Sources: BREKO network operators across Germany, if not indicated otherwise

BREKO Broadband Study 2015 Key results for European decision-makers

Market survey among BREKO

carriers

Regional network operators are driving innovation and investment in Germany

2

Market survey 2015

The BREKO member survey is representative

for the fixed broadband market

in Germany

3

BREKO in a nutshell:

o 130 network operators (230 member

companies in total)

o > € 1.5 billion investments each year

oUniting more than 70% of broadband

network operators in Germany and thus

representing the “voice of competition”

o The leading fibre association in Germany

oBuilding the network: a strong partner for

cities and municipalities

Investment record: Alternative network operators

significantly increase their investments once again

4

(Source: BNetzA, BREKO Research)

€ 7.4 bn investments in 2014

€ 3.2 bn

€ 4.2 bn

€ bn

2.6 2.4 2.7

3.3 3.3 2.9 2.8 3.0 2.8 2.9

3.2 3.1

3.4 3.8 3.8 3.9

3.2 3.1 3.3 3.6

3.7 4.2

5.7 5.8 6.5

7.1 7.2

6.1 5.9 6.3 6.4 6.6

7.4

0,0

1,0

2,0

3,0

4,0

5,0

6,0

7,0

8,0

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Deutsche Telekom competitors (incl. cable) total

BREKO network operators invest in the future

of broadband

• Investment rate (turnover):

22 %

• Investment rate (EBITDA):

103 %

• Compared to:

− Deutsche Telekom: − 14 % (turnover)

− 38 % (EBITDA)

− Unitymedia KabelBW: − 25 % (turnover)

− 40 % (EBITDA)

− Vodafone: − 16 % (turnover)

− 53 % (EBITDA)

0.0

0.5

1.0

1.5

2.0

2007 2008 2009 2010 2011 2012 2013 2014 2015(exp.)

1.5bn

1.5bn 1.35

bn

1.55bn

1.7bn

1.8bn

5

€ bn

BREKO members lead in fibre deployment

850 000 households in urban

areas

1.6 mn households outside

urban areas

of new NGA* subscriptions

outside urban areas are

provided by BREKO companies

*Next Generation Access: > 30 Mbps, here even > 50 Mbps

78.5%

39.1%

13.8%

82.3%

48.7%

20.5%

städtisch

halbstädtisch

ländlich

NGA deployment 2013 – 2014

(Source: TÜV Rheinland)

55 %

6

urban

semi-urban

rural

Status quo FTTB/H deployment in Germany

0.96 mn hh

47 % 0.48 mn hh

24 %

0.6 mn hh 29 %

BREKO operators Deutsche Telekom others

7

of FTTB/H deployment by

alternative network operators

(Source: BNetzA, BREKO Research, status: mid-2015)

hh = households (homes passed)

Infrastructure objective in Schleswig-Holstein is

effective

8

Schleswig- Holstein

Mecklenburg- Vorpommern*

Berlin*

Hamburg

Bremen*

Bavaria

Baden- Württemberg*

1

2

23 %

14 %

2 %

National average: 4.5 %

households reached with FTTB/H (homes passed)

*below 1 %

(Source: BREKO Research,

Länder Broadband Competence

Centres, status: mid-2015)

Bavaria: € 1.5 bn of public funding

do not lead to increased FTTB/H

deployment Brandenburg*

Lower Saxony

Saxony- Anhalt*

Hesse* Thuringia*

Saxony*

Saarland*

Rhineland- Palatinate*

North Rhine- Westphalia

3

7 %

2 %

2009 2010 2011 2012 2013 2014 2015 expected

Fixed line network “to go” Data usage: the indicator of the digital economy

9

3.6 bn GB

4.6 bn GB

5.5 bn GB

7.0 bn GB

8.8 bn GB

10.9 bn GB

27.0 GB 24.4

GB 21.2 GB 17.0

GB 15.1 GB 12.6

GB

of mobile internet usage

takes place in WiFi

“networks” (Source: Mobidia 01-12/2014)

of Germans do not want

to give up fixed line

network (compared to only 65% in

2012 and 80% in 2013)

(Source: D21)

(Source: BNetzA, BREKO Research)

5.70 % 4.15 % 3.05 % 2.23 % 1.41 %

35.0 GB

12.6 bn GB

290 MB mobile

~ factor 100

Demand for high-bitrate connections increases: Need for upload speed will multiply by factor 15

10

7

24

105

30

80

170

Present 2018 2020

Upload Download

BREKO companies’ expected demand until 2020

grows evermore

important

in the medium term

only satisfied by FTTB/H

networks

Mb

ps

11

• Fibre networks play a key role to preserve and increase

prosperity

97.5

151.5

238.1

31.5

48.4

75.6

0 50 100 150 200 250

Residential area

Mixed area

Industrial estate

Demand 2013

Demand 2018

Mbps

(Source: MLR Baden-Württemberg)

Broadband needs 2018

0%10%20%30%40%50%60%70%80%90%

100%

very important important less important not important

Broadband is the number one location factor

12

Source: IHK Karlsruhe 2014

for 63 % of businesses the desired

bandwidth is currently not available

at their location (2009: 43 %)

for more than 60 % of businesses

the availability of fast internet has a

significant and decisive impact on

the next decision to choose a

location

Criteria for the choice of location

Competition and diversity put Germany

in a good position especially compared to the United States

• Investment

dominant cable network operators

in the United States currently

invest roughly 1% of their turnover

• Broadband coverage

comparable high-speed supply in

Germany and the United States

• Monopoly structure in the

United States

75% of US households cannot

choose their broadband

connection

• Prices

EU: € 34 vs USA: $ 70

for a 30-100 Mbps connection

13

(Source: Studie Stiftung neue Verantwortung e.V., 06/2015)

Lessons from the United States:

De-Regulation leads to • less investment

• higher prices

• limited choice and quality of service

Regulation is not a barrier: Deutsche Telekom’s

margin is highest in the regulated home market

14

EBITDA margingroup

EBITDA marginGermany

EBITDA marginUnited States

EBITDA marginEurope

EBITDA marginsystems solutions

31.0%

40.5%

25.0%

35.0%

7.3%

29.0%

39.7%

20.0%

33.0%

8.8%

29.0%

39.5%

19.0%

34.0%

9.0%

2012 2013 2014

(Source: Deutsche Telekom Annual Report)

Alternative network operators shoulder about three quarters of the

deployment of ultrafast fibre connections

Local and regional network operators are driving innovation and investment

in Germany

BREKO network operators stand ready to further intensify their fibre roll-out

15

The BREKO Broadband Study shows: