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 2005

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 if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(1):         

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101 (b)(7):          

Indicate by check mark whether the registrant by furnishing the information contained in this form, the registrant 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.

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Deutsche Telekom at a glance.(1)

(a)          For detailed information and calculations, please refer to “Reconciliation of pro forma figures,” page 41 et seq.

(1)          All figures are shown according to IFRS for the first time. For further information, please refer to “Transition to IFRS,” page 47.

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Deutsche Telekom at a glance.

At a glance

(a)          For a detailed explanation of the special factors affecting EBITDA, adjusted EBITDA, adjusted EBITDA margin as well as special factors affecting profit/loss and the adjusted net profit, please refer to “Reconciliation of pro forma figures,” page 41 et seq. For detailed information and calculations of the figures for 2004, please refer to the reconciliation report “Historical figures according to IFRS. New Group organization.”

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

(c)          One ADS (American Depositary Share) corresponds in economic terms to one ordinary share of Deutsche Telekom AG.

(d)         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 41 et seq.

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

(g)         Number of subscribers of the fully consolidated mobile communications companies of the Mobile Communications business area. EuroTel Bratislava subscribers included for the first time as of December 31, 2004. Prior-year comparatives have been adjusted.

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Excellence.

A far-reaching transformation program known as the Excellence Program for Deutsche Telekom was launched at the beginning of 2005.  It supports the successful realization of the growth potential that emerged following the strategic realignment of the Group towards three growth areas: Broadband/Fixed Network, Mobile Communications and Business Customers.

Deutsche Telekom is pursuing the ambitious goal of becoming Europe’s fastest growing integrated provider of telecommunications services on the basis of the opportunities emerging from the realigned structure. The key to achieving sustained profitable growth is to orient the Group more consistently to the needs of the customer and increase customer satisfaction.  Deutsche Telekom has thus set the goal of becoming the leading service provider in its industry by 2007.

The Excellence Program has three key elements, which, if successfully implemented, will help Deutsche Telekom achieve its strategic goals:

•             Growth programs that are tailored to the specific conditions and market environment of the three strategic business areas;

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

•             Changing our corporate culture on a sustained basis to achieve excellence from the customer’s perspective.

Growth programs of the strategic business areas.

“Re-invent” is T-Com’s program for achieving a pro-found change.  The cornerstones of the program are:

•             Activities for more innovation and growth (i.e., new voice services and services to take advantage of the opportunities provided by broadband access);

•             Measures to enhance quality and efficiency (e.g., by making processes less complex); and

•             A major change in culture, putting the customer at the center of our actions.

T-Mobile is preparing itself for future market developments with “Save for growth.” Savings of approximately EUR 1 billion a year are planned in the medium term, around EUR 500 million of which will be reinvested in measures to safeguard the market position and achieve ambitious growth targets.

These activities have a threefold focus:

•             More favorable and less complicated mobile communications rates;

•             Further development of the mobile Internet for leisure and business; and

•             Seamless integration of various network platforms (e.g., GPRS, UMTS, and WLAN).

T-Systems, too, will orient itself even more to the requirements of business customers with “Focus on Growth.” It will focus on the following five areas to achieve its goal of becoming the leading ICT service provider:

•             Improving sales efficiency;

•             Enhancing its portfolio of products and services;

•             Operational excellence by optimizing internal processes;

•             Efficiency through cost management; and

•             Mobilization of employees through hands-on value management.

Group-wide initiatives.

The growth programs are supplemented with Group-wide initiatives.  Added value is generated by coordinating activities that aim at leveraging the benefits of an intelligently integrated telecommunications group through close cooperation between the strategic business areas to meet customer needs and achieve cost efficiencies.

Corporate culture.

The third cornerstone of the Excellence Program is a Group-wide cultural change.  The intention is to gear Deutsche Telekom’s entire organization to systematic customer orientation in line with T-Spirit.  One element is that all top executives spend at least five days a year at grass roots level in direct contact with customers.

Timeframe and initial results.

The Excellence Program is a three-year program.  We expect to see initial results as early as this financial year.

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Contents.

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Developments in the Group.

•             Net revenue increased by 3.5 percent from EUR 13.9 billion in the first quarter of 2004 to EUR 14.4 billion.

•             Group EBITDA(2) increased by 6.3 percent year-on-year from EUR 4.6 billion to EUR 4.9 billion; adjusted for special factors, it increased by 5.2 percent from EUR 4.7 billion to EUR 4.9 billion.

•             Profit before income taxes increased by 35.8 percent year-on-year from EUR 1.2 billion to EUR 1.6 billion.

•             Net profit increased by around 60 percent from EUR 0.6 billion to EUR 1.0 billion; adjusted for special factors, the increase was approximately 45 percent from EUR 0.7 billion to EUR 1.0 billion.

•             Free cash flow(3) before dividend payments decreased to minus EUR 0.9 billion particularly due to higher investments in network infrastructure.

•             Net debt(4) decreased from EUR 48.7 billion year-on-year to EUR 42.6 billion. Standard & Poor’s upgraded Deutsche Telekom’s long-term rating from BBB+ to A- and outlook: stable.

Continued strong customer growth in the first quarter of 2005:

•             The number of mobile subscribers increased by a further 1.5 million since the end of last year; of this increase, T-Mobile USA alone accounted for around 1.0 million.

•             Strong growth in broadband lines; 0.6 million new DSL subscribers since the end of last year, bringing the total to 6.7 million.

(2)          For a detailed explanation of the special factors affecting EBITDA, adjusted EBITDA, adjusted EBITDA margin as well as special factors affecting net profit or loss after income taxes and the adjusted net profit, please refer to “Reconciliation of pro forma figures,” page 41 et seq.

(3)          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 41 et seq.

(4)          For detailed information, please refer to “Reconciliation of pro forma figures,” page 41 et seq.

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Merger.

Merger of T-Online International AG into Deutsche Telekom AG approved.

One core element of the strategic realignment is the merger of T-Online International AG (“T-Online”) with and into Deutsche Telekom AG (“Deutsche Telekom”). The merger underlines the particular importance of T-Online for the further development of the new Broadband/Fixed Network strategic business area.

The full integration of T-Online into Deutsche Telekom is important to Deutsche Telekom’s realigned strategy of developing its fixed-network and broadband business in Germany.  Due to the increasing convergence of the business models of telephone fixed-network operators and Internet service providers as well as the increasing demand for comprehensive broadband products from a single source, an integrated strategy between Deutsche Telekom and T-Online will generate considerable benefits for both companies compared to continuing as separate business models.  In this respect, the objective is, in particular, to participate in the growth of a market that is currently evolving at a disproportionately high rate by providing a comprehensive product based on traditional telephony, voice over IP and Internet services, including products from the entertainment area.  Moreover, the merger will make it possible to combine the specific expertise of both companies more effectively for the design and further development of the new integrated products and to make better use of the potential of existing customers through facilitated use of both customer databases.  In particular, the companies expect to be able to use more effectively the know-how developed by T-Online in the past in the area of IP-based services to further develop the broadband business.  In addition, both companies assume that internal processes and procedures can be unified and streamlined as a result of the merger, thus significantly increasing the competitiveness of the merged company.

Deutsche Telekom and T-Online signed a merger agreement(5) on March 8, 2005 on the merger of T-Online with and into Deutsche Telekom, in which both companies agreed that, upon completion of the merger, Deutsche Telekom will grant (external) T-Online shareholders 13 no par value shares in Deutsche Telekom for every 25 no par value shares in T-Online; this is equivalent to an exchange ratio of 0.52 Deutsche Telekom shares for one T-Online share.  On the same day, the Boards of Management of both companies published a joint merger report in which they explained and justified the merger and the merger agreement, including the exchange ratio, in legal and business terms.  Effective March 9, 2005, an independent merger auditor selected and appointed by order of the relevant court stated in his audit report that according to his findings the proposed exchange ratio is appropriate.

T-Online’s shareholders’ meeting approved the merger agreement on April 29, 2005 with a majority of 99.46 percent of the votes cast.  The merger agreement did not require the approval of the shareholders’ meeting of Deutsche Telekom on April 26, 2005. The merger will become effective upon registration in the commercial registers of the companies involved. T-Online will then transfer its assets in their entirety to Deutsche Telekom in accordance with the provisions of the German Transformation Act (‘Umwandlungsgesetz’– UmwG)(merger by absorption (‘Verschmelzung durch Aufnahme’)).  At the same time, T-Online will cease to exist as an independent legal entity and T-Online shareholders will become shareholders of Deutsche Telekom.

(5)          The merger agreement, the merger report and the merger audit report are available on Deutsche Telekom’s and T-Online’s website.

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Highlights.

Group

Deutsche Telekom AG and T-Online International AG conclude merger agreement.

•             Deutsche Telekom and T-Online signed a merger agreement(6) on March 8, 2005 on the merger of T-Online into Deutsche Telekom.

Response to CeBIT presence very satisfactory.

•             Deutsche Telekom AG felt this year’s CeBIT computer tradeshow was quite a success with roughly 350,000 visitors.  This represents an increase of approximately 8 percent over the previous year. Visitors took to the newly designed stand.  T-Com, T-Systems and T-Online were able once again to increase the number of professional customer contacts.  Visitors were particularly interested in the products that were offered as part of the broadband marketing campaign.

Media technology for the 2006 FIFA World Cup^TM.

•             For the 2006 FIFA World Cup^TM to be held in Germany, Deutsche Telekom will supply all media workstations at the twelve World Cup stadiums and the media centers with innovative communication equipment.  A general contract between the organizing committee of the 2006 FIFA World Cup^TM and Deutsche Telekom provides that Deutsche Telekom will be responsible for supplying all press stands and press centers as well as the media centers with telecommunications equipment.  The technology in the stadiums will be put to the test during the FIFA Confederations Cup 2005^TM since Deutsche Telekom will also be equipping the media workstations at this competition.

Acquisition of Telekom Montenegro.

•             In the first quarter of 2005, Deutsche Telekom continued to expand its presence in the Eastern European telecommunications market.  Since March 29, 2005, the Hungarian subsidiary MATÁV, has held a 73.04 percent majority interest in the Telekom Montenegro group (Telekom Crne Gore A.D.).  This share was purchased for EUR 136.9 million.  In 2004, Telekom Montenegro generated revenue of just under EUR 97.7 million and EBITDA of EUR 33.6 million.  Telekom Montenegro has been included in the consolidated financial statements as of March 31, 2005 for the first time.  In segment reporting, the mobile business of Telekom Montenegro will be reported under Mobile Communications, and its fixed network and Internet segments under Broadband/Fixed Network.

Deutsche Telekom issued a new 3-billion-euro bond.

•             Deutsche Telekom has issued a euro bond with two tranches, one 5-year tranche for EUR 1.25 billion and one 10-year bond for EUR 1.75 billion. The issue, which was highly oversubscribed, generated a flurry of interest among investors. Deutsche Telekom’s net debt will not increase due to the bond issue.

(6)          For detailed information, please refer to “Merger,” page 7.

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Broadband/Fixed Network: T-Com

New calling plan launched on March 1, 2005.

•             Beginning on March 1, 2005, T-Com launched a completely redesigned pricing campaign known as the ‘Wünsch Dir was’ ((make a wish) calling plan for consumers, a move that significantly improves its competitive position.  The greatly simplified calling plan contains four rate variants (Call Plus, Call Time, XXL and XXL Freetime) and two additional options (XXL Local and Country Select).  As well as creating a new rate structure that is much more attractive for customers, this campaign also seeks to specifically respond to customer needs.  All new rate options include extra features such as call waiting, calling line identification restriction, consultation call, switching between lines, call completion on busy, three-way conferencing, and call fowarding.  Furthermore, all new rate options now offer to-the-minute billing, including for “City” calls.

New telecommunications act passed in Macedonia.

•             On February 18, 2005, a new telecommunications act was announced in Macedonia, which came into force in March.  This act is based on current EU legislation and lifts the licensing requirement for network operators.  The act includes requirements such as obliging providers with a substantial market share to present standard offers for interconnection and unbundled access to the local loop. Price regulation is also possible.  Furthermore, carrier selection, preselection and number portability must be provided as a general rule; details are yet to be agreed, however.

Broadband/Fixed Network: T-Online

DSL full-package marketing.

•             On January 31, 2005, T-Online launched its DSL full-package marketing campaign in Germany. The advantage for customers is that the moment they order their package, a single contact person is available to them for all services.  DSL line, Internet access, hardware, and additional services all come from a single source.

Expansion of video on demand.

•             T-Online has now also teamed up with Paramount Pictures Corporation to expand its video-on-demand service.  The major Hollywood studio will henceforth increase the number of cinema and television productions available online through T-Online Vision at www.vod.t-online.de.  In recent months, T-Online has also concluded contracts with international and national providers and media companies, which will supply blockbusters, high-quality feature films and interesting documentaries, thus meeting the needs of customers.

Cooperation with Intel.

•             At the center of the cooperation between Intel and T-Online is the interest of both parties in providing customers with the highest quality entertainment content through the largest number of distribution channels.  To achieve this goal, the formatting compatibility of devices at the customer’s end will be simplified and the interfaces between the devices and the applications improved.  In addition to the joint marketing of hardware and software and joint online advertising and co-branding, the joint initiative also entails technical cooperation for ensuring service quality and the transferability of services to devices made by various manufacturers.

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Mobile Communications

Acquisition of mobile communications networks in California and Nevada completed.

•             In January 2005, T-Mobile USA completed the purchase of the GSM network from Cingular in California and Nevada for USD 2.5 billion – including USD 180 million for spectrum.  Under the wholesale agreement with Cingular, T-Mobile has secured revenues of at least USD 1.2 billion over a maximum period of four years.  Deutsche Telekom expects this acquisition to lead to a significant increase in customers and therefore to further the dynamic development of T-Mobile USA.

Relax calling plan continues to make inroads.

•             The “Relax” calling plan, which includes a fixed bucket of minutes for certain mobile calls depending on the monthly package price, continues to make inroads.  The number of customers who have selected a “Relax” plan has increased to approximately 3.1 million in Germany, the United Kingdom, Austria, the Netherlands, the Czech Republic and Hungary.  This represents roughly 14 percent of all European fixed-term contract subscribers – and the trend is increasing.

Successful participation in Auction 58.

•             T-Mobile USA’s joint venture with Cook Inlet Region Inc. successfully participated in FCC Auction 58 and, pending FCC review and formal approval, will acquire additional mobile communications licenses in 35 markets, including Cleveland, Denver, Kansas City, Minneapolis, Richmond, San Antonio, and Seattle for a total of USD 235 million.  FCC approval and actual granting of the licenses is expected in late second quarter or early third quarter 2005. T-Mobile has resale agreements with the Cook Inlet/T-Mobile Joint Venture which will permit T-Mobile to significantly improve capacity in those markets.

Business Customers

Strategic partnership with Microsoft.

•             To mark the launch of its small and medium sized enterprises (SME) campaign,  T-Systems entered into a strategic partnership with Microsoft at CeBIT.  The partnership is part of a marketing and sales initiative by which the Business Customers strategic business area aims to increase its share in the ICT market among SMEs.  T-Systems and Microsoft will offer product and service packages from a single source.  The focus of the initiative will first be on integrated voice and data solutions.  Joint technology and innovation projects are planned for later on.

e-government portals from T-Systems.

•             The German state of Thuringia is launching an e-government portal and has awarded T-Systems the contract to provide system integration services. The aim is to execute administrative tasks quickly and conveniently through a central integration platform, thereby improving government service. T-Systems implements the portal functions, integrates various specialized applications, and coordinates the cooperation between the individual project partners.

In the German state of Saarland, various registration office procedures of the municipal governments will be centralized within a portal interface for citizens.  T-Systems will upgrade the information technology of the German regional state with the requisite hardware and software.

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Business developments.

Overview.

Net revenue

Deutsche Telekom continued its growth course in the first three months of the current financial year: Overall, the net revenue of the Group increased by around EUR 0.5 billion to approximately EUR 14.4 billion.  This equates to a growth of 3.5 percent.  The development of revenue in the reporting period was positively affected by around EUR 0.1 billion as a result of changes to the consolidated group, in particular the consolidation of EuroTel in Mobile Communications. This was offset by exchange rate effects also amounting to roughly EUR 0.1 billion, predominantly from the translation of U.S. dollars (USD).

The main revenue driver was once again the Mobile Communications business area.  Increased customer numbers, particularly at T-Mobile USA, and the effects from the first-time consolidation of EuroTel resulted in a considerable increase in revenue.  Negative exchange rate effects prevented the increase from being even greater.  The Business Customers business area also developed positively.  Revenue increases in the Enterprise Services business unit - particularly in the area of Computing & Desktop Services - more than compensated for the revenue decrease in the Business Services business unit.

Offsetting effects were recorded in the Broadband/Fixed Network business area.  Total revenue decreased compared with the same period last year.  The positive revenue development at T-Online, which is mainly attributable to the consistent development of the broadband market, was accompanied by increased revenue growth from broadband lines based on DSL technology at T-Com.  This growth is, however, more than offset by considerably higher revenue losses at T-Com, which are primarily the result of regulatory intervention in the areas of call-by-call and carrier preselection, as well as a rising level of fixed-mobile substitution and declining revenues from International Carrier Services.

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

(b)         Elimination of revenue between strategic business areas.

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Contribution of the strategic business areas to net revenue (after consolidation of revenue between strategic business areas)

Mobile Communications made the most significant contribution to net revenue of the Group, generating a share of over 45 percent.  This represents a considerable increase compared with the prior-year period. While the Broadband/Fixed Network strategic business area’s contribution to net revenue fell to around 38 percent, the contribution of the Business Customers business area remained at the same level as the previous year, at around 16 percent.

Revenue generated outside Germany

While domestic revenues in the first quarter of 2005 remained at approximately the same level as in the first quarter of 2004, revenues generated outside Germany increased by more than 7 percent.  The key factor behind this is the sustained positive development of revenue at T-Mobile USA.  The proportion of revenue generated outside Germany increased by 1.5 percentage points quarter-on-quarter to 40.2 percent.

Profit before income taxes

Year-on-year, profit before income taxes rose by EUR 0.4 billion to EUR 1.6 billion in the reporting period.  This equates to an increase of around 36 percent which is primarily attributable to a considerable decrease of net financial expense compared with the prior-year period.

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Net profit

Net profit increased in the first quarter of 2005 to EUR 1.0 billion.  This represents an increase of around 60 percent compared with the same quarter last year. This considerable growth was largely influenced by the positive development of profit before income taxes.

Special factors of EUR 8 million affected net profit in the first quarter of 2005, compared with a negative impact of EUR 59 million in the same period last year.  Adjusted for theses special factors, net profit increased by approximately EUR 0.3 billion to a total of EUR 1.0 billion.

EBIT

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

EBIT decreased slightly year-on-year by EUR 0.1 billion to EUR 2.3 billion.  EBIT increased year-on-year in the Broadband/Fixed Network and Business Customers business areas and in the Group Headquarters & Shared Services unit.  This was offset by a larger EBIT decrease in the Mobile Communications business area.  This decrease was caused in particular by higher depreciation, mainly of the UMTS network infrastructure and the new network infrastructure in California, Nevada and New York, as well as amortization of UMTS licenses.  This depreciation and amortization did not apply in the prior-year period, as they are only charged under IFRS once the UMTS network comes into operation.

EBITDA

EBITDA in the first quarter of 2005 amounted to approximately EUR 4.9 billion.  Compared with EBITDA of around EUR 4.6 billion in the same period last year, this represents an increase of around EUR 0.3 billion, or 6.3 percent.

Adjusted EBITDA

Special factors amounting to EUR 20 million had a negative impact in the first quarter.  These consisted mainly of severance and voluntary redundancy payments as well as restructuring expenses.  Adjusted for these special factors, EBITDA increased by EUR 0.2 billion from EUR 4.7 billion to EUR 4.9 billion.  While adjusted EBITDA in the Mobile Communications business area increased considerably, it was slightly higher than in the previous year in the Business Customers business area and the Group Headquarters & Shared Services unit.  In Broadband/Fixed Network, on the other hand, adjusted EBITDA decreased slightly.

Besides economies of scale and efficiency enhancements, the improvement in the Mobile Communications business area is primarily attributable to the increase in

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revenue as a result of customer growth, especially in the United States.  The stable development of adjusted EBITDA in the Business Customers segment is mainly a consequence of the positive development of business in the Enterprise Services business unit and the measures introduced to reduce costs and enhance efficiency.  Adjusted EBITDA remained constant in the Group Headquarters & Shared Services unit, largely as a result of lower costs of materials and personnel costs due to lower staff numbers.

The decline in the Broadband/Fixed Network business area is due to the fact that the revenue losses in the first quarter of 2005 were only partly compensated by additional measures to reduce costs.

(a)          Deutsche Telekom defines EBITDA as profit/loss from operations excluding depreciation and amortization. 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 41 et seq.

Free cash flow

Free cash flow decreased by EUR 3.9 billion year-on-year to minus EUR 0.9 billion.  This decrease is principally attributable to the changes in working capital and higher tax payments as well as increased investments, in particular in network infrastructure at T-Mobile USA; in contrast, tax refunds were recorded in 2004.

(a)          For detailed information and calculations, please refer to “Reconciliation of pro forma figures,” page 41 et seq.

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Net debt

Net debt decreased by around EUR 6 billion year-on-year to EUR 42.6 billion.  Compared with year-end 2004, however, an increase of 7.8 percent or EUR 3.1 billion was recorded.  This increase was mainly the result of payments at T-Mobile USA relating to the acquisition of network infrastructure and spectrum in California and Nevada.  In addition, the acquisition of additional shares in T-Online International AG prior to the merger of the company into Deutsche Telekom AG increased net debt.

(a)          For detailed information and calculations, please refer to “Reconciliation of pro forma figures,” page 41 et seq.

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Strategic business areas.

Deutsche Telekom’s strategic realignment.

The telecommunications industry is marked by changes in technology and a dynamic competitive environment. In order to put its business model on a sustainable footing for the long term, Deutsche Telekom is implementing a paradigm change – from a technology corporation into a customer-centric service provider.

This strategic alignment focuses on changes in customer needs.  While customers now perceive technology as becoming less and less significant, their needs for customer-oriented and integrated applications are increasing.  In an effort to become the leading service provider in the industry and the fastest-growing telecommunications company in Europe, Deutsche Telekom has been focusing on three strategic business areas since the beginning of 2005:

•             Broadband/Fixed Network handled by the T-Com and T-Online business units for the consumer and carrier segment as well as technical infrastructure;

•             Mobile Communications handled by T-Mobile;

•             Business Customers handled by T-Systems Enterprise Services for multinational corporations and T-Systems Business Services for small, medium-sized and large enterprises.

Its new structure now permits the Deutsche Telekom Group to focus on the key growth sectors of the industry.  At the same time, the individual strategic business areas will be able to increase their focus on their respective customer segments.  Such measures have set the course for comprehensive customer orientation, which Deutsche Telekom has established as a “customer centricity” benchmark within its global Group. The goal here is to create clear added value for the customer while ensuring profitable growth for the Company.

Growth sector “Broadband/Fixed Network”:

In the past four years, Deutsche Telekom helped transform broadband communications in Germany into a consumer mass market.  In future, the Group will offer its customers an even broader portfolio of information, communication and entertainment services, which will be delivered directly to homes via broadband technology.  The products and services offered will range from personalized Internet packages to film and television.

Growth sector “Mobile Communications”:

Until now, a key feature of the market for mobile data communications has been the variety of technologies and networks, such as GSM, UMTS and WLAN.  The important features for users are not, however, technical standards, but rather high-quality mobile services and good value for money.  In order to provide customers with high-speed mobile data transmission and convenient use of mobile products and services, T-Mobile is focusing on all three technologies and is linking them. It also offers innovative products and services at simple and transparent rates with clear added value for customers.

Growth sector “Business Customers”:

The new structure enables T-Systems, the Group unit responsible for business customers, to take a coordinated approach to marketing, and thus to refine its customer support. The “everything under one roof” policy ensures optimal customer proximity in the complex business customer segment where T-Systems acts as professional liaison and contact for all IT and telecommunications services.  T-Systems provides the entire range of ICT products and services integrated under the service commitment to “business flexibility.” Thus, T-Systems creates added value for business customers by helping to make operating processes more flexible and efficient.

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In this Interim Report on the first quarter of 2005, Deutsche Telekom is presenting its financial figures pursuant to IFRS (International Financial Reporting Standards) and in line with the new strategic business areas for the first time.(7)

The new segment structure with the strategic business areas Broadband/Fixed Network, Mobile Communications and Business Customers will supersede the previous reporting structure with the divisions T-Com, T-Mobile, T-Systems, and T-Online.

The strategic realignment entails changes within the Group and shifts between individual business areas with the following effects, which are also visually depicted below in the simplified diagram:

(1)         Small and medium-sized enterprises (SMEs) have been transferred from the previous business division T-Com to the new strategic business area Business Customers.  The planning, roll-out and operation of the service platform for SMEs will also be managed by Business Services in future.

(2)         Eastern European mobile communication companies, which legally belong to T-Com’s Eastern European subsidiaries, are assigned to the Mobile Communications strategic business area for reporting purposes.

(3)         As a result of plans to bundle the entire national and international wholesale business into T-Com, the technical platforms (Global Network Factory – GNF), international carrier business (International Carrier Services and Solutions – ICSS), and Network Services have been transferred from T-Systems to the new Broadband/Fixed Network strategic business area.

(4)         The strategic business area Broadband/Fixed Network consists of T-Online and T-Com.

(5)         The Billing & Collection unit, which is primarily responsible for billing and receivables management services, has been transferred from Group Head-quarters & Shared Services to Business Customers.

(7)          For detailed information, please refer to the reconciliation report “Historical figures according to IFRS. New Group organization.”

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Broadband/Fixed Network.

Broadband and narrowband lines (Germany and Central and Eastern Europe) are the responsibility of the T-Com business unit.

The T-Online business unit has also been marketing broadband lines (in Germany) since January 31, 2005.

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 been marketed by T-Online, broadband lines excluding internal use. Prior-year comparatives have been adjusted.

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

(e)          Central and Eastern Europe includes the fixed-network business of MATÁV (incl. Maktel), Slovak Telecom (ST) and T-Hrvatski Telecom (T-HT).

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

(g)         For the first time, the number of narrowband lines rather than channels are reported. Prior-year comparatives have been adjusted.

(h)         Telephone lines excluding internal use and public telecommunications, including wholesale services.  Prior-year comparatives have been adjusted.

(i)             Subscriber-line figures are recorded including MATÁV’s subsidiary, Maktel. Rebranding of MATÁV as Magyar Telekom as of the beginning of May 2005.

(j)             Brand name as of October 2004; legal name HT-Hrvatske telekomunikacije d.d.

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

(l)             PAYG: Pay as you go.

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The Broadband/Fixed Network strategic business area consists of the business units T-Com and T-Online, and serves consumers and very small business customers of the Deutsche Telekom Group as well as the wholesale market.  In addition, it handles business with resellers (wholesale business).  T-Com is also responsible for the entire national and international network infrastructure as well as business with international network operators (International Carrier Services business).

Broadband/Fixed Network: Customer development and selected KPIs

In the first quarter of 2005, Broadband/Fixed Network once again considerably increased the number of broadband subscribers – both in terms of lines and calling plans – as a result of its successful marketing strategy.  The number of broadband lines increased to 6.7 million at the end of the first quarter of 2005, 465,000 of which were DSL lines that had been sold to competitors as part of resale offers since June 1, 2004. In contrast, the number of narrowband lines and calls continued to decline as a result of competition and regulation.  The number of customers subscribing to narrowband rates for Internet access also decreased further, in part due to migration to broadband rates.

T-Com: Customer development and selected KPIs

In the first quarter of 2005, T-Com again focused its activities on increasing the mass market penetration of its broadband lines based on DSL technology.  As a result, the number of broadband lines grew by 621,000 to 6.7 million as compared with the end of 2004.  This is the second highest net increase ever recorded within a quarter.  Compared with the prior-year quarter, this figure increased by 48.9 percent.  Around 6.4 million lines were in operation in Germany at the end of March 2005, which corresponds to an increase of 581,000 in the past quarter.

T-Com mainly focuses on attractive offers such as the “three times zero” campaign(8) that T–Com and T-Online jointly ran until the end of January.  This enables T-Com not only to significantly increase the number of T-DSL lines, but also to push the trend towards DSL lines with higher bandwidths.  Thus at the end of March 2005, more than 10 percent of T-DSL lines had bandwidths of two or more megabits per second (Mbit/s).

One highlight for T-Com in emphasizing its role as an innovative telecommunications company is the T-Com House, which opened at the beginning of March 2005 in Berlin.  It is based on DSL technology and provides a clear demonstration and first-hand experience of what will be possible with the information,  telecommunication and entertainment technologies of tomorrow.  Here, T-Com is presenting such innovations as the “Family Whiteboard,” a kind of electronic pinboard that acts as a central communications platform for the family. The central control element of the T-Com House is a personal digital assistant, with which all communications, data and media applications can be controlled by WLAN technology at home or via HotSpots when on the move.

T-Com plans to further increase broadband coverage with the new wireless WiMAX technology.  In order to explore the possibilities of the new system, T-Com will begin a pilot operation in the next few months in the towns of Siegburg and Rheinbach in the Bonn area. Jointly, T-Com and T-Mobile have further expanded the public WLAN portfolio with the introduction of an even simpler and more transparent HotSpot rate system on March 1, 2005.  In total, the number of T-Com HotSpots in Germany rose to more than 3,700 at the end of March 2005.  In addition T-Com, in close cooperation with Autobahn Tank & Rast Holding GmbH, will exclusively supply the majority of highway service areas with HotSpots based on WLAN technology by the end of this year.

(8)          Under this plan, T-Online reimbursed the activation charge for the T-DSL line in the form of credit to the user’s account, and customers received the DSL modem for free.  The subscription fee for the T-Online dsl 1500 MB rate was waived for one month.

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The strong growth trend in the broadband sector continued in the first quarter of 2005 at T-Com’s subsidiaries in Central and Eastern Europe.  The subsidiaries increased the number of DSL lines by around 120 percent year-on-year to 305,000 thanks to marketing initiatives.  In the first quarter of 2005, the number of DSL lines increased by around 40,000, mainly driven by broadband growth in Central and Eastern Europe, in particular at MATÁV.  Within a year the Hungarian subsidiary raised the number of DSL lines by 99,000 to 224,000 at the end of the first quarter.  Slovak Telecom already had 51,000 DSL lines in operation at the end of March, which corresponds to a fivefold increase compared with the prior-year quarter.  Compared with the end of 2004, T-Hrvatski Telekom also significantly increased its number of broadband lines by 8,000 to 30,000 through targeted DSL marketing campaigns.

In the narrowband sector in Germany, the decline in the number of lines was mainly caused by customer migration to competitors and, to a lesser extent, the substitution effect caused by mobile communications. Compared with the prior-year quarter, the number of narrowband lines decreased by almost 2.7 percent to 36.4 million.  The number of T-ISDN lines decreased by 1 percent to 10.3 million compared with the prior-year quarter, primarily due to the discontinuation of the price advantage of combining T-DSL with T-ISDN (compared with T-DSL combined with an analog line), as well as continuing market saturation.

The decrease in the number of call minutes is continuing due to losses of market share.  The decline in market share in all four call areas (Local, Germany, World, fixed to mobile) slowed down slightly, however, especially in the Local and Germany call areas.  The reduction in call minutes in the consumer segment is due to continued high usage of call-by-call and preselection offers. Another negative influence is the increasing number of lines that are realized by competitors on the basis of leased subscriber lines.

T-Com introduced a brand new rate system(9) on March 1, 2005 to increase its competitiveness in the call market.  At the end of March 2005, T-Com’s new rates already had 7.3 million customers.  The simplification of the rate system is the first step towards a far-reaching streamlining of the product portfolio scheduled to be implemented in the consumer segment.  Its aim is to simplify the range on offer, to provide greater transparency for customers and to enable cost reductions.

In order to focus even more consistently on customer requirements, T-Com has established the growth program “Re-invent” in the context of Deutsche Telekom’s Excellence Program.  Together with “innovation and growth” as well as “quality and efficiency,” particular importance is given to customer satisfaction.  Alongside the rate campaign, there are also other serious considerations to improve customer satisfaction, such as the quicker installation of DSL lines or providing a fixed time (within an hour) for service appointments.  Another core element of “Re-invent” is the increase in process and cost efficiency based on the economical use of personnel and other resources.

(9)          Since March 1, 2005 T-Com has been offering a highly simplified rate portfolio with four rate variants (Call Plus, Call Time, XXL und XXL Freetime) and two optional rates (XXL Local und Country Select) that can be added to these variants.  Since March 1, 2005, the following service features have been included as standard with all lines with Call Plus, Call Time, XXL or XXL Freetime: calling line identification, call waiting, call completion on busy, consultation call, switching between lines, three-way conferencing, call forwarding and calling line identification restriction.  Furthermore, exact to-the-minute billing is available for all new rates, including for “City” calls.

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T-Online: Customer development and selected KPIs

The Internet market in Germany and the rest of Europe is currently influenced by two important trends – fast broadband growth with the associated expansion of possible uses and further individualization of services. In the 2004 financial year, T-Online focused its strategic orientation on sustained growth in the dynamic broadband market.  The goal is to introduce a range of initiatives to position T-Online in the fast-growing markets for broadband and IP services as the innovation and quality leader for the long term.

T-Online has identified and already begun implementing three key strategic initiatives in the first quarter of 2005:

T-Online has positioned itself as a full-package DSL provider in Germany since January 31, 2005 by marketing DSL lines and Internet access together with hardware components, and by continuing the broadband initiative until the end of January.  Since the beginning of 2005 about 295,000 customers have opted for a DSL rate in Germany, and 145,000 of these signed up for the combined DSL and Internet access offer. Compared with the same quarter last year, the number of customers with a DSL rate plan has increased by more than 40 percent to 3.5 million.

In Germany and Western Europe, the base of customers with broadband rate plans rose from 2.7 million to 3.9 million customers.

With a range of communications products based on voice over IP (VoIP), T-Online presented an important building block for future “triple play” offers at CeBIT 2005.  T-Online presented the first examples of these bundled offers, consisting of Internet access, and communications and entertainment services, under the name of “Home Entertainment & Services.”

An important component of the entertainment services of T-Online is the video-on-demand offer from the T-Online Vision broadband portal.  Here customers can currently choose from more than 300 films and documentaries in the movie and adult entertainment sections.  A monthly average of 70,000 films were accessed via T-Online Vision in the first quarter of 2005.

Only one and a half years after it was launched, Musicload had already registered one million customers – making it one of the leading providers of legal music downloads.  The threshold of one million downloaded titles was already exceeded in December 2004.  Musicload now offers 480,000 tracks (singles and albums).

The French Internet market is still characterized by high competitive pressure and rising demand for broadband.  T-Online is consistently and successfully expanding its competitive position in France via the Internet provider, Club Internet.  Club Internet further increased the number of broadband accesses in the first quarter of 2005 with a combination of fast broadband Internet access, digital multi-media entertainment services and attractively priced voice-over-IP offers.

In Spain, ya.com was able to achieve significant gains in the DSL market thanks to its broadband campaign, which was launched at the end of 2004, increasing its DSL customer base by about 80 percent compared with the prior-year quarter.  The DSL voice rate (pre-selection), launched in January 2005, was particularly successful with existing as well as new customers.

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Broadband/Fixed Network: Development of operations