Goal of profitable growth achieved in 2004

Deutsche Telekom ended the 2004 financial year with net income of 4.6 billion euro, thus clearly achieving its goal of continued profitable growth. Net revenue increased by 3.7 percent to 57.9 billion euro in 2004, compared with 55.8 billion in the previous year.

"We are back on the success trail," said CEO Kai-Uwe Ricke, presenting the results to the press. Revenue growth in the Group was mainly attributable to mobile communications and broadband business. At 19.4 billion euro, compared to 18.3 billion in 2003, Deutsche Telekom recorded a 5.9 percent increase in EBITDA excluding special factors. Organic EBITDA, adjusted for exchange rate fluctuations and changes in the composition of the Group, rose by as much as 7.1 percent to 19.5 billion euro. The adjusted EBITDA margin increased from 32.8 percent to 33.5 percent.

In addition to the divisions' positive development, the successful implementation of the "Agenda 2004" growth program played a key role in this success. But Ricke warned: "Success today is no guarantee of success tomorrow. We are very aware of this. That is why we will also continue to do everything necessary in order to put our current course of growth on a long-term and sustainable footing."

In this context, Ricke stressed the importance of DT's new Excellence Program, which aims to make the Group the fastest-growing integrated provider in Europe by putting "excellence in the eyes of the customer" at the heart of its activities. He said first results would be visible in 2005, but that the full effects of the Program and of the Group's strategic reorientation would only become apparent in 2006.

Operating results up 83 percent

Exchange rate effects and first-time consolidations of 0.7 billion euro, plus de-consolidations of 0.4 billion euro had a negative impact on revenue in the year under review. Adjusted for these factors, organic revenue growth amounted to 5.8 percent.

Operating results in 2003 had amounted to 5.4 billion euro. In 2004, the Group generated 9.9 billion - an increase of roughly 83 percent. In addition to sustained revenue growth and the resulting improvement in adjusted EBITDA, special factors also had a positive impact on operating results. These special factors were mainly attributable to the write-up for US mobile communications licenses and proceeds from disposals. Excluding special factors, operating results improved from 5.2 billion euro in 2003 to 6.9 billion in 2004.

The considerable increase in net income from 1.3 billion to 4.6 billion euro in 2004 was due to the positive development of the operating results and financial results. Adjusted net income increased from 0.2 billion to 2.2 billion euro.

CFO Karl-Gerhard Eick said that "we saw a tremendous improvement on the bottom line in 2004."

Debt down by 11.4 billion

Net debt decreased by 11.4 billion to 35.2 billion euro in 2004. This was primarily due to free cash flow and the sale of investments, such as of shares in the Russian mobile communications company MTS. In 2004, free cash flow before dividend payments amounted to 10.2 billion euro, compared to 8.3 billion the previous year - "one of the highlights of our results," as CFO Eick put it.

Dividend of 0.62 euro planned

Subject to final approval by the Supervisory Board, the Board of Management plans to propose a divided of 0.62 euro per share carrying dividend rights to the shareholders' meeting. This is a result of DT's encouraging performance in the 2004 financial year. Deutsche Telekom considers the dividend to be paid for 2004 a guide for future dividend payments. Any decisions regarding future dividend payments will, however, be based on the development of net income.

Outlook for 2005

In 2005, Deutsche Telekom expects adjusted EBITDA, calculated in accordance with IFRS, to be between 20.7 billion and 21.0 billion euro. The Group plans to invest between 7.5 billion and 8.0 billion euro in property, plant and equipment and expects to generate free cash flow in the same range. Deutsche Telekom expects additional cash outflows as a result of the acquisition of additional mobile communications licenses in the U.S. and the reintegration of T-Online.