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Deutsche Telekom The Joys and Perils of Doing IR in the U.S. June 24, 2002 Nils Paellmann

Deutsche Telekom The Joys and Perils of Doing IR in the U.S. June 24, 2002 Nils Paellmann. The joys and perils of doing IR in the U.S. Overview. Who is Deutsche Telekom? Why do IR in the U.S.? How to deal with institutional investors How to deal with retail investors

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Deutsche Telekom The Joys and Perils of Doing IR in the U.S. June 24, 2002 Nils Paellmann

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  1. Deutsche TelekomThe Joys and Perils of Doing IR in the U.S.June 24, 2002Nils Paellmann

  2. The joys and perils of doing IR in the U.S.Overview. • Who is Deutsche Telekom? • Why do IR in the U.S.? • How to deal with institutional investors • How to deal with retail investors • Uses and benefits of an exchange-listed ADR program • Conclusion

  3. The joys and perils of doing IR in the U.S.Who is Deutsche Telekom? • Europe’s largest integrated telecommunications company • Market cap: EUR 40 billion or $39 billion • Listed in Frankfurt (DTE) and on the NYSE (DT) • T-Mobile: among the largest mobile carriers worldwide with more than 50 million subscribers in majority-held operations • Owner of VoiceStream: only transatlantic GSM carrier • T-Com: largest DSL carrier among U.S. and European telcos with 2.5 million DSL customers • T-Systems: unique provider of integrated IT and telecommunications services • T-Online: one of Europe’s largest Internet companies

  4. The joys and perils of doing IR in the U.S.Why do IR in the U.S.? • U.S. shareholders hold almost 1/4 of our free float • 7 out of the top 10 foreign shareholders are based in the U.S. • Large amount of discretionary investment: U.S. investors have an over-proportional influence on our share price • Since the establishment of the New York IR office, the number of identified North American holders has almost doubled • Servicing geographically diverse shareholder base difficult from home market • Investors like commitment: positive image in the capital market

  5. Shareholder structure (in % of free float as of 3/02).Almost 1/4 of our shares are held by U.S. investors.

  6. Top ten foreign shareholders of DT.7 out of the top 10 investors are based in the U.S. December 1998 March 2002 1. Capital Brandes 2. Brandes State Street 3. State Street Merrill Lynch (U.S.) 4. Barclays Global (U.S.) Goldman Sachs 5. Putnam Merrill Lynch (U.K.) 6. GIC (Singapore) Barclays Global (U.S.) 7. TIAA-CREF Capital 8. UBS Brinson Schroder 9. Bankers Trust Artisan Partners 10. Rowe Price-Fleming Barclays Global (U.K.)

  7. Number of identified U.S. and Canadian holders.Almost doubled despite decrease in share price.

  8. North American shareholder structure by region.Geographically diverse shareholder base.

  9. The joys and perils of doing IR in the U.S.How to deal with institutional investors? • Active vs. passive/quantitative investors: 3/4 of our shareholder base are receptive to investor relations • IR in the U.S. means long-term relationships • Many investors will only invest once they have reached a high comfort level with the management • Investors are open to first contact with IROs with management contact to follow later: missionary road shows • Buy-side vs. sell-side: large investors do their own research and modeling; buy-side more important in the U.S. context • Long-term strategy more important than numbers • Increasing importance of bond investors • Investors expect “U.S.-style IR” (disclosure, Reg FD)

  10. Shareholder structure by investment style.IR can reach 3/4 of our North American shareholders.

  11. Capital and Brandes (DT shares in million).IR in the U.S. means long-term relationships.

  12. The joys and perils of doing IR in the U.S.How to deal with retail investors? • Retail investors represent 11% of DT shares (ordinary + ADRs) held by North American investors and 35% of ADRs • Retail investors provide stability in volatile markets • Leverage the broker community and relationships of depository bank: broker fact sheets, squawk box addresses, retail road shows, ADR research coverage • Target retail investors directly: direct investment program, retail conferences, NAIC • Internet and e-mail cost-efficient means of reaching retail investors • Large variation in degree of sophistication: don’t underestimate the U.S. retail investor • Branding (e.g. T-Mobile) helps but not essential

  13. North American shareholder structure (in % of total).Retail represents 11% or 67 million shares.

  14. North American ADR structure (in % of total).Retail represents 35% or 67 million shares.

  15. The joys and perils of doing IR in the U.S.Uses and benefits of an exchange-listed ADR program. • Our ADRs represent 1/3 of DT shares held by North American investors • ADRs received big boost through VoiceStream acquisition • Trading volume now on average 1 million shares per day • Without an ADR program a U.S. retail strategy is nearly impossible • Exchange listing provides additional credibility (SEC filing requirements, access to information for retail investors) • Some long-term investors prefer to hold ADRs because of lower long-term holding costs • Many U.S.-focused investors would only invest in ADRs

  16. North American shareholder structure (in % of total).ADRs represent 1/3 or 193 million shares.

  17. Outstanding ADRs and closing ADR price since IPO.Lasting increase following VoiceStream acquisition. 300,000,000 90.00 80.00 250,000,000 70.00 200,000,000 60.00 50.00 ADRs outstanding 150,000,000 Closing ADR price 40.00 100,000,000 30.00 20.00 50,000,000 10.00 0 0.00 June June June June June 14-Jun 18-Nov October October October October October February February February February February February 1997 1998 1999 2000 2001 2002

  18. Average daily trading volume (ADRs in million).Strong increase through VoiceStream acquisition. 7 6 5 4 3 2 1 0 June June June June June 18-Nov October October October October October February February February February February February 1997 1998 1999 2000 2001 2002

  19. Conclusion: investor feedback.The commitment pays off. • “DT’s investor relations is definitely superior to its peers. They do a great job of communicating with investors.” • “Nothing needs to be done to improve the communication. If anything, it’s on my part to be more proactive. I follow U.S. and European telecom and I am stretched very thin. You guys are always accessible if I need to get to you.” • “I think DT’s investor relations is pretty good. I think it’s among the better investor relations in European telecom.” • “I think the IR is very good. They saw me in New York when I was there and they made this big effort to come and talk to us this time. I appreciate that very much. It’s very positive when a company makes that kind of effort to reach out to a potential shareholder. I really appreciate their attempt at having good shareholder relations.”

  20. Contact information. Nils Paellmann Vice President, Investor RelationsDeutsche Telekom280 Park Avenue, 26th FloorNew York, NY 10017USA Phone +1-212-424-2951Fax +1-212-424-2977Mobile +1-917-214-7264e-mail Nils.Paellmann@usa.telekom.de

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