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Offices of Deutsche Telekom Searched

According to this September 3rd Dow Jones Newswire story “a German public prosecutor’s office based in Bonn [recently] searched German telecommunications company Deutsche Telekom AG offices as part of an initial inquiry into bribery allegations involving eight people, in response to a request from U.S. authorities.”

Deutsche Telekom holds a 59% stake in Magyar Telekom (see here) and the article suggests that the search is in connection with Magyar Telekom’s previously disclosed FCPA inquiry.

As the article notes, Hungary-based Magyar Telekom (see here), a company with ADRs listed on the New York Stock Exchange, disclosed suspicious payments and in December 2009 the company released this detailed press release.

In its Presentation of Second Quarter Results 2010 (see here) Magyar Telekom stated as follows:

“As previously announced, the DOJ, the SEC and the Ministry of Interior of the Republic of Macedonia have commenced investigations into certain of the Company’s activities that were the subject of the internal investigation. Further, in relation to certain activities that were the subject of the internal investigation, the Hungarian Central Investigating Chief Prosecutor’s Office has commenced a criminal investigation into alleged corruption with the intention of violating obligations in international relations and other alleged criminal offenses. Also, as previously announced, the Hungarian National Bureau of Investigation (“NBI”) has begun a criminal investigation into alleged misappropriation of funds relating to payments made in connection with the Company’s ongoing internal investigation and the possible misuse of personal data of employees in the context of the internal investigation. These governmental investigations are continuing, and the Company continues to cooperate with those investigations.

The Company, through its external legal counsel, has recently engaged in discussions with the DOJ and the SEC regarding the possibility of resolving their respective investigations as to the Company through negotiated settlements. The Company has not reached any agreement with either the DOJ or the SEC regarding resolution of their respective investigations, and discussions with both agencies are continuing. We may be unable to reach a negotiated settlement with either agency. Any resolution of the investigations could result in criminal or civil sanctions, including monetary penalties and/or disgorgement, against the Company or its affiliates, which could have a material effect on the Company’s financial position, results of operations or cash flows, as well as require additional changes to its business practices and compliance programs. The Company cannot predict or estimate whether or when a resolution of the DOJ or SEC investigations will occur, or the terms, conditions, or other parameters of any such resolution, including the size of any monetary penalties or disgorgement, the final outcome of these investigations, or any impact such resolution may have on its financial statements or results of operations. Consequently, the Company has not made any provisions in its financial statements as of June 30, 2010 with respect to the investigations.

Magyar Telekom incurred HUF 1.4 bn expenses [approximately $6.3 million] relating to the investigations in the first half of 2010, which are included in other operating expenses of Group Headquarters.”

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