statements made in the merger report or elsewhere. The forward-looking statements contained in the merger report are based upon the most recent medium-term and long-term plans of T-Online and Deutsche Telekom, which were prepared for solely for internal planning and accounting purposes and are subject to revision and change on a regular basis, and they are included in the merger report in accordance with German law and practice relating to mergers solely for the purpose of affording shareholders an insight into the manner in which the merger exchange ratio was calculated. They are not made for the purpose of implying, and should not be understood to imply, that our future share prices will develop in any particular direction or manner. The methodologies used in calculating the merger exchange ratio are not the only ones that may be used by investors in assessing the value of a company. The analyses used in calculating the equity values (Unternehmenswerte) were not prepared with a view to public disclosure or compliance with published guidelines of the U.S. Securities and Exchange Commission or the guidelines established by the American Institute of Certified Public Accountants regarding forward-looking information or U.S. generally accepted accounting principles or otherwise. There can be no assurance that the judgments and assumptions made in connection with the calculation of equity values will prove accurate or be realized. Moreover, such judgments and assumptions are subject to significant uncertainties and contingencies that are compounded to the extent that the projected periods are further away in time from the date of preparation.

2



All forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in the light of new information or future events.

Forward-looking statements, and particularly forward-looking statements covering a future period of ten years or more (such as the forward-looking statements contained in the merger report), involve inherent risks and uncertainties, many of which are difficult to predict and 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, these forward-looking statements. These factors include, among other factors:

3



CAUTIONARY NOTE REGARDING HISTORICAL FINANCIAL INFORMATION
PREPARED IN ACCORDANCE WITH
INTERNATIONAL FINANCIAL REPORTING STANDARDS

Subject to EU endorsement of outstanding standards and no further changes from the IASB this information is expected to form the basis for comparatives when reporting financial results for 2005, and for subsequent reporting periods. We cannot assure you, however, that no material changes will take place in IFRS between the date of the merger report and the first date on which we are required by applicable law to publish financial statements for 2004 and 2003 under IFRS.


CAUTIONARY NOTE REGARDING VALUATION METHODS

The merger report is an English translation of a German original. Throughout the merger report:

4



Table of Contents


I.

Introduction

II.

Description of the Companies Involved in the Merger

1.

Deutsche Telekom
  1.1 Registered office, financial year and corporate purpose
  1.2 History and development
  1.3 Business activities and investments
    1.3.1 Overview of the Deutsche Telekom Group
    1.3.2 The individual divisions
    1.3.3 Deutsche Telekom's principal subsidiaries
  1.4 Business development in 2004 and key figures
  1.5 Capital and shareholders
    1.5.1 Share capital
    1.5.2 Authorized capital
    1.5.3 Contingent capital
    1.5.4 Shareholders
  1.6 Board of Management and Supervisory Board
  1.7 Employees and employees' representative bodies
2. T-Online
  2.1 Registered office, financial year and corporate purpose
  2.2 History, development and dependency of T-Online
  2.3 Business activities and investments
    2.3.1 Overview of T-Online
    2.3.2 T-Online's principal subsidiaries
  2.4 Execution of the Agreement in Principle
  2.5 Business development in 2004 and key figures
  2.6 Capital and shareholders
    2.6.1 Share capital
    2.6.2 Authorized capital
    2.6.3 Contingent capital
    2.6.4 Shareholders
  2.7 Board of Management and Supervisory Board
  2.8 Employees and employee representative bodies

III.

Economic Explanation of and Reasons for the Merger

1.

Starting Point
  1.1 Introduction
  1.2 Changes in the telecommunications market
    1.2.1 Internet as a mass market with high growth rates
    1.2.2 Convergence of the business models and increasing demand for integrated products
2. Key reasons for the merger
  2.1 Continuing interlinking of the services of Deutsche Telekom and T-Online
  2.2 Increased efficiency by combining the business models
  2.3 Improved customer approaches
  2.4 Simplification of organization and business processes
  2.5 Realization of synergy effects
  2.6 Alternatives
       

5


3. Organizational and Management Structure of Deutsche Telekom following the Merger
  3.1 Deutsche Telekom in general
  3.2 The Broadband/Fixed Network strategic business area
4. Merger Costs
5. Alternatives to a merger of T-Online into Deutsche Telekom
  5.1 Conclusion of a control and profit and loss transfer agreement
  5.2 Spin-off of T-Com/joint venture with T-Online
  5.3 Merger of Deutsche Telekom and T-Online into a new company
  5.4 Merger of Deutsche Telekom into T-Online
6. Merger Control

IV.

Implementation of the Merger

1.

Statutory Merger of T-Online with and into Deutsche Telekom
2. Major Steps in the Merger
  2.1 Merger Agreement
  2.2 Shareholders' meetings of Deutsche Telekom and T-Online
  2.3 Filing and registration of the merger
  2.4 Steps and preliminary measures for the merger
3. Voluntary Public Offer by Deutsche Telekom to Acquire T-Online Shares
4. Deutsche Telekom's Repurchase of Own Shares

V.

Accounting, Corporate and Tax Consequences of the Merger

1.

Accounting Consequences of the Merger
  1.1 Pro forma balance sheet of Deutsche Telekom as at 1 January 2005
  1.2 Pro forma consolidated balance sheet of Deutsche Telekom as at 1 January 2005
2. Corporate Law Consequences of the Merger
  2.1 Transfer of T-Online assets to Deutsche Telekom by way of universal succession
  2.2 Retroactive effect of asset transfer as of the Merger Effective Date
  2.3 Granting of shares in Deutsche Telekom to T-Online shareholders
  2.4 Dividend entitlements
  2.5 Ownership structure at Deutsche Telekom following the merger
  2.6 Consequences for T-Online's stock option programs
  2.7 Judicial review of the merger exchange ratio
3. Tax Consequences of the Merger
  3.1 Taxation of the merger transaction
    3.1.1 Tax consequences for the companies participating in the merger
    3.1.2 Taxation of T-Online shareholders
    3.1.3 Taxation of the Deutsche Telekom shareholders
  3.2 Taxation of Deutsche Telekom's shareholders after completion of the merger
    3.2.1 Dividends
    3.2.2 Sale of shares
       

6



VI.

Explanation of the Merger Agreement

1.

Merger Agreement
  1.1 Asset transfer (§ 1)
  1.2 Consideration, exchange of shares (§ 2)
  1.3 Special rights and benefits (§ 3)
  1.4 Guarantee of equal rights for holders of stock options (§ 4)
    1.4.1 Stock Option Plan 2001
    1.4.2 Stock Option Plan 2000
  1.5 Capital increase (§ 5)
  1.6 Trustee (§ 6)
  1.7 Corporate structure of T-Online (§ 7)
  1.8 Consequences of the merger for employees and their representatives (§ 8)
  1.9 Costs (§ 9)
  1.10 Change of Merger Effective Date (§ 10)
  1.11 Approval requirements, rights of rescission (§ 11)
2. Agreement in Principle

VII.

Securities and Stock Exchange Trading

1.

Consequences of the Merger for T-Online Shares
  1.1 T-Online shares cease to exist/acquisition of Deutsche Telekom shares
  1.2 Execution of the share exchange
2. Consequences of the Merger for the Deutsche Telekom Shares
3. Consequences of the Merger for the Trading of the Securities on the Stock Exchange
  3.1 Deutsche Telekom shares
  3.2 T-Online shares
  3.3 Deutsche Telekom's American Depository Receipt Program

VIII.

Explanatory comments on and basis of the merger exchange ratio

1.

Preliminary comments
2. General valuation principles
  2.1 Discounted earnings value
  2.2 Special items
  2.3 Liquidation value and net asset value
  2.4 Stock market value
3. Methodical approach
  3.1 Structure and definition of the valuation entities
  3.2 Effective date of the valuation
  3.3 Derivation of future earnings
    3.3.1 Analysis of historical earnings
    3.3.2 Analysis of business plans
  3.4 Discount rate
    3.4.1 Risk-free rate
    3.4.2 Risk premium
    3.4.3 Growth rate
       

7


4. Valuation of T-Online
  4.1 Discounted earnings value
    4.1.1 Segment "Germany"
    4.1.2 Segment "Rest of Europe"
    4.1.3 T-Online business plans
    4.1.4 Calculation of the discounted earnings value
  4.2 Special items
  4.3 Equity value
5. Valuation of Deutsche Telekom
  5.1 Discounted earnings value
    5.1.1 T-Com
    5.1.2 T-Mobile
    5.1.3 T-Systems
    5.1.4 GHS
    5.1.5 Deutsche Telekom business plans
    5.1.6 Calculation of the discounted earnings value
  5.2 Special items
  5.3 Equity value
6. Calculation of the merger exchange ratio

8



I.    Introduction


II.    Description of the Companies Involved in the Merger

1.    Deutsche Telekom

1.1    Registered office, financial year and corporate purpose

9



1.2    History and development

10



1.3    Business activities and investments

1.3.1    Overview of the Deutsche Telekom Group

11


12


13


14


15



1.3.2    The individual divisions

1.3.2.1    T-Com

16


17


1.3.2.2    T-Mobile

18


Company

  Mobile phone
subscribers as of
31 December 2004
(in millions)

T-Mobile Deutschland GmbH ("T-Mobile Deutschland")   27.5
T-Mobile Holdings Limited(1) ("T-Mobile UK")   15.7
T-Mobile USA, Inc.("T-Mobile USA")   17.3
T-Mobile Austria GmbH   2.0
T-Mobile Czech Republic a.s. ("T-Mobile CZ")(2)   4.4
T-Mobile Netherlands Holding B.V. ("T-Mobile Netherlands")   2.3
T-Mobile MagyarországTávközlési Részvénytársaság (Hungary)(3)   4.0
T-Mobile Hrvatska d.o.o. (Croatia)(4)   1.5
EuroTel Bratislava, a.s. ("EuroTel") (Slovakia)(4)   1.9
Mobimak A.D. ("Mobimak") (Macedonia)(5)   0.8
PTC, Polska Telefonia Cyfrowa Sp.z o.o. (Poland)(6)   8.6
Mobile TeleSystems OJSC ("MTS")(Russia)(7)   33.4

19


20


1.3.2.3    T-Systems

21


22


1.3.2.4    T-Online

1.3.2.5    Group Headquarters & Shared Services (GHS)

23


24


1.3.2.6    Toll Collect and lawsuits based on liability for representations made in prospectuses ("prospectus liability")

25


26



1.3.3    Deutsche Telekom's principal subsidiaries

Company

  Shareholding in %
(31 December 2004)

 
T-Mobile Deutschland GmbH(1)   100.00  
T-Mobile USA, Inc.   100.00  
T-Mobile Holdings Ltd.   100.00  
T-Mobile Austria GmbH   100.00  
T-Mobile Netherlands Holding B.V.   100.00  
T-Mobile Czech Republic a.s.(2)   60.77  
T-Systems International GmbH(1)   100.00  
T-Systems GEI GmbH(1)   100.00  
T-Online International AG   73.97 (3)
DeTeImmobilien, Deutsche Telekom Immobilien und Service GmbH(1)   100.00  
GMG Generalmietgesellschaft mbH(1)   100.00  
Deutsche Telekom Network Projects and Services GmbH(1)   100.00  
Magyar Távközlési Rt. ("Matáv")   59.49  
Slovak Telecom a.s.   51.00  
HT-Hrvatske telekomunikacije d.d.   51.00  

27



1.4    Business development in 2004 and key figures

Deutsche Telekom Group

  2002
  2003
  2004
 
  (EUR in billions)

Net revenue   53.7   55.8   57.9
Operating results   -21.1   5.4   9.9
Net income/loss   -24.6   1.3   4.6
Net cash provided by operating activities   12.5   14.3   16.3
Balance sheet total   125.8   116.1   107.8
Shareholders' equity   35.4   33.8   37.9
Average number of employees (calculated on the basis of full-time equivalents, excluding trainees and student interns) (in thousands)   256   251   248

28



1.5    Capital and shareholders

1.5.1    Share capital


1.5.2    Authorized capital


1.5.3    Contingent capital

29



1.5.4    Shareholders


1.6    Board of Management and Supervisory Board

30


Shareholders' representatives

Dr. Klaus Zumwinkel
(Chairman)
  Chairman of the Board of Management of Deutsche Post AG, Bonn;

Dr. Hubertus von Grünberg

 

Member of several Supervisory Boards,
inter alia, Chairman of the Supervisory Board of Continental Aktiengesellschaft, Hanover;

Volker Halsch

 

State Secretary, Federal Ministry of Finance, Berlin;

Dr. sc. techn. Dieter Hundt

 

Managing shareholder of Allgaier Werke GmbH, Uhingen; President of the Confederation of German Employers' Association (Bundesvereinigung der Deutschen Arbeitgeberverbände), Berlin;

Hans W. Reich

 

Chairman of the Board of Managing Directors, KfW Bankengruppe, Frankfurt;

Dr. Wolfgang Reitzle

 

Chairman of the Board of Management of Linde AG, Wiesbaden;

Dr. Hans-Jürgen Schinzler

 

Chairman of the Supervisory Board of Münchener Rückversicherungs-Gesellschaft AG, Munich;

Dr. Klaus G. Schlede

 

Member of the Supervisory Board of Deutsche Lufthansa AG, Cologne;

Prof. Dr. h.c. Dieter Stolte

 

Publisher of the "WELT" and "Berliner Morgenpost" newspapers, Berlin;

Bernhard Walter

 

Former Chairman of the Board of Management of Dresdner Bank AG, Frankfurt am Main;

Employee representatives

Franz Treml
(Deputy Chairman)
  Deputy Chairman of ver.di, Head of Federal Department 9 at ver.di trade union, Berlin;

Monika Brandl

 

Member of the Central Works Council at Deutsche Telekom, Bonn;

Josef Falbisoner

 

Regional head of ver.di for Bavaria;

Lothar Holzwarth

 

Chairman of the Works Council at Deutsche Telekom, Business Customer Branch Office, South-West District, Stuttgart;

Waltraud Litzenberger

 

Member of the Works Council at Deutsche Telekom, Technical Customer Service Branch Office, Central District, Mainz;

Michael Löffler

 

Member of the Works Council at Deutsche Telekom, Networks Branch Office, Dresden;

Wolfgang Schmitt

 

Head of Business Consulting at Deutsche Telekom, T-Com Headquarters, Bonn;

Michael Sommer

 

Chairman of the German Trade Union Federation (Deutscher Gewerkschaftsbund), Berlin;

Ursula Steinke

 

Chairwoman of the Works Council at T-Systems CDS GmbH, Northern District Branch Office, Kiel;

Wilhelm Wegner

 

Chairman of the Central Works Council at Deutsche Telekom, Bonn.

31



1.7    Employees and employees' representative bodies


2.    T-Online

2.1    Registered office, financial year and corporate purpose


2.2    History, development and dependency of T-Online

32



2.3    Business activities and investments

2.3.1    Overview of T-Online

33


34


35


36



2.3.2    T-Online's principal subsidiaries

        The following table shows T-Online's principal (direct or indirect) subsidiaries.

Company

  Shareholding in %
(31 December 2004)

T-ONLINE FRANCE SAS, Paris   100.00
YA.COM INTERNET FACTORY S.A.U., Madrid   100.00
T-Online.at Internet Service GmbH, Vienna   100.00
Scout24 Holding GmbH, Munich(1)   100.00
Interactive Media CCSP GmbH, Darmstadt   100.00
T-Online.ch AG, Zurich   100.00
Atrada Trading Network AG, Nuremberg   100.00
T-Online Venture Fund GmbH & Co. KG, Bonn   99.00
comdirect bank AG, Quickborn   21.35
Bild.T-Online.de AG & Co. KG, Berlin   37.00
Congster GmbH, Darmstadt   100.00

(1)
At the end of 2004, Scout24 AG's business was contributed to Scout24 Holding GmbH as part of restructuring measures.


2.4    Execution of the Agreement in Principle

        On 5 October 2004, a meeting was held in Frankfurt am Main between representatives of Deutsche Telekom and T-Online accompanied by their respective legal advisers. At that meeting, Deutsche Telekom first presented T-Online with its ideas on how to integrate T-Online into Deutsche Telekom, including various structures. No concrete merger offer was made, however, and no date for doing so was agreed upon. On 9 October 2004, Deutsche Telekom invited T-Online to commence negotiations concerning the potential merger. At a Supervisory Board meeting on 10 October 2004, which had been called at short notice, T-Online's Board of Management and Supervisory Board discussed whether it would be in the company's interest to hold talks in relation to the potential merger.The Supervisory Board gave its consent to the Board of Management to commence merger negotiations. The issue of whether the merger would be a sensible course of action from T-Online's perspective and should be implemented was assessed over the weeks that followed, and the principles underlying the merger were negotiated between both companies. These negotiations lead to the Agreement in Principle, which was executed on 8 November 2004 with the consent of T-Online's Supervisory Board. (See Chapter VI.2).

37




2.5    Business development in 2004 and key figures

T-Online Group
  2002
  2003
  2004
 
  (EUR in millions)

Net revenue   1,568.1   1,851.2   2,011.8
Net income/loss   -489.7   -37.7   300.4
Cash flows from operating activities   213.1   455.7   421.3
Balance sheet total   5,893.5   5,946.3   6,360.5
Cash and cash equivalents   3,664.3   4,051.9   4,173.2
Shareholders' equity   5,517.7   5,480.0   5,780.1
Average number of employees (calculated on the basis of full-time equivalents, excluding trainees and student interns) (in thousands)   2,512   2,618   2,921

38



2.6    Capital and shareholders

2.6.1    Share capital


2.6.2    Authorized capital

39



2.6.3    Contingent capital

40



2.6.4    Shareholders


2.7    Board of Management and Supervisory Board

Rainer Beaujean, Chairman of the Board of Management    

Veronika Altmeyer, Board member responsible for Human Resources and Legal Affaires

 

Advisor to the Telekom Business Academy;

Jens Becker, Board member responsible for Finance

 

Member of the Investment Advisory Board of T-Venture Telekom Funds Beteiligungs-GmbH for T-Online Venture Fund GmbH & Co. KG;

Burkhard Graßmann, Board member responsible for Media

 

Member of the Supervisory Board of Deutsche Telekom Medien GmbH;

Thomas Hille, Board member responsible for Marketing and Sales

 

Member of the Supervisory Board of T-Punkt Vertriebsgesellschaft mbH;

Andreas Kindt, Board member responsible for Technology

 

Member of the Investment Advisory Board of T-Venture Telekom Funds Beteiligungs-GmbH for T-Online Venture Fund GmbH & Co. KG and Deputy Chairman of the Supervisory Board of T-Systems Multimedia Solutions GmbH.


Shareholders' representatives

Kai-Uwe Ricke (Chairman)   Chairman of the Board of Management of Deutsche Telekom, Bonn, and Chairman of the Supervisory Board of other companies within the Deutsche Telekom Group;

Dr. Karl-Gerhard Eick

 

Member of the Board of Management of Deutsche Telekom, Bonn, and member of the Supervisory Board of other companies within the Deutsche Telekom Group;

Dr. Heinz Klinkhammer

 

Member of the Board of Management of Deutsche Telekom, Bonn, and member of the Supervisory Board of other companies within the Deutsche Telekom Group;
     

41



Dieter Cazzonelli

 

Executive Deputy President Tax Department, Deutsche Telekom, Bonn, and member of the Supervisory Board of other companies within the Deutsche Telekom Group;

Dr. Eberhardt Rolle

 

Ministerial Director of the Federal Ministry of Finance, Berlin, and member of the Supervisory Board of T-Mobile International AG, an indirectly wholly-owned subsidiary of Deutsche Telekom;

Fabrice Sergent

 

Chairman of the Board of Management of Lagardère Active Broadband, Paris.

Employee representatives

Christoph Heil   (Deputy Chairman) Federal Union Spokesperson, ver.di trade union;

Viola Jackson

 

Chairwoman of the Works Council at T-Online, Darmstadt;

Monika Kusz

 

Chairwoman of the Works Council at T-Online, Oldenburg;

Anja Schiller

 

Union secretary, ver.di, Hesse;

Stefanie Waehlert

 

Senior Deputy President CMO Context at T-Online;

Udo Wilfert

 

Chairman of the Central Works Council at T-Online.


2.8    Employees and employee representative bodies


III.    Economic Explanation of and Reasons for the Merger

1.    Starting Point

1.1    Introduction

42



1.2    Changes in the telecommunications market

1.2.1    Internet as a mass market with high growth rates

43



1.2.2    Convergence of the business models and increasing demand for integrated products

44



2.    Key reasons for the merger

2.1    Continuing interlinking of the services of Deutsche Telekom and T-Online


2.2    Increased efficiency by combining the business models

45



2.3    Improved customer approaches


2.4    Simplification of organization and business processes

46



2.5    Realization of synergy effects

47



2.6    Alternatives


3.    Organizational and Management Structure of Deutsche Telekom following the Merger

3.1    Deutsche Telekom in general

48



3.2    The Broadband/Fixed Network strategic business area

49



4.    Merger Costs

50



5.    Alternatives to a merger of T-Online into Deutsche Telekom


5.1    Conclusion of a control and profit and loss transfer agreement

51



5.2    Spin-off of T-Com/joint venture with T-Online

52



5.3    Merger of Deutsche Telekom and T-Online into a new company

53



5.4    Merger of Deutsche Telekom into T-Online


6.    Merger Control


IV.    Implementation of the Merger

1.    Statutory Merger of T-Online with and into Deutsche Telekom

54



2.    Major Steps in the Merger

2.1    Merger Agreement


2.2    Shareholders' meetings of Deutsche Telekom and T-Online


2.3    Filing and registration of the merger


2.4    Steps and preliminary measures for the merger

55


56



3.    Voluntary Public Offer by Deutsche Telekom to Acquire T-Online Shares


4.    Deutsche Telekom's Repurchase of Own Shares

57



V.    Accounting, Corporate and Tax Consequences of the Merger


1.    Accounting Consequences of the Merger


1.1    Pro forma balance sheet of Deutsche Telekom as at 1 January 2005

58


In EUR millions

  Deutsche
Telekom
12.31.2004

  T-Online
12/31/2004

  Effects of
the merger and
voluntary
public offer

  Pro-forma
balance sheet
Deutsche Telekom
01.01.2005

Intangible assets   651   33   0   684
Property, plant and equipment   26,011   92   0   26,103
Financial assets   67,278   1,465   -1,121   67,622
   
 
 
 
Noncurrent assets   93,940   1,590   -1,121   94,409
   
 
 
 
Inventories, materials and supplies   203   0   0   203
Receivables   4,398   4,254   -4,113   4,539
Other assets   1,188   22   0   1,210
Marketable securities   7   0   0   7
Liquid assets   6,273   64   -1,550   4,787
   
 
 
 
Current assets   12,069   4,340   -5,663   10,746
   
 
 
 
Prepaid expenses and deferred charges   276   6       282
Total assets   106,285   5,936   -6,784   105,437
   
 
 
 
Share capital   10,747   1,224   [-1,224]   10,942
Capital increase           195    
Additional paid-in capital   24,354   2,975   [-2,975]   24,754
(Kapitalrücklage) Increased additional paid in capital           400    
Retained earnings   11,116   612   -612   11,116
Gain from merger           1,704   1,704
Unappropriated net income/loss   2,881   159   -159   2,881
   
 
 
 
Shareholders' equity   49,098   4,970   -2,671   51,397
   
 
 
 
Accruals for pensions and similar obligations   3,679   10   0   3,689
Tax accruals   982   46   0   1,028
Other accruals   4,321   137   0   4,458
   
 
 
 
Accruals   8,982   193   0   9,175
   
 
 
 
Debt   2,376   0   0   2,376
Other   45,763   734   -4,113   42,384
   
 
 
 
Liabilities   48,139   734   -4,113   44,760
   
 
 
 
Deferred income   66   39   0   105
   
 
 
 
Total liabilities   106,285   5,936   -6,784   105,437
   
 
 
 

59



1.2    Pro forma consolidated balance sheet of Deutsche Telekom as at 1 January 2005

60


In EUR millions
  Deutsche Telekom
Group
31.12.2004

  Effects of the
merger and
voluntary
public offer

  Pro-forma
consolidated
balance sheet
Deutsche Telekom
01.01.2005

Intangible assets   43,255   1,384   44,639
Property, plant and equipment   44,152   0   44,152
Financial assets   3,030   0   3,030
   
 
 
Noncurrent assets   90,437   1,384   91,821
   
 
 
Inventories, materials and supplies   1,417   0   1,417
Receivables   5,131   0   5,131
Other assets   1,959   0   1,959
Marketable securities   95   0   95
Liquid assets   8,050   -1,550   6,500
   
 
 
Current assets   16,652   -1,550   15,102
   
 
 
Prepaid expenses and deferred charges   727   0   727
   
 
 
Total assets   107,816   -166   107,650
   
 
 
Share capital   10,747   195   10,942
Additional paid-in capital   50,113   1,014   51,127
Retained earnings   248   0   248
Unappropriated net income/loss carried forward   -23,311   0   -23,311
Net income/loss   4,634   0   4,634
Cumulative translation adjustment account   -8,513   0   -8,513
Minority interest   4,023   -1,375   2,648
   
 
 
Shareholders' equity   37,941   -166   37,775
   
 
 
Accruals for pensions and similar obligations   4,591   0   4,591
Other accruals   12,250   0   12,250
   
 
 
Accruals   16,841   0   16,841
   
 
 
Debt   42,652   0   42,652
Other   9,758   0   9,758
   
 
 
Liabilities   52,410   0   52,410
   
 
 
Deferred income   624   0   624
   
 
 
Total liabilities   107,816   -166   107,650
   
 
 

61



2.    Corporate Law Consequences of the Merger


2.1    Transfer of T-Online assets to Deutsche Telekom by way of universal succession


2.2    Retroactive effect of asset transfer as of the Merger Effective Date


2.3    Granting of shares in Deutsche Telekom to T-Online shareholders

62


63



2.4    Dividend entitlements


2.5    Ownership structure at Deutsche Telekom following the merger


2.6    Consequences for T-Online's stock option programs


2.7    Judicial review of the merger exchange ratio

64



3.    Tax Consequences of the Merger


3.1    Taxation of the merger transaction


3.1.1    Tax consequences for the companies participating in the merger

3.1.1.1    Income taxes

(1)    T-Online

(2)    Deutsche Telekom

65


3.1.1.2    Transaction taxes

(1)    Value-added tax

(2)    Real estate transfer tax


3.1.2    Taxation of T-Online shareholders

3.1.2.1    Preliminary remarks

3.1.2.2    Tax treatment of the share exchange

(1)    Shares held as business assets

66


(2)    Shares held as non-business (private) assets


3.1.3    Taxation of the Deutsche Telekom shareholders


3.2    Taxation of Deutsche Telekom's shareholders after completion of the merger


3.2.1    Dividends

67



3.2.2    Sale of shares

(1)    Shares held as business assets

(2)    Shares held as private assets


VI.    Explanation of the Merger Agreement


1.    Merger Agreement


1.1    Asset transfer (§ 1)

68


69



1.2    Consideration, exchange of shares (§ 2)


1.3    Special rights and benefits (§ 3)

70


71



1.4    Guarantee of equal rights for holders of stock options (§ 4)


1.4.1    Stock Option Plan 2001

72



1.4.2    Stock Option Plan 2000

73



1.5    Capital increase (§ 5)

74



1.6    Trustee (§ 6)


1.7    Corporate structure of T-Online (§ 7)


1.8    Consequences of the merger for employees and their representatives (§ 8)

75


76



1.9    Costs (§ 9)


1.10    Change of Merger Effective Date (§ 10)

77



1.11    Approval requirements, rights of rescission (§ 11)

78



2.    Agreement in Principle

79



VII.    Securities and Stock Exchange Trading


1.    Consequences of the Merger for T-Online Shares


1.1    T-Online shares cease to exist/acquisition of Deutsche Telekom shares


1.2    Execution of the share exchange


2.    Consequences of the Merger for the Deutsche Telekom Shares


3.    Consequences of the Merger for the Trading of the Securities on the Stock Exchange


3.1    Deutsche Telekom shares

80



3.2    T-Online shares


3.3    Deutsche Telekom's American Depository Receipt Program


VIII.    Explanatory comments on and basis of the merger exchange ratio


1.    Preliminary comments

81



2.    General valuation principles


2.1    Discounted earnings value

82



2.2    Special items


2.3    Liquidation value and net asset value

83



2.4    Stock market value

84



3.    Methodical approach


3.1    Structure and definition of the valuation entities


3.2    Effective date of the valuation


3.3    Derivation of future earnings

85



3.3.1    Analysis of historical earnings


3.3.2    Analysis of business plans

86



3.4    Discount rate


3.4.1    Risk-free rate


3.4.2    Risk premium

87



3.4.3    Growth rate

88


 
  Growth rate
 
Growth rate

 
  2015 ff.
  Weighting
 
T-Online   3.5 % 10.7 %
T-Com   0.0 % 27.5 %
T-Mobile   3.0 % 51.3 %
T-Systems   2.0 % 6.9 %
GHS   0.0 % 3.7 %
   
 
 
Group   2.0 % 100.0 %
   
 
 

89



4.    Valuation of T-Online


4.1    Discounted earnings value


4.1.1    Segment "Germany"

 
  Actual
  Medium-term planning
  Long-term planning
  Sustainable
 
Segment "Germany"
  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   1,683   1,794   2,285   3,112   3,979   4,790   5,629   6,355   7,081   7,782   8,299   8,716   9,006  
Cost of sales   896   808   1,271   1,735   2,323   2,767   3,342   3,842   4,276   4,799   5,230   5,539   5,724  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   787   987   1,014   1,377   1,656   2,024   2,287   2,513   2,804   2,983   3,069   3,176   3,282  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   46.8 % 55.0 % 44.4 % 44.2 % 41.6 % 42.2 % 40.6 % 39.5 % 39.6 % 38.3 % 37.0 % 36.4 % 36.4 %

Selling costs

 

444

 

520

 

607

 

702

 

715

 

853

 

957

 

987

 

1,062

 

1,052

 

1,021

 

1,009

 

1,043

 
General and admin. costs   73   93   94   103   104   122   140   155   170   185   195   204   211  
Other op. inc./exp., net   57   9   -5   -6   -6   -6   -7   -7   -7   -7   -8   -8   -8  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   326   383   307   566   830   1,042   1,184   1,364   1,565   1,738   1,845   1,955   2,020  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   19.4 % 21.3 % 13.5 % 18.2 % 20.9 % 21.8 % 21.0 % 21.5 % 22.1 % 22.3 % 22.2 % 22.4 % 22.4 %

Adjustments

 

7

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             
Operating results (adjusted)   333   387                                              
   
 
                                             
as a % of net revenue   19.8 % 21.6 %                                            

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Operating results   326   383   307   566   830   1,042   1,184   1,364   1,565   1,738   1,845   1,955   2,020  
Amortization/depreciation   63   84   73   76   79   83   84   85   83   87   91   92   95  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   389   467   381   643   909   1,125   1,268   1,449   1,649   1,825   1,936   2,046   2,114  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   23.1 % 26.0 % 16.7 % 20.6 % 22.8 % 23.5 % 22.5 % 22.8 % 23.3 % 23.5 % 23.3 % 23.5 % 23.5 %

90


91


92


93



4.1.2    Segment "Rest of Europe"

 
  Actual
  Medium-term planning
  Long-term planning
  Sustainable
 
Segment "Rest of Europe"

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   171   230   244   374   587   821   1,027   1,169   1,296   1,412   1,515   1,598   1,669  
Cost of sales   141   151   200   311   434   531   637   717   779   846   906   909   950  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   30   79   45   63   153   290   389   452   518   567   609   688   719  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   17.6 % 34.4 % 18.2 % 16.9 % 26.1 % 35.3 % 37.9 % 38.6 % 39.9 % 40.1 % 40.2 % 43.1 % 43.1 %

Selling costs

 

82

 

86

 

136

 

190

 

216

 

247

 

259

 

282

 

300

 

318

 

334

 

347

 

363

 
General and admin. costs   14   16   13   14   15   16   17   18   19   19   20   21   22  
Other op. inc./exp., net   -343   8   -1   -1   -1   -1   -1   -1   -1   -1   -1   -1   -1  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   -410   -16   -105   -143   -80   26   112   150   198   228   253   319   334  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   -240.0 % -6.8 % -43.1 % -38.1 % -13.6 % 3.1 % 10.9 % 12.9 % 15.3 % 16.2 % 16.7 % 20.0 % 20.0 %

Adjustments

 

347

 

0

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             

Operating results (adjusted)

 

-62

 

-16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             
as a % of net revenue   -36.6 % -6.8 %                                            

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results

 

-410

 

-16

 

-105

 

-143

 

-80

 

26

 

112

 

150

 

198

 

228

 

253

 

319

 

334

 
Non-income taxes   0   2   0   0   0   0   0   0   0   0   0   0   0  
Amortization/depreciation   364   23   38   79   106   88   92   106   108   118   125   83   87  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   -45   9   -67   -63   26   114   204   257   306   346   378   403   421  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   -26.6 % 4.1 % -27.4 % -16.9 % 4.4 % 13.9 % 19.9 % 22.0 % 23.6 % 24.5 % 25.0 % 25.2 % 25.2 %

94


95


96



4.1.3    T-Online business plans

 
  Actual
  Medium-term planning
  Long-term planning
  Sustainable
 
T-Online

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   1,851   2,012   2,517   3,474   4,551   5,595   6,638   7,506   8,358   9,174   9,793   10,292   10,652  
Cost of sales   1,034   956   1,468   2,043   2,752   3,292   3,971   4,551   5,045   5,634   6,125   6,437   6,662  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   817   1,056   1,049   1,431   1,799   2,304   2,667   2,955   3,313   3,540   3,668   3,855   3,990  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   44.1 % 52.5 % 41.7 % 41.2 % 39.5 % 41.2 % 40.2 % 39.4 % 39.6 % 38.6 % 37.5 % 37.5 % 37.5 %

Selling costs

 

526

 

598

 

734

 

883

 

922

 

1,090

 

1,207

 

1,260

 

1,352

 

1,361

 

1,346

 

1,347

 

1,394

 
General and admin. costs   87   109   107   117   120   138   157   173   189   204   216   225   233  
Other op. inc./exp., net   -287   8   -6   -7   -7   -7   -8   -8   -8   -9   -9   -9   -9  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   -83   357   202   424   751   1,068   1,295   1,514   1,764   1,966   2,097   2,274   2,353  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   -4.5 % 17.8 % 8.0 % 12.2 % 16.5 % 19.1 % 19.5 % 20.2 % 21.1 % 21.4 % 21.4 % 22.1 % 22.1 %

Financial expense, net *

 

140

 

123

 

7

 

28

 

77

 

114

 

114

 

111

 

115

 

118

 

121

 

122

 

125

 
Income taxes   97   180   82   177   320   452   536   618   713   792   842   907   938  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Income after taxes   -40   301   127   275   508   730   874   1,008   1,165   1,293   1,377   1,489   1,540  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Inc. appl. to minority shareh.   3   -1   -2   -4   -5   -6   -6   -7   -7   -7   -8   -9   -9  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Net income *   -38   300   125   271   503   724   867   1,001   1,158   1,286   1,369   1,480   1,531  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   -2.0 % 14.9 % 5.0 % 7.8 % 11.0 % 12.9 % 13.1 % 13.3 % 13.9 % 14.0 % 14.0 % 14.4 % 14.4 %

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results

 

-83

 

357

 

202

 

424

 

751

 

1,068

 

1,295

 

1,514

 

1,764

 

1,966

 

2,097

 

2,274

 

2,353

 
Non-income taxes   0   3   0   0   0   0   0   0   0   0   0   0   0  
Amortization/depreciation   427   107   112   156   184   172   176   191   191   205   217   175   181  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   344   467   314   580   935   1,239   1,472   1,706   1,955   2,171   2,314   2,449   2,535  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   18.6 % 23.2 % 12.5 % 16.7 % 20.5 % 22.1 % 22.2 % 22.7 % 23.4 % 23.7 % 23.6 % 23.8 % 23.8 %
*
Separate valuation of non-operating cash and cash-equivalents in comparision to IFRS-consolidated financial statements results in lower financial income and thus lower group net income 2005 et. seq.

97


 
  Medium-term planning
  Long-term planning
  Sustainable
T-Online

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

Net revenue                                            
Segment "Germany"   2,285   3,112   3,979   4,790   5,629   6,355   7,081   7,782   8,299   8,716   9,006
Segment "Rest of Europe"   244   374   587   821   1,027   1,169   1,296   1,412   1,515   1,598   1,669
   
 
 
 
 
 
 
 
 
 
 
Subtotal   2,529   3,486   4,566   5,611   6,656   7,524   8,377   9,194   9,814   10,313   10,676
   
 
 
 
 
 
 
 
 
 
 
Intra-division revenue   12   13   14   16   17   18   19   20   21   22   24
   
 
 
 
 
 
 
 
 
 
 
Consolidated net revenue   2,517   3,474   4,551   5,595   6,638   7,506   8,358   9,174   9,793   10,292   10,652
   
 
 
 
 
 
 
 
 
 
 

Operating results

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Segment "Germany"   307   566   830   1,042   1,184   1,364   1,565   1,738   1,845   1,955   2,020
Segment "Rest of Europe"   -105   -105   -80   26   112   150   198   228   253   319   334
   
 
 
 
 
 
 
 
 
 
 
Consolidated operating results   202   424   751   1,068   1,295   1,514   1,764   1,966   2,097   2,274   2,353
   
 
 
 
 
 
 
 
 
 
 

98


99



4.1.4    Calculation of the discounted earnings value

 
  Medium-term planning
  Long-term planning
  Sustainable
 
T-Online

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net income*   125   271   503   724   867   1,001   1,158   1,286   1,369   1,480   1,531  
   
 
 
 
 
 
 
 
 
 
 
 
Retention   76   222   454   0   0   0   0   0   0   0   90  
   
 
 
 
 
 
 
 
 
 
 
 
Value impact of retention   0   0   0   625   715   787   865   910   916   933   874  
Value impact of distribution   49   49   49   99   152   214   293   376   453   548   566  
Typified shareholder income tax on distribution   -9   -9   -9   -17   -27   -38   -51   -66   -79   -96   -99  
   
 
 
 
 
 
 
 
 
 
 
 
Net earnings received   40   40   40   706   841   964   1,107   1,220   1,289   1,384   1,341  
   
 
 
 
 
 
 
 
 
 
 
 

Net earnings received

 

40

 

40

 

40

 

706

 

841

 

964

 

1,107

 

1,220

 

1,289

 

1,384

 

1,341

 
Present value as of 12/31   14,576   15,900   17,346   18,274   19,141   19,976   20,743   21,465   22,185   22,877      
   
 
 
 
 
 
 
 
 
 
 
 
Capitalization subtotal   14,616   15,941   17,386   18,980   19,982   20,940   21,850   22,685   23,474   24,262   1,341  
   
 
 
 
 
 
 
 
 
 
 
 
Discount rate   9.36 % 9.36 % 9.35 % 9.42 % 9.35 % 9.40 % 9.38 % 9.36 % 9.36 % 9.36 % 5.86 %
Present value factor applicable to the year   0.9144   0.9144   0.9145   0.9139   0.9145   0.9141   0.9143   0.9144   0.9144   0.9144   17.0558  
Applicable present value as of 01/01   13,365   14,576   15,900   17,346   18,274   19,141   19,976   20,743   21,465   22,185   22,877  
Discounted earnings value as of 01/01/2005   13,365                                          
 
  Medium-term planning
  Long-term planning
  Sustainable
 
T-Online

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Risk-free interest rate before typified shareholder income tax   5.00 % 5.00 % 5.00 % 5.00 % 5.00 % 5.00 % 5.00 % 5.00 % 5.00 % 5.00 % 5.00 %
Typified shareholder income tax   -1.75 % -1.75 % -1.75 % -1.75 % -1.75 % -1.75 % -1.75 % -1.75 % -1.75 % -1.75 % -1.75 %
   
 
 
 
 
 
 
 
 
 
 
 
Risk-free interest rate after typified shareholder income tax   3.25 % 3.25 % 3.25 % 3.25 % 3.25 % 3.25 % 3.25 % 3.25 % 3.25 % 3.25 % 3.25 %
   
 
 
 
 
 
 
 
 
 
 
 
Market risk premium after typified shareholder income tax   5.50 % 5.50 % 5.50 % 5.50 % 5.50 % 5.50 % 5.50 % 5.50 % 5.50 % 5.50 % 5.50 %
Beta factor unlevered   1.10   1.10   1.10   1.10   1.10   1.10   1.10   1.10   1.10   1.10   1.10  
Applicable present value as of 01/01   13,365   14,576   15,900   17,346   18,274   19,141   19,976   20,743   21,465   22,185   22,877  
Interest-bearing debt as of 01/01   140   153   156   309   168   298   251   212   222   232   241  
Debt to equity ratio   0.01   0.01   0.01   0.02   0.01   0.02   0.01   0.01   0.01   0.01   0.01  
Beta factor levered   1.11   1.11   1.11   1.12   1.11   1.12   1.11   1.11   1.11   1.11   1.11  
   
 
 
 
 
 
 
 
 
 
 
 
Risk premium   6.11 % 6.11 % 6.10 % 6.17 % 6.10 % 6.15 % 6.13 % 6.11 % 6.11 % 6.11 % 6.11 %
   
 
 
 
 
 
 
 
 
 
 
 
Growth rate   0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 0.00 % 3.50 %
   
 
 
 
 
 
 
 
 
 
 
 
Discount rate   9.36 % 9.36 % 9.35 % 9.42 % 9.35 % 9.40 % 9.38 % 9.36 % 9.36 % 9.36 % 5.86 %
   
 
 
 
 
 
 
 
 
 
 
 

*
Separate valuation of non-operating cash and cash-equivalents in comparison to IFRS-consolidated financial statements results in lower financial income and thus lower group net income 2005 et seq.

100



4.2    Special items

        The participation in comdirect bank AG has been valued separately. The valuation of the participating shares held by T-Online was based on the average stock exchange price determined by the German Federal Finance Supervisory Office (Bundesaufsicht für Finanzwesen) as of 31 January 2005 (EUR 211 million). Other participations held by T-Online which have not been included in the planning have been stated at their actual carrying amount (EUR 4 million).

        In connection with its stock options plans, T-Online granted its employees options to purchase shares in T-Online. If the options are exercised, the equity value per share must be reduced as part of the company valuation, to the extent that the calculated per share price is higher than the exercise price for the option prior to the exercise of such option (dilution effect).

101


Dilution effect of T-Online stock options

   
   
Preliminary equity value (discounted earnings value plus aforementioned special items) as of 01/01/2005   EUR m   17,480
Number of shares outstanding   Number   1,223,890,578
Preliminary value per share   EUR   14.28

Outstanding options

 

Number

 

3,868,195
Exercise price   EUR   10.31
Incoming cash flow   EUR m   39.86

Value of equity after exercise of options

 

EUR m

 

17,520
Number of shares after exercise of options   Number   1,227,758,773
Value per share after dilution   EUR   14.27

Dilution effect per share

 

EUR

 

0.01
   
 
Dilution effect as of 01/01/2005   EUR m   15
   
 


4.3    Equity value

Derivation of T-Online equity value

  EUR m
Discounted earnings value   13,365
Special items    
  Free cash and cash equivalents   3,900
  Participating interests   215
  Stock options program   -15
   
Equity value as of 01/01/2005   17,465
   
Accumulation factor   1.030523
   
Equity value as of 04/29/2005   17,998
   
Derivation of T-Online value per share

   
Equity value as of 04/29/2005 in EUR m   17,998
Number of shares   1,223,890,578
   
Value per share in EUR   14.71
   

102



5.    Valuation of Deutsche Telekom


5.1    Discounted earnings value


5.1.1    T-Com

 
  Actual
  Medium-term planning
  Long-term planning
  Sustainable
 
T-Com

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   27,884   26,253   26,254   25,854   25,505   23,925   23,729   23,535   23,404   23,264   23,382   23,507   23,507  
Cost of sales   16,062   14,610   14,278   14,123   14,001   13,532   13,590   13,340   13,215   12,564   12,137   12,158   12,408  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   11,822   11,643   11,976   11,731   11,504   10,393   10,139   10,195   10,188   10,700   11,245   11,348   11,098  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   42.4 % 44.4 % 45.6 % 45.4 % 45.1 % 43.4 % 42.7 % 43.3 % 43.5 % 46.0 % 48.1 % 48.3 % 47.2 %

Selling costs

 

5,399

 

4,937

 

4,719

 

4,585

 

4,491

 

4,307

 

4,251

 

4,137

 

4,005

 

3,991

 

3,874

 

3,885

 

3,885

 
General and admin. costs   1,653   1,535   1,593   1,595   1,547   1,533   1,562   1,531   1,440   1,369   1,348   1,344   1,344  
Other op. inc./exp., net   387   63   207   230   244   228   208   207   197   197   176   195   195  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   5,158   5,234   5,870   5,781   5,711   4,780   4,534   4,734   4,940   5,536   6,198   6,314   6,064  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   18.5 % 19.9 % 22.4 % 22.4 % 22.4 % 20.0 % 19.1 % 20.1 % 21.1 % 23.8 % 26.5 % 26.9 % 25.8 %

Adjustments

 

130

 

389

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             

Operating results (adjusted)

 

5,288

 

5,623

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             
as a % of net revenue   19.0 % 21.4 %                                            

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Operating results   5,158   5,234   5,870   5,781   5,711   4,780   4,534   4,734   4,940   5,536   6,198   6,314   6,064  
Amortization/depreciation   4,662   4,304   3,800   3,560   3,305   3,065   3,080   2,906   3,083   2,879   2,515   2,485   2,735  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   9,820   9,538   9,670   9,341   9,015   7,845   7,614   7,640   8,024   8,415   8,714   8,799   8,799  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   35.2 % 36.3 % 36.8 % 36.1 % 35.3 % 32.8 % 32.1 % 32.5 % 34.3 % 36.2 % 37.3 % 37.4 % 37.4 %

103


 
  Actual
  Medium-term planning
  Long-term planning
 
T-Com

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

 
Network communication   14,997   14,608   13,838   12,597   11,200   9,128   8,366   7,747   7,196   6,769   6,487   6,231  
Data communication   1,761   1,862   2,402   2,777   3,211   3,247   3,297   3,361   3,442   3,545   3,672   3,823  
Carrier services   4,707   4,185   4,464   4,854   5,405   5,819   6,305   6,605   6,869   6,968   7,149   7,286  
Miscellaneous   3,765   3,034   3,084   3,240   3,380   3,440   3,501   3,564   3,629   3,698   3,766   3,837  
   
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue "Germany"   25,230   23,689   23,788   23,468   23,196   21,634   21,470   21,277   21,137   20,980   21,073   21,177  
   
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue T-Com   90.5 % 90.2 % 90.6 % 90.8 % 90.9 % 90.4 % 90.5 % 90.4 % 90.3 % 90.2 % 90.1 % 90.1 %
   
 
 
 
 
 
 
 
 
 
 
 
 

Net revenue "Eastern Europe"

 

2,655

 

2,564

 

2,466

 

2,386

 

2,309

 

2,291

 

2,259

 

2,258

 

2,267

 

2,284

 

2,309

 

2,330

 
   
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue T-Com   9.5 % 9.8 % 9.4 % 9.2 % 9.1 % 9.6 % 9.5 % 9.6 % 9.7 % 9.8 % 9.9 % 9.9 %
   
 
 
 
 
 
 
 
 
 
 
 
 
Net revenue "Division T-Com"   27,884   26,253   26,254   25,854   25,505   23,925   23,729   23,535   23,404   23,264   23,382   23,507  
   
 
 
 
 
 
 
 
 
 
 
 
 

104


105


106


107


108



5.1.2    T-Mobile

 
  Actual
  Medium-term planning
  Long-term planning
  Sustainable
 
T-Mobile

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   24,198   26,527   29,330   30,932   32,518   34,142   35,627   37,224   38,604   39,913   41,160   42,333   43,603  
Cost of sales   12,489   15,184   15,382   15,858   16,297   16,918   17,454   17,914   18,339   18,787   19,330   19,888   21,474  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   11,709   11,344   13,948   15,075   16,221   17,224   18,174   19,311   20,265   21,127   21,830   22,445   22,129  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   48.4 % 42.8 % 47.6 % 48.7 % 49.9 % 50.4 % 51.0 % 51.9 % 52.5 % 52.9 % 53.0 % 53.0 % 50.8 %

Selling costs

 

6,725

 

7,208

 

7,087

 

7,311

 

7,467

 

7,595

 

7,844

 

8,068

 

8,270

 

8,474

 

8,683

 

8,851

 

9,116

 
General and admin. costs   1,031   938   1,590   1,658   1,536   1,477   1,501   1,553   1,604   1,646   1,688   1,739   1,791  
Other op. inc./exp., net   -520   -1,688   62   61   78   79   79   83   82   83   84   88   90  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   3,433   1,510   5,334   6,167   7,297   8,230   8,907   9,773   10,473   11,089   11,542   11,943   11,312  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   14.2 % 5.7 % 18.2 % 19.9 % 22.4 % 24.1 % 25.0 % 26.3 % 27.1 % 27.8 % 28.0 % 28.2 % 25.9 %

Adjustments

 

789

 

3,486

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results (adjusted)

 

4,222

 

4,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             
as a % of net revenue   17.4 % 18.8 %                                            

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results

 

3,433

 

1,510

 

5,334

 

6,167

 

7,297

 

8,230

 

8,907

 

9,773

 

10,473

 

11,089

 

11,542

 

11,943

 

11,312

 
Amortization/depreciation   3,768   6,953   4,388   4,455   4,237   4,201   4,167   4,114   4,107   4,078   4,146   4,238   5,162  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   7,201   8,463   9,722   10,622   11,534   12,431   13,073   13,887   14,580   15,167   15,688   16,181   16,473  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   29.8 % 31.9 % 33.1 % 34.3 % 35.5 % 36.4 % 36.7 % 37.3 % 37.8 % 38.0 % 38.1 % 38.2 % 37.8 %

109


 
  Actual
  Medium-term planning
  Long-term planning
T-Mobile

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

USA   7,363   9,278   11,093   12,132   13,016   13,889   14,733   15,679   16,493   17,221   17,872   18,377
Germany   8,479   8,745   9,212   9,504   9,968   10,331   10,705   11,090   11,391   11,741   12,096   12,544
Rest of Europe   8,622   8,822   9,330   9,629   9,883   10,265   10,540   10,814   11,087   11,325   11,573   11,801
Intra-division revenue   -266   -318   -305   -333   -349   -343   -351   -360   -367   -374   -382   -390
   
 
 
 
 
 
 
 
 
 
 
 
Net revenue T-Mobile   24,198   26,527   29,330   30,932   32,518   34,142   35,627   37,224   38,604   39,913   41,160   42,333
   
 
 
 
 
 
 
 
 
 
 
 

110


111


112


113


114


115



5.1.3    T-Systems

 
  Actual
  Medium-term planning
   
  Long-term planning
  Sustainable
 
T-Systems

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   10,469   10,369   10,845   11,655   12,500   13,167   13,916   14,712   15,560   16,465   17,431   18,466   18,835  
Cost of sales   8,908   8,347   8,753   9,374   10,017   10,537   11,124   11,748   12,413   13,122   13,898   14,710   15,004  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   1,561   2,021   2,092   2,282   2,483   2,629   2,791   2,963   3,147   3,343   3,532   3,756   3,831  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   14.9 % 19.5 % 19.3 % 19.6 % 19.9 % 20.0 % 20.1 % 20.1 % 20.2 % 20.3 % 20.3 % 20.3 % 20.3 %

Selling costs

 

656

 

806

 

868

 

907

 

946

 

979

 

1,018

 

1,058

 

1,100

 

1,143

 

1,188

 

1,234

 

1,259

 
General and admin. costs   710   713   713   746   767   796   828   860   893   927   963   1,000   1,020  
Other op. inc./exp., net   311   -114   0   -43   -33   -34   -35   -36   -36   -37   -38   -38   -39  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   506   388   511   585   737   820   911   1,010   1,118   1,235   1,344   1,483   1,513  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   4.8 % 3.7 % 4.7 % 5.0 % 5.9 % 6.2 % 6.5 % 6.9 % 7.2 % 7.5 % 7.7 % 8.0 % 8.0 %

Adjustments

 

-87

 

117

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
Operating results (adjusted)   420   505                                              
   
 
                                             
as a % of net revenue   4.0 % 4.9 %                                            
   
 
                                             

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results

 

506

 

388

 

511

 

585

 

737

 

820

 

911

 

1,010

 

1,118

 

1,235

 

1,344

 

1,483

 

1,513

 
Amortization/depreciation   1,021   921   890   924   950   983   1,026   1,072   1,119   1,168   1,238   1,291   1,317  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   1,527   1,309   1,401   1,509   1,686   1,803   1,937   2,082   2,236   2,403   2,582   2,774   2,830  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   14.6 % 12.6 % 12.9 % 12.9 % 13.5 % 13.7 % 13.9 % 14.2 % 14.4 % 14.6 % 14.8 % 15.0 % 15.0 %

116


117


118


119



5.1.4    GHS

 
  Actual
  Medium-term planning
   
  Long-term planning
  Sustainable
 
GHS

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   4,266   4,483   4,790   4,907   4,872   4,740   4,784   4,816   4,809   4,843   4,899   4,976   4,976  
Cost of sales   3,180   3,681   3,633   3,632   3,636   3,560   3,595   3,603   3,593   3,733   3,713   3,664   3,764  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Gross profit   1,086   802   1,157   1,275   1,236   1,180   1,189   1,213   1,216   1,110   1,186   1,312   1,212  
as a % of net revenue   25.5 % 17.9 % 24.2 % 26.0 % 25.4 % 24.9 % 24.8 % 25.2 % 25.3 % 22.9 % 24.2 % 26.4 % 24.4 %

Selling costs

 

276

 

141

 

139

 

139

 

139

 

136

 

137

 

138

 

137

 

143

 

142

 

140

 

140

 
General and admin. costs   1,934   1,939   1,913   1,913   1,915   1,875   1,893   1,897   1,892   1,966   1,955   1,930   1,930  
Other op. inc./exp., net   191   -10   -166   -324   -307   -288   -320   -351   -438   -435   -460   -488   33  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
Operating results   -933   -1,287   -1,060   -1,101   -1,125   -1,120   -1,162   -1,172   -1,251   -1,434   -1,370   -1,245   -824  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   -21.9 % -28.7 % -22.1 % -22.4 % -23.1 % -23.6 % -24.3 % -24.3 % -26.0 % -29.6 % -28.0 % -25.0 % -16.6 %

Adjustments

 

-107

 

8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results (adjusted)

 

-1,040

 

-1,279

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 
   
 
                                             
as a % of net revenue   -24.4 % -28.5 %                                            
   
 
                                             

Add. info:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating results

 

-933

 

-1,287

 

-1,060

 

-1,101

 

-1,125

 

-1,120

 

-1,162

 

-1,172

 

-1,251

 

-1,434

 

-1,370

 

-1,245

 

-824

 
Amortization/depreciation   820   914   758   778   800   795   801   797   785   779   762   738   705  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
EBITDA   -113   -373   -302   -323   -325   -324   -361   -375   -467   -655   -608   -507   -119  
   
 
 
 
 
 
 
 
 
 
 
 
 
 
as a % of net revenue   -2.7 % -8.3 % -6.3 % -6.6 % -6.7 % -6.8 % -7.5 % -7.8 % -9.7 % -13.5 % -12.4 % -10.2 % -2.4 %

120


121


122


123



5.1.5    Deutsche Telekom business plans

 
  Actual
  Medium-term planning
   
  Long-term planning
  Sustainable
 
Deutsche Telekom

  2003
EUR m

  2004
EUR m

  2005
EUR m

  2006
EUR m

  2007
EUR m

  2008
EUR m

  2009
EUR m

  2010
EUR m

  2011
EUR m

  2012
EUR m

  2013
EUR m

  2014
EUR m

  2015 ff.
EUR m

 
Net revenue   55,503   57,360   61,114   63,992   66,518   67,976   70,795   73,758   76,547   79,323   82,170   84,846   86,543  
Cost of sales   29,369   31,559   30,892   32,199   33,275   34,246   35,835   37,121   38,418   39,504   40,708   42,130   44,283  
Gross profit   26,134   25,801