Further optimization of organization in the Networks unit. In order to increase our efficiency furthermore, we laid the cornerstone for a far leaner, more efficient organization throughout the Networks unit during the year under review; implementation of the approved measures will continue in the current year. The six former regional directorates and 39 Networks branch offices will merge to form 13 Networks branch offices. This involves far flatter hierarchies, more direct reporting and rationalized workflows between the central and decentralized Networks units, bringing with it considerable cost savings. This bundling allows management to be streamlined, giving innovation capability and flexibility a distinct boost all to the benefit of our customers. Against the backdrop of tough competition in the national and international telecommunications arenas, Deutsche Telekom will continue to avail itself of every opportunity to gear its organization to the current needs of its customers and the market. Strict customer focus will enable us to secure our position among competition and, in the interest of our customers, accelerate innovation processes and the development of new application areas in modern telecommunications.
Network communications. Individual achievements in the face of tough competition.
Competition in the area of fixed network communications was even fiercer in 1999. In this context Deutsche Telekom pursues a clear strategy: We offer our customers individual telecommunications services in conjunction with innovative rates.
With a share of 47 percent in Group revenue, fixed network communications represents Deutsche Telekoms core business. This business area posted revenue of EUR 16.7 billion with income before taxes of EUR 2.3 billion in 1999. By comparison: In the 1998 financial year, revenue totaled EUR 20.5 billion and income before taxes amounted to EUR 4.8 billion. The decrease in revenue resulted primarily from loss of market share to our competitors but also to extensive cuts in rates, which benefited our customers to the tune of around EUR 3 billion in the area of fixed network communications, calculated over the whole year. Call charges accounted for 62 percent of revenue from telephony services in the year under review; the largest share 69 percent was earned in residential customer business, while 31 percent resulted from our business customers lines. 39 percent of the charges for customers calls stem from City calls, 29 percent from long-distance calls. International calls made by Deutsche Telekom customers contributed a share of 14 percent to call charge revenue. There was a distinct rise in the number of calls made to mobile telephony networks: These calls accounted for 17 percent of revenue in 1999 compared with 10 percent the previous year. As per the end of 1999 our customers were using 47.7 million telephone lines (including ISDN channels). In the second year following the complete liberalization of Germanys telecommunications market, competition in the area of telephony continued, characterized by a fierce price war. This led to falling margins in this segment of the telecommunications market and to first consolidation trends among providers. With customer-focused tariff campaigns, Deutsche Telekom was able to slow down the market share gains made by our competitors in several key sectors in the course of 1999. In the year under review, competition still concentrated on long-distance and international calls, both areas in which our competitors have, in the meantime, made considerable inroads into the market. 44

without roaming; outgoing traffic only.
Modacom. Modacom, T-Mobils radio data transmission service, will continue unchanged and is due to be converted to the new GPRS platform (General Packet Radio Service) during the course of the year 2000. Inmarsat. Within the context of portfolio optimization, T-Mobil has transferred its mobile satellite communications activities to its sister company DeTeSat Deutsche Telekom Gesellschaft fr Satellitenkommunikation mbH. New technology, new standards GPRS and UMTS. The year 2000 will be a landmark in the future development of mobile communications. As well as voice communication, mobile data transfer will play an increasingly important role. In the summer, T-D1 aims to become the first German network operator to introduce nationwide GPRS (General Packet Radio Service). In the initial phase, data transmission rates of up to 50 Kbit will be possible. GPRS will open up in this respect unknown possibilities for mobile communications, since GSM networks in the past were restricted to a transfer rate of 9,600 bits per second. T-Mobil will also play a pivotal role in the introduction of the next mobile communications generation, UMTS (Universal Mobile Telecommunications System). The company will be participating in an auction to obtain the required frequencies, the auction is expected in the summer of 2000. Tegaron modern traffic telematics. Since 1997, T-Mobil has cooperated with Daimler-Chrysler-Services (debis) in the joint venture Tegaron to develop pioneering traffic telematics concepts. Tegaron services are used in vehicles from Mercedes Benz, Volkswagen, Audi and Renault. The recently developed WAP service from Tegaron allows drivers to retrieve traffic information and route recommendations based on the current traffic situation. The traffic information service Tegaron Info (call 2211 on the mobile) has been extended and now reports on the delays anticipated from traffic jams. At the end of 1999, shares in the joint venture Tegaron were transferred from T-Mobil to Deutsche Telekom AG.
Extra frequencies clear the way for data applications. The increase in additional frequencies in the 1800 MHz range in October 1999 was highly significant to the future of the T-D1network. T-Mobil now has adequate frequency resources to enable it to offer modern data applications to its customers. In total, it invested around EUR100 million in the new frequency packages. As the T-D1 network continues to expand, use of the new frequencies will commence as early as the year 2000. Initially, the 1800 MHz frequencies will primarily be used in metropolitan areas. Customers with dual band mobile phones will be able to utilize both frequencies, with handover taking place automatically. More Call Centers for optimum service. T-Mobil has also upgraded its service in response to the latest developments. In the year under review, the company opened Call Centers and back offices in Erfurt, Hamburg, Dortmund, Berlin, Leipzig and Kamp-Lintfort. In total, some 1,500 new jobs were created in the field of customer care. Market orientation. The portfolio optimization process begun in the previous year, was largely completed during the year under review. T-C-Tel. T-Mobil has resolved to deactivate its analog network as of December 31, 2000. On December 31, 1999, some 165,000 customers were still using T-C-Tel to make calls. In the year under review, a large number of customers were attracted by a variety of attractive offers and thus switched from T-C-Tel to T-D1. These campaigns will be stepped up in the year 2000, making it easier for all customers to switch to the T-D1 network. Paging. T-Mobil has spun off its paging activities to an independent company, Q-bic (Q Business Information Counter GmbH). This company will continue the full range of paging services. Q-bic was sold as of December 31, 1999; the new owner has undertaken to maintain the paging services.

Bringing comfort and convenience to the virtual world. The networked home.
Services Intranet Solutions reports sharp growth. We supply our national and international customers with customized intranet solutions based on our IP, Frame Relay and ATM platforms, under the general brand name of Intranet Solutions. Our intranet services were the fastest growing product segment of T-InterConnect in 1999, with growth in excess of 400 percent. In the year under review, we configured customized intranet solutions for a number of customers, including a nationwide extranet for the automobile group Renault in Germany, linking the companys 660 dealers. Our LAN to LAN service is the ideal basis for customized national and international solutions to interconnect local area networks. Our subsidiary T-Data is responsible for implementing LAN to LAN solutions. In the 1999 financial year, we set up ENX (European Network Exchange) together with the German automobile association VDA. ENX is a sector-specific network for the automobile industry that meets maximum requirements with regard to encryption. ENX Solution connections have been marketed since December 1999, which means that a number of companies in the automobile industry were already able to enjoy the benefits of ENX Solution in the year under review. In 1999, we began marketing Global Intranet solutions. This service, a pioneering innovation by Deutsche Telekom in the international growth market of IP transport services, provides global access to corporate networks based on IP technology (IP= Internet Protocol). FrameLink Plus extended product portfolio. The FrameLink Plus service from Deutsche Telekom is based on Frame Relay technology and is especially designed to handle data that includes highvolume bursts. FrameLink Plus is equally well-suited both for linking LANs and as a basis for corporate networks. In the year under review, we significantly extended our FrameLink Plus portfolio, including a broader range of transmission speeds. We also introduced substantial rate cuts for FrameLink Plus. In the 1999 financial year, T-Data acquired a 51 percent stake in Datus GmbH. Datus is an engineering firm in the data communications business. It has been operating successfully on the German market for 25 years, planning and building data networks for clients, and supplying its own network components and network management systems. The acquisition will allow Deutsche Telekom to respond even more effectively to individual customer requirements and offer an extended range of customized solutions. Fixed connections show a clear trend towards digital transmission. Deutsche Telekom offers its customers fixed data connections in the form of leased lines, leased lines for data communications and CityNetz networks under the product name LeasedLink. In the year under review, the trend in favor of digital data lines continued. Whereas revenue for analog leased lines showed a further decline, revenue for digital leased lines for data communications increased significantly. Overall, revenue in the external LeasedLink business showed a significant increase, despite various cuts in rates. Combined know-how and systems solutions expertise customized telecommunications applications for our clients. Increasingly, our network platforms and our range of services in the field of data communications are being combined to create customized telecommunications applications. In the 1999 financial year, we successfully completed a large number of customer projects. One outstanding example was the InfoHighway Landesverwaltung Sachsen (IHL). In August 1999, the German state of Saxony requested Deutsche Telekom to build a high-performance network for its local government administration. The IHL links 70,000 users at 800 administrative offices; all voice and data communication between these users is integrated into a uniform network. Deutsche Telekom has been contracted to build and operate the IHL over a 7-year period. DeTeSystem experts in systems solutions. Deutsche Telekoms systems solutions business is managed by its subsidiary, Deutsche Telekom Systemlsungen GmbH (DeTeSystem). Thanks to its expertise in project management and innovative power, DeTeSystem is a strong supplier in the growing systems solutions market. In the year under review, the employees at DeTeSystem increased by 168 to 1,816. In the year under review, the entire international sales team of the Deutsche Telekom Group was combined under DeTeSystem, further strengthening our position in the implementation of international customer solutions and international projects. This will enable us to tap even more effectively the revenue potential with business customers operating worldwide. With this in mind, the sales force at DeTeSystem continues to expand. In the current year, we will recruit over 50 new sales experts.

Information and communications systems from standardized modules to customized solutions for telecommunications and information technology. Integrated solutions which combine telecommunications and information technology (IT) for complex PC and server infrastructures are becoming increasingly important for companies in most industries. In the 1999 financial year, Deutsche Telekom created a new business area, information and communications systems, which combines the Groups information technology and telecommunications services particularly those of specialist subsidiaries DeTeCSM, T-Nova and DeTeLine along with external suppliers to create customized, integrated solutions. The Group business area formerly known as systems solutions was divided between the data communications area and the newly founded information and communications systems area. Deutsche Telekom aims to become one of Germanys leading information technology suppliers over the next few years. In the IT services segment, Deutsche Telekom offers a product called Global Desktop Services, which is designed to provide holistic systems solutions for key accounts. It includes solutions and services which will optimize networked PC workstation structures and ensure global end-to-end accessibility. The service portfolio ranges from consulting, roll-out and on-site service, to the creation of user help desks and the operation of workstation systems. In this respect, Deutsche Telekoms cooperation with the American IT group Unisys of Global Desktop Services, agreed in December 1999, plays a key role. Together, we are able to meet customers requirements for systems solutions in information and communications technology in almost 100 countries. Deutsche Telekom markets not only customized IT applications for supply chain management, i.e., for the integration of suppliers and subcontractors into a companys purchasing and logistics processes, but also solutions for customer relationship management, which respond to business customers demands for optimum customer relations with innovative services. In this way, we support our customers in the optimization of their service and distribution processes, as well as help them become more competitive.
Carrier services. Full service for our competitors who are our customers.
The carrier services business area offers a full range of services to Deutsche Telekoms competitors in the end-user market. In the year under review, we optimized all success-critical functions to ensure maximum usage of the carriers carrier market. In the course of the year, carrier services generated revenue totaling EUR 2.9 billion, 79 percent up on last years figures.
Regulatory practice in the 1999 financial year. In the second year following the complete liberalization of Germanys telecommunications market, the virtually unlimited number of licenses granted and the extremely low-priced interconnection terms were drivers of greater competition also in the market for carrier products. With effect from December 31, 1999, the Regulatory Authority for Telecommunications and Posts granted 365 Class 3 licenses operation of transmission paths for the general public (211 licenses on December 31, 1998) and 262 Class 4 licenses operation of voice telephony services for the general public (164 licenses on December 31, 1998). The growing number of providers and lower prices bear witness to the keener competition, especially in the markets for transmission paths for carriers, interconnection for long-distance calls and interconnection for international calls.

International business. Strategic focus on acquisitions and majority shareholdings.
In 1999, Deutsche Telekom focused its internationalization activities on acquisitions and majority stakes in the companys four strategic business areas: mobile telephony, online services, data communications/systems solutions and network access.
Strong dynamic growth and tough competition were characteristic of the telecommunications sector in 1999. Providers set about bundling their skills in the market, above all in the strong growth segments of mobile telephony, Internet communications and systems solutions for key accounts. These developments had a sustained impact on the structures of global telecommunications markets. Against this backdrop, the strategic alliances that once dominated the global telecommunications market are now increasingly being replaced by acquisitions and majority shareholdings. In 1999, Deutsche Telekom consistently focussed on its internationalization strategy: it planned, through acquisitions and majority holdings in associated companies, to increase its added value and become a European company which delivers global services to the world telecommunications market. In doing so, our strategy focuses on the four dominant growth segments of the telecommunications market: mobile telephony, online services, data communications/systems solutions and network access. T-Mobile International AG Milestone on the way to becoming a European mobile communications provider. In order to expand its strategic pillar in mobile telephony within the international arena, Deutsche Telekom is bundling its mobile telephony subsidiaries and associated companies into a new holding, T-Mobile International AG. In the current financial year, T-Mobil, Britains One 2 One and the Austrian company max.mobil. are to be incorporated in addition to some minority held subsidiaries. Our objective is to gradually integrate all of the Groups mobile telephony interests into this holding.
You can go to the corner store from anywhere in the world. We serve our customers while the rest of the world is asleep.
Services Setting up T-Mobile International AG represents a major step towards providing cross-border mobile telephony services in Europe. By the end of the year, we served approximately 15 million mobile telephony customers in Europe through T-Mobil (Germany), One 2 One (Great Britain) and max.mobil. (Austria). One 2 One Moving into Britains mobile telephony market. With the purchase of the British telecommunications provider One 2 One in 1999, we continued our internationalization strategy in the mobile telephony segment in Great Britain, one of the key telecommunications markets in the European Union. Acquiring One 2 One marks a milestone on Deutsche Telekoms way to becoming a leading provider of mobile telephony services in Europe. The purchase price for One 2 One totaled 6.7 billion pounds sterling. With a market share of 17 percent, the company is the fourth largest mobile communications carrier in the United Kingdom and has an above-average share of market growth. At the end of 1999, One 2 One had 4.2 million customers compared with 1.9 million one year before. In the fourth quarter of 1999, our British mobile subsidiary generated revenue of EUR 544 million. One of the successes of One 2 One has been the introduction of prepaid cards into the mass market. Setting up the Virgin Mobile joint venture, in which One 2 One has a 50 percent stake, will make it possible to market One 2 Ones products at over 200 outlets under the attractive Virgin Mobile brand. max.mobil. Mobile success story in Austria. In the year under review, we raised our stake in Austrias mobile telephony provider max.mobil. from 25 to 91 percent. This majority interest is held by our mobile telephony subsidiary DeTeMobil. With a GSM market share of around 38 percent, max.mobil. was no. 2 in Austrias mobile telephony market as per year end. 1.5 million customers were using the companys services by the end of 1999. max.mobil. has a workforce of around 2,419 and increased its revenue in the last financial year by approximately 150 percent from 4.5 billion Austrian shillings to 11.1 billion shillings (EUR 811 million). SIRIS Positioning Deutsche Telekom in strategic business areas of the French market. By purchasing the telecommunications company SIRIS S.A.S. in November 1999, we established a strong presence in the strategic growth areas of data communications/systems solutions and network access in the French market in the year under review. The purchase price totaled EUR 700 million. Following the liberalization of the telecommunications market in France in 1998, SIRIS is, measured in terms of revenue, the second largest alternative provider in the fixed network segment and generated revenue of Francs 740 million or EUR 113 million in the 1999 financial year. SIRIS has mainly established itself in the lucrative business customer market: Every third company listed in the CAC-40 index of Frances stock exchange is a customer of our French subsidiary. As a full-service provider, SIRIS operates a nationwide optical fiber network for voice and data communications. With a length of 2,000 kilometers, the network links all major business centers in France. Wind Mobile communications and fixed network services in Italy. In 1999, Wind, the joint venture set up by Deutsche Telekom, France Telecom and Enel, expanded its position in Italys competitive telecommunications market. This has very successfully established Wind in Italys telecommunications market. By the end of the year, Wind attracted about 1.5 million customers. Nonetheless, despite the termination of merger negotiations between Deutsche Telekom and Telecom Italia, Enel and France Telecom instituted arbitration proceedings against Deutsche Telekom with regard to existing claims for alleged damages. MetroHoldingsMANinfrastructureinGreat Britain. DeutscheTelekom has been active in Britains fixed networks market since April 1998 through its infrastructure joint venture MetroHoldings with the British partner Energis and France Telecom. MetroHoldings builds and operates high-speed optical fiber networks based on the latest Synchronous Digital Hierarchy (SDH) technology. Activities concentrated on the business centers of London, Manchester and Birmingham. At the end of 1999, new metropolitan area networks (MAN) in Bristol and Leeds were added. On the basis of these networks and as a result of the direct link to Deutsche Telekoms global infrastructure, the sophisticated needs of business customers who are active in the national and international arenas can be met with products in the areas of data, voice and IP services.

Broadcasting and broadband cable. Decisive steps into the multimedia future.
Deutsche Telekoms broadband cable network is transforming itself from a genuine distribution network for radio and TV broadcasting into a network infrastructure for multimedia communications. In 1999, we made significant further progress in this area. At the same time, we prepared for the sale of parts of the broadband cable network in order to be able, together with investors, to exploit the potential of the broadband cable network in the interests of our customers. Moreover, we want to ensure that in the future the broadband cable network will remain one of the best platforms in the telecommunications and media landscape worldwide. As to traditional, terrestrial broadcasting, we are influencing the digitization of radio and TV broadcasting to a great extent.
Refocus on the broadband cable business essentially complete. 1999 was a key year in reorientation of the broadband cable business. We decided back in 1998 to divide up the business into two subsidiaries in order to improve its financial situation: MSG MediaServices GmbH (MSG) and Kabel Deutschland GmbH (KDG). Both businesses were formed at the beginning of 1999. MSG provides KDG as well as other network operators and program providers with services and is a neutral platform operator for digital services, with the main focus on TV in the Deutsche Telekom cable network. In the year under review, MSG, as Deutsche Telekom service provider for the multimedia sector, also started to market digital television and radio programs in the broadband cable network under the MediaVision trademark. KDG is responsible for operating the cable network.
Cosmopolitan Bohemia. Our club knows no boundaries.
MediaVision marketing platform launched. In 1999, we made an important contribution towards making digital television a success in Germany by launching MediaVision, our new marketing platform for the digital cable network. MediaVision offers a broad range of digital TV and radio programs, from which each subscriber can put together his or her own program package. VisionBasic, a package of digital free TV and radio programs, plus the electronic program guide (EPG), which is available to all MediaVision customers free of charge and which every subscriber automatically has access to. The future VisionProgram Manager will take viewers through the whole range of programs on offer. All programs will also be presented sorted by broadcasters, genre, favorites and time. VisionSelect, a Pay TV service, enables customers to put together their own personal TV package from a range of programs. VisionSelect currently comprises Bloomberg TV, Fashion TV, Bet on Jazz, Landscape and Extreme Sports. Other programs are to be added to the service. VisionGlobe, a foreign-language program package that is free of charge, currently boasts six TV programs for foreign citizens living in Germany. VisionSpecial offers individual Pay TV programs for special target groups; programs on offer include the Indian broadcasting station Zee TV or the Russian program from NTVi. VisionProfi, selected programs such as Fashion TV and Bloomberg TV used for business purposes. Since October 1, 1999, the digital programs of the Pay TV broadcasting station Premiere World the super package with the MOVIE WORLD, SPORTS WORLD and FAMILY WORLD programs, along with the EXTRAS that are available for subscription have been co-marketed. The MediaVision services as well as the equipment needed to receive the programs smart card and decoder are sold nationwide in our T-Punkt shops and Call Centers as well as via the MediaVision homepage (www.mediavision.de). Interested customers can also buy the digital Premiere World service in these locations. Deutsche Telekom also plans to further expand the existing MediaVision service in the future.

Pilot project in Berlin opens up multimedia world for residential customers. As part of a pilot project in Berlin, for approximately 680,000 homes we have begun to expand the broadband cable network to 862 MHz. In addition to expanding the frequency, we are also implementing broadband back channel capability in the capital. With this increase in capacity, we will be able to offer up to 49 additional 8 MHz channels for digital program packages or multimedia services and temporarily feed in 13 additional analog television programs. The cable will become interactive and is opening up the entire multimedia world to users via fast Internet access. Deutsche Telekoms partners in this innovative project are the Berlin Senate, private cable network operators and housing companies. Regionalization and sale of the broadband cable network started. KDG was established at the end of 1998 and the national property, plant & equipment of the broadband distribution networks were transferred to KDG. In the year under review, KDG took over operations. For this purpose some 2,900 Deutsche Telekom employees were transferred to KDG by the end of 1999. This way, KDG is now able to manage its operational business activities independently. Regional cable companies in which external investors with capital and expertise can participate are to be established to complete the intended partial sale. To this end, we divided Germany into nine regions at the beginning of 1999. In these regions the new companies are to independently shape the cable business activities, expand networks and offer new services. The first legally independent regional companies are to be established by June 30, 2000. With the establishment of these business units, the respective regional companies will maintain their own customer contacts and accounting and be headed by their own management. The first, initially non-binding offers were submitted by potential investors for all regions in August 1999. It is planned that the purchasers will acquire 35 percent or more of the shares in the future regional companies and take over the operational management. The remaining shares are to remain with Deutsche Telekom until the proposed listing of the regional companies. Deutsche Telekom plans to reduce its stake to 25 percent plus one share. The minority rights linked to Deutsche Telekoms shares would not have any influence on the strategy, services and pricing policy of the new regional companies. In February 2000, Deutsche Telekom signed the first contract on the partial sale of its cable networks. The new majority shareholder of the North-Rhine Westphalia regional company is to be Callahan Associates International LLC, a global communication development and operating company located in Denver, USA and London. The company is to acquire 55 percent of the cable network and 45 percent are to remain with Deutsche Telekom. Contracts on the sale of further regional companies are also to be concluded in the coming months.

Terminal equipment in the black again. In 1999, our terminal equipment group business area generated net revenue of EUR 1.2 billion and income before taxes of EUR 19 million, after making a loss in 1998. The main reasons for the turn-around were the continued streamlining of our product portfolio by cutting down on the number of model variants and the launching of innovative terminals such as the Sinus 45 product family. Siemens AG was again our biggest supplier in 1999, accounting for 48 percent of our purchasing volume in the terminal equipment segment. At the same time, Siemens was also our biggest competitor in the terminal equipment market. Where key products are involved, Deutsche Telekom draws on models from at least two manufacturers. Strong position in the ISDN growth market. In the year under review, we supported our companys fast growing T-ISDN business by marketing an attractive range of ISDN terminals. Inexpensive, user-friendly ISDN products were added to the T-Easy and T-Concept product lines introduced in 1998. With the launch of the T-Concept PC in mid 1999, we introduced a solution that enables a personal computer to be upgraded to an ISDN feature phone. Deutsche Telekom terminals voted number one. We are the only telecommunications company on the German market thus far to offer the full range of telecommunications services and a complete line of terminal equipment under the same brand name. In September 1999, consumers acknowledged our position as a future-oriented, competitive, full-service provider when readers of the well-known magazine, connect, voted Deutsche Telekom the most popular provider of terminal equipment. Our products performed extremely well especially in the category of ISDN systems, where the first three places went to Deutsche Telekom.
Multimedia. Two paths to success: With T-Online and T-Mart into the Internet.
Deutsche Telekom meets the different Internet requirements of its residential and business customers with two impressive brands: T-Online and T-Mart. With T-Online, we offer cost-effective, yet powerful Internet access primarily for residential users. Under the brand name T-Mart, our business customers find a broad spectrum of products and services for commercial utilization of the Internet.
T-Online another sizeable increase in online business. Measured in terms of its customer base, T-Online, the Deutsche Telekom online service operated by our wholly-owned subsidiary T-Online International AG, was once again the undisputed leader in the German market and the largest Internet access provider in Europe in the year under review. The transformation of the former DeTeOnline Service GmbH into a new stock corporation took place on January 1, 2000. In 1999, T-Online recorded growth averaging more than 100,000 new customers per month. By the close of the year, the total number of T-Online customers had risen to about 4.2 million. That is equivalent to more than 50 percent growth over the previous year. With the new customer-oriented rates, we gave the online market a decisive push. For example, in October 1999, we reduced our T-Online eco rate from three to two pfennigs per minute and did away with the six-pfennigs dial-in charge that had been charged previously. Since November 1, 1999, we have also been offering T-Online pro, a cost-effective package for frequent users: For a monthly price of DM 19.90, T-Online customers can surf the Internet for as long as they like, paying only three pfennigs per minute for network access via Deutsche Telekom.

The extended family is back. We are on the move.
Services Secure payment transactions as the basis for growing Internet commerce. Further development of electronic commerce in the Internet is closely linked with the availability of secure payment methods. As an independent service provider, Deutsche Telekom offers its customers user-friendly solutions guaranteeing maximum security in payment transactions and data interchange in the Internet. In the year under review, we concentrated these solutions under the umbrella of our wholly-owned subsidiary TeleCash Kommunikations-Services GmbH. Our range of products includes, for example, Secure Pay Services. This solution supports the use of credit cards complying with the SET (Secure Electronic Transaction) standard, an internationally recognized method of handling credit card transactions in the Internet. Secure Pay Services complement our online shops (T-Mart Shop Complete) ideally, thus providing Internet dealers with complete, customized solutions for doing business in the World Wide Web. Digital signature and ServerPass. In January 1999, we were the first German company to issue chipcards for digital signatures, offering our customers the possibility of affixing a legally binding signature to electronic data on the computer. Digital signatures provide a basis for secure data interchange in computer communications and via the Internet. Its areas of application include, for example, electronic tax returns, online banking, telemedicine, data archiving, the transfer of contracts and other legal documents and the electronic processing of public authority transactions. With ServerPass, an electronic ID for web servers, we have made available another effective solution for reliable and trustworthy communications between vendors and users in the Internet since October 1999.ServerPassensuresthatacontentprovider in the Web can be uniquely identified, thus providing online customers of department stores, travel agents or banks with the certainty that they are, in fact, connected with the desired vendor. In order to strengthen our position in the segment of network security products, we acquired a 34 percent stake in secunet Security Networks GmbH, a subsidiary of the TV Mitte group, in September. The spectrum of services offered by the Essen-based company covers the entire valueadded chain in information security, ranging from security analysis and consulting through implementation to maintenance and customer care. For both companies, this venture opens up possibilities for new business and synergies in international business. In November, secunet, which had meanwhile been transformed into a stock corporation, was successfully floated on the stock exchange. Together with the US company Commerce One we plan to further develop e-commerce in the Internet. Deutsche Telekoms goal is to set up an open business-to-business (B-to-B) marketplace , i.e., a virtual marketplace for companies with a commercial portal in the Internet. Deutsche Telekom will build this marketplace, operate it and integrate Commerce Ones technology. Deutsche Telekoms marketplace will simplify and accelerate the companies transactions when trading goods and services electronically. The contract was signed in January 2000.

Sales and Service. Customer-friendly, geared to service and high quality.
In the fiercely contested telecommunications market, the achievements of Sales and Service have a key impact on Deutsche Telekoms success. In the 1999 financial year, we continued to optimize the efficiency of our sales organization. In a market in which the rate of change is continually accelerating, we focus our activities on developing products which are geared to the needs and wishes of our customers as well as increasing the quality of our services. Quality and service campaigns were launched in Customer branch offices to ensure that our processes and employee qualifications are aligned more precisely to our customers needs.
New T-Punkt shops get ready for business. In 1999, we started implementing our new concept for Deutsche Telekoms T-Punkt shops. This includes optimizing our direct sales locations. In the future our shops will be located in busy city centers in areas covering at least 80,000 inhabitants. A key point of our new T-Punkt shop concept is to focus on the three core brands T-ISDN, T-D1 and T-Online. The focus is above all on younger target groups and high-end users in the areas of mobile communications, the Internet and state-of-the-art fixed network communications. In 1999, over 60 new T-Punkt shops opened for our customers. In 1999, we will push expansion of the new T-Punkt shops to other locations. In 2001, we expect the T-Punkt network to be complete. In the year under review, we also took initial steps towards introducing our T-Punkt Business shops to the market. These will concentrate on serving medium-sized businesses. The first T-Punkt Business shop opened in Minden at the beginning of January 2000.
Services Indirect sales channels gain momentum. Marketing via indirect sales continues to make great progress, with some 10,000 Deutsche Telekom sales partners as of the end of the year. During the course of the year 2000 we plan to enhance our product portfolio and to expand our distribution channels in order to give a further boost to our marketing activities. Customer segment management and specialized sales units set up in various areas. Setting up our customer segment management has enabled us to establish links between the product units and the sales units within our company. In a market in which change is continually gaining momentum, this measure allows us to develop products that focus on our customers and their needs. The areas of multimedia, mobile and data communications are among the strongest growing segments in the telecommunications market. Specialized sales know-how is required to market customerfocused solutions in these areas. Following a concept we developed in 1998, we established specialized sales units in 1999 to open up and develop these business areas. With their specialist knowhow these sales units support the business customer sales units in serving individual customers and support the placement of new products and solutions on the market. New focus in international sales force. The new focus of our international sales force under the direction of the Sales and Service Division was a key element in optimizing our sales organization. It will enable us to provide our multinational customers with marked improvements. We have combined all our sales support for international projects within our subsidiary DeTeSystem, thereby further improving the processes involved in international bids and operations. One example is the BASF Corporate Network BCN for the BASF Group for which DeTeSystem, as full-service provider, has set up a worldwide standard communications infrastructure for 70 national and 140 European sites. For its work the project management team received the Project Management Award 1999. Classic mail-order and new solutions. T-Versand, our classic mail-order business, has developed new solutions tailored to meet various customer needs. One joint sales promotion was launched by Commerzbank, Siemens and Deutsche Telekom and offered product bundles consisting of PCs, T-Online access and online banking. Expanding the Internet sales channel. In addition to our mail-order business, during the year under review we increased our sales activities in the Internet to a considerable degree. Our homepage at www.telekom.de provides customers with information about our products and services around the clock, enabling them to order the articles they require straight from our online catalog. Continuous changing offers on the start pages and special online promotions round off our Internet sales activities. Since October 1999 T-Versand operates an Internet Call Center, which supports Deutsche Telekoms online sales. T-Service focus on customer satisfaction. With over 32,000 employees, Deutsche Telekoms T-Service is one of the largest service organizations in the European telecommunications sector. T-Service is responsible for installation, repairs and maintenance of our customers lines and terminal equipment. It is also expanding its activities in the IT market. In the year under review, our T-Service was strategically and organizationally realigned. The service organizations for residential and business customers separate until that point were merged and existing processes and organizational structures saw improvement. The quality of T-Service performance was reflected in its customer satisfaction figures: In the middle of the year, the quality of assembly and installation services for business customers achieved the Tri:M value 7.0, a figure which we estimate to be above average for this segment. Tri:M is a value that is used internationally to measure customer satisfaction on a scale of 0 to 10. Since mid-1999, we have been processing customer orders automatically. Faster order processing enables us to achieve greater productivity in T-Service. The year 1999 saw greater application of alternative service methods such as remote configuration and remote maintenance. TelekomForum direct dialog with our customers. Again in the 1999 financial year we made extensive use of the opportunity provided by TelekomForum e.V. for direct dialog with our customers. Well over 300 of Deutsche Telekoms largest business customers have joined forces in TelekomForum, our business customer council which was founded in 1996. The suggestions made by our customers are channeled directly into our product development activities. About every two weeks, customers and product management meet to discuss potential product improvements.

DeTeCSM IT service provider for the Group. Deutsche Telekom Computer Service Management GmbH (DeTeCSM), a wholly-owned Deutsche Telekom subsidiary, is charged with expanding and operating our IT infrastructure and IT applications. In 1999, Deutsche Telekom continued the consolidation process which was started a few years ago. This led to the entire Deutsche Telekom IT service organization being bundled into DeTeCSM. The IT service provider has also taken on important tasks in the area of information technology for T-Mobil since September 1, 1999. DeTeCSM is likewise responsible for supporting T-Online and T-Mart systems engineering. The IT service provider employed approximately 5,200 employees in the Deutsche Telekom Group at the end of 1999.
Combined high-performance further expansion of the Deutsche Telekom intranet. The combination of DeTeCSM Computer Centers is one of the most powerful in the world with a capacity of 25,000 MIPS and a data storage capacity of more than 70 terabytes. Compass, a leading consulting firm specializing in information technology, carried out a benchmark study for DeTeCSM in July 1999. The study, which compared a selection of European and American IT service providers from the telecommunications industry, revealed that DeTeCSM had an efficiency factor which was 18 percent better than the average. HITNET, the Deutsche Telekom Group-wide intranet, underwent further expansion in 1999; in the year under review, we doubled the monthly network transport volume from approximately 15 terabytes in January to 30 terabytes in December. The network that DeTeCSM is in charge of contains approximately 180,000 IP connections in more than 6,000 buildings. Over 3,200 Unix and NT servers are integrated in this network. There are also more than 150,000 computer-aided workstations. By making consistent use of automatic software distribution, we were able to greatly speed up and complete an extensive project in 1999 that involved equipping 100,000 PCs with modern office communications software. According to Microsoft, the e-mail system operated by DeTeCSM, which is based on the Microsoft Exchange Server and has 120,000 users (as per December 31, 1999), is one of the largest of its kind. Security for large applications. DeTeCSM is smoothing the way for future innovative IT applications by using trend-setting technologies. In the year under review, the company linked up with EMC Computer Systems to complete a successful technology test for so-called Business Recovery Services. Large data volumes were mirrored on a remote computer over a distance of 700 kilometers based on optical telecommunications links. A Data Safe concept like this plays a significant role in securing data files belonging to banks and insurance companies, for instance, in the event of a catastrophe or an IT malfunction. DeTeCSM and T-Nova are also working together to implement customer-oriented solutions in the application areas that have a promising future, namely Data Warehousing and Web Services. Complex IT projects successfully completed. In July 1999, our IT subsidiary put the largest-ever installation of an SAP R/3 application worldwide

Global leader in commitment to the environment. Deutsche Telekoms total commitment to the efficient use of resources and sustainable environmental protection qualified it for inclusion in the new Dow Jones Sustainability Group Indexes (DJSGI). The indexes make it easier for investors to select companies for capital investment which are geared to sustained long-term value enhancement and which, at the same time, take into consideration social factors and the effects on the environment both within the company and within society as a whole. This index lists Deutsche Telekom as a global leader in the telecommunications sector. We have also been assigned leading positions in other ecological ratings such as that issued by the environmental research agency kom.