Statement of the Board of Management on business development in 2016

Bonn, February 14, 2017

We can once again look back on a successful financial year and are on track to meet our medium-term ambition level. We met, and in some cases actually exceeded, our key company targets for 2016. Adjusted EBITDA stood at EUR 21.4 billion, slightly exceeding our guidance of EUR 21.2 billion. This was largely attributable to the positive development of business in the United States. Free cash flow (before dividend payments and spectrum investments) reached EUR 4.9 billion as expected – growth of almost 9 percent year-on-year. ROCE increased by 0.9 percentage points year-on-year, mainly as a result of income from the sale of our stake in the EE joint venture to BT. This one-time effect also benefited ROCE, which was at 5.7 percent higher than expected.

Our net revenue rose by as much as 5.6 percent to EUR 73.1 billion. The driving force here was once again our United States operating segment, which grew by 16.6 percent year-on-year, mainly thanks to strong mobile customer additions of 8.2 million in particular as a result of T-Mobile US’ successful Un-carrier initiatives.

In the reporting year, our profit from operations (EBIT) amounted to EUR 9.2 billion, which was substantially higher than the prior-year figure. This was mainly as a result of income of around EUR 2.5 billion from the sale of our stake in the EE joint venture. The transactions for the exchange of spectrum licenses made in the United States during the year and the sales of further parts of our share package in Scout24 AG also had a positive effect on the development of EBIT. This trend was partially offset by higher amortization of intangible assets (including goodwill) and higher depreciation of property, plant and equipment compared with 2015 as a result of the high level of investment in building and expanding our mobile networks and fixed-network infrastructure, as well as for the forward-looking migration to IP as part of our integrated network strategy. 9 Net profit decreased by around 18 percent to EUR 2.7 billion. The EUR 2.2 billion impairment of our financial stake in BT, which was recognized in profit and loss, almost completely offset the income from the sale of our stake in the EE joint venture, which was recognized in EBIT.

Net debt increased from EUR 47.6 billion to EUR 50.0 billion, primarily as a result of acquiring mobile spectrum and continuing to invest heavily in building out and modernizing our networks in the United States, Germany, and Europe.

Subject to approval by the relevant bodies and the fulfillment of other legal requirements, we continue to adhere to our shareholder remuneration strategy as planned and will propose to the shareholders’ meeting a dividend of EUR 0.60 per dividend-bearing share. We thus once again kept the promise we made at our Capital Markets Days in February 2015, which was to include our shareholders in the relative growth of free cash flow. We are also considering offering our shareholders the choice – as in previous years – of having their dividend paid out in cash or converting it into Deutsche Telekom AG shares.

The trends in the industry, in particular on the European telecommunications markets, remain challenging: saturated markets, rising competition, strict regulatory requirements – all resulting in further price erosion. In order to succeed in the future, we continue to invest heavily in the key to our success: our networks. In 2016, we made investments (before spectrum) of EUR 11.0 billion, a marginally higher amount than in the prior year. In the fixed network, our focus was on investments in vectoring and fiber-optic roll-out in Germany, IPTV, and the continued migration to an IP-based network. In mobile communications, we invested in LTE, increased network coverage, and upgraded capacity to meet increasing demand for high-speed data transfer rates in all our operating segments. Our rating remained solid in 2016 with undisputed access to the capital market at all times. This helps us to flexibly manage our planned investments for the coming years and establish the basis for further growth.

Our customer satisfaction levels developed positively. In the reporting year, we raised our TRI*M customer loyalty score once again. Employee satisfaction at Deutsche Telekom also remains at a high level. The surveys conducted in 2016 corroborated the good results of our last employee survey in 2015. 8

Against this backdrop, we are reasserting our commitment to the strategic goal we set ourselves in 2014 of becoming the leading European telecommunications provider. With this goal in mind, in 2016 we continued to focus intently on delivering state-of-the-art networks and products that give our customers simple, convenient access to the digital world. We continue to see ourselves as the driving force behind the creation of a modern and competitive digital Europe. 9