THE FOLLOWING IS A SLIDE PRESENTATION GIVEN BEGINNING ON JULY 24, 2000
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Creation of first global GSM operator
Investor Presentation
July 2000
[DEUTSCHE TELEKOM LOGO] July 2000 [VOICESTREAM LOGO]
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Disclaimer
This presentation contains or may contain forward-looking statements within the
meaning of the U.S. private securities litigation reform act of 1995. It is
important to note that Deutsche Telekom's and VoiceStream's actual results could
differ materially from the results anticipated or projected in any such
forward-looking statements, based on a number of important factors. Deutsche
Telekom's and VoiceStream's filings with the U.S. Securities and Exchange
Commission (particularly their most recent reports on Form 20-F and Form 10-K,
respectively) contain cautionary statements identifying important factors
affecting such forward-looking statements, including certain risks and
uncertainties, that could cause actual results to differ materially from
projections contained in any forward-looking statements made by Deutsche Telekom
and VoiceStream.
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Transaction overview
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Creation of first global GSM operator
- VoiceStream transforms T-Mobile into the world's only global GSM operator
- Unique opportunity to enter the U.S. mobile market, with even higher growth
prospects than Europe
- Total consideration of $50.7 billion (euro 54.1 billion)(1), 85% in new
Deutsche Telekom shares and 15% in cash
- Full support of VoiceStream management and core shareholders (> 50% of
shares) to vote in favor of transaction
- VoiceStream management to lead T-Mobile's American operations
- Lock-up agreements secured with majority of core shareholders
- Transaction expected to be completed in H1 2001
(1) Based on closing prices on July 21, 2000
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Delivering on promises
[GRAPHIC]
Strategy
Vision
Financials
Mobile Consumer Data Access
Internet IP
Systems
Networks
- Mobile - one of our four strategic businesses - is the most significant
growth area in the U.S. telecoms market
- VoiceStream is a major step in delivering our strategy of building all four
pillars in the U.S. market
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Entry to high growth U.S. market
Additional subscribers required to reach 90% penetration (millions)
[BAR CHART]
<TABLE>
<CAPTION>
U.S. Germany France UK Italy
<S> <C> <C> <C> <C>
156.5 47.4 29.8 25.8 18.6
</TABLE>
- U.S. wireless penetration outlook strongly positive due to:
- Improved network quality
- Broader coverage
- More attractive customer value proposition
- Low U.S. penetration (33.5%)(1)should converge towards Western European
levels (44.8%)(1)
(1) Figures as of March 2000
Source: Financial Times Mobile Communications, CTIA
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Market leadership: Leapfrogging competition
Controlled equity POPs
(controlled, proportionate)(1)
[BAR CHART]
<TABLE>
<CAPTION>
Deutsche
Telekom/
VoiceStream Vodafone Sprint PCS AT&T Wireless Nextel Verizon Wireless Orange BellSouth/SBC
<S> <C> <C> <C> <C> <C> <C> <C>
375 307 277 236 230 223 190 159
</TABLE>
(1) Based on proportionate ownership in the controlled companies
- Ranks #1 globally with approx. 375 million POPs (controlled, proportionate)
- Pure play mobile company with single technology
- Only GSM operator with controlling interests in the U.S. and major European
markets
- Unparalleled transatlantic roaming opportunity
- Ideal platform to develop 3G (UMTS) services
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Leading presence in G7 countries
<TABLE>
<CAPTION>
Total Controlled
Company US GER UK FRA ITA CAN J POPs(1)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Deutsche Telekom/ 220 82 58 -- -- -- -- 360
VoiceStream
Sprint PCS 277 -- -- -- -- -- -- 277
Nextel 230 -- -- -- -- -- -- 230
Vodafone -- 82 58 -- 57 -- -- 197
NTT DoCoMo -- -- -- -- -- -- 126 126
Orange -- -- 58 59 -- -- -- 117
</TABLE>
(1) Based on proportionate ownership in the controlled companies
- We will control more POPs in the world's leading economies than any other
mobile company.
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The right transaction
Right Market U.S. is the most attractive wireless market globally
Right Time Transaction timed just ahead of growth in U.S. mobile market
Right Company VoiceStream is the fastest growing operator in the U.S.
Right Management Proven VoiceStream management team to lead American wireless
business
Right Price Price paid in line with precedent transactions on an
enterprise value per POP basis
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Overview of VoiceStream
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National footprint
VoiceStream: license areas
[MAP GRAPHIC]
- Nation-wide GSM operator using 1900 MHz
- Licenses in 23 of the top 25 U.S. markets
- 220 million licensed POPs
- Over 100 million covered POPs currently and planned to exceed 120 million
by 2001
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Fastest growing national U.S. mobile operator
[BAR CHART]
<TABLE>
<CAPTION>
Q1 2000 subscriber growth (%)
<S> <C>
VoiceStream(1) 18.5%
Sprint PCS 14.5%
Nextel 12.0%
AT&T Wireless 7.8%
SBC/BellSouth 5.1%
Verizon Wireless 4.0%
</TABLE>
(1) including Omnipoint and Aerial
Source: company data, DLJ research
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Highest annualized penetration
[BAR CHART]
Annualized incremental penetration (per covered POPs)
<TABLE>
<CAPTION>
<S> <C>
VoiceStream(1) 2.60%
Sprint PCS 1.87%
VoiceStream pro forma(2) 1.63%
BellSouth/SBC 1.43%
Nextel 1.20%
AT&T Wireless 1.04%
</TABLE>
(1) Pre Aerial and Omnipoint acquisitions
(2) Aerial and Omnipoint included pro-forma
(3) After elimination of 160,000 Omnipoint customers
- 2.3 million subscribers at March 31, 2000(3)
- Expectation of 4.0 million subscribers by end 2000 -- effectively doubling
the base from end 1999
- Rapid increase via organic growth and recent acquisitions
- VoiceStream has consistently outperformed average quarterly penetration
gains for U.S. PCS operators
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High ARPU
1999 ARPU ($ monthly)
[BAR CHART]
<TABLE>
<CAPTION>
<S> <C>
VoiceStream $ 56.72
U.S. average $ 46.00
European average $ 44.00
</TABLE>
- VoiceStream's ARPU significantly higher than U.S. and European average
- High minutes of usage by VoiceStream subscribers have generated rising
ARPU's even before mobile data contribution
Note: company data, CTIA, Dresdner Kleinwort Benson for 1999
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Financial performance
Quarterly financial performance
[BAR CHART]
(1) VoiceStream excluding Omnipoint acquisition
Source: Company data
- VoiceStream has experienced seven straight quarters of positive cash flow
before marketing costs
- Expected to continue to see robust subscriber and revenue growth
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Leadership in mobile data
[GRAPHIC]
- High U.S. Internet usage expected to drive mobile data demand
- VoiceStream is only provider of 2-way SMS in U.S.
- On track for GPRS in Q4/00
- Controls branding and content through MyVoiceStream.com
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Experienced and committed management
- Senior executive team averages over ten years in the industry
- Executive team is committed to the transaction
- Management incentivized like shareholders
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Overview of T-Mobile International
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Partner of choice
[GRAPH]
<TABLE>
<S> <C>
POPs in the U.S. ................ 220 million
POPs in Germany, UK, Austria
and Hungary ................... 155 million
</TABLE>
- Enhances attraction of T-Mobile as consolidation partner in Europe and rest
of world
- No other operator competing for pan-European consolidation can offer
membership of a global GSM footprint
Note: Chart refers to controlled, proportionate POPs in the U.S. and in Germany,
UK, Austria and Hungary
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Key competitive strengths
- Scale and Reach
- Growth
- Innovation
- Efficiencies
- Deutsche Telekom relationship
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Innovation
Combining technology and market innovation
Investing today in tomorrow's platforms
[GRAPHIC]
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Efficiencies
Long-term synergies
- Revenues
- Operating expenses
- Interest expenses
- Capex
Organizational efficiency gains
- "Best practice" across all mobile activities
- Task forces for key projects
- Pooling of mobile data interests in T-Motion
- Size and reach of business provides ability to realize organizational and
financial efficiencies
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Deutsche Telekom relationship
Competitive advantages from scope and scale of T-family
- Access to financing
- Financial muscle in the consolidation process
- UMTS licence acquisition
- Broader choice of acquisition targets
- Significant know-how transfer
- Strong basis for successful operation of T-Motion through T-Online
relationship
- Cost savings
- Brand synergies expected for mobile data operations
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Financial analysis
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Fair valuation vs. precedents
Favorable per POP valuation relative to U.S. + European benchmarks
Enterprise value per POP ($)
Vodafone/ Mannesmann $ 934
FT/Orange $ 675
Vodafone/ AirTouch $ 339(2)
Vodafone/ AirTouch $ 275
Deutsche Telekom/ VoiceStream $ 265(1)
(1) Based on closing price July 21, 2000 Calculation incl. shares issuable upon
Cook Inlet buy-out
(2) Adjusted to reflect PCS business only
- U.S. PCS companies valued on a per POP basis
- Coverage still in build stage
- Rapidly growing subscriber base
- Too early for subscriber-based multiples
- VoiceStream enterprise valuation of $265 per licensed POP compares
favorably with precedent company transforming transactions
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Overview of transaction terms
Price
- Fixed exchange ratio of 3.2 Deutsche Telekom shares for each VoiceStream
share plus $30 cash (incl. separate cash and stock election schemes)
- Deutsche Telekom will issue approximately 829 million shares to
VoiceStream's shareholders
- Pro-forma for transaction, German Government/KfW ownership reduced to 46%
Investment
- Deutsche Telekom to invest $5.0 billion in VoiceStream in form of
convertible preferred stock prior to closing
- To be used to fund license auctions and build-out
Transaction value
- Based on VoiceStream's 259 million fully diluted shares this implies an
equity value of (euro)54.1 billion and an enterprise value of (euro)59.4
billion
Lock-up for majority of core shareholders
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<TABLE>
<CAPTION>
Lock-up agreement with majority of core shareholders
Percentage of
holdings
Time Period available for sale
<S> <C>
- Signing until the latter of the shareholder vote
and January 1, 2001 0%
- The latter of shareholder vote and January 1, 2001
until closing up to 17.5%
- Closing - 3 months post-closing 0%
- 3 months - 6 months post-closing up to 40%
- After 6 months post-closing Remainder
</TABLE>
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Timeline of key events
Key events Date
- File preliminary merger proxy End August
- Distribute merger proxy to shareholders Q3/Q4 2000
- VoiceStream shareholder vote Q4 2000 - Q1 2001
- Expected completion of regulatory approval Q1 2001
- Closing Q1 2001 - Q2 2001
- VoiceStream integrated into T-Mobile Post closing
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Key financials
T-Mobile/VoiceStream
<TABLE>
<CAPTION>
1999 T-Mobile(1) VoiceStream(2)
in million $ (euro) $ (euro)
<S> <C> <C> <C> <C>
Revenue 6,754 6,336 1,047 987
EBITDA 1,806 1,694 -475 -446
Capex 1,383 1,297 664 623
Subscribers 17.5 2.3
</TABLE>
(1) Consolidated figures for 1999, One 2 One only included in Q4
(2) VoiceStream: pro forma for Cook Inlet partnership
Source: Company data (1999), except subscribers (Q1 2000 - after elimination of
160,000 Omnipoint subscribers)
Note: based on 1999 average exchange rate of $ 1.066/(euro) 1.0
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Impact on Deutsche Telekom
- Goodwill(1)of (euro)44.8 billion ($42 billion)
- Number of Deutsche Telekom shares to be issued: 829 million
- Total number of Deutsche Telekom shares post transaction: 3,858 million
- Impact:
- increase of $5.2 billion in consolidated debt from VoiceStream
- investment of $5.0 billion pre-closing
- $7.8 billion cash portion of consideration
(1) Defined as excess purchase price over book value of assets acquired,
estimated for year end 2000
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