T-Mobile USA Exceeds 25 Million Customer Milestone and Reports Fourth Quarter and 2006 Results

In the fourth quarter of 2006 T-Mobile USA, Inc (T-Mobile USA) added 901,000 net new customers, up from 802,000 net new customers added in the third quarter of 2006 and down from 1.39 million in the fourth quarter of 2005. Postpay customer net additions made up 87% of fourth quarter customer growth, up from 66% in the fourth quarter of 2005. Postpay customers comprised 85% of T-Mobile USA’s total customer base at December 31, 2006. The introduction of two-year contracts earlier in 2006 continued to prove popular with customers, with over three quarters of new postpay customers opting for two-year contract terms in the fourth quarter. Postpay churn declined to 2.1% in the fourth quarter of 2006 from 2.3% in the third quarter of 2006 and the fourth quarter of 2005. Blended churn, including both postpay and prepaid customers, was 2.9% in the fourth quarter of 2006, level with the fourth quarter of 2005, and slightly down from 3.0% in the third quarter of 2006. "myFavessm is attracting a new class of customers to our company. These customers see T-Mobile as truly standing apart by offering unique and simple ways for people to effortlessly communicate,” said Robert Dotson, Chief Executive Officer and President of T-Mobile USA, Inc. "With offerings like myFaves, we continue to add high quality customers to our ranks. In the fourth quarter, we added more than 900,000 new customers – of which 783,000 were postpay customers – helping us surpass the 25 million customer mark. Recently, we also captured our fifth consecutive J.D. Power and Associates award for customer care performance. This type of honor underscores how service at T-Mobile is foundational to the kinds of breakthrough communications capabilities we make possible for our customers.” "T-Mobile USA is playing an increasingly vital role in bringing a service leadership culture to all of DT,” said René Obermann, Chief Executive Officer, Deutsche Telekom. "At more than 25 million customers and growing, the U.S. business continues to assert its position as the leading growth driver for Deutsche Telekom.” T-Mobile USA reported OIBDA of $1.17 billion in the fourth quarter of 2006, slightly down from $1.23 billion in the third quarter of 2006 and up from $1.11 billion in the fourth quarter of 2005. The sequential fall in OIBDA occurred due to higher total customer acquisition costs related to the strong postpay customer growth and the expected continued decrease in Cingular Wireless LLC ("Cingular”) wholesale revenues (see below). 2006 OIBDA was $4.71 billion – an increase of 12.6% over 2005. T-Mobile USA’s net income for the fourth quarter of 2006 was $179 million, down from $1.79 billion in the third quarter of 2006 and $2.99 billion in the fourth quarter of 2005. The lower net income compared to the third quarter of 2006 and the fourth quarter of 2005 is primarily due to the recognition of non-cash income tax benefits in both of these prior quarters. T-Mobile USA service revenues, consisting of postpay, prepaid, roaming and other service revenues rose to $3.81 billion in the fourth quarter of 2006, up from $3.72 billion in the third quarter of 2006 and $3.26 billion in the fourth quarter of 2005. The increases are primarily due to growth in the number of customers, supported by strong postpay ARPU ("Average Revenue Per User” as defined in note 1 to the Selected Data, below). Other revenues were $122 million in the fourth quarter of 2006, down from $147 million in the third quarter of 2006 and $213 million in the fourth quarter of 2005. The main reason for the sequential and year on year decrease in other revenues is the ongoing migration of Cingular’s customers to its own network following the dissolution of our network sharing venture in early 2005. Total revenues, including service, equipment, and other revenues were $4.52 billion in the fourth quarter of 2006, up from $4.37 billion in the third quarter of 2006 and $3.95 billion in the fourth quarter of 2005. Blended ARPU was $52 in the fourth quarter of 2006, the same as the third quarter of 2006 and the fourth quarter of 2005. Postpay ARPU was $56 in the fourth quarter of 2006, the same as in the third quarter of 2006 and up from $54 in the fourth quarter of 2005. The year on year increase in postpay ARPU primarily relates to continued data revenue growth. Data services revenue (see note 1 below) continued to grow, reaching a total of $475 million in the fourth quarter of 2006. Data services revenue was 12.5% of blended ARPU, or approximately $6.50 per customer, in the fourth quarter of 2006, compared to 11.3%, or approximately $5.90, in the third quarter of 2006 and 9.1%, or almost $4.80, in the fourth quarter of 2005. 2006 saw a significant expansion of T-Mobile USA’s data device offering with the successful launch of T-Mobile MDA and SDA in February, the Sidekick 3 in July, BlackBerry Pearl in September, and T-Mobile Dash in October. The number of postpay converged device users (which is defined as including BlackBerry and Sidekick device users only) increased to almost 1.6 million by the end of the year, a net increase of over 200,000 users in the quarter. Strong growth in messaging continued to contribute to the increase in data ARPU. The total number of SMS and MMS messages increased to almost 13 billion in the fourth quarter of 2006, compared to 9.9 billion in the third quarter of 2006 and 5.4 billion in the fourth quarter of 2005. The average cost of acquiring a customer, Cost Per Gross Add ("CPGA", as defined in note 3 to the Selected Data, below) was $300 in the fourth quarter of 2006, level with $299 in the third quarter of 2006 and up from $264 in the fourth quarter of 2005. The higher CPGA compared to the fourth quarter of 2005 is primarily due to higher marketing costs, due in part to the launch of myFavessm in the fourth quarter of 2006. The average cash cost of serving customers, Cash Cost Per User ("CCPU", as defined in note 2 to the Selected Data, below), was $25.14 per customer per month in the fourth quarter of 2006, slightly higher than $24.83 in the third quarter of 2006 and $24.32 in the fourth quarter of 2005. The sequential increase in CCPU in the fourth quarter was primarily due to higher customer retention costs. Ongoing operational capital expenditures (purchases of property and equipment) were $675 million in the fourth quarter of 2006, compared with $569 million in the third quarter of 2006 and $807 million in the fourth quarter of 2005. Operational capital expenditures increased to $2.6 billion in 2006 from $2.3 billion in 2005. As part of its ongoing commitment to network coverage and quality, T-Mobile USA added approximately 800 new cell sites in the fourth quarter of 2006, and 3,200 for 2006 as a whole, bringing the total number of cell sites to more than 36,000. In addition, T-Mobile USA has started rolling out its UMTS network and has already deployed 3G equipment on over 1,200 cell sites in the New York metropolitan area. During the fourth quarter, T-Mobile USA was granted the AWS spectrum for which it was the high bidder in the Federal Communications Commission’s (FCC) Auction 66, more than doubling its average spectrum position in the top 100 markets. The total cost of these licenses of $4.18 billion was paid during the third and fourth quarters of 2006. Of the total $4.18 billion, $837 million was paid to the FCC directly by T-Mobile USA and $3.35 billion was paid on T-Mobile USA’s behalf by Deutsche Telekom. In 2006 T-Mobile USA continued its trend in taking highest honors in a number of key industry surveys. For the fourth consecutive reporting period T-Mobile USA was the only wireless carrier to rank highest in overall customer satisfaction among wireless telephone users in all of the six regions surveyed by J.D. Power and Associates, and T-Mobile also received the highest ranking in the J.D. Power and Associates Wireless Retail Sales Satisfaction Performance Study, again for the fourth consecutive reporting period. This successful run of awards continued into 2007, with J.D. Power and Associates announcing that T-Mobile ranked highest in Wireless Customer Care for the fifth reporting period in a row. Also in early January, T-Mobile led the VocaLabs Satisfaction Study among the four largest national wireless phone companies. This press release includes non-GAAP financial measures. The non-GAAP financial measures should be considered in addition to, but not as a substitute for, the information provided in accordance with GAAP. Reconciliations from the non-GAAP financial measures to the most directly comparable GAAP financial measures are provided below following Selected Data and the financial statements. T-Mobile USA is the U.S. operation of T-Mobile International AG & Co. KG ("T-Mobile International"), the mobile communications subsidiary of Deutsche Telekom AG ("Deutsche Telekom") (NYSE:DT). In order to provide comparability with the results of other U.S. wireless carriers all financial amounts are in US dollars and are based on accounting principles generally accepted in the United States ("GAAP”). T-Mobile USA results are included in the consolidated results of Deutsche Telekom, but differ from the information contained herein as Deutsche Telekom reports financial results in accordance with International Financial Reporting Standards (IFRS). SELECTED DATA FOR T-MOBILE USA (`000) YE 06 Q4 06 Q3 06 Q2 06 Q1 06 YE 05 Q4 05 Covered population 239,000  239,000  239,000  238,000  234,000  233,000  233,000  Customers, end of period 25,041  25,041  24,139  23,338  22,725  21,690  21,690  Thereof postpay customers 21,211  21,211  20,428  19,656  19,149  18,424  18,424  Thereof prepaid customers 3,829  3,829  3,711  3,682  3,576  3,266  3,266  Net customer additions 3,351  901  802  613  1,035  4,375  1,387                  Minutes of use/post pay customer/ month 1,031  1,022  1,049  1,041  1,013  963  985  Postpay churn 2.2% 2.1% 2.3% 2.2% 2.1% 2.3% 2.3% Blended churn 2.9% 2.9% 3.0% 2.9% 2.7% 2.9% 2.9%   ($ / month)               ARPU (blended) 1 52  52  52  52  51  53  52  ARPU (postpay) 55  56  56  55  54  55  54  ARPU (prepaid) 22  21  22  22  22  25  24  Cost of serving (CCPU)2 25.14  25.14  24.83  24.96  25.66  25.23  24.32  Cost per gross add (CPGA)3 299  300  299  322  275  297  264    ($ million)               Total revenues 17,138  4,523  4,367  4,209  4,039  14,806  3,953  Service revenues1 14,511  3,813  3,723  3,586  3,389  12,308  3,261  OIBDA4 4,712  1,172  1,227  1,210  1,103  4,185  1,112  OIBDA margin 5 31% 30% 32% 32% 31% 32% 32% Capital expenditures 6 3,444  1,512  569  593  770  5,045  807    Cell sites on-air 36,100  36,100  35,300  34,500  33,600  32,900  32,900  Since all companies do not calculate these figures in the same manner, the information contained in this press release may not be comparable to similarly titled measures reported by other companies. 1 Average Revenue Per User ("ARPU") represents the average monthly service revenue we earn from our customers. ARPU is calculated by dividing service revenues for the specified period by the average customers during the period, and further dividing by the number of months in the period. We believe ARPU provides management with useful information to evaluate the recurring revenues generated from our customer base.   Service revenues include postpay, prepaid, and roaming and other service revenues, and do not include equipment sales and other revenues. Data services revenue is a component of service revenues. Per the consolidated financial statements below, other revenues include Wi-Fi revenues, co-location rental income, and wholesale revenues from the usage of our network in California, Nevada, and New York by Cingular customers, and are therefore not included in ARPU.   2 The average cash cost of serving customers, or Cash Cost Per User ("CCPU") is a non-GAAP financial measure and includes all network and general and administrative costs as well as the subsidy loss unrelated to customer acquisition. Subsidy loss unrelated to customer acquisition includes upgrade handset costs offset by upgrade equipment revenues and other related direct costs. This measure is calculated as a per month average by dividing the total costs for the specified period by the average total customers during the period and further dividing by the number of months in the period. We believe that CCPU, which is a measure of the costs of serving a customer, provides relevant and useful information and is used by our management to evaluate the operating performance of our business.   3 Cost Per Gross Add ("CPGA") is a non-GAAP financial measure and is calculated by dividing the costs of acquiring a new customer, consisting of customer acquisition costs plus the subsidy loss related to customer acquisition for the specified period, by gross customers added during the period. Subsidy loss related to customer acquisition consists primarily of the excess of handset and accessory costs over related revenues incurred to acquire new customers. We believe that CPGA, which is a measure of the cost of acquiring a customer, provides relevant and useful information and is used by our management to evaluate the operating performance of our business.   4 OIBDA is a non-GAAP financial measure, which we define as operating income before depreciation and amortization. In a capital-intensive industry such as wireless telecommunications, we believe OIBDA, as well as the associated percentage margin calculation, to be meaningful measures of our operating performance. OIBDA should not be construed as an alternative to operating income or net income as determined in accordance with GAAP, as an alternative to cash flows from operating activities as determined in accordance with GAAP or as a measure of liquidity. We use OIBDA as an integral part of our planning and internal financial reporting processes, to evaluate the performance of our senior management and to compare our performance with that of many of our competitors. We believe that operating income is the financial measure calculated and presented in accordance with GAAP that is the most directly comparable to OIBDA.   5 OIBDA margin is a non-GAAP financial measure, which we define as OIBDA (as described in note 4 above) divided by total revenues less equipment sales.   6 In accordance with US GAAP, capital expenditures include amounts paid by T-Mobile USA, but exclude amounts paid by affiliate or parent companies on T-Mobile USA's behalf. T-MOBILE USA Condensed Consolidated Balance Sheets (dollars in millions) (unaudited) December 31, December 31,   2006    2005  ASSETS Current assets: Cash and cash equivalents $ 78  $ 57  Accounts receivable, net of allowances of $203 and $198, respectively 2,448  2,116  Accounts receivable from affiliates 136  188  Inventory 612  409  Current portion of net deferred tax assets 598  275  License held for exchange 1,145  -  Other current assets   446    437  Total current assets 5,463  3,482  Property and equipment, net of accumulated depreciation of $7,058 and $5,134, respectively 10,932  10,805  Goodwill 10,701  10,701  Spectrum licenses 14,516  11,510  Other intangible assets, net of accumulated amortization of $421 and $282, respectively 102  241  Other assets   181    253  $ 41,895  $ 36,992    LIABILITIES AND STOCKHOLDER’S EQUITY   Current liabilities: Accounts payable $ 1,702  $ 1,665  Current payables to affiliates 1,183  53  Accrued liabilities 1,253  1,082  Liability for license exchange 1,145  -  Deferred revenue   365    373  Total current liabilities   5,648    3,173    Long-term payables to affiliates 7,773  6,457  Deferred tax liabilities 491  906  Other long-term liabilities   756    1,697  Total long-term liabilities   9,020    9,060    Voting preferred stock held by parent company -  5,000    Minority interest in equity of consolidated subsidiaries 84  65    Commitments and contingencies   Stockholder’s equity: Common stock 44,462  39,452  Accumulated deficit   (17,319)   (19,758) Total stockholder’s equity   27,143    19,694  $ 41,895  $ 36,992  T-MOBILE USA Condensed Consolidated Statements of Operations (dollars in millions) (unaudited) Quarter Ended December 31, 2006 Quarter Ended December 31, 2005 Year Ended December 31, 2006 Year Ended December 31, 2005 Revenues: Postpay $ 3,470  $ 2,920  $ 13,078  $ 11,044  Prepaid 235  213  945  741  Roaming and other services 108  128  488  523  Equipment Sales 588  479  1,983  1,529  Other1   122    213    644    969  Total revenues   4,523    3,953    17,138    14,806  Operating expenses: Network 954  749  3,621  2,883  Cost of equipment sales 881  738  3,078  2,622  General and administrative 697  598  2,707  2,324  Customer acquisition 819  756  3,020  2,792  Depreciation and amortization   623    567    2,522    2,229  Total operating expenses   3,974    3,408    14,948    12,850  Operating income   549    545    2,190    1,956  Other income (expense): Interest expense (136) (97) (486) (453) Interest income and other, net   (6)   22    89    29  Total other income (expense), net   (142)   (75)   (397)   (424) Income before income taxes 407  470  1,793  1,532  Income tax (expense)/benefit   (228)   2,518    646    2,404  Net income $ 179  $ 2,988  $ 2,439  $ 3,936  T-MOBILE USA Condensed Consolidated Statements of Cash Flows (dollars in millions) (unaudited) Year Ended December 31, 2006 Year Ended December 31, 2005 Operating activities: Net income $ 2,439  $ 3,936  Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 2,522  2,229  Income tax benefit (646) (2,404) Other, net 203  17  Changes in operating assets and liabilities: Accounts receivable (284) (640) Inventory (202) 35  Other current assets 35  2,512  Accounts payable 83  149  Accrued liabilities   187    107  Net cash provided by operating activities   4,337    5,941  Investing activities: Purchases of property and equipment (2,608) (2,338) Joint venture and network transaction with Cingular -  (2,282) Acquisitions of spectrum licenses and wireless properties (837) (425) Proceeds on disposal of assets 22  22  Investments in and advances to unconsolidated affiliates, net 1  -  Short-term loan receivable from affiliate   (750)   -  Net cash used in investing activities   (4,172)   (5,023) Financing activities: Long-term debt repayments to affiliates (150) (1,205) Long-term debt borrowing from affiliates -  100  Other, net   6    62  Net cash used in financing activities   (144)   (1,043)   Change in cash and cash equivalents 21  (125) Cash and cash equivalents, beginning of period   57    182  Cash and cash equivalents, end of period $ 78  $ 57  T-MOBILE USA Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (dollars in millions, except for CPGA and CCPU) (unaudited) OIBDA can be reconciled to our operating income as follows: YE Q4 Q3 Q2 Q1 YE Q4 2006  2006  2006  2006  2006  2005  2005  OIBDA $4,712  $1,172  $1,227  $1,210  $1,103  $4,185  $1,112  Depreciation and amortization (2,522) (623) (654) (651) (594) (2,229) (567) Operating income $2,190  $549  $573  $559  $509  $1,956  $545  The following schedule reflects the CPGA calculation and provides a reconciliation of cost of acquiring customers used for the CPGA calculation to customer acquisition costs reported on our condensed consolidated statements of operations: YE Q4 Q3 Q2 Q1 YE Q4 2006  2006  2006  2006  2006  2005  2005  Customer acquisition costs $3,020  $819  $775  $737  $689  $2,792  $756    Plus: Subsidy loss Equipment sales (1,983) (588) (497) (446) (452) (1,529) (479) Cost of equipment sales 3,078  881  758  702  737  2,622  738  Total subsidy loss 1,095  293  261  256  285  1,093  259  Less: Subsidy loss unrelated to customer acquisition   (715)   (193)   (160)   (162)   (200)   (629)   (171) Subsidy loss related to customer acquisition 380  100  101  94  85  464  88                Cost of acquiring customers $3,400  $919  $876  $831  $774  $3,256  $844    CPGA ($ / new customer added) $299  $300  $299  $322  $275  $297  $264  T-MOBILE USA Reconciliation of Non-GAAP Financial Measures to GAAP Financial Measures (dollars in millions, except for CPGA and CCPU) (unaudited) The following schedule reflects the CCPU calculation and provides a reconciliation of the cost of serving customers used for the CCPU calculation to total network costs plus general and administrative costs reported on our condensed consolidated statements of operations: YE Q4 Q3 Q2 Q1 YE Q4 2006  2006  2006  2006  2006  2005  2005  Network costs $3,621  $954  $940  $878  $849  $2,883  $749  General and administrative 2,707  697  667  682  661  2,324  598  Total network and general and administrative costs   6,328    1,651    1,607    1,560    1,510    5,207    1,347    Plus: Subsidy loss unrelated to customer acquisition   715    193    160    162    200    629    171                Total cost of serving customers $7,043  $1,844  $1,767  $1,722  $1,710  $5,836  $1,518    CCPU ($ / customer per month)   $25.14    $25.14    $24.83    $24.96    $25.66    $25.23    $24.32  About T-Mobile USA: Based in Bellevue, WA, T-Mobile USA, Inc. is a member of the T-Mobile International group, the mobile telecommunications subsidiary of Deutsche Telekom AG (NYSE:DT). T-Mobile USA’s innovative wireless products and services help empower people to connect effortlessly to those who matter most. T-Mobile USA’s GSM/GPRS 1900 voice and data network, when combined with roaming and other agreements, reaches almost 277 million people in the U.S. In addition, T-Mobile USA operates the largest carrier-owned Wi-Fi (802.11b) wireless broadband (WLAN) network in the country, available in more than 8,200 convenient public access locations nationwide. Multiple independent research studies continue to rank T-Mobile USA highest in wireless customer satisfaction, wireless call quality and wireless customer care in numerous regions throughout the U.S. For more information, visit the company website at www.t-mobile.com. About T-Mobile International: T-Mobile International is one of the world’s leading companies in mobile communications. As one of Deutsche Telekom AG’s (NYSE:DT) three strategic business units, T-Mobile International concentrates on the key markets in Europe and the United States. By the end of the fourth quarter of 2006, more than 106 million mobile customers were served by the mobile segment of the Deutsche Telekom group, all over a common technology platform based on GSM, the world’s most widely used digital wireless standard. For more information about T-Mobile International, please visit www.t-mobile.net. For further information on Deutsche Telekom, please visit www.telekom.de/investor-relations.