annual200920f.htm
As
filed with the Securities and Exchange Commission on February 25,
2010
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Form 20-F
x ANNUAL REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
For the
fiscal year ended December 31, 2009
Commission
file number 001-14540
Deutsche
Telekom AG
(Exact
Name of Registrant as Specified in its Charter)
Federal
Republic of Germany
(Jurisdiction
of Incorporation or Organization)
Friedrich-Ebert-Allee
140, 53113 Bonn, Germany
(Address
of Registrant’s Principal Executive Offices)
Dr.
Guillaume Maisondieu
Deutsche
Telekom AG
Friedrich-Ebert-Allee
140, 53113 Bonn, Germany
+49-228-181-0
Guillaume.Maisondieu@telekom.de
(Name,
Telephone, E-mail and/or Facsimile number and Address of Company Contact
Person)
Securities
registered or to be registered pursuant to Section 12(b) of the
Act:
|
Title
of each class
|
Name
of each exchange on which registered
|
|
American
Depositary Shares, each representing
one
Ordinary Share
|
New
York Stock Exchange
|
|
Ordinary
Shares, no par value
|
New
York Stock Exchange*
|
Securities
registered or to be registered pursuant to
Section 12(g)
of the Act:
NONE
(Title
of Class)
Securities
for which there is a reporting obligation pursuant to
Section 15(d)
of the Act:
NONE
(Title
of Class)
Indicate
the number of outstanding shares of each of the issuer’s classes of capital or
common stock as of the close of the period covered by the annual
report:
Ordinary
Shares, no par value: 4,361,319,993 (as of December 31, 2009)
Indicate
by check mark if the registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Act.
Yes ý No o
If this
report is an annual or transition report, indicate by check mark if the
registrant is not required to file reports pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934.
Yeso No ý
Indicate
by check mark whether the registrant (1) has filed all reports required to
be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for
the past 90 days.
Yes ý No o
Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definition of “accelerated
filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.
|
Large
accelerated filer ý
|
Accelerated
filer o
|
Non-accelerated
filer o
|
Indicate by check mark which basis of accounting the registrant has used to
prepare the financial statements included in this filing:
|
o US
GAAP
|
ý International Financial Reporting
Standards as issued by the International Accounting Standards
Board
|
o
Other
|
If
“Other” has been checked in response to the previous question indicate by check
mark which financial statement item the registrant has elected to
follow.
Item 17
o
Item 18 o
If this
is an annual report, indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act).
Yes o Noý
*Not for
trading, but only in connection with the registration of American Depositary
Shares.
|
Item 10.
|
|
171 |
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|
|
171 |
|
|
|
177 |
|
|
|
178 |
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|
180 |
|
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|
180 |
|
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|
183 |
|
Item
11.
|
|
184 |
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|
184 |
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|
184 |
|
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|
185 |
|
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|
186 |
|
Item
12.
|
|
187 |
| |
American
Depositary Shares |
187 |
|
|
|
|
|
|
|
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|
Item
13.
|
|
189 |
|
Item
14.
|
|
189 |
|
Item
15.
|
|
189 |
|
Item
16A.
|
|
191 |
|
Item
16B.
|
|
191 |
|
Item
16C.
|
|
191 |
|
Item
16D.
|
|
192 |
|
Item 16E.
|
|
192 |
|
Item 16F.
|
|
192 |
|
Item 16G.
|
|
193 |
|
|
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|
Item
17.
|
|
196 |
|
Item
18.
|
|
196 |
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|
F-2 |
|
|
|
F-3 |
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F-4 |
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F-5 |
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F-6 |
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F-8 |
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|
F-9 |
|
Item
19
|
|
197 |
DEFINED
TERMS
Deutsche
Telekom AG is a private stock corporation organized under the laws of the
Federal Republic of Germany (the “Federal Republic”). As used in this annual
report on Form 20-F (“Annual Report”), unless the context otherwise
requires, the term “Deutsche Telekom” refers to Deutsche Telekom AG, and the
terms “we,” “us,” “our,” “Company” and “Group” refer to Deutsche Telekom and, as
applicable, Deutsche Telekom and its direct and indirect subsidiaries as a
group.
INTERNATIONAL
FINANCIAL REPORTING STANDARDS
Unless
otherwise indicated, the financial information contained in this Annual Report
has been prepared in accordance with the requirements of the International
Financial Reporting Standards (IFRS) as issued by the International Accounting
Standards Board (IASB).
FORWARD-LOOKING
STATEMENTS
This
Annual Report contains forward-looking statements. Forward-looking statements
are statements that are not historical facts. Examples of forward-looking
statements include statements concerning:
|
·
|
plans,
objectives and expectations relating to future operations, products and
services;
|
|
·
|
our
prospective share of new and existing
markets;
|
|
·
|
plans,
objectives and expectations for our cost savings and workforce reduction
programs and the impact of other significant strategic, labor or business
initiatives, including acquisitions, dispositions and business
combinations, and our network upgrade and expansion
initiatives;
|
|
·
|
the
potential impact of regulatory actions on our financial condition and
operations;
|
· our shareholder
remuneration policy and the payment of dividends and/or conduct of possible
share repurchases;
|
·
|
the
possible outcomes and effects of litigation, investigations, contested
regulatory proceedings and other
disputes;
|
|
·
|
future
general telecommunications sector and macroeconomic growth rates;
and
|
|
·
|
our
future revenues, expenditures and
performance.
|
Forward-looking
statements generally are identified by the words “expect,” “anticipate,”
“believe,” “intend,” “estimate,” “aim,” “plan,” “will,” “will continue,” “seek,”
“outlook,” “guidance” and similar expressions. The “Risk Factors” discussion in
Item 3, the “Management Overview” and “Outlook” discussion in Item 5,
the "Dividend Policy" discussion in Item 8 and the “Quantitative and
Qualitative Disclosures about Market Risk” discussion in Item 11, in
particular, contain numerous forward-looking statements, although such
statements also appear elsewhere in this Annual Report.
Forward-looking
statements are based on current plans, estimates and projections. You should
consider them with caution. Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update any forward-looking
statement in light of new information or future events. Forward-looking
statements involve inherent risks and uncertainties, most of which are difficult
to predict and are generally beyond our control. We caution you that a number of
important factors could cause actual results or outcomes to differ materially
from those expressed in, or implied by, the forward-looking statements. These
factors include, among others:
|
·
|
changes
in general economic and business conditions, including a continuous
deterioration in the economic environment, in the markets in which we and
our subsidiaries and associated companies
operate;
|
|
·
|
the
level of demand for telecommunications services in the markets we serve,
particularly for wireless telecommunications services, broadband access
lines, voice and data traffic, new higher-value products and services, and
new rate offerings;
|
|
·
|
changes
in government policies and new
legislation;
|
|
·
|
regulatory
developments and changes, including with respect to the levels of tariffs,
terms of interconnection, customer access and international settlement
arrangements;
|
|
·
|
our
ability to secure and retain the licenses needed to offer new and existing
services and the cost of these licenses and related network infrastructure
build-outs, particularly with respect to advanced
services;
|
|
·
|
competitive
forces, including pricing pressures, technological developments and
alternative routing developments, all of which affect our ability to gain
or retain market share and revenues in the face of competition from
existing and new market entrants;
|
|
·
|
the
effects of our customer acquisition and retention initiatives,
particularly in the fixed-line voice telephony business, the mobile
telecommunications business and our interconnection
business;
|
|
·
|
the
effects of industry consolidation on the markets in which we operate,
particularly with respect to our mobile and leased lines
businesses;
|
|
·
|
the
success of new business, operating and financial initiatives, many of
which involve substantial start-up costs and are untested, and of new
systems and applications, particularly with regard to the integration of
service offerings;
|
|
·
|
our
ability to achieve cost savings and realize productivity improvements,
particularly with respect to our workforce-reduction initiatives, while at
the same time enhancing customer service
quality;
|
|
·
|
our
ability to attract and retain qualified personnel, particularly in view of
our cost reduction efforts;
|
|
·
|
concerns
over health risks associated with the use of wireless mobile devices and
other health and safety risks related to radio frequency
emissions;
|
|
·
|
risks
of infrastructure failures or damage due to external factors, including
natural disasters, intentional wrongdoing, sabotage, acts of terrorism or
similar events;
|
|
·
|
the
outcome of litigation, disputes and investigations in which we are
involved or may become involved;
|
|
·
|
risks
and uncertainties relating to the benefits anticipated from our
international expansion, including in the United
States;
|
|
·
|
risks
and costs associated with integrating our acquired businesses and with
selling or combining businesses or other
assets;
|
|
·
|
the
progress of our domestic and international investments, joint ventures,
partnerships and alliances;
|
|
·
|
the
effects of foreign exchange rate fluctuations, particularly in connection
with subsidiaries operating outside the euro
zone;
|
|
·
|
instability
and volatility in worldwide financial
markets;
|
|
·
|
the
availability, terms and deployment of capital, particularly in view of our
financing alternatives, actions of the rating agencies, developments in
the banking sector and the impact of regulatory and competitive
developments on our capital outlays;
and
|
|
·
|
the
level of demand in the market for our debt obligations, and for the debt
obligations of our subsidiaries and associated companies, and our shares,
as well as for assets that we may decide to sell, which may affect our
financing and acquisition
strategies.
|
Certain of these factors are discussed in more detail elsewhere in this Annual
Report, including, without limitation, in Item 3, Item 4 and
Item 5. We caution investors that the foregoing list of important factors
is not exhaustive.
If these
factors or other risks and uncertainties materialize, or if the assumptions
underlying any of these statements prove incorrect, our actual performance and
future actions may materially differ from those expressed or implied by
forward-looking statements. We can offer no assurance that our estimates or
expectations will be achieved or that we will be able to achieve our policy
aims. When reviewing forward-looking statements contained in this
document, investors and others should carefully consider the foregoing factors,
as well as other uncertainties and events and their potential impact on our
operations and businesses.
Certain
information in this Annual Report has been provided by external sources. Due to
the rapid changes in our industry, it is possible that some of this information
is no longer accurate. Assessments of market share in particular involve the use
of information released or estimated by regulatory authorities, our competitors,
third parties or us.
World
Wide Web addresses contained in this Annual Report are for explanatory purposes
only and they (and the content contained therein) do not form a part of,
and are not incorporated by reference into, this Annual Report.
PART
I
Not
applicable.
Not
applicable.
The
following table presents selected consolidated financial and operating
information. This selected consolidated financial and operating information
should be read together with “Item 5. Operating and Financial Review and
Prospects” and our Consolidated Financial Statements and the notes thereto that
are included elsewhere in this Annual Report.
The
selected consolidated financial information as of and for each of the five years
ended December 31, 2005 through 2009 are extracted or derived from our
consolidated financial statements and the notes thereto, which have been audited
by Ernst & Young GmbH Wirtschaftsprüfungsgesellschaft (“E&Y”) and
PricewaterhouseCoopers Aktiengesellschaft Wirtschaftsprüfungsgesellschaft
(“PwC”).
Selected
Consolidated Financial Data of the Deutsche Telekom Group
|
|
|
%
Change
2009/2008(1)(2)
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
2006
|
|
|
2005
|
|
|
|
|
(billions
of €, except as otherwise indicated)
|
|
|
Income
Statement Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
revenues
|
|
|
4.8 |
|
|
|
64.6 |
|
|
|
61.7 |
|
|
|
62.5 |
|
|
|
61.3 |
|
|
|
59.6 |
|
|
Domestic
|
|
|
(2.9 |
) |
|
|
28.0 |
|
|
|
28.9 |
|
|
|
30.7 |
|
|
|
32.4 |
|
|
|
34.2 |
|
|
International
|
|
|
11.6 |
|
|
|
36.6 |
|
|
|
32.8 |
|
|
|
31.8 |
|
|
|
28.9 |
|
|
|
25.4 |
|
|
Profit
from operations
|
|
|
(14.6 |
) |
|
|
6.0 |
|
|
|
7.0 |
|
|
|
5.3 |
|
|
|
5.3 |
|
|
|
7.6 |
|
|
Profit
attributable to owners of the parent
|
|
|
(76.2 |
) |
|
|
0.4 |
|
|
|
1.5 |
|
|
|
0.6 |
|
|
|
3.2 |
|
|
|
5.6 |
|
|
Statement
of Financial Position
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
assets
|
|
|
3.8 |
|
|
|
127.8 |
|
|
|
123.1 |
|
|
|
120.7 |
|
|
|
130.2 |
|
|
|
128.5 |
|
|
Total
financial liabilities (in accordance with the consolidated statement of
financial position)
|
|
|
9.9 |
|
|
|
51.2 |
|
|
|
46.6 |
|
|
|
42.9 |
|
|
|
46.5 |
|
|
|
46.7 |
|
|
Shareholders’
equity
|
|
|
(2.7 |
) |
|
|
41.9 |
|
|
|
43.1 |
|
|
|
45.2 |
|
|
|
49.7 |
|
|
|
48.6 |
|
|
Cash
Flow Data(3)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash from operating activities
|
|
|
2.8 |
|
|
|
15.8 |
|
|
|
15.4 |
|
|
|
13.7 |
|
|
|
14.2 |
|
|
|
15.1 |
|
|
Net
cash used in investing activities
|
|
|
24.0 |
|
|
|
(8.6 |
) |
|
|
(11.4 |
) |
|
|
(8.1 |
) |
|
|
(14.3 |
) |
|
|
(10.1 |
) |
|
Net
cash used in financing activities
|
|
|
(65.4 |
) |
|
|
(5.1 |
) |
|
|
(3.1 |
) |
|
|
(6.1 |
) |
|
|
(2.1 |
) |
|
|
(8.0 |
) |
|
Ratios
and Selected Data
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additions
to intangible assets (including goodwill) and property, plant and
equipment
|
|
|
13.3 |
|
|
|
11.5 |
|
|
|
10.1 |
|
|
|
9.1 |
|
|
|
13.4 |
|
|
|
11.1 |
|
|
Capital
expenditures(3)
|
|
|
(5.7) |
|
|
|
(9.2 |
) |
|
|
(8.7 |
) |
|
|
(8.0 |
) |
|
|
(11.8) |
|
|
|
(9.3) |
|
|
Number
of employees averaged over the year (full-time employees excluding
trainees) (thousands)
|
|
|
9.7 |
|
|
|
258 |
|
|
|
235 |
|
|
|
244 |
|
|
|
248 |
|
|
|
244 |
|
|
Revenues
per employee (thousands of euro)(4)
|
|
|
(4.5 |
) |
|
|
250.8 |
|
|
|
262.5 |
|
|
|
256.5 |
|
|
|
246.9 |
|
|
|
244.3 |
|
|
Earnings
per share/ADS—basic and diluted euro)(5)
|
|
|
(76.5 |
) |
|
|
0.08 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
|
0.74 |
|
|
|
1.31 |
|
|
Weighted
average number of ordinary shares outstanding (basic)
(millions)
|
|
|
0.0 |
|
|
|
4,340 |
|
|
|
4,340 |
|
|
|
4,339 |
|
|
|
4,353 |
|
|
|
4,335 |
|
|
Total
number of ordinary shares at the reporting date (millions)
|
|
|
0.0 |
|
|
|
4,361 |
|
|
|
4,361 |
|
|
|
4,361 |
|
|
|
4,361 |
|
|
|
4,198 |
|
|
Dividend
per share/ADS (euro)(5)(6)
|
|
|
0.0 |
|
|
|
0.78 |
|
|
|
0.78 |
|
|
|
0.78 |
|
|
|
0.72 |
|
|
|
0.72 |
|
|
Dividend
per share/ADS (U.S. dollar)(5)(6)(7)
|
|
|
2.8 |
|
|
|
1.12 |
|
|
|
1.09 |
|
|
|
1.21 |
|
|
|
0.98 |
|
|
|
0.91 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Percentage
change based on figures expressed in
millions.
|
|
(2)
|
In
this Annual Report, increases in the size of negative numbers are
expressed in percentage terms with negative percentage amounts, and
decreases in the size of negative numbers are expressed with positive
percentage amounts.
|
|
(3)
|
In
accordance with the statement of cash
flows.
|
|
(4)
|
Calculated
on the basis of the average number of employees for the year, excluding
trainees, apprentices and student
interns.
|
|
(5)
|
ADS
refers to the Deutsche Telekom’s American Depositary Shares, which are
traded on the New York Stock Exchange, NYSE. One ADS corresponds to one
ordinary share of Deutsche Telekom
AG.
|
|
(6)
|
Dividends
per share are presented on the basis of the year in respect of which they
are declared, not the year in which they are paid. The proposed 2009
dividend per share amounts are subject to approval by the shareholders at
the annual shareholders’ meeting.
|
|
(7)
|
Dividend
amounts have been translated into U.S. dollars (using exchange rates
published by the European Central Bank) for the relevant dividend payment
date, which occurred during the second quarter of the following year,
except for the 2009 amount, which has been translated using the applicable
rate on December 31, 2009. As a result, the actual U.S. dollar amount
at the time of payment may vary from the amount shown
here.
|
Exchange
Rates
Unless
otherwise indicated, all amounts in this Annual Report are expressed in
euros.
As used
in this document, “euro,” “EUR” or “€” means the single unified currency that
was introduced in the Federal Republic and ten other participating Member States
of the European Union on January 1, 1999. “U.S. dollar,” “USD” or “$” means
the lawful currency of the United States. “Pound sterling” or “GBP” means the
lawful currency of the United Kingdom.
So that
you may more easily ascertain how the trends in our financial results might have
appeared had they been expressed in U.S. dollars, the following table shows, for
the periods indicated, the average, high and low exchange rates for euros,
expressed in U.S. dollars per EUR 1.00, as published by the European
Central Bank:
|
Year
or Month
|
|
Average
(1)
|
|
|
High
|
|
|
Low
|
|
|
|
|
(in
$ per €)
|
|
|
2005
|
|
|
1.2380 |
|
|
|
|
|
|
|
|
2006
|
|
|
1.2630 |
|
|
|
|
|
|
|
|
2007
|
|
|
1.3797 |
|
|
|
|
|
|
|
|
2008
|
|
|
1.4726 |
|
|
|
|
|
|
|
|
2009
|
|
|
1.3963 |
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
August
|
|
|
- |
|
|
|
1.4410 |
|
|
|
1.4072 |
|
|
September
|
|
|
- |
|
|
|
1.4783 |
|
|
|
1.4220 |
|
|
October
|
|
|
- |
|
|
|
1.5020 |
|
|
|
1.4537 |
|
|
November
|
|
|
- |
|
|
|
1.5083 |
|
|
|
1.4658 |
|
|
December
|
|
|
- |
|
|
|
1.5120 |
|
|
|
1.4276 |
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
- |
|
|
|
1.4563 |
|
|
|
1.3966 |
|
|
February
(through February 23)
|
|
|
- |
|
|
1.3984
|
|
|
1.3519
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
average of the exchange rates on the last business day of each month
during the relevant period.
|
On
February 23, 2010, the exchange rate was USD 1.377 per
EUR 1.00.
Our
shares trade on German stock exchanges, including the Frankfurt Stock Exchange,
in euros. Fluctuations in the exchange rate between the euro and the U.S. dollar
will affect the U.S. dollar equivalent of the euro price of the shares on the
German stock exchanges and, as a result, are likely to affect the market price
of our ADSs on the New York Stock Exchange. When we declare cash dividends, they
are declared in euros, and exchange rate fluctuations affect the U.S. dollar
amounts you would receive if you are a holder of American Depositary Receipts
(ADRs) evidencing ADSs upon conversion of cash dividends on the shares
represented by your ADSs.
In
addition to the other information contained in this Annual Report, investors in
our securities should carefully consider the risks described below. Our
financial condition or results of operations, or the trading prices of our
securities, could be materially adversely affected by any of these
risks.
The
following discussion contains a number of forward-looking statements. Please
refer to the “Forward-Looking Statements” discussion at the front of this Annual
Report for cautionary information.
An
economic downturn, a substantial slowdown in economic growth or deterioration in
consumer spending could adversely affect our customers’ purchases of our
products and services in each of our operating segments, which could have a
negative impact on our operating results and financial condition.
Our
business is influenced by general economic conditions in Germany, Europe and the
United States. The economic outlook for 2010 signals a slight recovery,
including in our largest markets in Europe and the United States, but the global
economic situation remains fragile.
A
continuous deterioration in the economic environment could have an adverse
effect on the level of demand by our individual customers for our products and
services and the willingness of our business customers to invest in information
and communications technology (ICT). This could, in turn, jeopardize the
attainment of our growth targets, such as those relating to multimedia services
in mobile telecommunications, or those relating to broadband products and
services based on digital subscriber line (DSL) technology.
Because
we operate in heavily regulated business environments, decisions that regulatory
authorities impose on us restrict flexibility in managing our business and may
force us to offer services to competitors, or reduce the prices we charge for
our products and services, either of which could have a material negative impact
on our revenues, profits and market shares.
We are
subject to strict regulation in all of our fixed-line and mobile markets in
Europe and the United States. Government agencies regularly intervene in the
offerings and in the pricing of our fixed-line and mobile products and services.
Regulation can impede our ability to grow and to react to the initiatives of
competitors and technological change.
Amendments
to the EU Telecommunications Framework entered into force on December 17, 2009.
Whether the revised regulatory framework will increase or decrease the
regulatory burden on us will depend on the manner in which revised directives
are subsequently implemented in the EU Member States, and how the revised
regulatory framework will be applied by the respective National Regulatory
Authorities.
In June
2009, the European Commission also proposed a draft recommendation on regulated
access to Next Generation Access Networks, or NGA, such as access to new and
existing ducts, civil engineering structures and other elements which are not
active and necessary for the roll-out of fiber-based telecommunications
infrastructure. The objective of the recommendation is to regulate fiber-based
telecommunications infrastructure and access. If this recommendation is
implemented as currently drafted may cause a decrease in our revenues and may
impact the extent and timing of our NGA build-out.
The
German telecommunications regulatory framework implemented by the Federal
Network Agency (Bundesnetzagentur) has an
especially significant impact on our domestic business. So far, we have been
exempted from regulation on the basis of a loss of significant market power in
markets of relatively minor importance only, such as the market for fixed-line
international calls.
Additionally,
since we are offering mobile and fixed-line triple-play services (“triple-play”
includes high-speed Internet access, communications services and entertainment
offerings), media regulation may become increasingly important to our business.
This regulation might restrict our ability to provide media services, including
the delivery of content, and could also result in additional costs for technical
implementation measures needed to comply with increased regulation.
Mobile
Telecommunications Operations
Regulatory
authorities supervise our mobile telecommunications operations in the countries
in which we operate. We expect a tightening of regulatory control in the area of
mobile telecommunications, with a probable negative effect on pricing and
revenues, for example as a result of further reductions in international roaming
charges for the wholesale and retail voice market, international data and SMS
roaming charges, call termination charges and possible access regulation in some
markets. In Europe, national regulatory authorities and various EU bodies have
the power to regulate based on market investigations or reviews.
With
respect to international roaming charges for the wholesale and retail voice
market, a European Union-wide regulation, valid until June 2010, is presently in
place. On July 1, 2009, a new EU roaming regulation came into force and expanded
the existing regulation to non-voice roaming services until June 30, 2012.
Besides additional reduction of wholesale and retail voice roaming tariffs, SMS
roaming charges were reduced and furthermore, price caps for wholesale data
roaming tariffs and additional transparency measures have been introduced. This
expansion of existing regulation has an additional negative effect on our
roaming revenues.
Mobile
call termination charges are also subject to regulatory measures in countries
with mobile telecommunications operations that can have a negative effect on
revenues. Various reviews of call termination rates and court proceedings
relating to regulatory measures are pending in several of those markets. The
European Commission intends to further reduce the termination rates
significantly and has therefore issued a recommendation that defines details for
the calculation of termination rates by the National Regulatory Authorities. The
recommendation neglects significant parts of the costs of mobile operators in
the termination rate calculation. Despite these serious negative consequences
for the mobile industry the recommendation was adopted in May 2009. If the
European Commission were to further reduce termination rates, it may have an
adverse effect on the profitability of our mobile-telecommunications operations
in Europe.
Our
operations in the United States are regulated primarily by the Federal
Communications Commission (FCC) and by various other federal, state and local
governmental agencies. These governmental agencies may also exercise
jurisdiction over mobile telecommunications operators. The FCC is continually
considering whether to establish new rules and policies, many of which, if
implemented could impose significant costs and burdens on our business. The most
significant areas of concern include whether the FCC makes available additional
spectrum for next generation wireless offerings in a reasonable timeframe and
ensures that existing spectrum holdings remain free and clear of any radio
interference concerns. The FCC is also considering imposing new “net neutrality”
regulations on wireless carriers that could, depending on how they are defined,
restrict a carrier’s ability to manage its network. In addition, many state and
local governments regulate various aspects of wireless operations, affecting our
business practices and the carrier-customer relationship. In
particular, consumer regulation at the federal or state level can impact a
variety of carrier practices in this area including for example early
termination fees, trial periods, billing practices and marketing. Any state or
federal regulation could have a potentially adverse effect on our mobile
telecommunications business in the United States, as would any failure to comply
with applicable regulations. Some U.S. states have taken actions to regulate
various aspects of wireless operations including customer billing, termination
of service arrangements and advertising. Any of those agencies could adopt
regulations or take other actions that could adversely affect our business. If
we fail to comply with applicable regulations, we may be subject to sanctions,
which may have an adverse effect on our mobile telecommunications business in
the United States.
Fixed-Network
Operations
We
believe that, for the foreseeable future, the Federal Network Agency is likely
to consider us a provider with significant market power in various German
markets for public voice telephony services in the fixed-line network and in
other markets, including most of those in which we held monopoly rights in the
past. Access and price regulation apply primarily to telecommunications services
that are considered to involve an operator with "significant market power." As a
result, we expect that the strict regulatory provisions of the German
Telecommunications Act relating to providers with significant market power will
continue to be applied to our activities in those markets. Considering that in
many markets our competitors are unlikely to gain significant market power in
the near future, we expect that we will have to compete in important markets
with providers not subject to these regulatory obligations. Therefore, these
competitors may be expected to have more flexibility than we have in terms of
the types of services offered and customers served, pricing and the granting of
network access.
We are
required to offer an Internet Protocol (IP) Bitstream Access product in the
wholesale-market and are therefore required to offer unbundled broadband access
to competitors since April 2008. According to the key elements of the draft
market analysis and regulatory order on bitstream access published on October
21, 2009, the Federal Network Agency intends to rely on ex-post regulation but
will expand the scope of regulation to include all wholesale bitstream access
products, including also new VDSL wholesale services and including the transfer
of traffic to a minimum of one point of presence (PoP) whereas until today, a
carrier must connect to 73 PoP in order to provide BSA-based retail services on
a nationwide basis. The final adoption of this market analysis and regulatory
order is expected in the first quarter of 2010.
According
to a regulatory order, we must grant access to competitors to ducts and
street cabinets. The replication of VDSL products, in particular by our
competitors using their own infrastructures, is therefore being made easier at
our expense. This will have a negative impact on our revenue and results of
operations, even if we offer our competitors a VDSL product on a voluntary
basis. The Federal Network Agency specified the obligations concerning access to
cable ducts, dark fiber and co-location within street cabinets on December 4,
2009. We applied for corresponding tariffs in mid-January 2010 and expect a
decision in the first quarter of 2010 regarding prices relating to access
to ducts and collocation within the street cabinets.
We are
involved in a number of pending legal proceedings regarding decisions of the
Federal Network Agency that concern access charges relating to the local loop.
Unbundled local loop charges for monthly rental, as determined by the Federal
Network Agency for the period from February 1999 to March 2001, were revoked.
The Court criticized the Federal Network Agency’s calculation method for
unbundled local loop costs. The Court ruling concerning unbundled local loop
charges for the period from 1999 to 2001 became effective in October 2009. As a
result, the Federal Network Agency must now decide again on our rate approval
applications of 1999. Unbundled local loop charges for monthly rental as well as
for one-off services, as determined by the Federal Network Agency for the period
April 2001 to March 2003, were also revoked by the Cologne Administrative Court.
These rulings are not yet effective due to pending claims of the Federal Network
Agency and Deutsche Telekom at the German Federal Administrative Court. It is
not possible at present to estimate whether these decisions will require
Deutsche Telekom to make payments or price adjustments and if so, in what
amount.
Our
fixed-line subsidiaries in Southern and Eastern Europe are subject to regulatory
provisions and risks that are similar to those affecting our fixed-line
operations in Germany. For example, we are designated an operator with
significant market power in most fixed-line markets in which we operate,
including in Hungary, Slovakia, Croatia and Greece. The provision of
telecommunications services in Greece is subject to regulation based on European
Union legislation, competition law and ex-ante sector-specific regulation
transposed in 2006 in the Greek Telecommunications Law. A second round of
analysis of the markets for wholesale broadband access and wholesale (physical)
network infrastructure access (including shared or fully unbundled access) at a
fixed location was concluded by in the Greek NRA in July 2009. The Greek NRA
defined the Hellenic Telecommunications Organization S.A., (" OTE") as
having significant market power and imposed additional
obligations. The business impact of increased regulation on our
subsidiaries in Southern and Eastern Europe will depend on the way in which
national regulatory authorities use their powers, and the extent to which our
competitors take advantage of regulatory decisions designed to foster increased
competition.
For
further information regarding the matters discussed above and other aspects of
the regulatory environments to which our businesses are subject, see “Item 4.
Information on the Company – Regulation” and “Item 8. Financial Information –
Legal Proceedings.”
We face
intense competition in all areas of our business, which could lead to reduced
prices for our products and services and a decrease in market share in certain
service areas, thereby adversely affecting our revenues and net
profit.
Germany
In
Germany, fixed-line network voice telephony service revenues and prices have
continued to decline, primarily due to intense competition and adverse decisions
imposed by the national regulation authorities, and also due to customers’
ongoing substitution of mobile telecommunications and VoIP services for
fixed-line usage.
Due to
competitive pressures from cable operators, mobile operators and fixed-line
carriers, we continued to lose market share in 2009. We expect a further
increase in competition from cable operators, in particular, offerings of
product bundles for telephone and broadband access lines, which are increasingly
offered in more regions throughout Germany. Furthermore, the switch of mobile
operators’ focus from pure mobile services towards fixed-line offerings,
regulatory actions by the Federal Network Agency and the increasing quality and
acceptance of VoIP services will increase pressure on our market shares,
revenues and margins.
Additional
local and regional network operators are expanding their presence to include
other major cities and regions. In the future, we could face even fiercer
competition and lose further market share if our competitors were to combine
their businesses.
Existing
mobile substitution effects are intensified by the proliferation of MVNOs.
Reduced prices for mobile telecommunications services (e.g., on the basis of
lower flat rates without call-based charges and regulatory decisions regarding
mobile telephony termination rates) could further increase pricing pressure on
our fixed-line services. Furthermore, mobile operators are increasingly engaging
in reselling DSL product bundles provided by other fixed-line operators, and
this continues to have an adverse effect on our fixed-line network
revenues.
The
German markets for Internet access and portal services, especially within the
broadband market, have been, and will continue to be, highly competitive and are
increasingly saturated. Prices for broadband flat rates have been steadily
declining. Our future competitive position in the broadband/fixed-network
business in Germany will be affected by pricing, network speed and reliability,
services offered, customer support and its ability to be technologically adept
and innovative. The regulatory environment can also exert a significant
influence on the level of competition. We expect that our competitors will
continue to pursue new broadband customers aggressively. In the market for
portal services and content, competition is also intense due to low barriers to
entry. In addition, a weaker economy may increase pressure on our revenues and
margins in these markets. Furthermore, recent regulatory decisions have required
us to offer to our competitors an IP Bitstream Access product, which enables our
competitors to expand their operations throughout Germany without building their
own infrastructure.
Part of
the challenge in the fixed-network business in Germany continues to be the
improvement of our reputation for customer service while implementing
cost-saving measures. If we do not continue to improve our customer service
sustainably, there is a risk that we might not stop our overall continuing loss
of fixed-network customers in the German market.
Competition
in the German mobile telecommunications segment with established players such as
Vodafone, E-Plus and O2 is intensive and can be expected to increase further in
the future. Growing competition is also fostered by resellers and “no-frills”
operators, offering discount rates without significant minimum-contract term
obligations. With our “Congstar” brand, we also participate in this market,
primarily as a measure to prevent churn from our established “T-Mobile” premium
brand.
In terms
of the mobile share of “total telecommunications minutes”, Germany consistently
lags behind the European average. Although the number of “mobile minutes” is
still growing in Germany, the respective growth rates are constantly declining
since early 2008. This makes it all the more difficult to compensate price
declines by higher usage.
As the
German market for mobile telecommunications has become increasingly saturated
(we believe the overall penetration rate to be well above 100%), the focus of
competition has been shifting from customer acquisition to customer retention,
and increasing the quality and value of existing customers. Accordingly, if we
are unable to offer increased quality and better value to our customers, our
market share and revenues may not grow as we have anticipated in our
plans.
United
States
In the
United States, each of T-Mobile USA’s three main national competitors –
AT&T, Verizon Wireless and Sprint/Nextel – is significantly larger than
T-Mobile USA. Their scale could afford them significant structural and
competitive advantages in this market. This situation presents T-Mobile USA with
a long-term challenge to compete effectively in terms of pricing, products,
coverage and the introduction of new technologies and services. Intense
competition from various regional and other small national operators also exists
in T-Mobile USA’s markets. Partly, these competitors operate on alternative
business models within the traditional wireless space that pose potential to
negatively affect T-Mobile USA’s ability to attract and retain customers, such
as low-cost unlimited prepaid offerings (offered by, e.g., regional carriers
Leap and MetroPCS, as well as Boost).
In
addition to traditional competitors, the entrance and influence of non-wireless
carriers, such as manufacturers, service providers and cable providers, could
cause further pressure on the wireless industry and T-Mobile USA.
The
incumbent wireless industry is experiencing disruptive innovation on many
fronts. For example, Apple transformed the device market with the launch of the
iPhone, and Clearwire hopes to transform the market with fixed mobile
convergence. As wireless networks open in response to consumer demand
(and threatened legislative/regulatory actions) and diverse industries converge
on the wireless communications industry, the era of limited choices (walled
gardens controlled by incumbent wireless carriers) will increasingly shift to a
new era of an abundance of options in devices, providers, and
services. This dynamic environment poses opportunity for companies
who identify and recognize opportunities within the threats, although a
significantly higher level of inherent risk comes with dynamism than with a
stable industry landscape.
Despite
the continued difficult economic context, the wireless industry is faring better
than most industries (wireless spending is becoming less discretionary in the
U.S.), but the industry is not immune from the cost-reduction efforts of
consumers and changes in consumer credit-worthiness. As the overall
drop in customer growth intensifies, and price competition also in
the Contract area becomes more perceptible, a comprehensive 3G coverage and
attractive “smartphone” offerings will be key to T-Mobile USA’s sustained
commercial success.
Since
T-Mobile USA is a significant contributor to our overall revenues and customer
growth, a further slowdown or decline in the business of T-Mobile USA could have
a material adverse effect on the attainment of the growth targets and
profitability of our Group as a whole.
Europe
Competition
in the European mobile telecommunications markets run by our Europe operating
segment is intense and can be expected to increase in the future. Growing
competition results, in part, from the market entry of low cost carriers, such
as mobile virtual network operators, or MVNOs, which use the networks of other
operators at volume discounts, and from market consolidation. If prices for
mobile telecommunications services continue to decline through competition
and/or regulation more than anticipated and this decline is not compensated for
by higher usage, planned objectives may not be achieved. In addition, mobile
network operators’ expansion of product offerings into the fixed-line sector may
result in a competitive disadvantage for our mobile telecommunications
operations in countries in which we offer only mobile communications services.
Moreover, technologies such as W-LAN, WiMax and Voice over Internet Protocol
(VoIP), which can be used with existing hardware and platforms, could drive
voice and data traffic from mobile networks, which could lead to significant
price and revenue reductions.
As
European markets have become increasingly saturated, the focus of competition
has been shifting from customer acquisition to customer retention, and
increasing the quality and value of existing customers. Accordingly, if we are
unable to offer increased quality and better value to our customers, our market
share and revenues may not grow as we have anticipated in our
plans.
Southern
and Eastern Europe
Through
our investments in OTE, our subsidiary in Greece, and Magyar Telekom, our
subsidiary in Hungary, and our subsidiaries Hrvatski Telekom and Slovak Telekom,
we have market presence in various countries of the Southern and Eastern
European region, offering integrated or either mobile or fixed-network
telecommunications services.
All of
our Southern and Eastern European companies face intense competition and
difficult economic conditions. As in other operating segments, growing
competition results, to a different extent in each regional market, from the
market entry of alternative carriers (such as Cable TV operators) or low cost
carriers (such as MVNOs), technology shifts (such as IP-based telecommunications
networks) and from market consolidation.
In
Greece, risk exists in the area of infrastructure roll-out, including VDSL and
FTTX. The Greek government announcement an initiative to support a passive
optical network across Greece that would provide open access to all
fixed-network providers and, as a result, increase competition. The impact of
this development on OTE and the related financial risk to us cannot be
quantified at this point.
Systems
Solutions
Our
Systems Solutions business is subject to risks associated with the general and
regional economies of its customers and the willingness and ability of its
customers to invest in information and communications technology services and
products. The ICT market is shaped by long sales cycles, severe competition and
declining prices. The result is downward pressure on revenues and margins, which
has been exacerbated by the global economic crisis.
Depending
on the economic development and their impact on our customers in 2010, T-Systems
will continue to be affected. For example, cost-cutting programs and
postponement or cancellation of investments of our customers can have a negative
impact on T-System’s revenues and margins. In this business environment, further
cost reductions will force T-Systems to rely on the development of lower cost
near- and off shore capacities in both IT Outsourcing and the System Integration
business.
In
addition, the international growth potential of T-Systems may be constrained by
its limited brand recognition in some national markets, at least compared to
that of competitors who may be more established there, particularly as this
relates to maintaining and increasing business with multinational companies
outside of Germany. Additionally the relatively small size of some international
T-Systems units may require expensive additional management resources from
Germany.
If
T-Systems’ focus on multinational customers and its service offerings, such as
dynamic SAP services or Cloud Computing are not successful, T-Systems may lose
market share to its competitors, suffer reduced revenues and incur
losses.
For more
information, see “Item 4. Information on the Company – Description of
Business.”
We
may realize neither the expected level of demand for our products and services,
nor the expected level or timing of revenues generated by those products and
services, as a result of lack of market acceptance, technological change or
delays from suppliers, which could adversely affect our cash flows.
There is
a risk that we will not succeed in making customers sufficiently aware of
existing and future value-added services or in creating customer acceptance of
these services at the prices we would want to charge. There is also a risk that
we will not identify trends correctly, or that we will not be able to bring new
services to market as quickly or price-competitively as our competitors. These
risks exist, in particular, with respect to our anticipated future growth
drivers in the mobile telecommunications area, such as mobile data services or
other advanced technologies (which are supported by advanced “smartphone”
products such as the iPhone and the T-Mobile G1 phone), and in the fixed-line
telecommunications area, such as triple-play services, which include telephone,
Internet and television services.
Under the
“Entertain” product name, we provide our customers in Germany with comprehensive
triple-play offerings. The market acceptance for these new products and services
could be negatively affected by an unwillingness to pay for additional features.
Since the content and technology of the product are very complex, we may find it
difficult to convey an understanding of the product’s benefits to our customers
via our traditional sales channels. In addition, some of our competitors offer
similar or pared-down products. These factors could lead to a potential
reduction of the perceived value of “Entertain” to our customers with adverse
effects on our pricing models, revenues and profit margins.
Further,
as a result of rapid technological progress, and the trend towards technological
convergence, there is a danger that new and established information and
telecommunications technologies or products may not only fail to complement one
another, but in some cases may even substitute for one another. An example of
this is VoIP, a technology that is already established in the business customer
market. VoIP has now reached the consumer market as well and, as a technology
that competes directly with traditional fixed-line telephony services, VoIP has
the potential to reduce further our market share and revenues in our fixed-line
business. The introduction of mobile handsets with VoIP functionality may also
adversely affect our pricing structures and market share in our mobile voice
telephony business. If we do not appropriately anticipate the demand for new
technologies, and adapt our strategies and cost structures accordingly, we may
be unable to compete effectively, with the result that our business activities,
financial condition and results may suffer.
For more
information, see “Item 4. Information on the Company—Description of
Business.”
Some
of our investments (such as in new spectrum licenses) to develop future products
and services may involve substantial cash outlays with no certainty of market
acceptance or regulatory non-interference with license
requirements.
In 2010,
the German Federal Network Agency is set to auction off certain recently
released radio frequencies. The terms and conditions for the award of new
spectrum in the 800 MHz, 1.8 GHz, 2 GHz, and 2.6 GHz bands were published in
October 2009. In the United Kingdom, current proposals call for
a combined auction of 800 MHz and 2.6 GHz spectrum in late 2010
with certain bidding restrictions, such as spectrum caps for incumbents and
joint ventures, release of spectrum already held by mobile telecommunications
companies and wholesale and coverage obligations. In the Netherlands, parliament
began the discussion of new rules for the auction of 2.6 GHz spectrum in spring
2009, and it is officially still expected to take place in the first quarter of
2010. In Austria, an auction for 2.6 GHz spectrum is now expected to take place
in the second quarter of 2010. Depending on the outcome of these auctions, a
greater cash outlay than anticipated may be necessary to gain new spectrum in
these countries, which would negatively affect our cash-flow generation
goals.
There is
a risk that the return on our investments, in particular in new spectrum
licenses and network infrastructure, may negatively deviate from our plans. In
addition to the negative impact on our cash flows, this could result in
significant write-downs of the value of spectrum or other licenses or other
network-related investments.
Should we
face a continuously deteriorating economic climate, we may decide, or be
required, to scale back capital expenditures. We believe that we have
flexibility in terms of the amount and timing of our capital expenditure
program, but a lasting reduction in capital expenditure levels below certain
thresholds could affect our future growth, in particular in our mobile
operations.
Failure
to achieve our planned reduction and restructuring of personnel or our human
resources-related cost-savings goals could negatively affect our reputation and
the achievement of our financial objectives and profitability.
Staff
restructuring within the Deutsche Telekom Group in Germany continued on a
socially conscious basis in 2009. It was implemented essentially by means of
voluntary redundancies, partial and early retirement, and employment
opportunities for civil servants and employees offered by Vivento, especially in
the public sector. We will also continue to restructure our workforce as
required. If it is not possible to implement the corresponding measures to the
extent planned or not at all, this may have negative effects on our financial
targets and profitability.
Deutsche
Telekom and employee representatives agreed to 3,000 job cuts at T-Systems by
2010. The agreement incorporates a series of measures, including help in
searching for new jobs, a voluntary redundancy program and early retirement
options. In the first quarter of 2010, T-Systems will examine the level of
take-up for the voluntary offers. If the affected employees have not found
alternative employment opportunities or accepted voluntary offers by then, they
will be offered fixed-term employment in a transitional company. Should the
desired workforce reduction targets not be met, compulsory redundancies, which
could have a negative impact on our corporate reputation in Germany, cannot be
ruled out.
The
successful realization of our ongoing staff reduction program depends on a range
of factors that are beyond our control, such as the continued successful sale of
non-core businesses, general developments in the labor market, the demand for
our retrained labor force, and the level of acceptance of the various severance
offers and other voluntary reduction measures. If the planned staff reduction
targets are not achieved, this would have a negative effect on our operating
expenses and profitability.
For more
information, see “Item 4. Information on the Company—Description of
Business—Group Headquarters and Shared Services” and “Item 6. Directors, Senior
Management and Employees—Employees and Labor Relations—Other
Employees.”
As
a result of dispositions of certain non-core businesses in Germany, there is an
increased risk of return of civil servants transferred out of the Group, which
could have a negative impact on our staff and cost reduction
objectives.
Our
employees who have civil servant status can, based on German civil service law,
only be completely transferred to the buyer of a business from us in exceptional
cases. Therefore, as a general matter, such transferred civil servants are
placed on leave of absence while employed with the transferred business unit.
Accordingly, in the event of termination of employment with the transferred
business unit, there is a risk that such civil servants will return to the
Deutsche Telekom Group. This risk of return can be reduced by an agreement on
compensation payments, but it cannot be completely eliminated. As of December
31, 2009, the total number of civil servants that can avail themselves of this
right of return to the Deutsche Telekom Group was 3,467, which represented a
considerable decrease over the 2008 year-end figure, chiefly as a result of some
400 civil servants actually returning to the Deutsche Telekom Group from
Strabag, Nokia Siemens Networks and the cable network operators.
If
further Group units employing civil servants are disposed of, the risk of
additional civil servants returning after the end of their temporary leave may
again increase. For
further information regarding civil servants and general human resources-related
matters, see “Item 6. Directors, Senior Management and Employees—Employees and
Labor Relations.”
Alleged
health risks of wireless communications devices have led to litigation affecting
markets with our mobile telecommunications operations subsidiaries, and could
lead to decreased wireless communications usage or increased difficulty in
obtaining sites for base stations and, as a result, adversely affect the
financial condition and results of operations of our wireless services
business.
Media
reports have suggested that radio frequency emissions from wireless mobile
devices and cell sites may raise various health concerns, including cancer, and
may interfere with various electronic medical devices, including hearing aids
and pacemakers. Research and studies are ongoing. The World Health Organization
has indicated that it will publish its recommendations for public policy in its
Radio Frequency Environmental Health Criteria in 2011. However, on the basis of
current scientific knowledge, there are no known adverse effects on health from
emissions at levels below internationally recognized health and safety
standards. We cannot provide assurance that research in the future will not
establish links between radio frequency emissions and health risks.
Whether
or not such research or studies conclude there is a link between radio frequency
emissions and health, popular concerns about radio frequency emissions may
discourage the use of wireless devices and may result in significant
restrictions on the location and operation of cell sites by our mobile
telecommunications subsidiaries and the usage of T-Home’s wireless devices,
telephones or products using wireless technology. Such restrictions on use could
have material adverse effects on our results of operations.
T-Mobile
USA is subject to current and potential litigation relating to these health
concerns. Several class action and individual lawsuits have been filed in the
United States against T-Mobile USA and several other wireless service operators
and wireless telephone manufacturers, asserting product liability, breach of
warranty and other claims relating to radio frequency transmissions to and from
wireless mobile devices. The complaints seek substantial monetary damages as
well as injunctive relief. To date, the cases filed against T-Mobile USA have
been dismissed by the trial courts, although one class action case is pending on
appeal. The defense of lawsuits alleging adverse health effects from wireless
telephone use may divert management’s attention, and T-Mobile USA may be
required to pay significant awards or settlements and incur significant expenses
in defending these lawsuits.
We do not
know whether legislators, regulators or private litigants will refrain from
taking other actions adverse to us, based on the purported health-related risks
associated with radio frequency emissions. Any such litigation, legislation or
adverse actions may result in additional costs and loss of revenues in our
mobile communications businesses. For more
information, see “Item 8. Financial Information—Legal Proceedings.”
We
continuously engage in large-scale programs to reshape our information
technology (IT) infrastructure to adapt to changing customer needs and
organizational requirements. Failure to effectively plan and monitor these
activities could lead to misallocations of resources and impaired processes with
negative consequences for our operations.
The “Next
Generation IT (NG IT)” program was launched in 2008 as a Group-wide framework
for all IT-related components of our transformation programs and the development
of our future overall IT architecture. Its focus is on a common platform to
support IT projects and services in the future. The close cooperation between IT
and business areas plays a central role in this program. Flexibility, cost
reduction, short response time to market changes and secure management of
business information are the major challenges for our future IT landscape. In
order to tackle these challenges, an architectural approach was developed to
identify the necessary IT changes, taking into account developments in business
processes, in the production environment and in customer and product
management.
Due to
the enormous complexity of the implementation of this IT initiative,
malfunctions, connectivity issues, implementation delays, and other unforeseen
problems, could result in costly process impairments and remediation, and
possible extended down-times of IT processes, and therefore frustrate the
attainment of our goals in terms of cost savings and quality
improvements.
One of
our most important IT programs deals with the long-term development and
implementation of a comprehensive IP platform that will support both fixed-line
and mobile telephony services. This means that the traditional platform will be
completely replaced by an IP-based system. Upon implementing this joint IP
platform, we will be subject to risks inherent in all IT systems connected to
the Internet, such as hacker attacks, “spam calls” and other disruptions. These
risks could lead to a temporary interruption of our IT resources and, as a
result, impair the performance of our technical infrastructure.
System
failures due to natural or man-made disruptions and loss of data could result in
reduced user traffic and reduced revenues and could harm our reputation and
results.
Our
technical infrastructure (including our network infrastructure for fixed-line
network services and mobile telecommunications services) and data may be damaged
or disrupted by fire, lightning, flooding and other calamities, technology
failures, human error, terrorist attacks, hacker attacks and malicious actions
(e.g., theft or misuse of customer data), and other similar events. We attempt
to mitigate these risks by employing a large number of measures, including a
comprehensive monitoring of our telecommunications networks, backup systems and
protective systems such as firewalls, virus scanners, and building security. In
addition, we have implemented a global business continuity management system at
our corporate headquarters. We cannot, however, be certain that these measures
will be effective under all circumstances, and that disruptions (such as the
network outage at T-Mobile Deutschland in April 2009 or the outage of a critical
“Sidekick” user database in the U.S. in October 2009) or damages will not occur.
Disruption or damage to our infrastructure may result in reduced user traffic
and revenues, increased costs, and damage to our reputation.
Shortcomings
in our supply and procurement process could negatively affect our product
portfolio, revenues and profits.
As a
fully integrated ICT service provider, we cooperate with a wide range of
different suppliers for technical components and assemblies, as well as for
software and other goods and information important to the conduct of our
business. Although we do not believe that we are materially dependent on any
single supplier, our contractors may want to extend delivery times, raise prices
and limit supply due to their own shortages or changing business and product
strategies. Furthermore, our vendors may be subject to litigation with respect
to technology that is important for the conduct of our business. Especially in
times of economic turmoil, supply chains, credit access and financial stability
of our vendors may be negatively affected, which could disturb our commercial
relationship with them.
If our
commercial partners fail to deliver quality products and services in a timely
manner, the ensuing disruptions in our chain of supply could negatively affect
our product portfolio, cost structure, revenues and profits. We take a variety
of measures to shelter ourselves from these risks, but we cannot be sure that
these measures will be effective under all circumstances.
We
are continuously involved in disputes and litigation with regulators,
competition authorities, competitors and other parties. The ultimate outcome of
such legal proceedings is generally uncertain. When finally concluded, they may
have a material adverse effect on our results of operations and financial
condition.
We are
subject to numerous risks relating to legal and regulatory proceedings, in which
we are currently a party or which could develop in the future. Litigation and
regulatory proceedings, including patent infringement lawsuits, are inherently
unpredictable. Legal or regulatory proceedings in which we are or come to be
involved (or settlements thereof) may have a material adverse effect on our
results of operations or financial condition. For information concerning some of
the litigation in which we are involved, including with respect to Polska
Telefonia Cyfrowa Sp.z o.o (“PTC”) and Toll Collect, see “Item 8. Financial
Information—Legal Proceedings.” For information concerning our regulatory
environment, see “Item 4. Information on the Company—Regulation.”
We
face allegations of data misuse and flaws in our security systems. Despite
diverse measures taken to protect customer data, damage to our reputation
remains a significant risk, which may also affect our business.
The Bonn
public prosecutor's office is still investigating the circumstances surrounding
the illegal monitoring of phone calls and the theft of data relating to several
million mobile customers. As a result of these events, we implemented several
measures to further improve data security and transparency, including the
creation of a new Management Board position relating to data privacy, compliance
and legal affairs, which has the right to veto Management Board business
decisions related to data privacy. A first voluntary annual progress report,
prepared by the Group Privacy Officer, was published in April 2009 and submitted
to the Federal Commissioner for Data Protection, our Supervisory Board and the
public. A newly established Data Privacy Advisory Board advises our Management
Board on all issues related to data privacy. The Advisory Board closely consults
with leading data privacy experts from outside the Group with regard to the
handling of customer and employee data, data privacy audits, IT security and the
consequences of the introduction of new legal provisions. Data privacy contacts
were nominated at each level of the organization to ensure an intense
cooperation with our operating segments. Additionally, we established a
dedicated website to keep the public informed of ongoing developments in this
area. However, despite extensive testing by internal and external audits, there
can be no assurance that the current investigations will not result in the
imposition of additional remedial measures or that further breaches relating to
our customer data will not materialize in the future.
Future
sales of our shares by the Federal Republic or KfW Bankengruppe (“KfW”) may
adversely affect the trading prices of our shares and ADSs.
The
Federal Republic (which, together with KfW, owns approximately 31.7% of our
outstanding shares) has previously indicated an intent to continue with its
privatization policy. In this regard, we cannot predict if and when the Federal
Republic will further reduce its holdings of its equity interest in Deutsche
Telekom AG. The reduction in the Federal Republic’s direct or indirect holdings
may involve KfW. For shareholders, there is a danger that the market offering of
a significant volume of our shares by either the Federal Republic or KfW, or
speculation to this effect on the markets, could have a negative impact on the
price of our shares and ADSs.
Certain
of KfW’s debt instruments are exchangeable into shares of Deutsche Telekom AG,
which, upon exchange, could also have a negative impact on the price of our
shares. KfW issued a class of exchangeable bonds on May 16, 2008 that matures in
June 2013. Exchangeable bonds are debt securities that the holder may exchange
for shares in another company during a predefined period and at a predefined
price. When the exchange price is exceeded and when the holder exercises the
exchange right, KfW will be obligated to exchange the bonds offered for Deutsche
Telekom AG shares. When the exchangeable bonds mature in June 2013, KfW has the
right to settle them in Deutsche Telekom AG shares. These exchangeable bonds in
the aggregate amount of EUR 3.3 billion have a share exchange price of EUR
14.9341 per ordinary share. Accordingly, approximately 221 million shares may be
delivered by KfW in exchange for the outstanding bonds maturing in June 2013.
The delivery to debt holders by KfW of a significant amount of our shares could
have a negative impact on the market price of our shares.
Exchange-rate,
interest-rate and rating risks have had, and may continue to have, an adverse
effect on our revenue and cost development.
We are
exposed to currency risks related to our international business activities.
Generally, our Central Treasury hedges currency risks that may have an impact on
our cash flows (so called, known as a transaction risk), although there can be
no guarantee that our hedging strategies will succeed. Currency risks may have a
negative impact on our results of operations when amounts in local currencies
are translated into euros, particularly in connection with U.S. dollar- and
pound sterling-denominated results. For more
information with respect to the impact of exchange rates and currency
translation, see “Item 5. Operating and Financial Review and
Prospects—Consolidated Results of Operations.”
We are
also exposed to interest-rate risks, primarily in the Euro and U.S. dollar
currencies. Interest-rate risks arise as a result of fluctuations in interest
rates affecting the level of interest payments due on indebtedness at variable
rates in each of these currencies. Once per year, our Management Board specifies
ratios of fixed and variable debt in these two currencies. Our Central Treasury
then takes measures, using derivative instruments and other measures, to
implement the interest-risk management decisions of the Management Board.
For more
information about our hedging activities and interest-rate and market risks, see
“Item 11. Quantitative and Qualitative Disclosures about Market
Risk.”.
In 2009,
Fitch changed our long-term rating from A- to BBB+ with a stable outlook.
Moody’s Investor Service and Standard and Poor’s maintained our long-term rating
at Baa1 and BBB+ respectively with a stable outlook. A further decrease in our
credit ratings below certain thresholds by various rating agencies would result
in an increase in the interest rates on certain of our bonds and medium-term
notes due to step-up provisions and could raise the cost of our debt refinancing
activities generally. For more
information, see “Item 5. Operating and Financial Review and Prospects –
Liquidity and Capital Resources – Capital Resources – Step-up
Provisions.”
We aim to solely place our financial
investments at financial institutions that have high credit
ratings. As a result of international M&A transactions, the
investment portfolio of newly acquired entities may not always meet this
requirement. In individual cases, we thus may face a risk of
unplanned write offs.
Risky
financial exposures to financial institutions by subsidiaries in Southern and
Eastern Europe in particular exist on account of transfer restrictions or
shareholder resolutions. With our investment in OTE, exposures to credit risks
associated with deposits with various, mostly regional banks in Southern and
Eastern Europe became part of our exposure. The goal is to spread these
exposures in order to achieve a higher degree of
diversification.
As
a result of a major restructuring program, we will bring together our domestic
fixed-network business and our domestic mobile business within a new Germany
company. Failure to achieve a smooth transition to “One Company” could
negatively affect our business processes, operational systems and customer
service.
On
November 19, 2009, an extraordinary shareholders meeting approved the spin-off
of the fixed-network business in Germany into “T-Mobile Deutschland GmbH”. The
"new" company will be responsible for almost 27 million fixed-network lines – of
which some 13 million support DSL – and more than 39 million mobile lines. In
total, just under 85,000 employees will work in this company. With this move, we
plan to be in a better position to offer integrated solutions and services for
fixed network and mobile communications from a single source. In addition, we
project to reinforce customer service, safeguard jobs, and tap the potential for
additional revenue and cost synergies.
A
successful completion of creating “One Company” in the course of the second
quarter of 2010 will require major organizational efforts, and the realignment
of numerous people, processes and IT-systems. If the planned targets are not
achieved, there is a risk that the transition period will last longer than
expected, and that our operational performance in Germany will be periodically
disturbed.
Developments
in the telecommunications sector have resulted, and may in the future result, in
substantial write-downs of the carrying value of certain of our
assets.
We review
on a regular basis the value of each of our subsidiaries and their assets. In
addition to our regular annual impairment reviews, whenever indications exist
that goodwill, intangible assets or fixed assets may be impaired due to changes
in the economic, regulatory, business or political environment, we consider the
necessity of performing certain valuation tests, which may result in impairment
charges. The recognition of impairments of intangible assets, property, plant
and equipment and financial assets could cause us to take large, non-cash
charges against net profit, which could lead to a reduction in the trading price
of our shares and ADSs.
For more
information, see “Item 5. Operating and Financial Review and Prospects—Critical
Accounting Estimates.”
Potential
breaches of compliance requirements or the identification of material weaknesses
in our internal control over financial reporting may have an adverse impact on
our corporate reputation, financial condition and the trading price of our
securities.
In
general, compliance requirements for publicly traded companies and, in
particular, the investigation of potential breaches and corporate misconduct are
increasing and leading to major financial implications for the companies
concerned. At the same time, the legal framework governing the monitoring of
companies is becoming more comprehensive, which increases the liability risks
for executive bodies and associated costs.
While we
believe that we have established an appropriate compliance organization to
detect, assess, reduce and manage these risks, the global and diverse nature of
our operations means that these risks and their related consequences will
continue to exist. Although we intend to take prompt measures to remediate any
identified shortcomings in our internal controls over financial reporting,
activities of this kind may involve significant effort and expense, and
disclosure of any failures, material weakness or other conditions, may result in
a deterioration of our corporate image and negative market
reactions.
For more
information with regard to Section 404 of the Sarbanes-Oxley Act of 2002, see
“Item 15.Controls and Procedures – (b) Management’s Annual Report on Internal
Control over Financial Reporting.”
ITEM 4. Information on the Company
The legal
and commercial name of our company is Deutsche Telekom AG. We are a private
stock corporation organized under German law. Our registered office is located
at Friedrich-Ebert-Allee 140, 53113 Bonn, Germany, and our telephone number is
+49 (228) 181-0. Our agent for service of process in the United States is
Deutsche Telekom, Inc., 14 Wall Street, Suite 6B, New York, NY
10005.
We are an
integrated telecommunications provider offering our customers around the world a
comprehensive portfolio of state-of-the-art services in the areas of
telecommunications and IT.
The
provision of public telecommunications services in Germany was long a state
monopoly, as formerly provided in the constitution of the Federal Republic. In
1989, the Federal Republic began to transform the postal, telephone and
telegraph services administered by the former monopoly provider of such services
into market-oriented businesses, and divided the former monopoly into three
distinct entities along their lines of business, one of which was our
predecessor, Deutsche Bundespost Telekom. At the same time, the Federal Republic
also began the liberalization of the German telecommunications market. We were
transformed into a private stock corporation effective January 1,
1995.
The
operation of networks (including cable networks) for all telecommunications
services, other than public fixed-line voice telephony, was opened to
competition in Germany on August 1, 1996, when the new legal framework for
the regulation of the telecommunications sector in Germany, the
Telecommunications Act, became effective. As required by the Telecommunications
Act, and mandated by the directives of the EU Commission, the telecommunications
sector in Germany was further liberalized on January 1, 1998, through the
opening of the public fixed-line voice telephony services to competition. Since
then, we have faced intense competition and have been required, among other
things, to offer competitors access to our fixed-line network at regulated
interconnection rates. For more information on the regulatory effects on
competition in our fixed-line business, see “—Regulation.”
Important
events in the development of our business since January 1, 2009 have
included:
|
·
|
the
announcement of a joint venture between T-Mobile UK and Orange UK in the
United Kingdom;
|
|
·
|
the
creation of a more regional and integrated structure for third-party
domestic carriers and service providers as well as our company, including
the integration of our sales and customer service functions at our
fixed-line and mobile operations in
Germany;
|
|
·
|
the
acquisition in 2009 of an additional 5% in the Greek telecommunications
company OTE for EUR 0.7 billion;
and
|
|
·
|
the
first-time full consolidation of
OTE.
|
Additional
information regarding the foregoing events and other developments is contained
throughout this Item 4.
Since
July 1, 2009, our organizational structure has reflected the realigned
management structure approved by our Supervisory Board on April 29, 2009. The
new structure reflects a more regional focus, with a greater emphasis on
integrating our fixed-network and mobile communications business. In addition,
we centralized the responsibility for product development, IT and technology for
our European operations.
This
realignment resulted in a change to the structure of our operating segments from
July 1, 2009. The business activities in four of these five operating segments
are assigned by regions. In the fifth segment, the business activities are
assigned by customers and products as described below. Since July 1, 2009,
we have reported on the following five operating segments:
|
·
|
Germany,
which combines all fixed-network and mobile activities in Germany and also
includes wholesale telecommunications services for third-party domestic
carriers and service providers as well as our Group’s other operating
segments;
|
|
·
|
the
United States, which comprises all mobile activities in the U.S.
market;
|
|
·
|
Europe,
which covers all activities of the mobile communications companies in the
United Kingdom, Poland, the Netherlands, the Czech Republic and Austria,
as well as the International Carrier Sales and Solutions unit, which
mainly provides wholesale telecommunications services for our Group’s
other operating segments;
|
|
·
|
Southern
and Eastern Europe, which comprises all of our fixed-network and mobile
communications operations in Hungary, Croatia, Slovakia, Greece, Romania,
Bulgaria, Albania, the F.Y.R.O Macedonia, and Montenegro;
and
|
|
·
|
Systems
Solutions, which bundles business with ICT products and solutions for
large multinational corporations and public institutions under the
T-Systems brand.
|
We also
report on Group Headquarters and Shared Services, which includes our service
headquarters and our subsidiaries that are not allocated to the operating
segments.
Fixed-Network
and Mobile Communications Services
Fixed-Network
Services
Our
fixed-network business includes all voice and data communications activities
based on fixed-network and broadband technology. These product offerings are
marketed as basic telephony services, or single-play, telephony and high-speed
Internet access, or double-play, and packages comprising voice communication,
high-speed Internet access and television with interactive television-based
services, or triple-play. Our fixed-network business also includes the sale of
terminal equipment and other hardware, as well as the sale of services to
resellers.
Mobile
Communications Services
Our
mobile communications business offers digital mobile telephony voice services
and data services, such as Short Message Service, or SMS, Multimedia Messaging
Service, or MMS, mobile Internet and other data services, to retail and business
customers. Terminal equipment and other hardware are sold in connection with the
services offered. In addition, our mobile communications services are sold to
resellers and to companies that buy network services and market them
independently to third parties, such as MVNOs. Through our mobile communication
subsidiaries, we also operate one of the largest carrier-owned networks of W-LAN
(WiFi) HotSpots in Europe and the United States.
We offer
mobile voice and data services on both a contract basis and a prepay basis. Our
mobile communications customers generally purchase contract services on the
basis of fixed monthly fees, and pay time-based airtime and per-message fees.
Some contract service offerings include a specified amount of airtime, data
volume or messages in the monthly fee. Prepay services are purchased on the
basis of monetary increments that are recorded on the customers’ Subscriber
Identity Module, or SIM, cards and then deducted, based on airtime or messaging
usage fees, as the cards are used. Usage fees can vary according to the rate
plan selected by the customer, the day and time when a call is made, the
destination of the call, the location where the call originates and, in some
cases, other terms applicable to the rate plan, such as whether the called party
is also a customer of the same network. Furthermore, some contracts allow
unlimited usage at a set monthly rate. We offer national and international
roaming services to our customers through a number of roaming agreements with
third-party operators, which allow customers to access mobile services while
outside their home network service area. W-LAN services are sold on both a
monthly subscription basis and through various usage-based plans. Our mobile
communications subsidiaries provide their customers with access to our specific
and third-party content services as well as to the open Internet. Content
provided to customers is either at no additional charge, in which case the
customer only has to pay the normal connection charges to view the content, or
it is premium content, where a customer pays a specific charge through the
customer’s mobile telephone bill to access the content. Our goal is to provide
our mobile customers with an integrated portfolio of voice and data services,
using the most appropriate technologies available depending on local market
conditions.
We count
our mobile communications customers by the number of SIM cards activated and not
churned. Our customer figures include the SIM cards with which machines can
communicate automatically with one another, or M2M cards. Our mobile
communications subsidiaries count contract customers as customers for the length
of their contracts, and count prepay customers as customers as long as they
continue to use our services, and then for a prescribed period thereafter, which
differs according to the particular market. Generally, at the end of this
period, or in the case of payment default or voluntary disconnection, the
customers are cancelled or “churned.” The churn rate for any given period
represents the number of customers whose service was discontinued during that
period, expressed as a percentage of the average number of customers during the
period, based on beginning and period-end figures. Our competitors may calculate
their churn rates using methods different from ours. In addition, because we use
different calculation methodologies in different jurisdictions, our own churn
figures are not comparable across all of our national operations. Our churn
methodologies are described in greater detail in the discussion of our operating
segments below.
Sales
Channels
Our
Germany and Southern and Eastern Europe operating segments offer their
fixed-line and mobile products and services through a broad range of direct and
indirect sales channels. The direct distribution channels include
our:
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·
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retail
outlets, including our Telekom shops in Germany, and throughout Southern
and Eastern Europe such as OTEShops, Germanos and Cosmote shops
in Greece and T-Home Shops in
Hungary;
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·
|
toll-free
service hotlines that allow potential and current customers to obtain
information about, and place orders for, our various products and
services;
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·
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various
Internet websites, which provide a variety of online ordering options;
and
|
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·
|
sales
force, organized into various units that focus on our retail customers,
small- and medium-sized business customers, domestic carrier services
customers and services offered to network operators and other third-party
providers.
|
Indirect distribution channels include national retailers and independent
distributors, such as Internet and IT equipment retailers.
In
addition, our mobile communications subsidiaries in Europe and the United States
use various direct and indirect distribution channels to market their voice and
data products and services to their customers. In the United States, the United
Kingdom, Austria, Poland , the Netherlands and Czech Republic, our mobile
communications subsidiaries sell their products and services to retail customers
through networks of direct retail stores, including some franchise-like
exclusive dealer operations. Other direct sales channels include a direct sales
force dedicated to business customers and sales through toll-free service
hotlines and local websites, which are used for customer-relationship management
as well as for sales transactions. In addition, third-party distributors, who
typically market the products and services of multiple mobile network operators,
play a significant role in distribution. Our mobile telecommunications
subsidiaries use a variety of incentives to encourage third-party vendors to
sell our products and services, such as payment of associated marketing expenses
and commissions.
Mobile
telecommunications resellers and MVNOs are also an important distribution
channel for our mobile communications products and services, especially in
Germany and the United Kingdom. In the United States, MVNOs are currently a
growing distribution channel for T-Mobile USA products and services. In
general, mobile telecommunications resellers and MVNOs purchase minutes and data
at wholesale rates and mobile devices at a discount from network operators,
resell packaged services and mobile devices under their own brands through their
own distribution channels, charge their customers at retail rates that they set
independently and provide customer service and technical support.
For more
information on our marketing sales channels in our Systems Solutions operating
segment, see Systems Solutions.
Seasonality
In
general, our operations are not affected by any major seasonal
variations.
However,
certain seasonal factors are noticeable in our mobile operations in our Germany,
the United States, Europe and Southern and Eastern Europe operating
segments. Our mobile operations in our Germany, Europe and United
States operating segments generally experience an increase in sales of products
and services occurring during the fourth calendar quarter, due to holiday
purchases. As a result, performance during the fourth quarter can have a
significant influence on full-year performance. In addition, our mobile
operations in our Europe, Southern and Eastern Europe operating segments
generally experience an increase in visitor roaming revenues during the third
calendar quarter, due to the number of tourists who spend part of their summer
vacations in this area.
The
revenues of our Systems Solutions operating segment may be subject to quarterly
fluctuations depending on sales cycles (currently ranging between 6 and
18 months) and the purchasing patterns and resources of its customers,
which are subject to general economic conditions and, therefore, difficult to
predict. Accordingly, revenues received in a particular quarter by our Systems
Solutions operating segment may not be indicative of future revenues to be
received in any subsequent quarter.
Suppliers
Although
we do not believe we are dependent on any single supplier due to our
multiple-supplier strategy, there may be occasions when a particular product
from a certain supplier is delayed or back-ordered. We believe that we have
reduced our technological risks and the risk of delays in the supply of
equipment and other technologies, both by contracting with multiple suppliers
having significant market share in the network infrastructure, IT services and
mobile device businesses, and by negotiating contractual penalties to be
enforced in the event a supplier does not meet its obligations with respect to
timeliness and quality. However, these penalty provisions may not fully mitigate
the harm to our business caused by any such contractual breaches.
The
principal types of equipment purchased by our fixed-network operations in our
Germany and Southern and Eastern Europe operating segments are network
components, such as switching systems, transmission systems, access network
components, and customer premises equipment, such as telephones, fax machines,
broadband modems and similar items. The major suppliers to our fixed-network
operations are Siemens AG, Deutsche Post DHL, Alcatel-Lucent Deutschland
AG, Grey Global Group (MediaCom), AVM Computersysteme, Cisco Systems Inc.,
Corning Cable Systems GmbH & Co. KG, and IBM.
Our
mobile operations mainly purchase IT and network components, as well as mobile
devices for purposes of resale, from a number of different
suppliers.
The
principal goods and services purchased by our Systems Solutions operating
segment are computer hardware for client servers and mainframes, operating
systems and applications software, network capacity, network services,
telecommunications network components and IT consulting services.
Dependence
on Patents, Licenses and Industrial, Commercial or Financial
Contracts
We do not
believe that we are materially dependent on any particular patent or other
intellectual property rights. In addition, we do not believe that we are
dependent on any individual third-party customer or on any industrial,
commercial or financial contracts.
Our
mobile communications subsidiaries own a large number of registered patents and
generally have a number of patent applications outstanding at any given time for
technical innovations in the area of mobile telecommunications applications as a
consequence of our continuous development activities. Patent protection activity
is focused on countries where we have mobile operations. In addition, to enable
us to offer mobile telecommunications services in the different jurisdictions in
which we operate, we require, and therefore are dependent on, telecommunications
licenses from the relevant authorities in each of these jurisdictions. For
further information, see “—Regulation.”
For
a description of patent infringement litigation relating to certain DSL-related
technology that is relevant to our fixed-network business in our Germany
operating segment, “Item 8. Financial Information—Legal Proceedings—Other
Proceedings.”
Our
Systems Solutions operating segment is subject to third-party software licenses
in connection with the services it provides to its customers. Any breach,
violation or misuse of third-party software licenses could result in additional
costs with respect to the particular projects that are the subject of such
licenses.
Our
Systems Solutions operating segment intends to become less dependent on other
Deutsche Telekom Group companies and to improve its market position with respect
to external customers. In 2009, other Deutsche Telekom Group companies accounted
for approximately 30.9% of Systems Solutions’ total revenues, compared to 23.2%
in 2008 and 25.1% in 2007. No other customer accounted for a significant portion
of Systems Solutions’ total revenues in 2009.
The
following table shows the significant subsidiaries that we owned, directly or
indirectly, as of December 31, 2009.
|
Name
and registered office
|
|
%
Held
|
|
|
T-Mobile
USA, Inc., Bellevue, Washington, United States
|
|
|
100.00 |
|
|
T-Systems
International GmbH, Frankfurt/Main, Germany
|
|
|
100.00 |
|
|
T-Mobile
Deutschland GmbH, Bonn, Germany
|
|
|
100.00 |
|
|
Hellenic
Telecommunications Organization S.A. (OTE), Athens, Greece
|
|
|
30.00 |
|
|
T-Mobile
Holdings Ltd., Hatfield, United Kingdom
|
|
|
100.00 |
|
|
Magyar
Telekom Nyrt., Budapest, Hungary
|
|
|
59.20 |
|
|
T-Mobile
Netherlands Holding B.V., The Hague, Netherlands
|
|
|
100.00 |
|
|
PTC,
Polska Telefonia Cyfrowa Sp.z o.o., Warsaw, Poland
|
|
|
97.00 |
|
|
T-Mobile
Czech Republic a.s., Prague, Czech Republic
|
|
|
60.77 |
|
|
HT-Hrvatske
telekomunikacije d.d., Zagreb, Croatia
|
|
|
51.00 |
|
|
T-Mobile
Austria Holding GmbH, Vienna, Austria
|
|
|
100.00 |
|
|
Slovak
Telekom a.s., Bratislava, Slovakia
|
|
|
51.00 |
|
|
|
|
|
|
|
A list
of our subsidiaries as of December 31, 2009, is filed as Exhibit 8.1
to this Annual Report.
The
following table presents total revenues (the sum of external (net) revenues and
intersegment revenues), net revenues and intersegment revenues of our segments
for the years indicated.
|
millions
of €
|
Year
|
|
Net
revenue
|
|
|
Intersegment
revenue
|
|
|
Total
revenue
|
|
|
|
|
|
Germany
|
2009
|
|
|
23,813 |
|
|
|
1,610 |
|
|
|
25,423 |
|
|
|
|
|
|
2008
|
|
|
24,754 |
|
|
|
1,646 |
|
|
|
26,400 |
|
|
|
|
|
|
2007
|
|
|
26,134 |
|
|
|
1,982 |
|
|
|
28,116 |
|
|
|
|
|
United
States
|
2009
|
|
|
15,457 |
|
|
|
14 |
|
|
|
15,471 |
|
|
|
|
|
|
2008
|
|
|
14,942 |
|
|
|
15 |
|
|
|
14,957 |
|
|
|
|
|
|
2007
|
|
|
14,050 |
|
|
|
25 |
|
|
|
14,075 |
|
|
|
|
|
Europe
|
2009
|
|
|
9,486 |
|
|
|
548 |
|
|
|
10,034 |
|
|
|
|
|
|
2008
|
|
|
10,798 |
|
|
|
556 |
|
|
|
11,354 |
|
|
|
|
|
|
2007
|
|
|
10,675 |
|
|
|
559 |
|
|
|
11,234 |
|
|
|
|
|
Southern
and Eastern Europe
|
2009
|
|
|
9,510 |
|
|
|
175 |
|
|
|
9,685 |
|
|
|
|
|
|
2008
|
|
|
4,497 |
|
|
|
148 |
|
|
|
4,645 |
|
|
|
|
|
|
2007
|
|
|
4,458 |
|
|
|
142 |
|
|
|
4,600 |
|
|
|
|
|
Systems
Solutions
|
2009
|
|
|
6,083 |
|
|
|
2,715 |
|
|
|
8,798 |
|
|
|
|
|
|
2008
|
|
|
6,368 |
|
|
|
2,975 |
|
|
|
9,343 |
|
|
|
|
|
|
2007
|
|
|
6,911 |
|
|
|
3,660 |
|
|
|
10,571 |
|
|
|
|
|
Group
Headquarters and Shared Services
|
2009
|
|
|
253 |
|
|
|
2,157 |
|
|
|
2,410 |
|
|
|
|
|
|
2008
|
|
|
307 |
|
|
|
2,474 |
|
|
|
2,781 |
|
|
|
|
|
|
2007
|
|
|
288 |
|
|
|
2,855 |
|
|
|
3,143 |
|
|
|
|
|
Total
|
2009
|
|
|
64,602 |
|
|
|
7,219 |
|
|
|
71,821 |
|
|
|
|
|
|
2008
|
|
|
61,666 |
|
|
|
7,814 |
|
|
|
69,480 |
|
|
|
|
|
|
2007
|
|
|
62,516 |
|
|
|
9,223 |
|
|
|
71,739 |
|
|
|
|
|
Reconciliation
|
2009
|
|
|
- |
|
|
|
(7,219 |
) |
|
|
(7,219 |
) |
|
|
|
|
|
2008
|
|
|
- |
|
|
|
(7,814 |
) |
|
|
(7,814 |
) |
|
|
|
|
|
2007
|
|
|
- |
|
|
|
(9,223 |
) |
|
|
(9,223 |
) |
|
|
|
|
Group
|
2009
|
|
|
64,602 |
|
|
|
- |
|
|
|
64,602 |
|
|
|
|
|
|
2008
|
|
|
61,666 |
|
|
|
- |
|
|
|
61,666 |
|
|
|
|
|
|
2007
|
|
|
62,516 |
|
|
|
- |
|
|
|
62,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For more
information regarding our revenues on a segment and geographical basis, see
“Item 5. Operating and Financial Review and Prospects—Segment
Analysis.”
The
following table reflects the number of fixed-network and broadband lines in
operation and mobile customers in Germany.
|
|
|
As
of Dec. 31,
2009
millions
|
|
|
As
of Dec. 31,
2008
millions
|
|
|
%
Change
Dec.
31, 2009/
Dec
31, 2008
|
|
|
As
of Dec. 31,
2007
millions
|
|
|
%
Change
Dec.
31, 2008/
Dec.
31, 2007
|
|
|
Fixed
Network Germany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Fixed-network
lines(1)
|
|
|
26.2 |
|
|
|
28.3 |
|
|
|
(7.4 |
) |
|
|
30.8 |
|
|
|
(8.1 |
) |
|
Retail
broadband lines(1)
|
|
|
11.5 |
|
|
|
10.6 |
|
|
|
8.5 |
|
|
|
9.0 |
|
|
|
17.8 |
|
|
Wholesale
bundled access lines(2)
|
|
|
1.6 |
|
|
|
2.5 |
|
|
|
(36.0 |
) |
|
|
3.5 |
|
|
|
(28.6 |
) |
|
ULLs(3)
|
|
|
9.1 |
|
|
|
8.3 |
|
|
|
9.6 |
|
|
|
6.4 |
|
|
|
29.7 |
|
|
Wholesale
unbundled access lines(4)
|
|
|
0.6 |
|
|
|
0.2 |
|
|
n.a.
|
|
|
0.0
|
|
|
n.a.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications Germany
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
customers(5)
|
|
|
39.1 |
|
|
|
39.1 |
|
|
|
0.0 |
|
|
|
36.0 |
|
|
|
8.6 |
|
|
n.a.—not
applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Totals
were calculated on the basis of precise figures and rounded to millions.
Percentages are calculated on the basis of figures
shown.
|
|
(1)
|
Lines
in operation, including IP-based lines and congstar, but excluding
internal use and public telecommunications systems. Congstar is our
broadband and mobile brand aimed at younger, more price sensitive
customers.
|
|
(2)
|
Wholesale
bundled access lines: Sale of broadband lines based on DSL technology to
alternative providers outside Deutsche Telekom, including bundled IP
Bitstream Access, or IP-BSA. In the case of IP-BSA, we lease DSL lines to
our competitors and transport the datastream carried over the
lines.
|
|
(3)
|
Unbundled
local loop lines (ULL): Wholesale service that can be leased by
alternative telecommunications operators without upstream technical
equipment in order to offer their own customers a telephone or DSL
line.
|
|
(4)
|
Wholesale
unbundled access lines: Wholesale service not bundled with an analog
telephone line. Allows competitors to offer an all-IP product range, for
example IP- BSA Stand Alone.
|
|
(5)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer. Due to various rulings on the expiry of
prepaid credit and the limited validity of prepaid cards, T-Mobile
Deutschland changed its terms of contract and therefore its deactivation
policy in the first quarter of 2007 in favor of its prepay customers.
These customers can now use their prepaid credit longer than before. As a
result of the change in the terms of contract, prepaid contracts no longer
end automatically, but run for an unlimited duration and can be terminated
by the customer at any time and by T-Mobile with one month's notice.
T-Mobile Deutschland reserves the right to make use of this right of
termination and to deactivate cards in the
system.
|
The
Germany operating segment comprises our fixed network and mobile operations in
Germany. Since January 1, 2009, fixed network has been responsible for the
small- and medium-sized business customers that were previously included in our
System Solutions operating segment. Our Germany operating segment also includes
certain of our telecommunications facilities operations, including the
operation, management and servicing of our radio transmission sites in Germany.
For more information on our related network infrastructure, including our access
and transmission networks and service platforms, see “—Description of Property,
Plant and Equipment.”
We intend
to use convergence products that bring together mobile communications, Internet
and the fixed network in the context of connected life and work to enhance our
product portfolio and increase the number of high-value customer relationships
over the long term.
Fixed
Network
Network
Communications
Through
our fixed network business, we offer network access, including analog,
universal/ISDN and IP Access, as well as calling services to individual,
business and wholesale customers.
Analog
access lines, which we market under the name “Standard”, permit the customer to
use a single telecommunications channel for voice, data or facsimile
transmission. The number of analog access lines decreased year on year, from
22.2 million in 2007 to 20.0 million in 2008 and 18.3 million in 2009.
ISDN/Universal access lines, which we market under the name “Universal”, permit
a customer to use simultaneously two telecommunication channels to provide
multiple products and services, including voice, data and facsimile
transmission. The number of ISDN/Universal access lines decreased year-on-year,
from 8.6 million in 2007 to 8.3 million in 2008 and 7.9 million in 2009.
IP-Based access lines provide services such as telecommunication, IPTV and
data transfer, as well as other services to retail customers at home and
elsewhere.
The
number of fixed-network access line losses in Germany decreased, as expected, in
2009. The number of line losses includes fixed-network lines previously operated
by us but now operated as IP-based lines by other service providers using the
unbundled local loop line (ULL). In addition, the decrease in the number of
fixed-network access lines is mainly attributable to customers switching to
alternative cable, local network and mobile operators. In 2009, line losses also
resulted from the technology driven migration of Wholesale bundled customers to
the all-IP network. We expect the number of fixed-network access lines in
operation to continue to decrease in the future due to increased competition,
fixed-to-mobile substitution, as well as increased migration to IP-based
products.
Through
the network access product offerings described above, we provide comprehensive
national and international calling services and dial-up Internet access, and
also offer services such as three-way calling, call-waiting and caller ID. In
addition, our portfolio of integrated products, called “Complete Packages”
(Komplettpakete), includes an access line and a variety of flat-rates and
services for telephony and Internet access. Our Complete Packages with a
national voice flat-rate component have led to an increase in unbilled calling
minutes by customers using those plans. The trend towards flat-rate components
in Complete Packages continued to increase in 2009 and we believe that this
trend will continue in the future. Consequently, we expect calling revenues in
the future to decrease due to the decreasing proportion of billed minutes as a
result of customer acceptance of Complete Packages, continued loss of
fixed-network access lines and fixed-to-mobile substitution.
IP/Internet
Broadband
services allow customers to access the Internet and Internet-related services at
significantly higher speeds than traditional dial-up services. Broadband access
is used to refer to ADSL (asymmetric digital subscriber line), ADSL2 and ADSL2+
(advanced ADSL) and VDSL (very high-speed digital subscriber line) technologies,
for which the downstream data rate is greater than 128 Kbit/s. We believe
that broadband growth in Germany, particularly in the retail market, is largely
dependent on the acceptance of double-play and triple-play products and services
and improved customer services.
We offer
broadband and IP services based on ADSL, ADSL2+ and VDSL technologies, which
combine a high-speed data download transmission speed with a lower upload
transmission speed, primarily to retail customers. We also offer our Complete
Packages with a flat-rate component including offerings for voice communication
and high-speed data access. The total number of retail broadband lines operated
by us increased in 2009, due to the offer of Complete Packages with additional
features and options. For example, we offer our Complete Packages with
television services under the brand “Entertain”. Our Entertain products are
offered in a basic version, which includes voice, data and television services,
and an enhanced version, which includes a variety of additional services,
including HDTV, timeshift, Program Manager and TV-archive. In addition, we
introduced a new Entertain product in 2009 known as “Entertain pure”, which
comprises a telephone and TV connection without Internet access. The number of
Entertain lines in operation, which are included within the number of retail
broadband lines in the table above, increased to 806,000 by the end of 2009 from
352,000 in 2008. In 2009, we also launched a new LIGA total! product range. With
Entertain, customers can now watch all first- and second-division Bundesliga
soccer matches on television for an additional charge. We expect that our
Entertain product portfolio will continue to expand with the inclusion of new
features and new rates in response to customer demand. A topic for 2010 will be
the further development of Entertain products available to the retail market
through a combination of broadband lines and attractive content and features,
including flat-rate packages.
Our
broadband product portfolio also includes a variety of Internet website services
provided by the Scout-Group as well as the "Load" product portfolio, which
includes video, game, software and music offerings available for
download.
Wholesale
Services
Through
our wholesale services business, we provide products and services, including
access, interconnection, IP and network services, to third-party domestic
carriers and service providers as well as other Group companies in accordance
with regulatory guidelines stipulated by the Federal Network Agency. Network
operators and service providers implement their own business models based on our
wholesale services, such as unbundled local loop (ULL) lines, bitstream access
or resale, including the Wholesale Internet Access (WIA) and WIA Gate product
options. We expect that the results of regulatory decisions will continue to
have an effect on demand for our wholesale products.
Unbundled
local loop lines (ULL), can be leased by third-parties to provide their
customers with telephone and Internet services or DSL-based products. In 2009,
the number of ULLs rose compared to the end of 2008, mainly as a result of the
migration of competitors to all-IP lines. We expect that the number of ULLs in
operation will increase in the future. However, the rate of growth is expected
to decrease. In 2008, we were required by the Federal Network Agency to offer
wholesale unbundled access line products. Wholesale unbundled access lines in
operation increased to 0.6 million in 2009 compared to 0.2 million lines in
2008.
Through
our wholesale bundled product, we lease DSL lines combined with one of our
standard access lines to third-party providers and then transport the data from
our network to the third-party’s network. In 2008, we introduced regulatorily
mandated Wholesale bundled and unbundled products, including transport services
and symmetric DSL access, or SDSL. We also sell broadband access to competitors
through our Wholesale bundled products, which enable third-party operators to
offer an integrated service combining access and IP services to their retail
customers under their own brands. The growth in ULLs in 2009 mentioned above
primarily came at the expense of our Wholesale bundled products. The number of
wholesale bundled access lines in operation decreased from 3.5 million in 2007
to 2.5 million in 2008 and 1.6 million in 2009.
Our
interconnection wholesale services primarily consist of call origination and the
transit and termination of switched voice traffic. The terms under which we
interconnect our telephone network with the networks of other domestic carriers
and service providers are either bilaterally negotiated or imposed by the
Federal Network Agency. At December 31, 2009, we had 117 national
bilateral interconnection agreements and 45 national interconnection orders
issued by the Federal Network Agency. The Federal Network Agency mandated
interconnection prices from December 1, 2008 until June 30, 2011.
We
provide additional wholesale services, including:
|
·
|
IP-Services:
Internet transport services for broadband and fixed network service
providers, such as virtual ISP services, as well as transport services for
carrier interconnection;
|
|
·
|
Network
Services: leased lines, which can be used both for the transmission of
data and for voice traffic and are tailored to fit the specific needs of
carriers and mobile network operators;
and
|
|
·
|
Carrier
Services Networks, which combine leased lines with network management
services.
|
Other
Services
Other
services primarily includes:
|
·
|
value-added
telephone services, which include toll-free numbers and shared-cost
numbers, such as 0180, T-VoteCall for customer-relationship management,
directory-assistance numbers, the provision and administration of
directory databases and public payphones as well as premium-rate services
(which use the 0190 and 0900
exchanges);
|
|
·
|
our
terminal equipment business, through which we distribute, for purchase or
lease, an extensive range of telecommunications equipment that is either
manufactured by third-parties for us or sold under third-party brand
names;
|
|
·
|
data
communications solutions, such as Telekom Design Networks, platform
management, Internet solutions and IP-related services as well as
dedicated customer line products connecting two customer networks (located
up to 50 kilometers apart) with transmission speeds of up to one
Gbit/s;
|
|
·
|
support
services and publishing services, which include the sale of marketing and
advertising services to small- and medium-sized companies via our
telephone directories, such as DasTelefonbuch, GelbeSeiten, and
DasÖrtliche; and
|
|
·
|
the
sale of products and services through our Telekom Shop outlets and
services for energy-based products used to reliably operate
telecommunications systems.
|
Mobile
Communications
Through
T-Mobile Deutschland, we offer mobile telecommunications services to individual
and business customers in Germany. The following table summarizes certain
information regarding our customers and the German mobile communications
market.
|
Customers
(millions) (1)
|
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
|
39.1 |
|
|
|
39.1 |
|
|
|
36.0 |
|
| |
M2M |
|
|
|
1.0 |
|
|
|
0.9 |
|
|
|
0.7 |
|
|
Contract
|
|
|
|
17.2 |
|
|
|
17.0 |
|
|
|
16.1 |
|
|
Prepay
|
|
|
|
21.9 |
|
|
|
22.1 |
|
|
|
19.9 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
|
1.5 |
% |
|
|
1.0 |
% |
|
|
1.1 |
% |
|
Contract
(2)
|
|
|
|
1.2 |
% |
|
|
1.1 |
% |
|
|
1.2 |
% |
|
Prepay
(3)
|
|
|
|
1.7 |
% |
|
|
0.9 |
% |
|
|
1.0 |
% |
|
(1)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer.
|
|
(2)
|
In
general, a contract customer of T-Mobile Deutschland is churned either
after voluntary termination upon the lapse of the customer’s contract or
after forced contract termination due to the customer’s failure to fulfill
contractual obligations.
|
|
(3)
|
Due
to various rulings on the expiry of prepaid credit and the limited
validity of prepaid cards, T-Mobile Deutschland changed its terms of
contract and therefore its deactivation policy in the first quarter of
2007 in favor of its prepay customers. These customers can now use their
prepaid credit longer than before. As a result of the change in the terms
of contract, prepaid contracts no longer end automatically, but run for an
unlimited duration and can be terminated by the customer at any time and
by T-Mobile Deutschland with one month's notice. T-Mobile Deutschland
reserves the right to make use of this right of termination and to
deactivate cards in the system.
|
T-Mobile
Deutschland offers mobile telecommunications services, including voice, SMS,
MMS, Mobile Internet and other data services to consumer and business customers
in Germany.
At
December 31, 2009, T-Mobile Deutschland had approximately 39.1 million
customers, including approximately 1.0 million M2M cards in use. With an overall
penetration rate of well over 100%, the focus in our German mobile operations
has been on the higher-value contract customer business. In 2009, the share of
contract customers in our overall customer base was 44% of the total customer
base.
T-Mobile
Deutschland’s total average churn rate for 2009 was 1.5% per month, compared to
an average churn rate of 1.0% per month in 2008, mainly due to an increase in
prepay churn rates. The average contract customer churn rate was 1.2% per month
in 2009, which is a slight increase compared to 1.1% per month in 2008. The
average prepay churn rate during 2009 was 1.7% per month, compared to the
average prepay churn rate of 0.9% per month during 2008. T-Mobile Deutschland’s
total average churn rate for 2008 was 1.0% per month, compared to an
average churn rate of 1.1% per month in 2007, due to a decrease in both
contract and prepay churn rates. The average contract customer churn rate was
1.1% per month in 2008, which is a slight decrease compared to 1.2% per
month in 2007. The average prepay churn rate during 2008 was 0.9% per
month, compared to the average prepay churn rate of 1.0% per month during
2007, which was primarily caused by a change in the churn policy in
2007.
Competition
Our
fixed-network operations in Germany face intense competition based primarily on
price in the market for fixed-line network voice telephony and broadband
services. Competitors include cable operators, such as Kabel
Deutschland GmbH & Co. KG, other fixed-line carriers, such as Vodafone,
Versatel AG or NetCologne Gesellschaft für Telekommunikation mbH, and mobile
operators. Average
consumer prices for telecommunications services in the fixed-network and in
mobile communications in Germany were once again lower than in the prior year.
The price index for fixed-network and Internet telephony was down
2.3 percent, while rates for mobile telephony were 2.5 percent lower.
Aside from pure call charges, prices for mobile data services also
decreased.
However,
continued competition in these markets resulted in higher service levels being
provided for these product packages, for example, increased broadband access
widths and higher number of flat-rate minutes. The increased use of complete
packages with a flat-rate component and a decrease in the overall prices for
these packages by our competitors have intensified the downward pricing pressure
on our own products, services and pricing packages. In particular, competition
through bundled offers from other fixed-line carriers has intensified.
Competition from local network operators, on the basis of ULLs or the
competitor’s own infrastructure is increasing, particularly from entities owned
by large European telecommunications companies, such as HanseNet (a subsidiary
of Telefonica).We expect that competition from cable operators will also
continue to increase. Depending on the degree to which alternative technologies,
such as VoIP, cable broadband and the Internet, gain market acceptance, the
usage of our network may be adversely affected.
The
growing appeal of cable TV lines is due to the very large bandwidths that are
already available – in some cases up to 100 Mbit/s – at attractive
prices.
Competitors
have invested in their own infrastructure. Given the significant competitive
advantage that high-speed networks offer in the broadband access market, we
expect that our competitors will continue to invest in their own network
infrastructure to offer their own IP-based products to compete with our products
and services.
The
impact of mobile substitution on our fixed-network operations in Germany is also
increasing, in part because of the increased market entry of Mobile Virtual
Network Operators (MVNOs). In addition, as prices for mobile telephony decline,
local and other calling services, as well as access services, face increasing
competition from mobile telephone operators, due to mobile substitution. These
factors, combined with the continued implementation of regulatory policies
intended to foster greater competition, are expected to yield similar trends in
the future.
T-Mobile
Deutschland faces intense competition from mobile network operators Vodafone,
E-Plus and O2. We believe that T-Mobile Deutschland maintained its market
leadership position, in terms of number of customers, at December 31, 2009. The
German mobile communications market is saturated in terms of customers with a
penetration rate of well over 100 percent. T-Mobile Deutschland will focus
mainly on value-driven growth, sustainable customer growth and customer
retention in the higher-value contract customer business.
The
United States operating segment offers mobile voice and data telecommunications
services to individual and business customers in the United States through
T-Mobile USA.
|
Customers (millions)
(1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
33.8 |
|
|
|
32.8 |
|
|
|
28.7 |
|
|
Contract
|
|
|
26.8 |
|
|
|
26.8 |
|
|
|
23.9 |
|
|
Prepay
|
|
|
7.0 |
|
|
|
6.0 |
|
|
|
4.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
3.2 |
% |
|
|
2.9 |
% |
|
|
2.8 |
% |
|
Contract
|
|
|
2.3 |
% |
|
|
2.1 |
% |
|
|
1.9 |
% |
|
Prepay
|
|
|
7.0 |
% |
|
|
6.9 |
% |
|
|
7.2 |
% |
|
|
(1) Total
number of contract and prepay customers at year-end for the periods presented
based on the number of activated SIM cards. One SIM card corresponds
to one customer.
At
December 31, 2009, T-Mobile USA had approximately 33.8 million customers,
an increase of 1.0 million customers during the year. Of the total customers at
December 31, 2009, approximately 79 percent, were contract customers
(including machine-to-machine customers), compared to approximately 82 percent
at December 31, 2008. The number of contract customers decreased
as a proportion of the customer base due to a decline in the number of T-Mobile
USA branded customers (wireless customers excluding MVNO and machine-to-machine
customers), offset by growth in wholesale customers.
At
December 31, 2008, T-Mobile USA had approximately 32.8 million customers,
compared to approximately 28.7 million at December 31, 2007. Included
in the increase of 4.1 million customers in 2008 were 1.1 million customers
related to our acquisition of SunCom Wireless in February 2008. Of the total
customers at December 31, 2008, approximately 26.8 million, or 82
percent, were contract customers, compared to approximately 23.9 million,
or 83 percent, at December 31, 2007, and approximately 6.0 million
were prepay customers at December 31, 2008, compared to approximately
4.8 million at December 31, 2007.
T-Mobile
USA’s average churn rate for 2009 was 3.2 percent per month, up from 2.9
percent in 2008. The contract customer churn rate increased to 2.3 percent in
2009, from 2.1 percent in 2008. This was due in part to competitive intensity,
including competition based on handset innovation. T-Mobile
USA’s average churn rate for 2008 was 2.9 percent per month, up from 2.8
percent in 2007. The contract customer churn rate increased to 2.1 percent in
2008, from 1.9 percent in 2007. This was largely due to the second anniversary
of the introduction of two-year customer contracts in the second quarter of
2006, and competitive intensity particularly in the second half of the
year.
Competitive
differences, differences in features and services due to the use of multiple
wireless technologies, and general differences in consumer behavior between the
United States and Europe factor into the higher industry churn rates in the
United States compared to Europe. However, the churn rate of T-Mobile USA’s
operations is higher than the U.S. industry average due in part to the higher
proportion of prepay customers in T-Mobile USA’s customer base relative to most
of its U.S. competitors, competitive intensity particularly relating to handset
innovation and due to the greater focus on individual consumers than other U.S.
carriers (who have a larger focus on lower-churn enterprise and government
customers). Prepay customers in the United States typically churn at
substantially higher rates than contract customers.
Generally,
a contract customer of T-Mobile USA is churned either after voluntary
termination or after forced contract termination due to the customer’s failure
to fulfill contractual obligations. A prepay customer in the United States is
churned after a period of 90 days of inactivity (i.e., the customer has neither
originated nor received a voice communication, and has not originated a data
communication in that period).
Through
the acquisition of SunCom Wireless Holdings, Inc. on February 22, 2008,
T-Mobile USA expanded its network in the southeastern United States, Puerto
Rico and the U.S. Virgin Islands.
During
2009, T-Mobile USA invested in network infrastructure in certain markets to
utilize the Advanced Wireless Services spectrum in the 1700 MHz and 2100 MHz
frequency bands it acquired in 2006. By the end of 2009, T-Mobile USA’s 3G
network covered over 205 million people compared to 107 million people at the
end of 2008.
Marketing
and Sales
The
United States operating segment comprises all of Deutsche Telekom’s wireless
activities in the U.S. market and offers mobile voice and data services to
consumers and business customers through T-Mobile USA. Mobile devices and
accessories are usually sold in connection with the services offered. In late
2009, T-Mobile USA introduced its Even More rate plans, which feature unlimited
nationwide voice, text, and data services. In addition, T-Mobile USA offers its
customers a number of service options, including rate plans with and without
contracts, the ability to pay in advance or in arrears, and rate plans with and
without subsidized handsets.
T-Mobile
USA uses a mix of direct and indirect distribution channels to market its mobile
voice and mobile data products and services to its customers. T-Mobile USA sells
its products and services to retail customers through a network of direct retail
stores. Additionally, T-Mobile USA has a direct sales force dedicated to
business customers and sales through customer service and the T-Mobile USA
website. In addition, third-party distributors, who may market the products and
services of one or multiple mobile network operators, play a significant role in
distribution. T-Mobile USA uses a variety of incentives to encourage third-party
vendors to sell T-Mobile products and services, such as payment of associated
marketing expenses and commissions.
Wholesale
entities such as MVNOs and machine-to-machine operators are a growing
distribution channel for T-Mobile USA unbranded products and services. In
general, wholesale entities purchase minutes and data at wholesale rates, resell
packaged services and mobile devices under their own brands through their own
distribution channels, charge their customers at retail rates that they set
independently, and provide customer service and technical support.
T-Mobile
USA provides its customers with access to T-Mobile USA specific and third-party
content services as well as to the open Internet. Content provided to customers
is either at no additional charge, in which case the customer only has to pay
the normal connection charges to view the content, or it is premium content,
where a customer pays a specific charge, e.g., a charge is added to the
customer’s mobile telephone bill to access the content.
Competition
General
The
United States operating segment faces intense competition in the United States
mobile telecommunications market from the three other large national mobile
providers, Verizon, AT&T and Sprint, and from MVNOs and two growing regional
operators offering low-priced unlimited services. In addition to competitive
factors, the three largest national mobile providers have been involved in more
significant acquisition activity in the last five years than T-Mobile
USA.
Verizon,
AT&T and Sprint have potential advantages through size, scale and bundling
with other non-wireless communication services. These advantages could allow
them to deliver services in a more cost-efficient manner and disproportionately
increase their customer base, thereby negatively affecting T-Mobile USA’s
competitive position.
Furthermore,
AT&T has had a competitive advantage in the past two years with the
exclusive distribution of the Apple iPhone. Verizon and AT&T, in
particular, achieved proportionately higher net customer additions in 2009,
which combined with pressure from the regional unlimited discount operators,
resulted in T-Mobile USA’s slight decline in market share in 2009.
The
United States mobile telecommunications market is quite different in a number of
respects from the European mobile telecommunications markets. For example, there
is no single communications standard. In addition, licenses used to provide
wireless services do not cover the entire country and different frequency ranges
may be required within a nationwide footprint. It can therefore be difficult for
network operators to obtain the spectrum needed in some localities to expand
customer base, upgrade the quality of service and add new services, particularly
in densely-populated urban areas. Low population density in other areas can
cause problems with network efficiency and result in geographic areas with no or
limited coverage. For these and other reasons, penetration levels for mobile
telecommunications services in the United States are generally lower than
penetration levels in western European countries, although the difference
continues to decrease over time. Mobile telecommunications operators in the
United States generally continue to invest heavily in their networks in order to
generate customer and revenue growth. Slowing wireless industry customer growth
expectations indicate that the market is maturing, with focus moving towards
data services growth.
Usage and
pricing practices in the United States mobile market also differ significantly
from typical usage and pricing in European markets. Average voice usage per
customer per month is generally much higher in the United States than in Europe
primarily due to lower priced plans for usage and the increasing popularity of
unlimited plans, resulting in a higher number of postpay plans in the United
States. Contract pricing in the United States is typically in the form of a
fixed monthly charge at various price points for specified bundles of features
and services, which permit usage up to prescribed limits with no incremental
charges. Usage in excess of the limits results in incremental charges. The
majority of prepay service is priced solely on a usage basis, similar to Europe,
but the percentage of prepay customers is significantly smaller in the United
States than Europe. Typically, both inbound and outbound usage counts against
the contract usage limits, and both are subject to incremental charges for
excess contract usage and prepaid usage. Monthly average revenue per user (ARPU)
is typically higher in the United States than in Europe. However, average
revenue per minute of use is substantially lower in the United States than in
Europe. Furthermore, in the United States unlimited voice and data services
offerings have expanded, eliminating incremental usage charges at certain price
points. In late 2009, T-Mobile USA introduced its Even More rate plans, which
feature unlimited nationwide voice, text, and data services. These
plans also allow customers the option of being on a service contract and
receiving a subsidized handset, or a no-contract option at lower rates but
without a discounted handset. The no-contract plan also includes the option of
no-interest handset financing over a period of up to 20 months.
The
differences between the United States and European mobile telecommunications
markets result in different competitive pressures. Like the European market,
handset lineup and the perceived value of bundles of voice, messaging, and data
services are key competitive factors in the United States. In
addition, 3G network coverage and quality in the United States has recently
become a more important factor than in the past. To the extent that the
competitive environment requires T-Mobile USA to decrease prices, or increase
service and product offerings, there could be significant adverse impacts to
revenues, costs and customer retention.
United
Kingdom
T-Mobile
UK offers mobile telecommunications services to individual and business
customers in the United Kingdom.
|
Customers
(millions)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
17.2 |
|
|
|
16.8 |
|
|
|
17.3 |
|
|
Contract
|
|
|
4.1 |
|
|
|
4.1 |
|
|
|
3.9 |
|
|
Prepay
|
|
|
13.1 |
|
|
|
12.7 |
|
|
|
13.4 |
|
|
Thereof
: Virgin Mobile
|
|
|
4.3 |
|
|
|
4.8 |
|
|
|
5.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
2.6 |
% |
|
|
3.4 |
% |
|
|
3.2 |
% |
|
Contract
|
|
|
2.1 |
% |
|
|
2.1 |
% |
|
|
2.0 |
% |
|
Prepay
|
|
|
2.8 |
% |
|
|
4.0 |
% |
|
|
3.8 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009,
T-Mobile UK’s total customer base increased compared to 2008. The number of
prepay customers (not including Virgin Mobile customers) increased by 0.8
million, which was mainly caused by focusing on SIM card only sales.
At
December 31, 2008, T-Mobile UK had approximately 16.8 million customers,
compared to approximately 17.3 million at December 31, 2007.
The
number of Virgin Mobile Telecoms Limited, or Virgin Mobile, customers decreased
by 0.5 million year on year. Customers of Virgin Mobile, an MVNO, are included
in T-Mobile UK’s reported customer base as prepay customers because it is
currently impossible for T-Mobile UK to differentiate between Virgin Mobile
customers as contract customers or prepay customers. As an MVNO, Virgin Mobile
purchases airtime minutes and basic mobile services from T-Mobile UK and resells
these minutes and services under the “Virgin Mobile” brand name.
Of the
total number of T-Mobile UK customers at December 31, 2008 and 2007,
approximately 4.8 million and 5.2 million, respectively, were customers of
Virgin Mobile. M2M cards
are also included in the T-Mobile UK customer base. M2M cards account for one
percent of the overall customer base.
On November
5, 2009, we and France Télécom entered into an agreement to merge their
mobile units in the UK. The closing of the transaction is expected during the
course of 2010, depending on the approval of the respective authorities. The
outcome of the merger will be a 50:50 joint venture with a balanced
governance structure. Through this merger, we and France Télécom are creating a
company in the UK mobile market that will serve a combined customer base of
approximately 32.7 million customers (as of the end of third quarter 2009
and including Virgin Mobile customers). The transaction also has synergy
potential through costs savings that we expect to realize through integration
and scale and includes the Orange broadband activities.
Under the
terms of the joint venture agreement, if a third party were to take a
controlling stake in Deutsche Telekom, France Télécom would be relieved of all
restrictions imposed on the shareholders relating to the transfer of their
shares for a period of one year. However, even in this situation, transferring
shares to competitors would remain prohibited.
In
December 2007, “3” (a brand name of Hutchison 3G UK Limited) and T-Mobile UK
entered into a network sharing agreement to consolidate their 3G Radio
Access Networks to provide customers with enhanced network coverage and faster
access to high-speed mobile services at a lower cost. In early 2008, the joint
venture they established, Mobile Broadband Network Limited, or MBNL, introduced
its first integrated cell site using the new network consolidation technology.
With the continued strong cooperation with our joint venture partner, Hutchison
3G, MBNL has significantly advanced the progress of its network roll out.
We expect considerable further progress in the expansion of the 3G network
in 2010 to provide the UK's largest 3G network to our customers in
terms of number of sites.
During
2009, T-Mobile UK’s average monthly churn rate (not including Virgin Mobile
customers) was 2.6%, compared to 3.4% in 2008. This decrease in churn rate was
predominantly caused by the decrease in T-Mobile UK’s prepay churn rate of 2.8%
per month in 2009, compared to 4.0% per month in 2008. This positive development
was caused mainly by improved prepay retention programs. The contract churn rate
remained unchanged.
During
2008, T-Mobile UK’s average monthly churn rate (not including Virgin Mobile
customers) was 3.4%, compared to 3.2% in 2007. The increase in churn was
predominantly caused by an increase in T-Mobile UK’s prepay churn rate of 4.0%
per month in 2008, compared to 3.8% per month in 2007, which was mainly caused
by an intense focus on the contract customer base. The contract churn rate was
2.1% per month in 2008, which slightly increased compared to 2007
Generally,
a contract customer of T-Mobile UK is churned either after the voluntary
termination upon the lapse of a contract or after forced contract termination
due to the customer’s failure to fulfill contractual obligations. A prepay
customer in the United Kingdom is churned after a period of 180 days of
inactivity, i.e., the customer has neither originated nor received a voice or
data communication in that period. Virgin Mobile reports to T-Mobile UK the
number of customers using a churn policy whereby a customer is churned after a
period of 180 days of inactivity.
In the
UK, T-Mobile UK faces intense competition from mobile network operators
Vodafone, O2, Orange
and “3”. In addition, in the retail market, T-Mobile UK competes against
resellers and MVNOs.
Poland
Through
PTC, we offer mobile telecommunications services to individual and business
customers in Poland. We hold a 97% interest in PTC.
|
Customers
(millions)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
13.5 |
|
|
|
13.3 |
|
|
|
13.0 |
|
|
Contract
|
|
|
6.7 |
|
|
|
6.3 |
|
|
|
5.4 |
|
|
Prepay
|
|
|
6.8 |
|
|
|
6.9 |
|
|
|
7.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
2.7 |
% |
|
|
3.1 |
% |
|
|
3.1 |
% |
|
Contract
|
|
|
0.8 |
% |
|
|
0.6 |
% |
|
|
0.7 |
% |
|
Prepay
|
|
|
4.6 |
% |
|
|
5.2 |
% |
|
|
4.6 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009,
the customer base of PTC increased compared with 2008 due to a positive
development in the number of contract customers, as a result of successful
retention campaigns.
The
monthly churn decreased in 2009 compared with 2008. This reduction was due to a
high prepay churn in 2008 as a result of disconnections of SIM cards that were
being used improperly at that time.
PTC’s
average churn rate during 2008 and 2007 was 3.1% per month. The average contract
churn rate during 2008 was 0.6% per month, which represents a decrease from 0.7%
per month in 2007, primarily due to intensive retention campaigns. The average
prepay churn rate increased from 4.6% per month in 2007 to 5.2% per month in
2008, primarily due to disconnections of improperly used SIM cards.
In
general, a contract customer of PTC is churned either after the voluntary
termination upon the lapse of a contract or after forced contract termination
due to the customer’s failure to fulfill contractual obligations. PTC’s prepay
churn policy generally states that a customer can originate calls or data
traffic and receive data or voice communications during the relevant validity
period. The length of the validity period can be up to 12 months depending on
the recharge amount (account validity). The validity period can be extended by
additional top-up credits. If a customer exceeds the account validity date, the
customer will receive a grace period depending on the applicable tariff. During
the grace period, the customer can only receive voice and data communications.
The grace period is either 3 months or 12 months depending on the tariff plan.
If the prepay account has not been topped-up during this grace period, the
customer is churned.
PTC
includes in its customer base machine-to-machine cards. M2M cards account for
1.4% of the overall customer base in 2009.
In
Poland, PTC faces competition from network operators Polkomtel, Centertel and P4
and in addition from MVNOs.
For
information regarding a dispute concerning our investment in PTC, including
challenges to our ownership of PTC shares, see “Item 8. Financial
Information—Legal Proceedings.”
The
Netherlands
Through
T-Mobile Netherlands, we offer mobile telecommunications and broadband
fixed-line services to individual and business customers in The
Netherlands.
|
Customers
(millions)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
4.6 |
|
|
|
5.3 |
|
|
|
4.9 |
|
|
Contract
|
|
|
2.4 |
|
|
|
2.3 |
|
|
|
2.1 |
|
|
Prepay
|
|
|
2.2 |
|
|
|
3.0 |
|
|
|
2.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
3.8 |
% |
|
|
2.5 |
% |
|
|
2.8 |
% |
|
Contract
|
|
|
1.5 |
% |
|
|
1.6 |
% |
|
|
1.4 |
% |
|
Prepay
|
|
|
5.6 |
% |
|
|
3.1 |
% |
|
|
4.1 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
T-Mobile Netherlands, the overall customer base decreased in 2009 compared with
2008. This decline was attributable to a reduction in the prepay customer base
as a result of an increase in prepay churn. The contract customer base increased
in 2009, despite a highly competitive market situation in The
Netherlands.
In 2009,
the overall churn rate increased sharply as a result of an increase in the
prepay churn rate. The increase of prepay churn was caused by an initiative
resulting from the Orange customer migration. Prepay customers of Orange
Nederland N.V. who had been migrated to the T-Mobile Netherlands customer base
in the middle of 2009, but who did not show any activity within 180 days after
the migration, were churned by the end of 2009. This led to a significant
decrease of customer base in the prepay segment. The churn rate in the contact
customer segment decreased in 2009 compared with 2008 as a result of enhanced
initiatives for customer retention.
T-Mobile
Netherlands’ average churn rate for 2008 (including Orange Nederland for a full
year) was 2.5% per month, compared to an average churn rate of 2.8% per month in
2007. This decrease in 2008 was due to a decrease in prepay churn
rate.
In
general, a contract customer of T-Mobile Netherlands is churned either after the
voluntary termination upon the lapse of a contract or after forced contract
termination due to the customer’s failure to fulfill contractual obligations. If
a prepay customer of T-Mobile Netherlands has neither originated nor received
voice or data activity (or received only SMS/MMS messages) for a period of
180 days, the customer is churned and removed from the customer
base.
In the
Dutch retail market, in addition to competition from the mobile network
operators KPN Mobile and Vodafone, T-Mobile Netherlands competes with an
increasing number of MVNOs.
Czech
Republic
Through
T-Mobile Czech Republic, we offer mobile telecommunications services to
individual and business customers in the Czech Republic and since December 2009
fixed line services. We hold an interest of approximately 61% in T-Mobile Czech
Republic.
|
Customers
(millions)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
5.5 |
|
|
|
5.4 |
|
|
|
5.3 |
|
|
Contract
|
|
|
2.7 |
|
|
|
2.5 |
|
|
|
2.2 |
|
|
Prepay
|
|
|
2.8 |
|
|
|
2.9 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
1.4 |
% |
|
|
1.4 |
% |
|
|
1.4 |
% |
|
Contract
|
|
|
0.5 |
% |
|
|
0.5 |
% |
|
|
0.6 |
% |
|
Prepay
|
|
|
2.2 |
% |
|
|
2.1 |
% |
|
|
1.9 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009,
the overall customer base of T-Mobile Czech Republic slightly increased compared
with 2008. As a result of our strategy to focus on high value contract
customers, the contract customer base increased year-over-year, while the prepay
customer base slightly decreased.
The
slight increase in the prepay churn rate in 2009 was the result of a stable
level of prepay disconnections relative to a smaller average customer base due
to lower prepay customer gross additions.
T-Mobile
Czech Republic’s average churn rate during 2008 was 1.4% per month, which is
approximately the same as in 2007. The average contract churn rate during 2008
was 0.5% per month, compared to the average contract churn rate of 0.6% per
month during 2007. The average prepay churn rate during 2008 was 2.1% per month,
compared to the average prepay churn rate of 1.9% per month during 2007. The
year-over-year changes of contract and prepay churn are caused by an ongoing
trend of migration to prepay segment instead of deactivation the customer in
contract segment, which allows T-Mobile Czech Republic to save part of contract
customers in prepay segment. Nevertheless it is also increasing the prepay
churn.
At
T-Mobile Czech Republic, generally, a contract customer is churned either after
the voluntary termination upon the lapse of a contract or after forced contract
termination due to the customer’s failure to fulfill contractual obligations. In
the absence of re-charging, a prepay customer is churned 30 days after
completing a period of 12 months without charged voice or data
communications activity.
In the
Czech Republic, T-Mobile Czech Republic faces competition from Telefónica O2 Czech Republic
(formerly Eurotel Praha), Vodafone Czech Republic (formerly Oskar Mobil) and
since mid-2008 MobilKom under its brand “U:Fon”.
Austria
Through
T-Mobile Austria, we offer mobile telecommunications services to individual and
business customers in Austria.
|
Customers
(millions)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
3.4 |
|
|
|
3.4 |
|
|
|
3.3 |
|
|
Contract
|
|
|
2.3 |
|
|
|
2.3 |
|
|
|
2.1 |
|
|
Prepay
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
1.8 |
% |
|
|
1.8 |
% |
|
|
2.0 |
% |
|
Contract
|
|
|
1.1 |
% |
|
|
1.0 |
% |
|
|
1.2 |
% |
|
Prepay
|
|
|
3.5 |
% |
|
|
3.3 |
% |
|
|
3.4 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009,
the customer base of T-Mobile Austria remained unchanged compared with 2008,
both in the contract and the prepay customer segment. This result was achieved
despite intense competition in the Austrian mobile communication market. M2M
cards account for one percent of T-Mobile Austria’s overall prepay customer base
at the end of 2009.
The
overall churn rate at T-Mobile Austria remained stable in 2009 compared with
2008, despite a slight churn rate increase in prepay and contract. This effect
was attributable to a slightly higher average contract customer share in the
overall average customer base in 2009 compared with 2008. The prepay churn rate
increased as a result of intense competition in the Austrian mobile
communication market.
T-Mobile
Austria’s average churn rate during 2008 slightly decreased to 1.8% per month
(tele.ring’s average churn rate was 2.1% per month during 2008), as compared to
the average churn rate of 2.0% per month during 2007. The average churn rate for
contract customers during 2008 decreased to 1.0% per month compared to 1.2% per
month in 2007 (tele.ring’s average contract churn rate was 1.2% per month during
2008) due to increased retention measures. The average prepay churn rate during
2008 was 3.3% per month, compared to the average prepay churn rate of 3.4% per
month during 2007.
In
general, a contract customer is churned either after the voluntary termination
upon the lapse of a contract or after forced contract termination due to the
customer’s failure to fulfill contractual obligations. Since the beginning of
September 2007, T-Mobile Austria has generally churned prepay customers if
they had 13 months and two weeks without any charged data or voice
communication.
tele.ring,
which we manage as a separate brand within T-Mobile Austria, generally churned
prepay customers after three months without any charged data or voice
communication. Beginning in January 2010, the churn policy of T-Mobile Austria
for prepay customers will also be used for tele.ring prepay customers. The
alignment of the churn policies will result in a higher reported subscriber base
and thus, a lower amount of average revenue per customer.
In
Austria, T-Mobile Austria primarily faces competition from mobilkom austria,
Orange (formerly ONE) and “3”.
Our
Southern and Eastern Europe (SEE) operating segment includes the fixed-network
and mobile communications subsidiaries of T-Hrvatski Telekom, Slovak Telekom,
Magyar Telekom, Makedonski Telekom, Crnogorski Telekom and the OTE group: OTE,
COSMOTE, Romtelecom, COSMOTE Romania, Globul (Bulgaria) and AMC
(Albania).
|
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Fixed-network
lines (1)
|
|
|
11.9 |
|
|
|
12.8 |
|
|
|
13.6 |
|
|
Retail
broadband lines
|
|
|
3.5 |
|
|
|
3.0 |
|
|
|
2.1 |
|
|
Wholesale
bundled lines (2)
|
|
|
0.2 |
|
|
|
0.3 |
|
|
|
0.4 |
|
|
ULLs
(3)
|
|
|
1.1 |
|
|
|
0.7 |
|
|
|
0.3 |
|
|
Mobile
customers (4)
|
|
|
34.6 |
|
|
|
31.6 |
|
|
|
26.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
has been consolidated since February 2009. Prior-year figures in
all tables have been adjusted accordingly on a pro forma
basis.
|
|
(1)
|
Lines
in operation excluding internal use and public telecommunications,
including IP-based lines.
|
|
(2)
|
Wholesale
bundled lines: sale of broadband lines based on DSL technology to
alternative providers outside Deutsche Telekom, including bundled
IP-Bitstream Access (IP-BSA). In the case of IP-BSA, we lease DSL lines to
the competitor and transport the datastream carried over these
lines.
|
|
(3)
|
Unbundled
local loop line: Deutsche Telekom wholesale service that can be leased by
alternative telecommunications operators without upstream technical
equipment in order to offer their own customers a telephone or DSL
line.
|
|
(4)
|
One
mobile communications card corresponds to one
customer.
|
Hungary
We hold a
59.2% interest in Magyar Telekom, the leading full-service telecommunications
provider in terms of customers and revenues in Hungary. The following table
summarizes our key customer information for Hungary.
|
Fixed
network
|
|
|
|
|
|
|
|
|
|
|
Lines
(millions)(1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Broadband
access lines
|
|
|
0.8 |
|
|
|
0.8 |
|
|
|
0.7 |
|
|
Fixed
network access lines
|
|
|
1.8 |
|
|
|
2.0 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
(millions)(2)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
5.1 |
|
|
|
5.4 |
|
|
|
4.9 |
|
|
Contract
|
|
|
2.3 |
|
|
|
2.1 |
|
|
|
1.8 |
|
|
Prepay
|
|
|
2.8 |
|
|
|
3.3 |
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
2.1 |
% |
|
|
1.3 |
% |
|
|
1.3 |
|
|
Contract
(3)
|
|
|
1.1 |
% |
|
|
0.9 |
% |
|
|
0.8 |
|
|
Prepay
(4)
|
|
|
2.8 |
% |
|
|
1.6 |
% |
|
|
1.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Lines
in operation, including IP-based lines, but excluding internal use and
public telecommunications systems. Broadband include bundled and unbundled
resale and retail services.
|
|
(2)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer.
|
|
(3)
|
A
contract customer of T-Mobile Hungary is churned either after the
voluntary termination upon the lapse of his contracted loyalty period or
after forced contract termination due to the customer’s failure to fulfill
payment obligations.
|
|
(4)
|
In
the absence of re-charging, a prepay customer is suspended after a period
of 12 to 16 months depending on the amount charged on the prepay
card.
|
Magyar
Telekom offers telecommunications services, such as fixed-line and mobile
telephone services, data communications services, wholesale services,
IP/Internet services, multimedia broadcast services and other services for
customers throughout Hungary. Magyar Telekom’s systems integration and IT
operations are reported under our operating segment Systems
Solutions.
In 2009,
the number of Magyar Telekom's fixed-network access lines in operation decreased
compared to 2008 and 2007 mainly due to ongoing fixed-mobile
substitution. The positive development of the broadband market and high demand
for broadband solutions influenced Magyar Telekom's number of
broadband access lines in operation. Broadband access lines in operation
increased in 2009 to 789,000, compared to 761,000 at December 31, 2008 and
715,000 at December 31, 2007.
In
September 2008, Magyar Telekom decided to roll-out a fiber-optic network that
would enable it to offer innovative products, including television services.
Magyar Telekom’s multimedia services business primarily consists of its cable
television business. The number of Magyar Telekom’s cable television
customers decreased to 407,000 at December 31, 2009 from 423,000
at December 31, 2008 and 419,000 at December 31, 2007, mainly driven
by the entry of new competing technologies. As part
of Magyar Telekom’s strategy to provide international network and carrier
services in southeastern Europe, Magyar Telekom currently offers wholesale
services in Romania, Bulgaria and the Ukraine.
T-Mobile
Hungary, the mobile brand of Magyar Telekom, offers mobile telecommunications
services to individual and business customers in Hungary. At December 31,
2009, the number of T-Mobile Hungary’s customers declined compared with 2008 due
mainly to the impact of the economic crisis and the churn of inactive SIM cards.
Growth in
the number of contract customers, as a result of attractive tariff packages,
sales commission schemes and loyalty programs, partially offset the decline in
prepay customers.
T-Mobile
Hungary’s average churn rate during 2009 was 2.1% per month, which represents an
increase from 2008. The average contract churn rate in 2009 was approximately
1.1% per month, compared to approximately 0.9% per month in 2008 due to
continued competitive pressure in the Hungarian market. The corresponding prepay
customer churn rate was approximately 2.8% in 2009 compared to approximately
1.6% in 2008 due to increased churn of inactive customers and cancellations
related to the economic crisis.
Croatia
We own
51% of T-Hrvatski Telekom, the leading full-service telecommunications provider
in the Croatia in terms of revenues. The following table summarizes our key
customer information for Croatia.
|
Fixed
network
|
|
|
|
|
|
|
|
|
|
|
Lines
(millions) (1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Broadband
access lines
|
|
|
0.6 |
|
|
|
0.5 |
|
|
|
0.3 |
|
|
Fixed
network access lines
|
|
|
1.5 |
|
|
|
1.6 |
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
(millions) (2)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
2.9 |
|
|
|
2.7 |
|
|
|
2.4 |
|
|
Contract
|
|
|
0.9 |
|
|
|
0.8 |
|
|
|
0.7 |
|
|
Prepay
|
|
|
1.9 |
|
|
|
1.9 |
|
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
1.9 |
% |
|
|
1.4 |
% |
|
|
1.3 |
% |
|
Contract
(3)
|
|
|
0.8 |
% |
|
|
0.7 |
% |
|
|
0.7 |
% |
|
Prepay
(4)
|
|
|
2.3 |
% |
|
|
1.7 |
% |
|
|
1.5 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Lines
in operation, including IP-based lines, but excluding internal use and
public telecommunications systems. Broadband
access lines include bundled and unbundled resale and retail
services.
|
|
(2)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM card
corresponds to one customer.
|
|
(3)
|
A
contract customer is churned either after the voluntary termination upon
the lapse of his contract or after forced contract termination due to the
customer’s failure to fulfill contractual
obligations.
|
|
(4)
|
A
prepay customer is churned after a period of 270 days without
recharging.
|
T-Hrvatski
Telekom offers access and local, long-distance and international fixed-line
telephone services, data communications services, IP/Internet services,
including IPTV, and wholesale services and mobile telecommunications services
through T-Mobile Hrvatska d.o.o., or T-Mobile Croatia, to individual and
business customers in Croatia. As of January 1, 2010, T-Hrvatski Telekom merged
its fixed network and mobile communication businesses to improve customer
service and operational efficiencies.
T-Hrvatski
Telekom operates a digitalized fixed-line telecommunications network and started
the commercial roll-out of a fiber network in 2008. In 2009, the number of
T-Hrvatski Telekom’s fixed network access lines in operation decreased slightly
compared to 2008 and 2007. The number of broadband access lines provided by
T-Hrvatski Telekom continued to increase in 2009. The number of broadband access
lines in operation at December 31, 2009 was 555,000 compared to 473,000 at
December 31, 2008 and 345,000 at December 31, 2007. The fixed-line business
continues to be characterized by increasing competition, particularly the
broadband business, as a result of the unbundled local loop. However,
mobile substitution is the main competitive challenge in Croatia.
Through
its wholly-owned subsidiary, T-Mobile Croatia, T-Hrvatski Telekom offers mobile
telecommunications services to individual and business customers in Croatia. At
December 31, 2009, T-Mobile Croatia had approximately 2.8 million
customers, an increase compared to 2008. Of the total customers at
December 31, 2009, approximately 0.9 million were contract customers,
a slight increase over 2008 primarily as a result of attractive
tariffs. The number of prepay customers slightly increased in 2009
compared with 2008.
T-Mobile
Croatia’s average monthly churn rate during 2009 increased to 1.9% from 1.4% per
month in 2008, primarily as a result of increased contract and prepay churn. The
average contract churn rate was 0.8% per month in 2009, a slight increase
compared with 2008 primarily as a result of increasing
competition. The average prepay churn rate during 2009 was 2.3% per
month compared with 1.7% per month in 2008, mainly as a result of increased
competition in the lower-margin prepay segment.
Slovakia
We hold a
51% interest in Slovak Telekom, a leading full-service telecommunications
provider in the Slovak Republic. The following table summarizes our key customer
information for Slovakia.
|
Fixed
network
|
|
|
|
|
|
|
|
|
|
|
Lines
(millions) (1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Broadband
access lines
|
|
|
0.4 |
|
|
|
0.3 |
|
|
|
0.3 |
|
|
Fixed
network access lines
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
(millions)
(2)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
2.4 |
|
|
|
2.3 |
|
|
|
2.4 |
|
|
Contract
|
|
|
1.4 |
|
|
|
1.4 |
|
|
|
1.2 |
|
|
Prepay
|
|
|
1.0 |
|
|
|
1.0 |
|
|
|
1.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
1.4 |
% |
|
|
1.8 |
% |
|
|
1.5 |
% |
|
Contract
(3)
|
|
|
1.0 |
% |
|
|
0.8 |
% |
|
|
0.8 |
% |
|
Prepay
(4)
|
|
|
2.0 |
% |
|
|
3.0 |
% |
|
|
2.1 |
% |
|
(1)
|
Lines
in operation, including IP-based lines, but excluding internal use and
public telecommunications systems. Broadband access lines include bundled
and unbundled resale and retail
services.
|
|
(2)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer.
|
|
(3)
|
A
contract customer is churned either after the voluntary termination upon
the lapse of his contract or after forced contract termination due to the
customer’s failure to fulfill contractual
obligations.
|
|
(4)
|
A
prepay customer is churned after a period of 12 months without
re-charging since the most recent
use.
|
Slovak
Telekom offers access and local, long-distance and international fixed-line
telephone services, data communications services, wholesale services, and
IP/Internet services. In January 2010, Slovak Telekom officially launched
satellite TV services. Through its wholly-owned subsidiary, T-Mobile Slovensko,
Slovak Telekom offers mobile telecommunications services to individual and
business customers in Slovakia. In December 2009, the Boards of Directors of
Slovak Telekom and T-Mobile Slovensko approved a plan to combine the fixed-line
and mobile businesses into one integrated company in 2010 with the objective of
improving customer service and internal efficiency.
Slovak
Telekom’s total number of fixed-network access lines decreased slightly in 2009
by 2.2% compared to 2008. The decrease in traditional fixed network lines was
partially offset by an increase in the number of All-IP access lines compared to
previous year. Slovak Telekom’s total number of fixed-network access lines
decreased in 2008 by 1.3% compared to 2007, despite a substantial increase in
demand for All-IP access lines. In 2009, Slovak Telekom continued to increase
its triple-play services offering and believes that triple-play is one of the
main drivers for the success of its broadband business. The number of broadband
access lines in operation in Slovak Telekom’s network continued to increase in
2009. The number of broadband access lines in operation at December 31, 2009 was
391,000 compared with 339,000 at December 31, 2008 and 261,000 at
December 31, 2007. Mobile substitution remains one of the main competitive
challenges for Slovak Telekom’s fixed-network business.
At
December 31, 2009, T-Mobile Slovensko had approximately 2.4 million customers,
compared with 2.3 million at December 31, 2008 and 2.4 million at
December 31, 2007. The slight increase in the number of customers in 2009
compared to 2008 was primarily a result of overall market growth. T-Mobile
Slovensko’s average churn rate during 2009 was 1.4% per month, which
represents a decrease from 1.8% in 2008, primarily as a result of the decline in
prepay churn, which was partially offset by an increase in contract churn. The
average prepay churn decreased from 3.0% per month in 2009 to 2.0% per month in
2008, primarily as a result of less competition. The average contract
churn rate increased from 0.8% per month to 1.0% per month in 2009, primarily as
a result of increasing competition.
Greece
We
currently own 30% plus one share in OTE and control additional shares through a
shareholders’ agreement with the Hellenic Republic or HR, pursuant to which
we have assumed management control of OTE. We have consolidated OTE since
February 2009. The Hellenic Republic also has a put option with respect to its
current holdings in OTE. For more information, see “Item 5. Operating and
Financial Review and Prospects—Liquidity and Capital Resources—Contractual
Obligations and Other Commitments—Contractual Cash Obligations.” In addition to
its presence in Greece, OTE also has subsidiaries in Romania, Bulgaria and
Albania.
The
following table summarizes our key customer information for Greece.
|
Fixed
network
|
|
|
|
|
|
|
|
|
|
|
Lines
(millions) (1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Broadband
access lines
|
|
|
1.1 |
|
|
|
1.0 |
|
|
|
0.8 |
|
|
Fixed
network access lines
|
|
|
4.2 |
|
|
|
4.6 |
|
|
|
5.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
(millions)
(2)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
9.2 |
|
|
|
7.9 |
|
|
|
6.3 |
|
|
Contract
|
|
|
2.3 |
|
|
|
2.2 |
|
|
|
2.0 |
|
|
Prepay
|
|
|
6.9 |
|
|
|
5.7 |
|
|
|
4.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
3.2 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
Contract
(3)
|
|
|
2.0 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
Prepay
(4)
|
|
|
3.6 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
n.a.—not
applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Lines
in operation, including IP-based lines, but excluding internal use and
public telecommunications systems. Broadband access lines include bundled
and unbundled resale and retail
services.
|
|
(2)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer.
|
|
(3)
|
A
contract customer is churned either after the voluntary termination upon
the lapse of his contract or after forced contract termination due to the
customer's failure to fulfill contractual
obligations.
|
|
(4)
|
A
prepay customer gets suspended in the sixth or twelfth month after the
last recharge depending on the tariff. The suspension period is one month.
During this period, the subscriber is barred from making calls but can
accept incoming calls. Seven or thirteen months after the last recharge
the customer gets deactivated and is considered as
churned.
|
OTE is
the leading full-service telecommunications provider, based on revenues, of
fixed-line voice telephony and IP/Internet access services to residential and
business customers in Greece. It also provides data communication services,
wholesale services and satellite telecommunications services.
The
number of fixed-network access lines decreased as a result of increasing
competition and fixed-mobile substitution. Increased access to the unbundled
local loop has increased competition in Greece. In 2009, the number of broadband
lines increased compared with 2008 due to the efforts of OTE to promote its
broadband business through investment in infrastructure covering the needs of
both retail and wholesale customers, as well as through extensive sales
promotions. These actions, combined with the initial low penetration levels of
broadband access lines in Greece, led to strong growth, which continued despite
the economic environment.
The
number of mobile customers increased in 2009 compared to 2008 mainly as a result
of a larger number of prepay customers. In addition, customer growth resulted
from numerous innovative and competitive products offered during 2009, improved
and successful marketing and communication strategy, sales activities of
GERMANOS retail stores and the integration of GERMANOS operations. During 2009,
COSMOTE expanded its leadership in the Greek market based on the number of
customers, reaching 9.2 million customers. COSMOTE has been gaining market share
over the past few years by focusing on the enhancement of the services offered,
the upgrade of the network, the improvement of customer service, its
distribution network, the strengthening of its corporate image and through
competitive products and services. In 2009,
average churn increased, due to a significant increase in prepay churn, which
was mainly a result of newly introduced prepay customer registration and several
aggressive market offers by our competitors.
Romania
OTE holds
a 54.01% interest in the share capital of RomTelecom S.A., the incumbent
telecommunications services provider in Romania. RomTelecom offers fixed-line,
data communication, IP/Internet, wholesale and satellite TV services.
OTE’s
subsidiary, Cosmote S.A., holds an interest of 70% in the share capital of the
mobile operator Cosmote Romania, with RomTelecom holding the remaining 30%.
Cosmote Romania is currently one of the three GSM (2G) mobile telecommunications
providers in Romania. As further described below, in 2009 Cosmote acquired
Telemobil S.A. (Zapp), the oldest mobile communications provider in
Romania.
The
following table summarizes our key customer information for
Romania.
|
Fixed
network
|
|
|
|
|
|
|
|
|
|
|
Lines
(millions) (1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Broadband
access lines
|
|
|
0.8 |
|
|
|
0.7 |
|
|
|
0.4 |
|
|
Fixed
network access lines
|
|
|
2.8 |
|
|
|
3.0 |
|
|
|
3.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Customers
(millions) (2)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
7.3 |
|
|
|
5.9 |
|
|
|
3.6 |
|
|
Contract
|
|
|
1.5 |
|
|
|
1.1 |
|
|
|
0.6 |
|
|
Prepay
|
|
|
5.7 |
|
|
|
4.8 |
|
|
|
3.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
3.8 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
Contract
(3)
|
|
|
2.1 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
Prepay
(4)
|
|
|
4.3 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
n.a.—not
applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Lines
in operation, including IP-based lines, but excluding internal use and
public telecommunications systems. Broadband access lines, including
bundled and unbundled resale and retail
services.
|
|
(2)
|
Total
number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer. Figures of Zapp have been included in
the 2009 customer data, but were not included in 2008 or 2007 customer
data.
|
|
(3)
|
A
contract customer is churned either after the voluntary termination upon
the lapse of his contract or after forced contract termination due to the
customer's failure to fulfill contractual
obligations.
|
|
(4)
|
A
prepay customer gets suspended in the twelfth month after the last
recharge for one month. During this one-month suspension period, the
subscriber is barred from making calls but can accept incoming calls.
Thirteen months after the last recharge, the customer is deactivated and
is considered as churned.
|
The number of fixed-network access
lines in Romania decreased in 2009 due to general trends such as fixed-mobile
substitution and the high level of competition, which resulted in a strong
pressure on prices. The growing broadband market in Romania is
expected to generate demand for a number of newly-introduced applications, such
as IPTV. RomTelecom is considering a number of options for responding to the
increase in demand for broadband based products, including investing in VDSL or
fiber networks.
The
number of mobile customers increased in 2009 as a result of growth in both
contract and prepay customers despite intense competition and the effects of the
global economic crisis. The increase in contract customers was
partially a result of the acquisition of Zapp. On October 29, 2009, the Romanian
authorities approved the acquisition of 100% less one share of Zapp, the oldest
mobile communications provider in Romania, by Cosmote. OTE has consolidated Zapp
since November 2009. At the end of 2009, Zapp had approximately 360,000
customers and its 3G network covered 23 cities in Romania. The acquisition of
Zapp was made to enhance the business’ outlook, as Cosmote Romania will be able
to offer new mobile broadband services through its 3G and CDMA
licenses.
The total
number of mobile subscribers in Romania reached 7.3 million in 2009, an increase
of 23.7% compared to 2008.
Bulgaria
Cosmote
S.A. (Greece) owns 100% of Globul, a mobile telecommunications operator in
Bulgaria. Globul also holds a license for the construction, maintenance and use
of a public telecommunications network for data transmission and the provision
of public telecommunications services in Bulgaria, and has been awarded the
right to use microwave frequencies and the right to provide leased
lines.
The
following table summarizes our key customer information for
Bulgaria.
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
Customers
(millions) (1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Total
|
|
|
3.9 |
|
|
|
4.1 |
|
|
|
3.9 |
|
|
Contract
|
|
|
2.1 |
|
|
|
2.1 |
|
|
|
1.7 |
|
|
Prepay
|
|
|
1.8 |
|
|
|
2.0 |
|
|
|
2.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Monthly
churn rate
|
|
For
the year ended
December
31, 2009
|
|
|
For
the year ended
December
31, 2008
|
|
|
For
the year ended
December
31, 2007
|
|
|
Total
|
|
|
3.8 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
Contract
(2)
|
|
|
2.5 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
Prepay
(3)
|
|
|
5.3 |
% |
|
n.a.
|
|
|
n.a.
|
|
|
n.a.—not
applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
Total number of contract and prepay customers at year-end for the periods
presented based on the number of activated SIM cards. One SIM
card corresponds to one customer.
|
|
(2)
A contract customer is churned either after the voluntary termination upon
the lapse of his contract or after forced contract termination due to the
customer's failure to fulfill contractual
obligations.
|
|
(3)
A prepay customer is suspended for one month after the twelfth month after
the last recharge. During this suspension period, the subscriber is barred
from making calls but can accept incoming calls. Thirteen months after the
last recharge, the customer gets deactivated and is considered as
churned.
|
Globul is
the second largest operator in the Bulgarian mobile market in terms of the
number of customers. By the end of 2009, Globul had 3.9 million customers, down
by 4.8% compared to 2008, mainly due to the decline in prepaid customers.
Contract subscribers exceeded 54% of the total customer base compared to 51% in
2008, while the company’s total market share remained stable at approximately
38% despite the aggressive competition. In 2009, Globul continued upgrading its
telecommunication infrastructure, maintaining its competitiveness both in terms
of geographical coverage and quality of its 2G and 3G networks. The company has
been introducing new innovative and competitive products to meet the needs of
the consumers.
Other
Other
includes our operations in Albania, the F.Y.R.O. Macedonia and Montenegro.
Through the 97 % owned COSMO-Holding Albania, and the acquisition of a 12.5%
stake during 2009 directly by Cosmote, Cosmote indirectly holds a majority
(effective 95%) of the share capital of AMC, a mobile telecommunications
subsidiary in Albania. AMC’s network operates on the GSM 900 and GSM 1800
frequencies in Albania. In the F.Y.R.O. Macedonia, we offer fixed network
communications through Makedonski Telekom, which is majority owned by Magyar
Telekom. We offer mobile telecommunications services through T-Mobile Macedonia,
a wholly-owned subsidiary of Makedonski Telekom. In addition, Magyar Telekom has
a stake of 76.5% in Crnogorski Telekom, which provides fixed-network and mobile
telecommunications services in the Republic of Montenegro.
|
Other
(1)
|
|
As
of December 31, 2009
|
|
|
As
of December 31, 2008
|
|
|
As
of December 31, 2007
|
|
|
Fixed-network
lines (2)
|
|
|
0.5 |
|
|
|
0.6 |
|
|
|
0.6 |
|
|
Broadband
lines (3)
|
|
|
0.2 |
|
|
|
0.1 |
|
|
|
0.1 |
|
|
Mobile
customers (4)
|
|
|
5.9 |
|
|
|
5.4 |
|
|
|
4.4 |
|
|
(1)
|
Other
includes the companies AMC (Albania), Makedonski Telekom (the F.Y.R.O.
Macedonia), T-Mobile Macedonia (the F.Y.R.O. Macedonia) and Crnogorski
Telekom (Montenegro: mobile communications and fixed
network).
|
|
(2)
|
Lines
in operation excluding internal use and public telecommunications,
including IP-based lines.
|
|
(3)
|
Total
of retail and resale broadband
lines.
|
|
(4)
|
One
mobile communications card corresponds to one
customer.
|
Other
includes our operations in Albania, the F.Y.R.O. Macedonia and Montenegro.
Through the 97 % owned COSMO-Holding Albania, and the acquisition of
a 12.5% stake during 2009 directly by Cosmote, Cosmote indirectly holds a
majority (effective 95%) of the share capital of AMC, a mobile
telecommunications subsidiary in Albania. AMC’s network operates on the GSM 900
and GSM 1800 frequencies in Albania. In the F.Y.R.O. Macedonia, we offer fixed
network communications through Makedonski Telekom, which is majority owned by
Magyar Telekom. We offer mobile telecommunications services through T-Mobile
Macedonia, a wholly-owned subsidiary of Makedonski Telekom. In addition, Magyar
Telekom has a stake of 76.5% in Crnogorski Telekom, which provides fixed-network
and mobile telecommunications services in the Republic of
Montenegro.
Competition
Competition
in the fixed-line network business in Southern and Eastern Europe increased in
2009. Mobile substitution and regulation requiring access to the unbundled local
loop led this development. Competition in the fixed-line network business is
primarily based on price. In
addition, the mobile telecommunications market is highly competitive, with the
operators competing primarily based on price. T-Mobile Hungary faces competition
from Pannon and Vodafone Hungary. T-Mobile Croatia faces competition from
VIPnet and Tele2. T-Mobile Slovakia mainly competes against Orange and
Telefónica O2. Cosmote Greece
faces competition from Vodafone and Wind Hellas while in Romania, COSMOTE faces
competition mainly from Orange and Vodafone. In Bulgaria, Globul faces
competition from M-Tel and Vivatel. In Hungary, Croatia, and Greece we are the
mobile telecommunications market-leader in terms of customers.
Through
T-Systems, our Systems Solutions operating segment provides Information and
Communications Technology, or ICT, services worldwide, primarily to
multinational companies, government agencies and non-profit organizations. The
mission of T-Systems is to shape the networked future of business and society
and add value for our customers and employees with innovative ICT solutions.
Beginning in 2009, we transferred responsibility for our small, medium and large
business customers from T-Systems to our Germany operating segment.
Principal
Markets
T-Systems
uses its information technology and telecommunications expertise to provide ICT
infrastructure and tailored solutions to its customers. Its service offering
portfolio along the entire ICT value chain has been simplified from a few
hundred to 55 offerings, which include standardized service offerings and
individual solutions tailored to the specific needs of our customers. T-Systems
supports its customers through its global telecommunications and IT
infrastructure networks. T-Systems’ primary markets are located in Germany and
the rest of Western Europe.
Although
the majority of T-Systems’ customers are headquartered in Germany, as of
December 31, 2009, approximately 45% of T-Systems’ 46 021 employees provided
services from locations outside Germany. The German-based operations contributed
approximately 70% of T-Systems’ total revenues, which include intersegment
revenues from other Deutsche Telekom Group companies and affiliates. For more
information, see “Item 5. Operating and Financial Review and Prospects—Segment
Analysis—Systems Solutions.”
Organizational
Structure
In 2009,
T-Systems continued to improve its organization and sales and delivery
processes. T-Systems is comprised of one sales unit and two delivery units.
T-Systems’ sales unit, known as Corporate Customers, is responsible for sales
and providing ICT solutions to multinational companies, large enterprises and
organizations. Two delivery units, ICT Operations and Systems Integration,
complement the activities of Corporate Customers.
T-Systems’
operations are supported by the activities of Detecon International GmbH and
T-Systems Multimedia Solutions GmbH. Detecon offers its customers integrated
management and technology consulting and operates worldwide with a focus on
consulting for the telecommunications market. T-Systems Multimedia Solutions
develops web based solutions for T-Systems’ customers, with a focus on
e-commerce and information and knowledge management.
Corporate
Customers
Corporate
Customers is the sales unit of T-Systems International GmbH serving over 400
biggest customers of Deutsche Telekom including our customers of the public and
health sector. Furthermore, Corporate Customers is also responsible for selling
ICT services to all business customers outside Germany. The Corporate Customers
business unit currently serves its multinational and other major customers with
a dedicated key account management team and large customers with a direct sales
approach.
Corporate
Customers formed its organization along its customers and has been structured
into 5 operational units and 5 support units.
The KAM
Unit is responsible for the overall global development and management of
business with major customers with headquarters in Germany. This unit has a
customer base of approximately 40 customers in 9 industry segments. Each of
these customers will be served by its own key account management.
Due to
their business impact, four Global Accounts, Daimler, DP DHL, Shell and VW have
been organized as separate operational units. Each of these customers
will be served by its own key account management.
The
Direct Sales Unit serves approximately 340 customers. Direct Sales is
responsible for the overall global development and management of business with
these customers. Direct Sales bundles account management and service management,
as well as sales management capabilities, and is supported by pre-sales
capabilities.
The
Corporate Customers business unit also includes the Deutsche Telekom global
account, which reduces IT and telecommunications related costs for the Group.
Working on the basis of a “one company” principle with shared goals across all
business units of the Group, the DTAG Global Account team aims to contribute to
positive developments in the IT landscapes, cost savings, innovation and
simplicity within the Group.
Due to
its specific requirements, the public and healthcare industries (including
government agencies in the federal structure, state pension funds, the armed
forces of the Federal Republic, research and teaching institutions,
international organizations and the healthcare sector) are served by a separate
dedicated team. The unit has been organized in accordance with the federal
structure.
Corporate
Customers combines its support functions in five specific units: ICT PreSales,
Big Deal Management, Sales Operations Management, Business Operations &
Excellence and International Operations & Services.
ICT
PreSales is responsible for bid management and has the technical
expertise to provide solutions to fit the customers’ needs. ICT PreSales
supports the operative sales units through the entire sales process until
closing the deal.
Big
Deal Management is responsible for the development of large volume and
strategically relevant deals in selected geographic areas, including the initial
sales phase, closing the transaction, and transition to the appropriate service
and delivery unit.
Sales
Operations Management is responsible for maintaining the same methods and
processes relating to the main functions within Corporate Customers and sales
operations, as well as account and sales management support.
Business
Operations & Excellence bundles different tasks and projects across
the Corporate Customers Unit, such as Complaint Management, Six Sigma for
enhanced quality management, support for the CSO, interaction among employees,
management and our KAM, etc.
The
International Operations and Services unit has been established to
support the international operations of T-Systems’ customers and the
international activities of T-Systems. This unit supports the account, sales and
bid management activities and oversees the roll-out of management and strategic
programs globally. The unit manages international activities together with the
management of the countries.
ICT
Operations
The ICT
Operations delivery unit is responsible for providing services relating to
customer ICT infrastructure, including computing services, desktop services,
application services and telecommunications services. ICT Operations integrates
the solution and process design, with responsibility for standardization of
delivery of services. As of December 31, 2009, ICT Operations had a total of
more than 20,000 employees, of whom approximately half were based in Germany.
ICT
Operations provides the personnel, servers and infrastructure necessary to
operate the ICT functions of T-Systems’ customers. ICT Operations is represented
in a large number of locations throughout Germany and the world. ICT Operations
has three main service lines, Desktop Services & Solutions, Computing
Services & Solutions and Telecommunications Services &
Solutions.
Desktop
Services & Solutions
The
Desktop Services & Solutions service line is responsible for the development
and implementation of complete office systems solutions with wide-ranging
responsibility for IT infrastructure. Other core services include stand-alone
office systems solutions, including desktop operations, call-center and
help-desk services, as well as the operation of computing services
infrastructure, consulting and IT design. These services may include sales or
leasing contracts relating to desktop computer hardware supplied by third
parties. Through Desktop Services & Solutions, T-Systems provides
cost-effective desktop services primarily to large customers. Such services
cover the entire lifecycle of the workstations provided to the customer, and
also include the remote configuration, troubleshooting and debugging of software
running on workstations serviced through Desktop Services &
Solutions.
Through
Desktop Services & Solutions, ICT Operations also ensures the proper
operation of the workstations and services hardware and software products
provided. As of December 31, 2009, more than 1,800,000 workstations were
serviced through Desktop Services & Solutions. Help-desk services are
primarily provided through the Services Office platform and the Call Center
Platform Management (CCPM) services. The Services Office platform supports one
of the largest and most sophisticated Microsoft Exchange applications worldwide,
with more than 270,000 mailboxes as well as file, fax and SMS services. CCPM
includes services that are required for the smooth operation of a call-center
platform. In
general, desktop services contracts have an average duration of two years.
Customers pay for managed desktop services based on contractually agreed service
levels. These agreements describe quantities of goods, such as the number of
computers leased and maintained, as well as customer-specific availability and
quality requirements for the services provided.
Computing
Services & Solutions
Computing
Services & Solutions provides customers with the ability to outsource their
entire IT operations. The services offered include the operation of data
centers, application management, user support and network management. Other
services offered include the installation, operation and administration of
central and open computer systems, data center infrastructure services and
business applications. Generally,
contracts involving computing services have an average duration of four years or
more. Customers pay for computing services based on contractually agreed service
levels. These agreements describe the quantity, quality and extent of services
to be provided.
CSS
possesses the server equipment, software tools and expertise employed in the
operation of the computer network infrastructure described above. As of
December 31, 2009, CSS’ global mainframe systems performance had a combined
total computing power of more than 100,000 millions of instructions per second
(MIPS).
T-Systems’
mainframe computing equipment in Germany and Switzerland (more than 70% of
T-Systems’ total worldwide computing power) is based on a leasing contract with
IBM. T-Systems only purchases the computing capacity actually required,
according to a flexible, demand-driven business agreement. In addition to these
mainframe systems, as of December 31, 2009, a total of approximately 50,000
servers (most of which are owned by T-Systems) were operated worldwide, in
particular in Europe.
Telecommunications
Services & Solutions
Telecommunications
Services & Solutions manages the development, construction and operation of
T-Systems’ German and international service platforms, based on transport
capacity leased primarily from our Germany operating segment and, to a lesser
extent, from other providers. T-Systems’
service platforms include:
|
·
|
IP
MPLS, which provides advanced IP services and features, including VPNs for
business customers;
|
|
·
|
ATM/Frame
Relay, which supports our portfolio of specific services for customer
networks;
|
|
·
|
Voice
over IP, which supports VoIP products and acts as a gateway to analog or
ISDN networks; and
|
|
·
|
Ethernet
Platform, which supports ethernet VPN services and LAN-to-LAN
connections.
|
Telecommunications
Services & Solutions also provides value-added services through IP-based
platforms, including remote dial-in, client encryption and other security
services, share internet access services and managed hosting
services.
Systems
Integration
The
Systems Integration delivery unit focuses on IT integration projects,
application management and application development. Systems Integration provides
advice and assistance for a company’s entire “plan-build-run” lifecycle. Through
its ICT solutions, Systems Integration increases the flexibility of its
customers’ business processes. Its primary focus is on solution design and
architecture, IT projects and solution and application development, including
testing and application lifecycle services. Systems Integration focuses on the
introduction of uniform processes, general standards, methods and tools and
enhancing the re-usability of modular solutions. In addition, Systems
Integration supports T-Systems international activities through its delivery
network, which provides sales and services to international customers by
offering them tailored, efficient solutions and service components.
Systems
Integration’s offshore resources have been significantly increased through
T-Systems’ cooperation with Cognizant Technology Solutions Corporation that
started in March 2008. Joint activities target mainly European enterprises in
order to meet their demands for global services. T-Systems and Cognizant have
bundled their respective consulting businesses to obtain projects primarily for
customers with locations in Asia and Europe that require global IT
solutions.
Competition
T-Systems
operates in markets that are subject to intense competitive pressures. The
overall market for T-Systems’ services has been characterized by consolidation
and increased concentration during the past year. T-Systems faces a significant
number of competitors, ranging in size from large IT and telecommunications
providers to an increasing number of relatively small, rapidly growing and
highly specialized organizations. T-Systems believes that the specific ICT
service and solutions offered, performance, quality, reliability and price are
important factors in maintaining a strong competitive position.
T-Systems
holds different market positions (based on total revenues) in different regions
of the world. In Germany, T-Systems believes it was the market leader in 2009 in
the IT and telecommunications areas. In Western Europe, on a revenues basis
(counting its intersegment revenues), T-Systems was one of the largest IT
services vendors in 2009, together with IBM Global Services, Accenture,
CapGemini, and HP Services. In the telecommunications area, it was one of the
four largest companies, together with BT Global Services, France Telecom and
Telefónica. Globally, T-Systems ranked among the top 20 IT and
telecommunications companies in 2009
Competition
in the telecommunications markets in which T-Systems competes is very intense,
both in Germany and globally. The market is characterized by substitution of
legacy services (voice and data) by IP and mobile services and by strong pricing
pressures. The competitive landscape over the past several years has been
characterized by market participants attempting to reduce their indebtedness and
increase their profitability through strategic refocusing and concentration on
IP services, fixed-mobile convergence and network-centric ICT solutions.
Additionally, consolidation in the ICT market (primarily in the U.S. market) has
increased competition. T-Systems expects this strategic refocusing to continue
in 2010 and therefore expects similarly fierce competition.
Competition
is also intense in the information technology area. The current market is
characterized by strong pricing pressures, reduced customer IT budgets,
prolonged customer sales cycles and aggressive competition from offshore
providers. As a result of these competitive pressures, many companies, including
T-Systems, are attempting to maintain or expand market share through improved
productivity, cost-cutting and efficiency measures. This situation has also led
to a consolidation in the IT sector, which T-Systems expects to continue for the
foreseeable future. However, T-Systems expects the global IT services markets to
continue to grow only Competition will remain intense for the foreseeable
future.
Group Headquarters and Shared Services
General
Group
Headquarters and Shared Services performs strategic and cross-divisional
management functions for the Deutsche Telekom Group. Group Headquarters
functions include those performed by many of our central departments, such as
treasury, legal, accounting and human resources. Operating functions not
directly related to the core businesses of our operating segments are considered
Shared Services functions. These functions also include, among others, the
management and servicing of our real estate portfolio in Germany, fleet
management and Vivento. Since July 1, 2009, Group Headquarters and
Shared Services also includes certain Group-wide functions in the areas of
products and innovation, technology, IT and mobile communications that are
assigned to our Chief Operating Officer. The shared services and group
headquarters functions of Magyar Telekom and the shared services functions of
OTE formerly assigned to Group Headquarters and Shared Services are reported
under the Southern and Eastern Europe operating segment since
July 1, 2009. Although many of the Group Headquarters and Shared
Services functions are legally part of Deutsche Telekom AG, we manage Group
Headquarters and Shared Services as though it were a separate legal
entity.
Principal
Activities
The real
estate unit is, based on total revenues, the largest shared service within Group
Headquarters and Shared Services. The real estate unit is responsible for
managing our real estate portfolio and renting commercial real estate in
Germany. Our real estate operations are conducted through various subsidiaries
and affiliates and include:
|
·
|
the
internal and external Group leasing and rental
business;
|
|
·
|
the
power supply and air conditioning solutions business related to our
telecommunications facilities (since July 1, 2009 assigned to
the Germany operating segment); and
|
|
·
|
the
operation, management and servicing of our radio transmission sites, such
as our radio towers and transmitter masts in Germany (primarily used in
mobile, radio and satellite communications, as well as for television
broadcasting; since July 1, 2009 assigned to the Germany
operating segment).
|
For
more information about our real estate portfolio and management activities, see
“—Description of Property, Plant and Equipment—Network Infrastructure—Real
Estate.”
Vivento
was established in 2002 with the goal of efficiently implementing our staff
restructuring measures in a socially responsible manner. Through Vivento,
displaced workers are retrained and equipped with new employment qualifications
for permanent redeployment within our Group or with external employers, or for
project and temporary assignments. In addition to individual placements, Vivento
staffs major projects and workforce-intensive operations and services. To create
further employment opportunities for the employees of the Group, Vivento
acquires additional external employment opportunities for civil servant and
non-civil servant employees, particularly in the public sector. At the beginning
of 2004, Vivento commenced providing call center services primarily to some of
our Group companies and, to a lesser extent, to third parties. These call center
operations consist of the former call center operations of our fixed-network
operations in Germany and Vivento Customer Services GmbH.
Vivento
Customer Services provides customer-relationship services, including call center
and back-office services, within the Group and, to a lesser extent, to third
parties. As of December 31, 2009, Vivento Customer Services employed
approximately 1,500 people. In addition, approximately 900 people from Vivento
were employed by Vivento Customer Services on a temporary basis as of that
date.
During
2009, Vivento took on approximately 3,700 of the Group’s employees.
Approximately 63% were transferred from our Germany operating segment. In the
reporting period, approximately 2,300 employees left Vivento to pursue new
employment opportunities. About 50% of these employees were placed outside of
the Group. At December 31, 2009, the workforce at Vivento totaled
around 9,600 employees. This included around 4,200 employees who were deployed
externally, mainly in the public sector, for example at the Federal Employment
Agency. Approximately another 2,600 people were employed within the Group,
especially in call centers, and around 2,800 employees were placed in Vivento’s
operational and strategic units or provided with support by
Vivento.
The
following table provides information regarding Vivento’s employee structure and
movements for the periods presented:
|
|
|
2009(1)
|
|
|
2008(1)
|
|
|
2007(1)
|
|
|
Number
of employees transferred to Vivento
|
|
|
3,700 |
|
|
|
2,600 |
|
|
|
1,700 |
|
|
Number
of employees that left Vivento
|
|
|
2,300 |
|
|
|
4,600 |
|
|
|
5,000 |
|
|
Total
number of employees in Vivento as of year-end
|
|
|
9,600 |
|
|
|
8,200 |
|
|
|
10,200 |
|
|
of
which: Employees in external employment arrangements
|
|
|
4,200 |
|
|
|
3,300 |
|
|
|
1,600 |
|
|
of
which: Employees in internal employment arrangements
|
|
|
2,600 |
|
|
|
2,300 |
|
|
|
5,600 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Figures
have been rounded to nearest 100.
|
Our fleet
management company, DeTeFleetServices GmbH, provides fleet management and
mobility services, with approximately 37,000 vehicles provided to our Group
companies and affiliates within Germany. DeTeFleetServices also generates
revenues from third parties through its sale of used fleet vehicles and, to a
limited extent, through fleet management services to third parties. The majority
of third-party customers are former affiliates of Deutsche Telekom that
were sold.
Group
Headquarters and Shared Services is also responsible for certain Group-wide
functions in the areas of products and innovation and includes the operation and
management of our network to be used by our Group companies around the world and
the provision of carrier services to our international
organization.
The
Central Treasury department is primarily responsible for cash management,
leasing arrangements and the refinancing of indebtedness through a variety of
financial arrangements, including, among other things, bank loans and other
credit arrangements. Furthermore, this unit is responsible for the issuance of
debt in the international capital markets, the handling of payments and clearing
transactions, and foreign exchange and hedging activities. For more information,
see “Item 5. Operating and Financial Review and Prospects—Liquidity and Capital
Resources” and “Item 11. Quantitative and Qualitative Disclosures about Market
Risk.”
T-Venture
Holding GmbH is also included in Group Headquarters and Shared Services.
T-Venture’s mission is to scout new products, technologies and services and to
acquire access to them on our behalf. Accordingly, a central corporate fund has
been established for the purpose of making investments in these areas, in
addition to the individual investments that can be made by our operating
segments.
Group
Headquarters and Shared Services is also responsible for providing professional
training and qualification services for our employees within Germany. We also
provided training for approximately 9,500 apprentices during 2009.
Group
Headquarters and Shared Services also includes the establishment and maintenance
of international intellectual property rights for the Deutsche Telekom Group,
including all Telekom brands.
Research
& Development
Our
Product and Innovation Department is responsible for coordinating research and
development activities, innovation strategy, innovation management, innovation
marketing and through T-Venture, corporate venture capital. This department
focuses primarily on issues that are relevant to all operating segments. The
operating segments are primarily responsible for product innovations that are
close to market launch, usually with a development lead time of up to 24
months.
Deutsche
Telekom Laboratories
Deutsche
Telekom Laboratories acts as a central research and development unit, focusing
primarily on topics and new technologies that are expected to be rolled-out in
18 months to five years. It is divided into the Innovation Development
Laboratory and the Strategic Research Laboratory. Both areas are organized to
support the transfer of knowledge and findings from academic research into
product design with our operating segments.
The
Innovation Development Laboratory has assumed the role of general contractor for
applied research and development. It develops and assesses innovative ideas,
implements test environments, assists with demonstrations and prototypes, and
develops business models. It then transfers results to the operating segments
for further review and development.
Research
and Development Expenditures
In 2009,
our expenditures on experimental, and pre-production research and development
were EUR 0.2 billion (2008: EUR 0.2 billion; 2007: EUR 0.2
billion). Typical research and development activities included the development
of new data-transmission processes and innovative telecommunications products.
In 2009, investment in internally generated intangible assets to be capitalized
amounted to EUR 0.2 billion (2008: EUR 0.4 billion; 2007: EUR 0.3
billion). These investments related primarily to internally developed software.
The vast majority of this amount was attributable to the Germany operating
segments. In 2009, over 2,600 employees were involved in projects and activities
to create new products and market them efficiently to customers.
Intellectual
Property
In 2009,
we filed 713 patent applications worldwide, compared to 665 patent applications
in 2008. We held 6,881 intellectual property rights (inventions, patent
applications, patents, utility models, and design models) as of the end of 2009
(2008: 6,328 2007: 5,800). The portfolio of rights is reviewed on a regular
basis, and those rights that are no longer relevant are eliminated. Management
of these intellectual property rights is governed by strict cost-benefit
considerations.
The
following table presents each of the principal acquisitions and divestitures
made by us during our last three fiscal years:
|
Year
|
Segment
|
Event
|
|
Amount
|
|
|
|
|
|
|
(billions of €)
|
|
|
2009
|
Southern
and Eastern Europe
|
Purchase
of additional shares in OTE
|
|
|
(0.7 |
) |
|
2008
|
Southern
and Eastern Europe
|
Purchase
of shares in OTE
|
|
|
(3.1 |
) |
|
2008
|
United
States
|
Acquisition
of SunCom Wireless Holdings, Inc.
|
|
|
(1.1 |
) |
|
2008
|
Systems
Solutions
|
Sale
of T-Systems Media&Broadcast GmbH
|
|
|
0.7 |
|
|
2007
|
Europe
|
Acquisition
of Orange Nederland
|
|
|
(1.3 |
) |
|
2007
|
Germany
|
Purchase
of shares in Immobilien Scout GmbH
|
|
|
(0.4 |
) |
|
2007
|
Germany
|
Sale
of T-Online France S.A.S.
|
|
|
0.5 |
|
|
2007
|
Germany
|
Sale
of T-Online Spain S.A.
|
|
|
0.3 |
|
Overview
Our
operations worldwide, as well as those of our subsidiaries and affiliates, are
subject to sector-specific telecommunications regulations and general
competition law, as well as a variety of other regulations. The extent to which
telecommunications regulations apply to us depends largely on the nature of our
activities in a particular country, with the conduct of traditional fixed-line
telephony services usually being subject to the most extensive regulation.
Regulations can have a very direct and material effect on our overall business,
particularly in jurisdictions that favor regulatory intervention.
General
Licensing Requirements
To
provide services and to operate our networks, either general authorizations or
licenses are required from regulatory authorities in countries in which we
operate. In member states of the European Union or EU Member States, the
operation of fixed networks and the provision of public voice telephony services
in the fixed network require notification to, or registration with, regulatory
authorities.
Licensing
procedures also apply to our mobile network operations with respect to radio
frequencies. The duration of any particular license or spectrum usage right
depends on the legal framework in the relevant country. Most countries limit the
duration of licenses or usage rights, which are generally renewable, to between
three and thirty years.
The
EU Regulatory Framework for Electronic Communications
General
EU Member
States are required to enact EU legislation in their domestic law and to take EU
legislation into account when applying domestic law. In each EU Member State, a
national regulatory authority, or NRA, is responsible for enforcing the national
telecommunications laws that are based on the EU Framework. NRAs generally have
significant powers under their relevant telecommunications acts, including the
authority to impose network access and interconnection obligations, and to
approve or review the charges and general business terms and conditions of
providers with “significant market power.” In general, a company can be
considered to have significant market power if its share of a particular market
exceeds 40%. NRAs also have the authority to assign wireless spectrum and
supervise frequencies and to impose universal service obligations.
The
European Commission supervises the NRAs and formally and informally influences
their decisions in order to ensure the harmonized application of the EU
Framework throughout the European Union. Companies can challenge decisions of
the relevant NRA before national courts. Such legal proceedings can lead to a
decision by the European Court of Justice, or ECJ, which is the ultimate
authority on the correct application of EU legislation.
In 2002,
the European Union completed the review of the existing EU telecommunications
regulatory framework and adopted several legislative measures, which included a
general framework directive and four specific directives, collectively
constituting the “EU Framework”. Since the most significant part of our business
is undertaken in the European Union, our operations are, to a large extent,
subject to this EU Framework on telecommunications regulation.
In 2007,
the European Commission issued proposals to amend the EU Framework, which must
be accepted by the European Parliament and the Council of Ministers before
becoming legislation. After two years of intense negotiations among the
Commission, the European Parliament and the Council, a revised EU Framework was
finally adopted on November 24, 2009 and entered into force on December 18,
2009.
The
revised EU Framework gives NRAs the power to separate the access network
operations of providers with significant market power from the service business
of such providers in certain circumstances, which is known as functional
separation. This authority is meant to be a remedy of last resort, with high
thresholds to be overcome before it can be employed. When we refer to the EU
Framework in the following discussion, we are referring to the EU Framework as
revised on December 18, 2009.
In
addition, a new Body of European Regulators for Electronic Communications, or
BEREC, was established in January 2010 as part of the new EU
Framework. The main function of this body will be to advise the
Commission and NRAs on regulatory issues and it will have agency status at the
EU level. Decisions and recommendations of BEREC have to be taken into account
by national regulatory authorities and the Commission. BEREC will replace the
existing European Regulators’ Group.
Whether
the revised EU Framework will increase or decrease the regulatory burden on us
will depend on how the revised regulatory framework will be applied by the
relevant NRA. Member states have 18 months to implement the revised EU Framework
and, as a result, we currently expect that the new legislation will come into
force by mid-2011.
Special
Requirements Applicable to Providers with Significant Market Power
The most
significant impact on our business comes from the EU Framework’s special
requirements applicable to providers with significant market power. Obligations
in relation to network access, price setting, separate accounting for
interconnection services, publication, and non-discrimination, can be imposed on
those operators that are designated by the relevant NRA as having significant
market power in an electronic communications market. Such determinations are
based on EU guidelines and EU competition case law. We have been designated as
having significant market power primarily in most fixed-line markets in which we
operate, as well as in mobile voice call termination markets.
In
particular, an NRA may subject providers with significant market power, and
their affiliates, to the following rules and obligations:
|
·
|
The
prior approval or retroactive review of charges, insofar as such charges
and conditions relate to a market in which the provider holds significant
market power.
|
|
·
|
The
obligation to offer other companies unbundled special network access
(including interconnection) as well as access to certain services and
facilities on a non-discriminatory
basis.
|
In
addition, providers with significant market power can be obliged to maintain
segregated accounting systems with regard to access services. This obligation is
intended to allow for transparency with respect to various telecommunications
services in order to prevent, among other things, the cross-subsidization of
services. In this regard, an NRA may specify the structure of a provider’s
internal accounting for particular telecommunications services, which can
increase costs of compliance.
Under the
EU Framework, the European Commission periodically issues a recommendation on
relevant markets, which is a list of telecommunications markets that it
considers susceptible to sector-specific regulation. NRAs must take this list of
markets into account when defining the markets that are to be analyzed for the
existence of competitive restraints. If an NRA finds that a market is not
competitive, it establishes which providers have significant market power in
this market and imposes certain measures prescribed by statute. NRAs may analyze
additional markets not included in the Commission’s recommendation if justified
by special national circumstances. NRAs are required to conduct market analyses
on all communications markets included in the Commission’s recommendation, as
well as those that the NRAs have decided to include within the scope of
sector-specific regulation in agreement with the European Commission. All NRA
market analyses are subject to the supervision of the European Commission and
can be challenged if the European Commission does not agree with the NRA’s
findings.
In
addition to the Commission’s recommendation, there is a separate EU regulation
on unbundled access to the local loop, which became effective in January 2001.
It contains the obligations to provide full unbundled access to copper-paired
wire lines, as well as unbundled access to the high-frequency spectrum of those
lines (line-sharing). Unbundling has led to a considerable loss of our market
share. For more information regarding the effects of unbundling obligations, see
“—German Telecommunications Regulation—Interconnection” below.
Next
Generation Access Recommendation
In June
2009, the European Commission published its second draft recommendation on
Regulated Access to Next Generation Access Networks for fiber based access
networks or NGAs. The recommendation aims to harmonize obligations imposed by
NRAs on operators with significant market power in the markets for wholesale
network infrastructure access at a fixed location and the market for wholesale
broadband access to NGA networks. According to the draft recommendation,
operators having significant market power must grant competitors access to new
and existing ducts, fiber, street cabinets and other elements. In addition,
operators with significant market power must provide fiber access unbundling and
wholesale broadband access services (Bitstream Access).
Furthermore,
the draft contains pricing principles for duct usage, the usage of other civil
engineering works and other elements as well as for joint cooperative network
deployment and risk sharing arrangements. If the draft recommendation would be
adopted in its current form, we do not expect that the recommendation would lead
to a decrease in regulation with regard to NGA. It remains unclear whether
the draft will be adopted in its existing form. The adoption of the existing or
modified recommendation is expected in the first half of 2010.
Fixed
and Mobile Termination Rate Recommendation
The
European Commission recommendation on relevant markets from 2007 requires NRAs
to analyze the call termination market in order to determine whether regulatory
remedies need to be imposed. The European Commission intends to further reduce
termination rates significantly. In May 2009, the Commission issued the
recommendation on the regulatory treatment of fixed and mobile termination rates
in the EU that defines details for the cost calculation of termination rates by
the NRAs. With the recommendation, the Commission intends to harmonize cost
standards for mobile termination rates throughout the EU In this respect, the EU
Commission stated the intention to reduce termination rates to EUR 0.015 to
EUR 0.03 EUR by the end of 2012, while also eliminating asymmetry between
operators. Although the recommendation is not legally binding, NRAs have to pay
utmost account to the recommendation while still being able to reflect
national circumstances. Mobile operators could therefore be subject to further
pressure to lower termination rates in the future, which may have an additional
negative impact on our revenues.
Competition
Law
The EU’s
competition rules have the force of law in all EU Member States. The main
principles of the EU competition rules are set forth in Articles 101 and 102 of
the Treaty of the Functioning of the European Union, or TFEU, and in the EU
Merger Regulation, or Merger Regulation. In general, the TFEU prohibits
concerted practices and all agreements that may affect trade between Member
States and which restrict, or are intended to restrict, competition within the
European Union. In addition, the TFEU prohibits any abuse of a dominant position
in the common European Market, or any substantial part of it, which may affect
trade between Member States. The European Commission enforces these rules in
cooperation with the national competition authorities, which may also directly
enforce the competition rules of the TFEU. In addition, the national courts have
jurisdiction over alleged violations of EU competition law.
The
Merger Regulation requires that all mergers, acquisitions and joint ventures
involving participants meeting certain turnover thresholds are to be submitted
to the European Commission for review, rather than to the national competition
authorities. Under the Merger Regulation, concentrations will be prohibited if
they significantly impede effective competition in the common European market,
or a substantial part of it, in particular as a result of the creation or
strengthening of a dominant position.
In
addition, all EU Member States, and other jurisdictions in which we operate,
such as the United States, have legislation in place, which is substantially
similar to the EU competition rules. Thus, in markets where we are dominant, our
ability to practice business freely and to establish our own prices can be
restricted. Moreover, our opportunities to cooperate with other companies, or to
enhance our business by fully or partially acquiring other businesses, can also
be limited. In Germany, the authority responsible for the application of
competition law is the Federal Cartel Office (Bundeskartellamt). For information
regarding specific competition cases in which we are involved, see “Item 8.
Financial Information—Legal Proceedings.”
German
Fixed-Network Telecommunications Regulation
Since the
most substantial part of our business is located in Germany, German
telecommunications regulation has an especially significant impact on our
business. As in all EU Member States, German telecommunications regulation is
based on the EU Framework. German telecommunications regulation is mainly
derived from the Telecommunications Act (Telekommunikationsgesetz).
We
believe that, for the foreseeable future, the Federal Network Agency is likely
to view us as a provider with significant market power in various German markets
for public voice telephony services in the fixed network and in other markets,
including most of those in which we held monopoly rights in the past.
Additionally, we have been determined to be a provider with significant market
power in the German market for mobile voice call termination. We expect that the
strict regulatory provisions of the Telecommunications Act relating to providers
with significant market power will be applied to our activities in those markets
also in the future. Considering that in many markets our competitors are
unlikely to gain significant market power in the near future, we expect that we
will have to compete in important markets with providers not subject to those
regulatory obligations. Therefore, these competitors may have more flexibility
than we have in terms of the selection of services offered and customers served,
pricing and the granting of network access.
Pricing
Under the
Telecommunications Act, tariffs for telecommunications access services offered
by providers with significant market power and their affiliates can be subject
to price regulation, insofar as the tariffs relate to a market in which
significant market power has been determined to exist. Other tariffs are
essentially unregulated. The tariffs of all providers in Germany are, however,
subject to generally applicable EU and German laws, including competition law
and consumer protection rules.
The
Telecommunications Act distinguishes between tariffs that require prior
regulatory approval and those that are subject to retroactive review. Generally,
regulated wholesale pricing requires prior approval, whereas regulated retail
pricing is subject to retroactive review. Nevertheless, at present, we are
required to disclose most retail pricing measures concerning our fixed telephony
network to the Federal Network Agency two months before they become effective,
which enables the Federal Network Agency to undertake a preliminary evaluation
with respect to whether our prices comply with rules prohibiting abuse of
significant market power. This requirement restricts our flexibility to react
quickly to competition in the retail markets for fixed telephony.
General
Network Access
Every
operator of a public telecommunications network, irrespective of its market
position, is obligated, upon request, to make an interconnection offer to other
network operators for interconnection with its network. If the parties cannot
agree on the interconnection terms and conditions, upon application by one of
the parties, the Federal Network Agency can compel an operator that controls
access to end users to allow interconnection to its network and can impose other
access obligations.
Universal
Services
The
Telecommunications Act includes provisions to ensure the availability of certain
basic telecommunications services, or universal services, throughout Germany.
Universal services comprise public fixed-line network voice telephony with
certain ISDN features, directory services, telephone books, public pay phones
and certain categories of transmission lines. These services must be universally
available to all customers at a price determined by the Federal Network Agency
to be an affordable price. We currently provide the universal services specified
by the Telecommunications Act voluntarily and without compensation.
Media
Regulation
Although
regulation of broadcast media and media content has not materially affected our
business to this point, as traditional telecommunications services and media
services increasingly converge through products such as triple-play, media
regulation may become increasingly important to our business. For example, in
Germany we currently offer IPTV to our high-speed broadband customers, as well
as mobile TV services to customers of T-Mobile Deutschland. There are already
several regulations related to media services and platforms, such as Entertain,
including “must-carry” obligations. Legislation also regulates the
contractual conditions for such transmissions. Moreover, the legislation can be
interpreted to suggest that in Germany, we are restricted in the production of
our own TV and radio programs as long as a significant part of our shares are
controlled by the German government.
Other EU
regulation requires TV set top boxes to be interoperable, such as with regard to
encryption technology or a common scrambling algorithm. The set top boxes we use
for our German IPTV services rely on a special digital rights management
technology that might not be entirely compatible with the common scrambling
algorithm. However, the Federal Network Agency has granted us a preliminary
exemption from this regulation until April 2012. Modification of the current
digital rights management technology could prove costly and some features of our
IPTV service may be discontinued.
Fixed-Fixed
Interconnection
Fixed-fixed
interconnection prices require prior approval by the Federal Network Agency. The
current charges were approved on November 28, 2008 and are valid until June 30,
2011.
Local
Loop Access
We have
been offering unbundled local loop access since 1998. We are obliged to publish
a reference offer for access to unbundled local loop and prices require prior
regulatory, or ex-ante approval. By allowing competitors to connect to customer
access lines within our local networks, unbundling of the local loop allows our
competitors to gain direct access to customers without having to build local
networks of their own. In this way, competitors are able to use our customer
access lines to offer a wide range of local services directly to
customers.
The
Federal Network Agency is currently conducting the next round of market analysis
concerning access to physical infrastructures, including the unbundled local
loop. The related draft of the regulatory remedies is expected to be published
in the first quarter of 2010. The final adoption of the market analysis is
expected in the first half of 2010.
We are
involved in a number of pending legal proceedings regarding recent decisions of
the Federal Network Agency that concern access charges relating to the local
loop, and which have resulted in severe reductions in our charges for access by
our competitors. We believe that the Federal Network Agency did not take into
account a number of our costs that were justifiable costs for these services,
and that if it had done so, our permitted local loop access charges would have
been higher.
Unbundled
local loop charges, as determined by the Federal Network Agency for the period
from February 1999 to March 2001, were revoked by the Administrative Court of
Cologne. The Court criticized the Federal Network Agency’s calculation method
for unbundled local loop costs. The Court ruling concerning unbundled local loop
charges for the period from 1999 to 2001 became effective in October
2009. As a result, the Federal Network Agency must now decide again
on our rate approval applications of 1999. It is not possible at present to
estimate whether these decisions will require Deutsche Telekom to make payments
or price adjustments and if so, in what amount.
Unbundled
local loop charges for monthly rental as well as for one-off services, as
determined by the Federal Network Agency for the period April 2001 to March 2003
were also revoked by the Administrative Court of Cologne . These rulings are not
yet effective due to pending claims (Nichtzulassungsbeschwerde) of the Federal
Network Agency and Deutsche Telekom at the German Federal Administrative
Court.
In June
2007, the Federal Network Agency updated its regulatory order relating to local
loop access. In addition to existing obligations (access to the local loop,
co-location, ex ante approval), we must also provide access to cable ducts and,
under certain conditions, dark fiber and co-location within the street cabinets.
We have initiated legal proceedings against this obligation. On January 27,
2010, the Federal Administrative Court (Bundesverwaltungsgericht) canceled the
decision of the Federal Network Agency of June 2007 concerning access to dark
fiber. For further information see “Item 8. Financial Information—Legal
Proceedings.”
The
Federal Network Agency specified the obligations concerning access to cable
ducts, dark fiber and co-location within the street cabinets on December 4,
2009. We applied for corresponding tariffs in mid-January 2010. The Federal
Network Agency is expected to decide by March 2010, but may extend this tariff
application procedure until May 2010. We will now have to apply for
corresponding tariffs. A decision on such tariffs is expected in the end of the
first quarter of 2010.
On March
30, 2009, the Federal Network Agency reduced the monthly unbundled local loop
charges from EUR 10.50 to EUR 10.20. These charges are valid for the period from
April 1, 2009 to March 31, 20011. On June 30, 2008, the Federal Network Agency
decided to reduce the one-time activation (takeover of an existing line) charge
for the unbundled local loop by approximately 1.4% to EUR 35.70 for the most
common type of subscriber line (copper wire pair with high bit-rate use). The
corresponding cancellation charges have been reduced as well between 0.2% and
4.1%. These one-time charges for the unbundled local loop are valid until June
30, 2010.
Since
January 2001, we have been offering line sharing (using a single access line for
multiple purposes, including sharing access with competitors) in accordance with
EU requirements. On June 30, 2008, the Federal Network Agency also reduced the
monthly rental charge for line sharing from EUR 1.91 to EUR 1.78 until June 30,
2010. Further, the Federal Network Agency decided on the one-time activation
charges for the provision of line sharing, which were reduced to EUR
43.99.
Broadband
Access – IP Bitstream
We are
required to offer an IP Bitstream Access product in the wholesale-market and
have therefore been required to offer unbundled broadband access to competitors
since April 2008. On September 14, 2009, the Federal Network Agency
decided again on new charges for IP-Bitstream Access and decreased the monthly
charges to EUR 8.12 from EUR 8.65 for the bundled variant and to EUR 18.32 from
EUR 19.15 for stand-alone variant. With the stand-alone variant the end user is
no longer required to maintain a telephone access line with us. The decreases
mainly trace back to decreases for other regulated product to which the IP-BSA
product structure refers, such as TAL (Teilnehmeranschlussleitung) or ZISP
(Zusammenschaltung für Internet Service Provider). According to the key elements
of the draft market analysis and regulatory order on bitstream access published
on October 21, 2009, the Federal Network Agency intends to rely on retroactive
review, or ex-post regulation, but may expand the scope of regulation to include
all wholesale bitstream access products. The final adoption of this market
analysis and regulatory order is expected in the first quarter of
2010.
IP
Bitstream Access enables our competitors to offer all IP-access throughout
Germany. For the IP Bitstream Access market, the Federal Network Agency issued a
regulatory order in September 2006.
According
to a regulatory order, we must grant access to competitors to ducts or,
alternatively, to dark fiber cable. The replication of VDSL products, in
particular by our competitors using their own infrastructures, is therefore
being made easier at our expense. This will have a negative impact on our
revenue generation, even if we offer our competitors a VDSL product on a
voluntary basis. The Federal Network Agency specified the obligations concerning
access to cable ducts, dark fiber and co-location within the street cabinets on
December 4, 2009.
Retail
Regulation
The
Federal Network Agency has determined that we are a provider with significant
market power for the markets for national fixed-to-mobile calls. In December
2007, the Federal Network Agency imposed on us the obligation to disclose to it
any retail pricing measures within the market for national fixed-to-mobile calls
(excluding VoIP services) two months before they become effective. National
fixed-to-mobile calls for VoIP services are still subject to ex ante review.
Therefore, in general, these obligations to provide pricing measures two months
prior to effectiveness (excluding VoIP services) will delay our ability to react
quickly to market changes.
The
Federal Network Agency still does not classify VoIP as a publicly available
telephone service, which would imply an emergency services obligation. However,
with the further development of VoIP, and the increasing use of this nomadic
service, the Federal Network Agency has requested all market participants to
submit proposals for a technical solution to the emergency services
problem.
The
broadband access tariffs, as well as the broadband and narrowband service
tariffs, that we offer to retail customers are not subject to regulation under
the Telecommunications Act. However, these tariffs are indirectly affected by
the regulation of wholesale tariffs for these services and will be taken into
account by the Federal Network Agency in a review undertaken as part of a
retroactive procedure if they form part of a product bundle that contains
regulated components. Moreover, sector-specific regulation may be extended in
the future to the broadband services market, which will depend on the results of
the Federal Network Agency’s current market analyses procedures.
On August
27, 2008, the Federal Network Agency published a draft of its market analyses
results for retail products and determined that we are a provider with
significant market power for the retail market “Access to the public telephone
network at a fixed location for residential and non residential
customers.” All-IP Access is classified as access to the public
telephone network. The regulatory decision based on this draft from January 25,
2010 includes the following regulatory measures:
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regulation
of All-IP Access for the first time (if provided together with
voice/VoIP);
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Call
by Call and Preselection have to be continued to be offered even for
All-IP Access; and
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prices
and conditions will be subject to ex-post regulation without prior
notification.
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On April
22, 2009, the Federal Network Agency revoked the decision of June 23, 2006
concerning the markets for national fixed-to-fixed and fixed-to-mobile calls
with the consequence that there is no regulation in this area
anymore.
Southern
and Eastern European Telecommunications Regulation
Our
subsidiaries in Greece, Hungary, Romania, and Slovakia are subject to the same
EU Framework as our fixed-line business in Germany. We also operate fixed-line
networks in Croatia, the F.Y.R.O Macedonia, and Montenegro. These countries are
also orientating their regulatory frameworks towards the EU Framework.
Therefore, all of our subsidiaries in Southern and Eastern Europe are generally
exposed to a set of regulatory risks similar to those in Germany described
above. Additional significant regulatory matters affecting specific subsidiaries
are discussed below.
Hungary
Although
some significant competition within the fixed-line network has existed in
Hungary for several years, Magyar Telekom still has a substantial market share
in many telecommunications markets within Hungary. As expected, the Hungarian
NRA has found Magyar Telekom to be an operator with significant market power in
a large number of the markets currently subject to regulation, including
subscriber lines and calling services.
Currently,
Magyar Telekom has to comply with wholesale obligations regarding call
origination and termination, unbundling, local and national bitstream access and
price regulation for the termination of wholesale leased lines. As in previous
years, Magyar Telekom also remains under the obligation to submit its reference
offers for interconnection and unbundling to the NRA for prior
approval.
As
competition between Magyar Telekom and cable and fiber television network
providers for telephony, Internet access and television services becomes more
intense, Magyar Telekom expects to be increasingly affected by the disparity of
regulatory burdens between services provided over the fixed-line telephony
network and those provided over cable and fiber networks. Unlike Magyar Telekom,
cable and fiber network providers are currently not subject to any wholesale
obligations.
Moreover,
Magyar Telekom is required to pay other fixed-line network operators in Hungary
call termination rates that are between 30% and 40% higher than the
regulated rates Magyar Telekom is allowed to charge competitors. This asymmetry
decreased in 2009.
In
addition, the Hungarian NRA has reduced the prices of the reference offer for
unbundled products. The monthly fees of local loop unbundling, shared access and
local bitstream access have decreased by 2%, 38% and 8%, respectively, compared
to the previous tariffs. Despite the continued decrease of these monthly fees,
the number of unbundled lines is still rather low and not expected to accelerate
significantly in the near future due to intense competition with cable operators
with cable and fiber network operators.
In 2009,
the Hungarian Government had plans to build up a state owned optical network
infrastructure in rural areas financed by reallocation of EU resources. These
plans have been put on hold and it is uncertain how and when the Government
plans to resume this project. A state owned optical backbone network
infrastructure may have an impact on Magyar Telekom’s business
operations.
Greece
The Greek
Telecommunications Law includes the enactment of a series of ministerial
decisions, a number of which have not yet been concluded, such as the joint
ministerial decision on the procedures for granting rights of way. Although
experience with the regulation of fixed-line voice telephony in Greece has
increased over recent years, delays and ambiguous secondary legislation, in
addition to the lack of understanding of the regulatory issues relevant to new
technologies and new services, have influenced OTE’s business decisions and
strategy.
Based on
the EU Regulatory Framework as well as this national legal framework OTE has to
comply with retail and wholesale obligations. Retail obligations include
regulated price caps for access to the public telephone network at a fixed
location, local and national telephone services and retail leased lines at cost
oriented prices. Wholesale obligations include call origination, termination and
transit, wholesale line rental, full and shared access to local loop services,
including distant and physical collocation and backhauling services, national
bitstream access and trunk and termination of wholesale leased lines. OTE has to
provide reference offers for bitstream access, unbundling of the local loop,
wholesale line rental and terminating, trunk segments of leased lines and
partial circuits.
A second
round of analysis of the markets for wholesale broadband access and wholesale
(physical) network infrastructure access (including shared or fully unbundled
access) at a fixed location market was concluded by the Greek NRA in July 2009.
The NRA defined OTE as having significant market power, not taking into account
the strong competition in the market by alternative providers using the
unbundled local loop. The NRA imposed additional obligations, including access
to ducts and manholes and, if not available, access to dark
fiber. Regarding the wholesale broadband access market the Greek NRA,
did not take into consideration the existence of distinct geographic markets and
has imposed cost orientation to national bitstream access. The price
of the local loop is lower than the European average price, while terminating
rates between OTE and alternative fixed providers are asymmetric with a price
schedule that preserves asymmetry in the future.
Regarding
the deployment of NGA in Greece, the previous Greek Government in power until
October 2009 announced an initiative to support a passive optical network for
two million homes across Greece that would provide open access to all providers.
The current Greek Government announced its intention to redesign the project,
but the details are not known yet.
A number
of factors relating to the Greek Government’s network project remain unclear,
including the cost of the project, the potential allocation of this cost, and
its future impact on fixed-line competition in the Greek market. Therefore, OTE
cannot predict its potential effect on technical and economic aspects of its own
plans and on competition in the Greek fixed-line market.
Mobile
Regulation
Our
subsidiaries in Germany, Austria, Bulgaria, Czech Republic, Greece, Hungary,
Netherlands, Poland, Slovakia, Romania and in the UK are all subject to this EU
Framework. We also operate mobile networks in Croatia, the F.Y.R.O Macedonia,
Montenegro, and Albania. These countries are also orientating their regulatory
frameworks towards the EU Framework. Therefore, all of our subsidiaries are
generally exposed to a set of regulatory risks. Significant regulatory matters
affecting specific subsidiaries are discussed below.
European
Union
The
markets for access and call origination and international roaming have been
deleted from the list of recommended markets to be analyzed. However, it will be
possible for NRAs to analyze and regulate further markets, if:
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high
and non-transitory entry barriers are present in a particular
market;
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a
market structure does not tend towards effective competition within the
relevant time horizon taking into account the state of competition and the
barriers to entry; or
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competition
law alone is insufficient to adequately address the market failures
concerned.
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On June
30, 2007, the European Union adopted a regulation that regulates international
roaming tariffs for wholesale and retail customers on the basis of a capped
pricing system. As a consequence, our mobile operations in the European Union
had to lower wholesale and retail roaming tariffs, which negatively affected our
revenues. On the basis of a price schedule mandated by this EU regulation,
further reductions of wholesale and retail roaming prices were made in mid-2008.
On July 1, 2009, a new EU roaming regulation came into force and expanded the
existing regulation to SMS and data roaming services. This regulation will be
valid until June 30, 2012. Besides additional reduction of wholesale and retail
voice roaming tariffs, SMS roaming charges were reduced and price caps for
wholesale data roaming tariffs and additional transparency measures have been
introduced. This expansion of existing regulation has an additional negative
effect on our roaming revenues. Furthermore, the introduction of a third roaming
regulation focusing especially on data roaming retail prices is currently being
discussed at the EU level. This could have an additional material negative
effect on our roaming revenues.
In
October 2008, the European Commission launched a preliminary investigation and
requested information from European mobile communications operators, including
T-Mobile International, regarding their respective handling of mobile VoIP
services. T-Mobile International has responded to the European Commission's
information request. So far, the European Commission has not taken further
steps. The European Commission may initiate formal proceedings, if the results
of the preliminary investigation indicate a possible infringement of EU
competition law. If the European Commission ultimately finds that an
infringement has occurred, it may issue a prohibition decision and impose
fines.
Germany
The
Federal Network Agency has the obligation to review markets every two years.
With its decision of December 5, 2008, the regulatory ex ante obligations on
mobile termination for T-Mobile Deutschland remain unchanged. On March 31, 2009,
the Federal Network Agency decided that T-Mobile Deutschland had to reduce its
termination rate charges to EUR 0.0659 per minute (from EUR 0.0792 per minute)
from April 1, 2009 until November 30, 2010. The same rate also applies to
Vodafone, while E-Plus and O2 are required to
lower their mobile termination rates to EUR 0.0714 per minute (from EUR 0.088
per minute) for the same time period.
The EU
Commission required the Federal Network Agency to use a particular cost model
for the next mobile termination rate decision beginning in December 2010. The
intention of this cost model is to determine a comprehensive efficiency standard
for all mobile network operators and to standardize the documents relating to
cost data upon which a mobile termination rate decision is made. Together with
the relevant recommendation on the regulatory treatment of fixed and mobile
termination rates this could result in further termination rate reductions for
T-Mobile Deutschland.
The
Federal Network Agency decided to auction a total of 360 MHz of spectrum in
different bands (800 MHz (“digital dividend”), 1.8 GHz, 2.1 GHz, 2.6 GHz) in the
fourth quarter of 2009, although the dispute on limitation of bidding rights, or
the spectrum cap, for 800 MHz spectrum had not been resolved. E-Plus and O2 raised competitive
concerns against the auction rules, which allow a new entrant to bid for 2x20
MHz and which allow them to bid for 2x15 MHz each. At the same time,
a spectrum cap of a maximum of 2x10 MHz exists for T-Mobile and Vodafone. The
application phase ended on January 21, 2010 with six applications and the
bidding phase is currently expected to begin on April 12, 2010. This auction is
likely to have a significant impact on the mobile market development of the next
two decades as it will be the last possibility to acquire large blocks of
contiguous spectrum feasible for broadband networks. Several legal actions
against the auction rules were taken by E-Plus, O2, several cable
operators and broadcasters.
In May
2009, the Federal Network Agency requested information from German mobile
operators on the current treatment of VoIP in each of their respective networks.
In September 2009 T-Mobile launched a tariff for the use of third-party VoIP
services. The Federal Network Agency responded that they will not take measures
with regard to VoIP traffic in mobile networks, but will observe the
developments in this area closely. It can not be excluded that actions will be
taken, which could lead to an obligation to allow the use of third-party VoIP
services in all tariffs.
United
Kingdom
On
October 18, 2009, the UK Government issued a consultation to the NRA setting out
its proposals for a binding Direction under the Communications Act 2004 to the
NRA on spectrum liberalization, upcoming spectrum auctions and related spectrum
matters. Following passage through Parliament, the Direction may be made in
April 2010 subject to it being approved by the UK Parliament.
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T-Mobile
UK and the other UK GSM operators will be able to change the use of their
current GSM spectrum, for example to use it for UMTS
services;
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the
fees associated with GSM spectrum will be increased following the auction
to reflect the economic value of the
spectrum;
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T-Mobile
UK and the other UK UMTS operators will have their UMTS spectrum licenses
at 2.1 GHz liberalized, made tradable and made indefinite in return for
enhanced retail service
obligations;
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the
NRA will hold a spectrum auction in early 2011, in which bidders would be
subject to spectrum caps and the spectrum purchased would be subject to
conditions including retail service obligations and wholesale access
conditions; and operators with 2x25 MHz or more of liberalized GSM
spectrum would be required to relinquish 2x5 MHz of spectrum in order to
acquire any new spectrum in the proposed
auction.
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T-Mobile
UK is currently regulated on its average price for call termination and these
regulations expire on March 31, 2011. The regulated maximum mobile voice
call termination charge for T-Mobile UK for the period from April 1, 2008
to March 31, 2009 was 6.088 pence per minute and from April 1, 2009 to
March 31, 2010 was 4.848 pence per minute. A reduction of 11.1% will apply
to the March 2010-March 2011 period. These revised rates were
determined by the NRA in April 2009, following an appeal brought to the NRA’s
original decision in March 2007. The final decision also set out rates for April
2007 to March 2009. T-Mobile and all the other UK mobile operators, other than
Hutchison 3G UK Limited, have appealed this aspect of the final decision to the
High Court arguing that there was no jurisdiction on the Competition Appeal
Tribunal to set rates for the period between April 2007 and March
2009. This appeal will be heard in the spring of 2010.
The NRA
has started a review of call termination prices for the period from April
2011. It is expected to issue proposals in 2010, which could include
proposals for further reductions based on the EU Commission’s recommendation of
the regulatory treatment of fixed and mobile termination rates in the
EU.
The UK
NRA is currently considering a dispute raised by Hutchinson 3G regarding the
termination rates payable on calls to ported numbers. Disputes have been raised
by Hutchinson 3G against each of T-Mobile, Orange, O2 and Vodafone. The
final decision is expected in the first quarter of 2010.
The
Netherlands
The Dutch
NRA issued a new decision on July 31, 2007, in which it adopted a
self-regulatory proposal of the Dutch mobile network operators to lower mobile
termination rates in three yearly reductions (from July 1, 2009 to June 30, 2010
from EUR 0.104 to EUR 0.081 for T-Mobile). On July 23, 2008, a Dutch Appeals
Court instructed the NRA to review its market analysis. On December 19, 2008,
the NRA published its revised decision. In this revised decision, the NRA left
the imposed tariffs unchanged. A final appeal decision on this revised decision
by the appeals court on this revised decision is still pending and is now
expected in the first quarter of 2010.
In
September 2009, the NRA started a new market analysis process regarding mobile
termination rates for the period from 2010 to 2012. The NRA is analyzing both
the fixed and mobile termination markets. In January 2010, the NRA published its
draft cost model where it proposes to reduce mobile termination rates from EUR
0.081 at the end of December 2009 to MTR to EUR 0.018 per minute during the
2010-2012 regulation period starting in July 1, 2010. The NRA is expected to
publish its market analysis decision for mobile termination rates in March
2010. This decision therefore could have additional negative impact
on revenues.
After the
acquisition of Orange Nederlands in October 2007, T-Mobile Netherlands obtained
the GSM and UMTS radio frequency licenses of Orange. In 2008, the mobile
networks of Orange and T-Mobile Netherlands were combined resulting in a
temporary switch off of the Orange UMTS frequencies (to be used again as from
mid 2010). Early 2009 the Dutch Radiofrequency Authority (“AT”) informed
T-Mobile Netherlands that it failed to comply with the (former) Orange UMTS
license obligations because no (efficient) use was being made of the
frequencies. T-Mobile Netherlands contested this view. On November 2, 2009, the
AT issued a so-called ‘order enforced by penalties’ requiring T-Mobile
Netherlands to start using the UMTS frequencies three months following the
issuance of the order. Should T-Mobile fail to do so, it will incur a penalty of
EUR 5 million per quarter to a maximum of EUR 40 million (and ultimately
withdrawal of the UMTS license). Compliance with the order will be measured by
the AT in February 2010 at 300 geographical locations in the Netherlands.
T-Mobile Netherlands has filed an objection against this order and will also
file a court appeal. Next to these legal measures, operational measures have
been implemented to prepare the network for the AT measurements in February
2010. In particular TMNL implemented a plan to meet the obligations in the 300
points which are intended to be measured by AT. The results of this measurement
are not expected before March 2010.
On
November 22, 2009, AT sent an intention to issue another order enforced by
penalties to T-Mobile Netherlands for supposed non compliance with the
requirements of the former Orange GSM frequency licenses (combined E-GSM and
DCS1800 spectrum). The AT believes that T-Mobile Netherlands is using these
frequencies inefficiently (by combining the Orange GSM frequency licenses with
the T-Mobile GSM frequency licenses) which results in hoarding of scarce radio
frequencies. T-Mobile Netherlands has in December 2009 submitted its written
views on this intention but nevertheless still believes that the AT will issue a
second order enforced by penalties. This is now expected in the first quarter of
2010. The order will consist of a 3-month grace period to ensure proper use of
the GSM radio frequencies, failure of which will result in a fine of EUR 2.8
million per quarter with a maximum of EUR 22.5 million (and ultimately
withdrawal of the GSM license). Court proceedings will be filed (including
possible injunction proceedings to freeze the imposition of a fine) should the
order be issued.
Poland
In July
2006, three mobile operators in Poland, including PTC, were designated as having
significant market power in the call termination market and, as a result,
regulatory obligations relating to provision of access, non-discrimination,
transparency and cost orientation were imposed on them. In a decision dated
April 27, 2007, the Polish NRA introduced a price schedule lowering termination
rates to PLN 0.2775 (EUR 0.0677) per minute beginning in May 2009 and PLN 0.2162
(EUR 0.0527) per minute as of May 2010. PTC appealed the NRA decision. On
February 25, 2009, the civil court ordered the Polish NRA to decide again about
PTC’s appeal.
In
October 2008, the Polish NRA withdrew its original price schedule and, without
prior consultation with the operators and notification to the European
Commission, issued ahead of schedule a new price schedule reducing mobile
termination rates to PLN 0.2162 (EUR 0.0527) as of January 1, 2009, and to PLN
0.1677 (EUR 0.0409) starting July 1, 2009. The level of PLN 0.1677
(EUR 0.0409) is set for an unspecified period of time and, as a result, is still
valid today. PTC has issued legal proceedings against these decisions, which are
still pending.
Greece
In
November 2008, the Greek NRA published the conclusions of its analysis of the
wholesale market for voice call termination on individual mobile networks. The
NRA determined that COSMOTE, Vodafone and WIND separately hold significant
market power in the market for the termination of calls on their respective
network. The NRA also imposed a range of regulatory remedies on each operator,
including cost-orientation, provision of access, transparency,
non-discrimination, accounting separation and the publication of a reference
interconnection offer.
In order
to achieve cost-orientated termination charges, the NRA imposed a series of
phased reductions in charges, such that each operator’s termination charge was
reduced to EUR 0.0786/min on January 1, 2009, with further scheduled reductions
to EUR 0.0624/min on January 1, 2010 and EUR 0.0495/min starting on January 1,
2011.
The Greek
mobile sector currently faces serious problems in the licensing of base
stations. The current licensing process for base stations is
extremely complex and time consuming, making it difficult for mobile operators
to license the new base stations needed for network expansion and also in some
cases leading to existing base stations being taken out of operation. Currently,
the Greek mobile sector is in discussion with the Government to take concrete
actions to improve the licensing process.
Hungary
On
November 8, 2007, Magyar Telekom signed a renewed concession contract on the
basis of which the duration of the 900 MHz frequency usage right was extended
until May 4, 2016. Magyar Telekom and T-Mobile Hungary paid approximately EUR 39
million for the 900 MHz license extension and committed to a EUR 78 million
mobile broadband investment obligation in underdeveloped regions of the
country.
The NRA
published its third market analysis decision regarding the mobile voice
termination market for public consultation in October 2008, which took effect on
January 1, 2009. The NRA designated T-Mobile Hungary, Vodafone and Pannon GSM as
having significant market power. The decision confirmed the charging of
symmetrical termination rates by the three mobile network operators and proposed
the continued gradual reduction of termination rates to HUF 14.13 per minute
from January 1, 2010 and to HUF 11.86 per minute from December 1, 2010. On
January 5, 2009, Magyar Telekom filed suit against this decision.
On
October 22, 2008, the National Communications Authority issued a tender on 450
MHz frequency and on the available fourth license pack. On March 16 and April
30, 2009, respectively, the NRA declared the auctions unsuccessful.
In
conjunction with the implementation of a modified GSM Directive, a new E-GSM900
competitive bidding auction is expected to take place in 2010.
United
States
Our U.S.
mobile operations, conducted through T-Mobile USA, are regulated by the FCC and
by various other federal, state and local governmental bodies. Only the FCC has
authority to regulate “rates and entry” by Commercial Mobile Radio Service
(“CMRS”) operators, while both the individual states of the United States and
the FCC have authority to regulate “other terms and conditions” of
CMRS. The FCC has refrained from regulating rates charged by CMRS
operators. However, under its authority to license CMRS operators to serve
the public, the FCC has imposed a number of requirements on operators,
including, for example, rules for providing emergency 911 services, number
portability, support for lawful electronic surveillance, and intercarrier
compensation (payment of access charges for carrying and terminating traffic).
In addition, the FCC issues and regulates CMRS spectrum licenses. Spectrum
related to the Advanced Wireless Services (AWS-1) licenses granted in 2006 is
occupied by incumbent commercial providers on the 2.1GHz band and Federal
government agencies on the 1.7 GHz band. The 2.1 GHz incumbents relocation rules
are governed by FCC regulation, whereas the 1.7 GHz incumbents relocation
process is governed by the Commercial Spectrum Enhancement Act (CSEA). Access to
the spectrum is tied to moving these entities away from using these spectrum
bands. T-Mobile USA has made substantial progress in coordinating
with and moving incumbent commercial and government users off the AWS-1
frequency bands that have been licensed to T-Mobile USA, and the company has now
launched “3G” service in areas covering over 200 million people.
Other
current U.S. regulatory issues that may significantly impact T-Mobile USA’s
business include:
Open
Access/Network Neutrality: The FCC has initiated several proceedings that
propose to adopt regulations to require wireless providers (and other
telecommunications carriers) to “open” their networks to applications, devices,
and services provided by third parties. These various proceedings
involve a variety of issues, including text messaging practices, network
provisioning, handset locking, exclusive arrangements with handset
manufacturers, and the extent to which carriers may deny access to devices and
applications based on their need to manage their networks. Most
significantly, the FCC launched a rulemaking to codify the FCC’s four existing
Broadband Principles and to add two additional principles as obligations of
broadband providers. The current Broadband Principles focus on consumer rights
to:
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access
the lawful Internet content of their
choice;
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run
applications and use services of their
choice;
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connect
their choice of legal devices that do not harm the network;
and
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benefit
from competition among network, application / service, and content
providers.
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All of
these principles are subject to carriers’ ability to utilize reasonable network
management measures. The FCC has proposed adding a non-discrimination principle
stating that “broadband providers cannot discriminate against particular
Internet content or applications” and a transparency principle, which would
require broadband providers to clearly disclose their network management
practices. Of particular significance to wireless carriers, the FCC
has proposed to formally apply all six of these principles (as codified into
rules) to mobile networks. It is possible that regulators or
policymakers will impose net neutrality requirements on the wireless industry
that, if not narrowly tailored, could hamper the way in which wireless carriers
provide service and/or impose significant costs on the industry, including
T-Mobile USA.
|
·
|
Roaming: T-Mobile
USA relies on roaming services of other U.S. CMRS carriers to provide
service to its customers where T-Mobile USA does not provide
facilities-based service. In 2007, the FCC adopted an automatic roaming
mandate for voice services, which, unlike previous regulations, excluded
from the mandate all geographic areas in which the home carrier holds
spectrum licenses, regardless of whether facilities have been constructed
in those areas. In addition, the FCC held that carriers do not
have a statutory right to file complaints at the FCC if the host carrier
refuses to provide roaming in these “home markets” or if it charges unjust
and unreasonable rates. T-Mobile USA and other carriers that
depend heavily on roaming have urged the FCC to eliminate or significantly
revise this home-market exclusion, and to extend the automatic roaming
requirement to data. The issue is under review by the
FCC.
|
|
·
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Intercarrier
Compensation: Intercarrier compensation refers to the charges that one
carrier pays to another carrier to originate, transport, and/or terminate
telecommunications traffic. Intercarrier compensation payments are
governed by a complex system of federal and state rules. After initially
adopting its intercarrier compensation rules in the late 1980s, the FCC
modified and expanded its rules following passage of the
Telecommunications Act of 1996. Due in part to a pending court action
regarding the treatment of calls to and from Internet Service Providers,
the FCC is evaluating the legality and structure of an intercarrier
compensation rule addressing Internet-bound traffic, and has expanded the
scope of its evaluation to include consideration of a more comprehensive
reform of intercarrier compensation. Moreover, the FCC is considering
these issues as part of a proceeding to develop a National Broadband
Plan. The FCC’s report to Congress on the National Broadband
Plan is expected in March 2010. It is possible that the FCC
will discuss or propose additional reforms to intercarrier compensation in
connection with that report. Otherwise, it is not clear what action, if
any, the FCC will take in the area of intercarrier compensation in 2010,
or what impact such action may have on T-Mobile USA’s
business.
|
|
·
|
Universal
Service: The FCC and many states administer universal service programs
that help ensure that affordable telecommunications services are
accessible throughout the United States. The federal universal service
fund (“USF”) is statutorily mandated by the Telecommunications Act of 1996
and provides support to rural and non-rural high-cost areas, low-income
subscribers, schools and libraries, and rural health-care providers.
Wireless carriers, including T-Mobile USA, are required to contribute to
the federal USF as well as to some of the state universal service
programs. Currently, FCC rules require carriers to contribute to the
federal USF based upon interstate end-user revenues, and carriers may then
collect those contributions from their end-user customers. The
USF contribution methodology is subject to an ongoing rulemaking
proceeding in which the FCC is considering basing contributions on line
capacity or the aggregate number of telephone numbers its customers
utilize. Although the FCC is expected to consider various
USF reform proposals as part of its National Broadband Plan, it is not
possible to predict whether the FCC will act on those proposals in 2010,
and if it does, how or whether it will modify the contribution and
distribution methodologies.
|
Wireless
carriers also are eligible to receive USF support if they are designated as an
eligible telecommunications carrier (“ETC”). SunCom Puerto Rico, which became an
indirect wholly-owned subsidiary of T-Mobile USA through the acquisition of
SunCom in 2008 and now operates as T-Mobile in Puerto Rico, receives USF support
as an ETC in Puerto Rico. Additionally, T-Mobile USA became eligible
to receive USF support for services provided in North Carolina beginning in the
first quarter 2009. T-Mobile USA has also filed an application to become an ETC
in the state of Florida, and additional applications are planned in other
states. The FCC has imposed a cap on high-cost USF support
received by competitive ETCs (including wireless carriers), and has proposed
other changes to the way in which high-cost USF support is distributed.
USF
contributors as well as carriers who receive USF support are subject to a
variety of rules regarding how they calculate those contributions and utilize
those receipts, respectively, and may be audited by the FCC and its USF
administrator to ensure compliance with applicable FCC regulations.
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·
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Special
Access: High capacity circuits used by CMRS operators for
transporting traffic between cell sites and local exchange carrier
switching facilities are supplied in large part by the incumbent local
exchange carriers. The FCC initiated a proceeding to reform special
access provisioning in 2005. Since then, the issue has been raised in
both concluded and pending local exchange carrier or interexchange carrier
merger proceedings, although broad rules applicable to all local exchange
carriers have yet to be established. In light of public comments and a
report issued by the Government Accountability Office, the FCC imposed
reporting, non-discrimination, and limited pricing relief conditions on
the wireline companies involved in significant ILEC mergers. In 2007,
however, the FCC granted several local exchange carriers pricing relief
for certain next-generation broadband special access services, so prices
for those specific services could rise. Special access costs are an
increasingly large portion of T-Mobile USA’s annual operating
expenditures, and the inability to secure special access circuits on
cost-based and non-discriminatory terms could impose significant
additional costs on T-Mobile USA’s
business.
|
Over the
past year, industries and public interest groups have renewed their push for
special access reform, and both Congress and the FCC have expressed interest in
reforming special access regulation. The FCC has asked for comment on
how to analyze the current state of the special access marketplace, and we
anticipate that it will issue a request for special access data from carriers,
including T-Mobile USA. Recently, T-Mobile USA has made significant progress in
securing new contracts with better rates for special access services, but the
Company still faces challenges in areas lacking competition. FCC
special access reform could affect T-Mobile USA’s efforts in this
area.
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·
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E911
Autolocation: In late 2009, the FCC sought comment to “refresh the
record” on the location accuracy issue whereby they are considering
measuring E911 location accuracy at the county level. T-Mobile
USA filed comments jointly with several rural wireless carriers,
highlighting the technical infeasibility of what is being considered, and
noting that greater accuracy will occur with the roll out of 3G networks
and GPS based handsets operating on 3G networks. The E911 rulemaking
proceeding is pending.
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·
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Back-up
Power Rule: In October 2007, the FCC adopted rules that would have
required wireless carriers to have eight hours of backup power at all of
their cell sites and remote terminals. While the rules contained
exclusions for some sites and an alternative compliance route, the
exclusions were very narrow and there was significant uncertainty about
whether alternative compliance plans would be approved. The
industry appealed the FCC’s order in the DC Circuit Court of Appeals
(T-Mobile USA was an intervenor on behalf of the appellants) on the ground
that the rules were adopted without appropriate notice and comment and
that the burden they would place on the wireless industry rendered them
arbitrary and capricious. The court granted a stay of the FCC’s
order pending approval by the Office of Management and Budget (“OMB”) of
the underlying back-up power requirements and on a final decision from the
court. In late 2008, the OMB rejected the FCC’s rules under the
Paperwork Reduction Act and the FCC has informed the court that it does
not intend to override the OMB’s decision. Accordingly, the FCC
may commence a new rulemaking proceeding on back-up power in
2010. At this point, it not possible to determine whether any
new rules that the FCC might adopt will be less onerous than the
previously proposed rules.
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·
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Regulation
on the State and Local Level: Some states, through their respective public
utility commissions and legislatures, or through other means, have taken,
or are seeking to take, actions to regulate various aspects of wireless
operations, including customer billing, termination of service
arrangements, advertising, and filing of “informational” tariffs and
certification of operations. These developments have significantly
affected, or have the potential to significantly affect, T-Mobile USA’s
business practices with respect to many aspects of the carrier-customer
relationship, including solicitations, marketing, activations, billing and
customer care. This potential is increased by the lack of a clear dividing
line between permissible “terms and conditions” regulation by the states
and prohibited state regulation of “rates.” Furthermore, state
jurisdiction over companies designated as ETCs receiving funds from the
federal Universal Fund is enhanced, and as T-Mobile USA gains ETC
certification in additional states the potential for material state
regulation increases. At the local level, wireless facilities
typically are also subject to zoning and land use regulation, and may be
subject to fees for use of public rights-of-way. T-Mobile USA’s access to
additional sites to install wireless facilities is a key component of its
ability to continue to deploy wireless services in an effective manner,
and significant denials of or delays in necessary zoning approvals could
negatively affect the future expansion or upgrading of T-Mobile USA’s
network.
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Fixed-Network
Infrastructure in Germany
As a
result of substantial investments in telecommunications and cable networks since
the early 1990s, our fixed-line network in Germany is one of the most
technologically advanced networks in the world, with full-digital switching and
digital transmission capability. Advanced VDSL and ADSL2+ technologies are
incorporated in this network, which not only provide higher bandwidth for the
customer, but also improved network management and reliability.
Our
fixed-network infrastructure in Germany is comprised of access and transmission
networks as well as service platforms.
Access
Network
In
jurisdictions where we offer fixed-line services, we offer ICT access for
individual and business customers and other telecommunication carriers,
typically by means of a copper, but also by an increasing use of fiber-optic,
cable that runs from our transmission network to the customer’s home or office.
The portion of the access network that connects the transmission network to the
customer is commonly referred to as the “last mile” or “local loop.” We began to
significantly upgrade our access network in 2005 through the deployment of VDSL
high-speed access technology with access speeds up to 50 Mbit/s. The
implementation of VDSL has achieved a coverage of more than 11 million
households as of December 31, 2009. We have also upgraded our
broadband access network with ADSL2+ technology, which provides access speeds of
up to 16 Mbit/s. In rural areas, we continue to work with local authorities to
use innovative means to enable improved broadband services.
For more
information regarding network access regulation, see “—Regulation—German
Telecommunications Regulation—Interconnection.”
Transmission
Network
Our
transmission network consists of fiber-optic cables enhanced with Wavelength
Division Multiplexing, or WDM, and Synchronous Digital Hierarchy, or SDH,
technologies. WDM uses wavelengths of light to increase the transmission
capacity of fiber-optic cables, thereby allowing multiple communication
channels. This offers the possibility to increase the capacity of its
transmission network without expensive roll out of additional fiber-optic
cables. SDH is an international high-speed transmission standard, which improves
network management and the reliability of fiber-optic networks. According to
expected traffic demand we are migrating our SDH and WDM enhanced network to an
Optical Transport Network (OTN). OTN enables higher transmission rates, more
flexibility in high bandwidth management (from 1 Mbit/s up to 100 Gbit/s) and
high quality transport.
During
2009, we continued to expand our use of NGN, enabling high-speed access and
enhanced transmission network technologies. In particular, we continue to
increase incorporating ADSL2+ technology, with speeds of up to 16Mbit/s and VDSL
technology as part of our ongoing broadband strategy. Moreover, in addition to
our efforts to increase broadband access speeds, we continue to increase the use
of innovative technologies like Outdoor DSLAM and Gigabit Ethernet to provide
high-speed access at speeds up to 50 Mbit/s. We are still obligated to provide
service to customers using the public switched telephony network, or PSTN, which
necessitates continued use of those portions of our existing network
infrastructure in parallel with the NGN until these customers can be migrated to
comparable products delivered through the NGN. As of December 31, 2009, our
PSTN in Germany consisted of approximately 7,900 local exchanges connected by a
long-distance transmission network.
The
following table provides information on the length of the copper and fiber-optic
cables contained in our access and transmission networks in Germany at
December 31, 2009, and each of the two prior years:
|
|
Length
in km
|
|
Year
|
Copper Cable
|
Fiber-Optic Cable
|
|
2007
|
1.491
million
|
0.231
million
|
|
2008
|
1.495
million
|
0.242
million
|
|
2009
|
1.491
million
|
0.256
million
|
|
|
|
|
Our
service platforms provide a wide range of voice, video, data and other
value-added services to residential, business and wholesale customers. These
service platforms include IP-based technologies, which permit the high-quality
transmission of large scale data, such as text, audio and video.
Cable
Transmission Infrastructure
Our
global transmission infrastructure consists of underground and submarine cables,
which directly link the German national telecommunications network to numerous
other telecommunications service providers worldwide. In addition, we hold
interests in numerous fiber-optic submarine and terrestrial cable networks
worldwide. Restoration contracts with other cable operators and
telecommunications carriers have been created to prevent network failures from
affecting network availability. Our fixed-network infrastructure in Germany is
connected to submarine cables via various “landing points,” five of which are
located in Germany.
Technology
Voice and
data services provided by our mobile communications subsidiaries are based on
Global System for Mobile Communications, or GSM, network technology. General
Packet Radio Service, or GPRS, technologies have been deployed to add data
capabilities to the GSM network, which are being further enhanced in terms of
performance and capacity by Enhanced Data Rates for GSM Evolution, or EDGE,
technology. EDGE is currently commercially available in the United States,
Germany, the Czech Republic, Austria, Poland, Hungary, Croatia, the F.Y.R.O
Macedonia, Slovakia and Montenegro. In urban and suburban areas in Europe with a
higher demand for data capacity, this technology is supplemented by Universal
Mobile Telecommunications System-Frequency Division Duplex, or UMTS-FDD, or
UMTS-Time Division Duplex, or UMTS-TDD technology. These technologies are fully
integrated and allow a seamless user experience for voice and data services. Our
mobile communications market with UMTS-FDD coverage areas have been upgraded to
support High-Speed Downlink Packet Access, or HDSPA, and High-Speed Uplink
Packet Access, or HSUPA, technology. HSDPA allows data rates of up to 7.2 Mbit/s
in the downlink and HSUPA allows data rates of up to 2.0 Mbit/s in the
uplink.
In
September 2008, T-Mobile, jointly with Nortel Networks Corporation, was the
first network operator to successfully demonstrate in a live test the next
generation communications known as Next Generation Mobile Networks, or NGMN,
under everyday conditions, using the LTE (Long Term Evolution) technology as an
example. We believe that LTE download rates of up to 170 Mbit/s and upload rates
of up to 50 Mbit/s could be achieved in the future. For more
information regarding regulatory obligations that apply to our fixed-line and
mobile operations, see “ – Regulation.”
Real
Estate
Our
German real estate portfolio consists of approximately 9,500 properties, which
comprise a total site area of approximately 28.2 million square meters. The
total net floor space of these properties is approximately 8.8 million
square meters. In addition, we have leased from third parties approximately
4.2 million square meters. Most of this area is used for telecommunications
installations, research centers, service outlets, computer centers and offices.
Area and sites used for our radio transmission facilities are not itemized in
square meters and therefore are not included in the total real estate portfolio
figures above.
We manage
and service our German real estate portfolio through various subsidiaries and
third-party service providers, including Corpus Sireo, which acts as asset
manager, and Strabag PFS, which acts as service provider for certain parts of
our real estate portfolio. In addition, Deutsche Telekom Group Facility
Management provides real estate management services, such as organizing office
space or installing related infrastructure.
The real
estate portfolio of our consolidated Group had a book value of EUR 10,703
million at December 31, 2009, including radio transmission properties and real
estate assets of our foreign subsidiaries. Approximately 53% of this amount, or
EUR 5,662 million, relates to properties held directly by Deutsche Telekom AG on
an unconsolidated basis. The remaining 47%, or EUR 5,041 million, is mostly held
through OTE Estate (EUR 1,395 million) as a part of our Southern and Eastern
European subsidiaries and our Europe and United States operating segments. About
65% of the real estate portfolio is located in Germany, approximately 28% is
located in Europe (excluding Germany) and approximately 7% is located in the
United States.
To
improve operational efficiencies and to dispose of non-core assets, we have
continued to monetize certain of our real estate assets. In 2009, we entered
into agreements for the sale of properties in the aggregate amount of EUR 194.7
million. Of the EUR 156.4 million in proceeds we received in 2009, EUR
138.9.0 million related to properties transferred in 2009 and EUR 17.5
million related to transactions in 2008 and prior years. The properties we sold
in 2009 comprised approximately 1.2 million square meters of land area and
approximately 0.2 million square meters of net floor space, of which we
leased-back 0.1 million square meters of these properties. Although we will
incur rent expense related to the leased-back properties, we will achieve a
reduction in interest payments and other costs related to the properties sold.
In 2010, we intend to continue to review our portfolio and dispose of non-core
assets.
Our radio
transmission sites in Germany, including towers, masts and rooftops, are owned
or leased by various subsidiaries, including Deutsche Funkturm GmbH, or DFMG.
Our subsidiaries manage these radio transmission sites and the related technical
infrastructure facilities to provide antenna space for our fixed-line and mobile
operations in Germany. These subsidiaries also offer these services to
third-party radio-network operators. Our subsidiaries currently manage
approximately 25,800 radio transmission sites, of which approximately 3,200 are
located on Deutsche Telekom AG property. Approximately 23,200 of these
transmission sites are owned by our subsidiaries, whereas the remaining 2,600
are owned by third-parties.
ITEM 4A. Unresolved Staff Comments
Not
applicable.
ITEM 5. Operating and Financial Review and
Prospects
You
should read the following discussion in conjunction with our annual consolidated
financial statements, including the notes to those consolidated financial
statements, which appear elsewhere in this Annual Report.
The
strategies and expectations referred to in the following discussions are
considered forward-looking statements and may be strongly influenced or changed
by shifts in market conditions, new initiatives we implement and other factors.
We cannot provide assurance that the strategies and expectations referred to in
these discussions will come to fruition. Forward-looking statements are based on
current plans, estimates and projections, and therefore, you should not place
too much reliance on them. Forward-looking statements speak only as of the date
they are made, and we undertake no obligation to update any forward-looking
statements in light of new information or future events. Forward-looking
statements involve inherent risks and uncertainties, most of which are difficult
to predict and are generally beyond our control. We caution you that a number of
important factors could cause actual results or outcomes to differ materially
from those expressed in, or implied by, the forward-looking statements. Please
refer to “Forward-Looking Statements” and “Item 3. Key Information—Risk
Factors” for descriptions of some of the factors relevant to these discussions
and other forward-looking statements in this Annual Report.
Group
strategy
Our strategy.
The
telecommunications industry is marked by constant change in the
fixed-network business, mobile communications, and the Internet, a momentum that
even economic upheaval is unable to suppress. This affects key areas of the
economy, technology, consumers, the markets, and our competitors. At the same
time, the boundaries with related industries – IT, the media, entertainment, and
software – are becoming blurred, creating new competitive constellations and
increasingly requiring strategic partnerships.
Deutsche
Telekom’s aim is to position itself successfully in this complex environment and
become a market leader in connected life and work in the long term. In the 2009
financial year, we continued to systematically implement our “Focus, fix and
grow” strategy through the following four strategic areas of
action:
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·
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Improve
competitiveness in Germany and in Southern and Eastern
Europe.
|
|
·
|
Roll
out network-centric ICT.
|
Improve
competitiveness.
Markets
in Germany and in Southern and Eastern Europe are becoming saturated,
particularly in the fixed-network area, and competition is fierce. In this
challenging environment, Deutsche Telekom is focusing on increasing capital
expenditure on broadband infrastructure, first-rate products and excellent
service and streamlining its cost base. We expect our integrated market
strategy, which combines our fixed-network and mobile business into a single
business unit where practicable, to make the Group more
competitive.
Focused
network expansion. As we aim to retain our broadband and innovation
leadership, we are focusing our investments on network expansion. In its
footprint markets, the Group is continuously expanding and upgrading its UMTS
networks and enabling fast mobile Internet usage with HSPA+ and other
technologies. In the German fixed network, we already supply around 1,000 towns
and cities with ADSL2+ and 50 towns and cities with VDSL. As it continues to
expand the broadband network, the Group has not only launched cooperation
projects with local authorities but is also entering into partnerships with
competitors.
Innovative
entertainment products. We aim to provide exciting and innovative
entertainment products. For example, since 2009, Entertain customers
in Germany have been able to link up several media receivers using the connected
video recorder, share photos with friends and relatives, and subscribe to LIGA
total! to watch Bundesliga soccer games on TV or while on the move. Three years
after the launch of the Dolce satellite service, OTE’s Romanian subsidiary
RomTelecom expanded its entertainment range and introduced its new Dolce
Interactive IPTV product in ten towns and cities around the country in 2009. In
Slovakia, the expansion of satellite broadcasting will permit nationwide
reception of Magio TV’s digital television.
Service
and quality. Entertain has received several awards from customers and
neutral experts. The readers of connect magazine (May 2009 issue) named
Entertain the best triple-play provider in 2009. Deutsche Telekom also beat the
competition in a ranking published in the September 2009 issue of Computer Bild.
Furthermore, we have sold over one million Entertain products, which is our
Internet-based television service, the Apple iPhone, and the terminal equipment
service package, demonstrating that with excellent service and high-quality
products we can make a lasting impression on customers even in saturated
markets. In 2010, we will introduce the ACCI/ICCA (After Customer
Contact Interview; International Customer Contact Analysis) study to
measure customer perception of other national companies and customer contact
channels and improve customer service further.
Fixed-mobile
convergence. We are also improving competitiveness by integrating
fixed-network and mobile operations. As part of the One Company project, we
intend to boost our presence in relevant markets as an integrated provider
offering convergent products from a single source. To this end, the Group is
currently realigning its activities in Croatia, Slovakia, and Germany with a new
organization and strategy. This move will improve our customer service,
safeguard jobs, and unlock potential for more innovation, additional revenue,
and cost synergies.
Improved
cost base. In addition to tapping growth potential, we need to work
steadily on improving our cost base. To this effect, the Save for Service
program was launched in 2006 with the goal of achieving savings of up to
EUR 4.7 billion by 2010. By the end of 2009, this target had already been
exceeded at EUR 5.9 billion on a cumulative basis. Savings of EUR 1.8
billion were made in the 2009 financial year alone, mainly in the Germany and
Systems Solutions operating segments, of which EUR 0.4 billion was
reinvested. We will usher in the next phase of Save for Service in early 2010
and bring our international activities within the program’s scope.
Operational
strength. To enhance quality and efficiency, in 2006 we began applying
Six Sigma and Lean Management/ Office Lean measurement methods. Several hundred
improvement projects have since been carried out, with many business processes
enhanced for long-term across business units, and additional revenue and cost
cutting in the high triple-digit millions realized.
Grow
abroad.
The
proportion of net revenue generated abroad has grown rapidly over the last few
years. While our home market, Germany, generated 46.8 % of net revenue in
2008, the figure had dropped to 43.4 % one year later. The main
contributing factor is the first-time consolidation of the Greek company
Hellenic Telecommunications Organization S.A., Athens, Greece (OTE) and its
mobile subsidiary COSMOTE S.A. (COSMOTE). We intend to continue to leverage
international economies of scale and synergies in the future and grow further.
The increase in our stake in OTE, other minor acquisitions in footprint markets,
joint ventures, and the focused expansion of its broadband infrastructure form
part of our ongoing international growth strategy.
Increased
stake in OTE and leveraged synergies. In 2009, we acquired an additional
5 % in the Greek company OTE, bringing its shareholding up to around 30%.
During the 2009 financial year, the two companies concentrated on leveraging
synergies in various areas including in procurement, where contracts
were renegotiated and lower prices agreed, and introducing innovative devices
and services.
Acquisition
of Telemobil S.A. (Zapp) in Romania. The COSMOTE group finalized its
acquisition of Zapp in Romania. The acquisition will enable the company to offer
new mobile broadband services with the 3G license it acquired in the process,
enlarge its customer base, and maintain its footprint in the business customer
market.
Merger
in the United Kingdom. Deutsche Telekom AG and France Télécom S.A.
have signed an agreement to merge their British companies, T-Mobile UK and
Orange UK, in a 50:50 joint venture. We are hoping for approval of the
transaction by the relevant authorities in the course of 2010. When formed, the
joint venture will be the leading mobile operator in the UK market.
Network
expansion in the United States. In 2009, we continued to invest in the
expansion of our mobile communications network in the United States and doubled
our 3G network coverage. By the end of the year, the new data network covered
205 million people in the United States. The rapid upgrade of the mobile network
is set to continue in 2010 and coverage with HSPA+ and other technologies will
be further improved.
Mobilize
the Internet.
We are
continuing to lead the way in connected life and work on the move. Thanks to
state-of-the-art terminal devices and innovative applications, mobile Internet
access, e-mails, communication, and photo and video sharing is now easier than
ever before. We are very well positioned in this field and will continue to
benefit strongly from future growth in mobile Internet usage.
Expansion
of the handset portfolio. We launched numerous innovative handsets in
2009, including the T-Mobile G1, the world’s first Android-based smartphone, and
Apple’s latest iPhone 3GS. These were followed by other exclusive devices such
as T-Mobile G2 Touch, the T-Mobile Pulse, and RIM’s BlackBerry BoldTM
9700. T-Mobile also introduced the first Windows-based cell phones, the HTC
Touch2 and the HTC HD2, which use the new operating system Microsoft Windows
Mobile 6.5 Professional.
Innovative
applications. In 2009, we also rolled out a large number of innovative
applications for mobile Internet usage. MyCommunity is one such service, which
allows mobile customers to see their contacts immediately on their device’s home
screen and contact them even faster via an intuitive user interface. Via the
Media Center, our customers can access their personal content anytime and
anywhere – be it digital photos, videos, music, or constantly updated contacts
and e-mails.
International
roll-out. Besides offering new equipment the Group has also introduced a
range of new and innovative services such as Music Zone, which was launched in
Greece and will bring T-Mobile’s music services also to COSMOTE customers. This
music project is the first in a series of international packages of our products
and services that are set to be launched in the Greek market.
Mobile
TV. We added further channels to our MobileTV service and improved image
and sound quality. The service is now also available on most UMTS-enabled
handsets, such as the Apple iPhone 3G and 3GS, the T-Mobile G1, and the T-Mobile
G2 Touch. In 2009, we began to broadcast all first- and second-division
Bundesliga soccer matches live to cell phones with LIGA total!
Roll
out network-centric ICT.
T-Systems
identified the trend toward convergent IT and telecommunications services and
applications at an early stage and realigned its strategy to focus on customized
solutions for corporate customers. The entity manages networks and computing
centers worldwide and develops solutions for global corporate networks,
mobility, security, and sustainability. On this basis, T-Systems successfully
continued its international growth strategy in 2009 and won a large number of
tenders for cloud services, dynamic SAP services, and telecommunications and
data services. Such large-scale contracts give T-Systems the critical mass it
needs to continue offering multinational corporations in key markets attractive
services locally.
Growth
through targeted acquisition. In May 2009, T-Systems expanded its
operations in Southwestern Europe with the acquisition of IT service provider
Metrolico.
Cloud
computing. In the future, corporate customers will obtain the software,
storage capacity and bandwidth they need online. T-Systems already provides more
than 300 corporate customers with IT services from the cloud and plans to
continue growing in this area. T-Systems started providing global
computing center and SAP services for Philips beginning in January 2010. In the
future, international T-Systems locations will provide services using a secure
proprietary network – a “private cloud” – on an as-needed basis.
SAP
services. T-Systems is the world leader for customized SAP solutions, as
confirmed in studies by analysts at Forrester Research and AMR Research.
T-Systems scored points for customer satisfaction and SAP expertise, and
also due to large-scale deals with the Nuance Group and Komatsu in South
Africa and the acquisition of SAP AG’s hosting business in Europe.
Telecommunications
and data services. Many large corporations such as Linde and Deutsche
Post DHL already benefit from T-Systems’ experience and expertise in
telecommunications solutions and data services. In December 2009, T-Systems was
commissioned by BP to migrate the petroleum giant’s data network to the next
generation, in the course of which it will provide all telecommunications
services in over 50 countries.
Strategic
partnerships. T-Systems participates in selected partnerships to
safeguard its long-term competitiveness and global delivery capacity. T-Systems
and Microsoft signed an exclusive partnership to offer business software from
the Internet for companies with over 5,000 users. T-Systems is the only German
sales partner for such cloud services with Microsoft products. The partnership
with Cognizant concluded back in 2008 resulted in orders for systems integration
services, for example, from the R&D unit of Continental’s tire
division.
We will
continue to drive forward in the dynamic competitive environment in 2010 and
concentrate on achieving our long-term vision of becoming a global leader in
connected life and work. In the first quarter of 2010, our Group will refine and
review implementation of our “Focus, fix and grow” strategy with its four
strategic areas of action focusing on how to further benefit from our more
integrated structure through the One Company approach.
Our
strategies may, of course, be adapted and modified to respond to opportunities
and changing conditions. As disclosed in past years, we may embark on capital
expenditure programs and pursue acquisitions, joint ventures or full or partial
dispositions or combinations of businesses where we perceive opportunity for
profitable growth, cost savings or other benefits for our Group. Transactions
may be conducted using newly issued shares of Deutsche Telekom or shares of
affiliates, cash or a combination of cash and shares, and may individually or in
the aggregate be material to our financial and business condition or results of
operations. As a result, they may affect the trading prices of our securities.
As in the past, discussions with third parties in this regard may be commenced,
on-going or discontinued at any time or from time to time.
Outlook
(1)
Our
market expectations.
The
follow-on effects of current economic trends, most noticeably the continued rise
in unemployment and the resulting negative climate for overall consumption, may
adversely affect retail business in Europe and the United States, and, on a
delayed basis, lead to restraint in expenditures for telephone and data
services.
Austerity
measures in fiscal policy – made necessary by higher levels of national debt –
in the form of higher taxes or lower expenditures may have direct or indirect
effects on retail consumption and public demand for telecommunications products
and services. In Greece, in particular, the high level of national debt and the
government’s austerity measures could have an impact on consumer
behavior.
The
modest pace of economic recovery in domestic and international markets may lead
companies around the world to continue to cut costs, which in turn may
negatively affect business with corporate and business customers in
telecommunications and IT.
Our main
sales markets will face intense competition and a continuing decline in prices,
as large competitors expand their telecommunications businesses into further
product areas. There will, however, be opportunities that arise from some market
trends. The global trends toward digitization and connected life and work are
accelerating. An increase in demand for mobile Internet and data services is
expected in the United States and Europe. Demand among business customers for
cloud computing and telecommunications and data services from a single source is
growing considerably.
(1) This
Outlook discussion contains forward-looking statements that reflect management’s
current views with respect to future events. Words such as “expect,”
“anticipate,” “believe,” “intend,” “may,” “could,” “estimate,” “aim,” “goal,”
“plan,” “project,” “should,” “will,” “seek,” “outlook” or similar expressions
generally identify forward-looking statements. These forward-looking statements
include statements with regard to the expected development of revenue, earnings,
profits from operations, depreciation and amortization, cash flows and
personnel-related measures. You should consider forward-looking statements with
caution. They are subject to risks and uncertainties, most of which are
difficult to predict and are often beyond our control. The risks and
uncertainties include those described in the sections “Forward-Looking
Statements” and “Risk Factors” of this Annual Report. Please read those sections
when considering this Outlook discussion. Among the factors that might influence
our ability to achieve our objectives are the progress of our workforce
reduction initiative and other cost-saving measures, and the impact of other
significant strategic, labor or business initiatives, including acquisitions,
dispositions and business combinations, and our network upgrade and expansion
initiatives. In addition, stronger than expected competition, technological
change, legal proceedings and regulatory developments, among other factors, may
have a material adverse effect on our costs and revenue development. Further,
the economic downturn in our markets, and changes in interest and currency
exchange rates, may also have an impact on our business development and the
availability of financing on favorable conditions. Changes in our expectations
regarding recoverable amounts of assets, including expectations concerning
future cash flows, may lead to impairments of assets, which may materially
affect our results at the group and operating segment levels. If
these or other risks and uncertainties materialize, or if the assumptions
underlying any of these statements prove incorrect, our actual performance may
materially differ from the performance expressed or implied by forward-looking
statements. We can offer no assurance that our estimates or expectations will be
achieved. We do not assume any obligation to update forward-looking statements
to take new information or future events into account or
otherwise.
Our
expectations for the Group.
We will
focus our investment activities in 2010 and 2011 on efforts to safeguard our
competitiveness and future viability, including in our home market, Germany,
where our capital expenditure will increase significantly. At the
same time, we aim to maintain stable credit ratings to facilitate access to the
debt capital markets, and to achieve a level of financial performance that
supports an appropriate return to our shareholders. Taking this into
consideration, we expect our overall capital expenditures on assets other than
spectrum to increase slightly year-on-year in 2010 to around EUR 9.1
billion, which should strengthen our position in our core markets. Based on
current market conditions, for 2010, we expect to generate profit from
operations of approximately EUR 8 billion, with scheduled depreciation and
amortization of approximately EUR 12 billion. We expect cash flow
from operating activities of approximately EUR 15.3 billion in 2010. These
expectations are based on the assumption that our UK subsidiary T-Mobile UK,
which is to be merged to create a 50:50 joint venture following approval by the
relevant authorities, will continue to be fully consolidated through at least
the end of 2010, which may or may not be the case. Subsequent
to the closing of the transaction, we will account for our investment in the
joint venture using the equity method of accounting. Should the closing occur
before the end of 2010, the expectations described above would be affected in
various ways. Following the change to the equity method of accounting, we will
no longer report capital expenditures for the business. In addition, we will
cease reporting revenue, operating expenses and profit from operations, but
will, rather, report our share of the net profit of the joint venture as part of
our profit (loss) from financial activities. Similarly, the revenues and
operating costs from T-Mobile UK will no longer directly affect cash flow from
operating activities; instead, dividends paid by the joint venture will be
recognized as cash flows from operating activities. The expectations
are also based on assumptions regarding currency exchange
rates. Our consolidated results are sensitive to fluctuations in the
relationship between the euro and the U.S. dollar (and, to a lesser extent, the
British pound and Eastern European currencies). Should actual exchange rates
deviate from the exchange rates that we have assumed, our capital expenditures,
profit from operations, amortization and depreciation, and cash flows may be
materially affected. Our expectation concerning profit from operations is
founded on the assumption that there will not be material unscheduled
amortization (impairment charges) or charges or costs from as yet unanticipated
restructurings or from setbacks in litigation or regulatory
proceedings. Any such charges or costs would reduce our profit from
operations. Please refer to the footnote at the end of this Outlook
discussion for further cautionary warnings concerning forward-looking
statements.
We intend
to continue to realize international economies of scale and synergies through
appropriate acquisitions in our footprint markets and through joint ventures. We
have, however, no plans at present for major acquisitions or expansion into
emerging markets.
The tense
situation in the international financial markets eased over the course of 2009,
and there were large issuances on the debt capital markets. We also took
advantage of market conditions and the low interest rate environment to issue
debt securities amounting to approximately EUR 5.3 billion. We believe that
our committed bilateral credit lines, short-term cash deposits, cash flows from
operations, and ability to access the capital markets will be sufficient to meet
our anticipated liquidity requirements during 2010. We may take advantage of
favorable conditions for capital markets debt issuances in 2010.
Our
expectations for the operating segments.
Germany.
We will
continue to improve our product portfolio to promote “connected life” and will
endeavor to increase the number of high-value customer relationships over the
long term. In 2010
and 2011, our operating segment in Germany will focus on the following
activities:
|
·
|
Defending
and consolidating our leadership in the fixed-network and mobile
communications markets, for example through stronger cross-selling and the
sale of more advanced products and
services;
|
|
·
|
Expanding
the growing Entertain and mobile data
business;
|
|
·
|
Increasing
customer satisfaction by, for example, improving customer
service;
|
|
·
|
Significantly
enhancing network quality and coverage, by, for example, increasing 3G
coverage and improving network
stability;
|
|
·
|
Further
improving processes and quality with the goal of trimming our cost base;
and
|
|
·
|
Using
our new “One Company” organizational structure to enhance
competencies.
|
In the
Germany operating segment, we expect the decline in our revenue to decelerate
and profit from operations to decline slightly in 2010.
We will
defend our market leadership in the fixed-network business, even though our
traditional access business will continue to suffer market share losses. One of
the key issues will be the further development of the mass market with Entertain
products through a combination of high-speed broadband lines and attractive
content and features, including high-performance packages with TV and Entertain
content via DSL and fixed-network lines with flat rates. The range of
high-definition (HD) services for TV will be extended in the 2010 financial
year, allowing customers to benefit from a fully HD-enabled
infrastructure.
In the
mobile communications market, we expect to be able to maintain our market
position in a highly competitive environment. Mobile Internet will be the
principal growth driver. We expect the high level of mobile Internet growth to
continue in 2010 due in part to the sale of smartphones. With a portfolio of
intelligent handsets, attractive rate plans and innovative applications, we plan
to further develop the consumer and business customer markets through data
services for cell phones and laptops. In addition, we plan to offer
machine-to-machine solutions that we expect will make a positive contribution to
the mobile non-voice growth area.
Capital
expenditure in Germany will focus on growth and innovation, particularly the
further integrated and value-enhanced broadband expansion in fixed-network and
mobile communications, as well as on quality and service initiatives. In view of
the general market and financial situation, bidding at the mobile communications
spectrum auction is expected to be less intense than at the UMTS auction in
2000. Demanding coverage requirements facing the winners of the spectrum auction
as well as spectrum usage restrictions support this expectation.
United
States.
In 2010,
our United States operating segment will focus on attracting and retaining a
loyal customer base. Data growth and the higher utilization of the 3G network
will form the basis for the future development. In addition, with a continued
focus on cost efficiencies, but offset by market-driven declines in voice
revenues per customer in an increasingly mature U.S. market, we currently expect
our revenue and profit from operations in the United States to be broadly stable
in 2010. However, exchange rate changes, regulatory changes and competitive
pressures may significantly affect revenues and profit from
operations.
The focus
of capital expenditure for T-Mobile USA will continue to be the enhancement of
network quality and coverage. In particular T-Mobile USA intends to expand and
upgrade the 3G mobile communications network, including an upgrade of the top 30
U.S. markets to HSPA+ with a top download speed of 21 Mbit/s in
2010.
Europe.
We expect
customer numbers to continue to grow in the Europe operating segment. Ongoing
development of the mobile Internet with innovative data services and new,
intelligent mobile handsets at attractive prices are proving to be important and
consistent growth drivers. Nevertheless, the Europe operating segment is facing
ongoing intense competition in a challenging macroeconomic environment.
Regulatory measures and exchange rate fluctuations in the countries in which we
operate may have a negative effect on revenue and earnings on a
euro-basis.
Taking
this into account, in 2010 we expect revenue to be broadly stable and profit
from operations, which was significantly reduced by goodwill impairments in
2009, in the Europe operating segment to increase provided the composition of
the operating segment remains unchanged (in particular assuming that the
T-Mobile UK joint venture is not consummated this year, which may or may not be
the case). We expect the ongoing intense competition and the continued
challenging macroeconomic situation to adversely affect profit from operations,
although this effect is expected to be offset partially by cost-cutting
initiatives.
The key
areas of capital expenditure in the Europe operating segment will be
improvements in GSM network quality and the further roll-out of UMTS networks as
part of the drive to introduce the technology for next-generation mobile
networks.
Southern
and Eastern Europe.
The
acquisition of a stake in OTE has given us a foothold in further Southern and
Eastern European markets. We expect revenue, which will be positively affected
by the inclusion of the OTE group for a full year, and profit from operations,
which was significantly reduced by goodwill impairments in 2009, to increase in
the Southern and Eastern Europe segment in 2010. We expect the continuing
difficult macroeconomic situation and ongoing intense competition to adversely
affect profit from operations in 2010. Regulatory measures and exchange rate
fluctuations in the individual countries as well as recently imposed or
increased mobile communications taxes may have an additional adverse
effect.
Capital
expenditures in Southern and Eastern Europe will focus on the network
infrastructure to expand broadband coverage and for the further build-out of the
3G network and TV infrastructure (satellite and IP). Further investments have
been scheduled to improve and refine customer service and raise process
efficiency.
Systems
Solutions.
T-Systems
focuses on the growing ICT services market, where it provides solutions for
corporate customers. Demand for international ICT solutions is increasing – not
least as a result of the further globalization of corporations. Utilizing a
global infrastructure of data centers and networks, T-Systems manages
information and communication services for some 400 corporate customers,
including multinational corporations and public-sector and public health
institutions, and provides integrated solutions for the networked future of
business and society. We expect that large-scale contracts with renowned
industry giants, such as MAN, Linde, Philips and BP, will lay the foundation for
the revenue development in coming years. It nevertheless remains to be seen how
the businesses of T-Systems’ customers and their need for our services will
develop in the wake of the global financial and economic crisis.
T-Systems’
cost-cutting measures showed encouraging effects in the past year and will be
continued. We expect revenue to be stable and profit from operations at the
operating segment Systems Solutions to improve slightly in 2010 in view of the
measures described, although uncertainty resulting from the unsettled economic
environment remains.
Group
Headquarters and Shared Services.
Profit
from operations at Group Headquarters and Shared Services is largely influenced
by expenditure at Group Headquarters and staff restructuring activities at
Vivento. Measures taken to improve and centralize functions in connection with
the realignment of the management structure will enhance efficiency on a
Group-wide basis, but will have a negative impact on profit from operations at
Group Headquarters and Shared Services. Key goals for our centralized functions
include cost management and increasing efficiency.
Our
consolidated financial statements prepared in accordance with IFRS as issued by
the IASB, are dependent upon and sensitive to accounting methods, assumptions
and estimates that we use as bases for the preparation of our consolidated
financial statements. We have identified the following critical accounting
estimates and related assumptions and uncertainties inherent in our accounting
policies that we believe are essential to an understanding of the underlying
financial reporting risks, and the effect that these accounting estimates,
assumptions and uncertainties have on our consolidated financial statements
under IFRS.
Measurement
of property, plant and equipment, and intangible assets involves the use of
estimates for determining the fair value at the acquisition date, provided they
were acquired in a business combination. Furthermore, the expected useful lives
of these assets must be estimated. The determination of the fair values of
assets and liabilities, as well as of the useful lives of the assets is based on
management’s judgment.
The
determination of impairments of property, plant and equipment, and intangible
assets involves the use of estimates that include, but are not limited to, the
cause, timing and amount of the impairment. Impairment is based on a large
number of factors, such as changes in current competitive conditions,
expectations of growth in the telecommunications industry, increased cost of
capital, changes in the future availability of financing, technological
obsolescence, discontinuance of services, current replacement costs, prices paid
in comparable transactions and other changes in circumstances that indicate an
impairment exists. The recoverable amount and the fair values are typically
determined using a discounted cash flow method which incorporates reasonable
market participant assumptions. The identification of impairment indicators, as
well as the estimation of future cash flows and the determination of fair values
for assets (or groups of assets) require management to make significant
judgments concerning the identification and validation of impairment indicators,
expected cash flows, applicable discount rates, useful lives and residual
values. Specifically, the estimation of cash flows underlying the fair values of
the mobile businesses considers the continued investment in network
infrastructure required to generate future revenue growth through the offering
of new data products and services, for which only limited historical information
on customer demand is available. If the demand for these products and services
does not materialize as expected, this would result in less revenue, less cash
flow and potential impairment to write-down these investments to their fair
values, which could adversely affect future operating results.
The
determination of the recoverable amount of a cash-generating unit involves the
use of estimates by management. Methods used to determine the fair value less
costs to sell may include discounted cash flow-based methods and methods that
use quoted stock market prices as a basis. Key assumptions on which management
has based its determination of fair value less costs to sell include ARPU,
subscriber acquisition and retention costs, churn rates, capital expenditure and
market share. These estimates, including the methodologies used, can have a
material impact on the fair value and ultimately the amount of any goodwill
impairment.
Other
financial assets include equity investments in foreign telecommunications
service providers on which the Group does not have a significant influence and
that are principally engaged in the mobile, fixed network, Internet and data
communications businesses, some of which are publicly traded and have highly
volatile share prices. Generally, an investment impairment loss is recorded when
an investment’s carrying amount exceeds the present value of its estimated
future cash flows. The calculation of the present value of estimated future cash
flows and the determination of whether an impairment is permanent involve
judgment and rely heavily on an assessment by management regarding the future
development prospects of the investee. In measuring impairments, quoted market
prices are used, if available, or other valuation parameters, based on
information available from the investee. To determine whether an impairment is
permanent, the Company considers the ability and intent to hold the investment
for a reasonable period of time sufficient for a forecasted recovery of fair
value up to (or beyond) the carrying amount, including an assessment of factors
such as the length of time and magnitude of the excess of carrying value over
market value, the forecasted results of the investee, the regional geographic
economic environment and state of the industry. Future adverse changes in market
conditions, particularly a downturn in the telecommunications industry or poor
operating results of investees, could result in losses or an inability to
recover the carrying amount of the investments that may not be reflected in an
investment’s current carrying amount. This could result in impairment losses,
which could adversely affect future operating results.
Management
maintains an allowance for doubtful accounts to account for estimated losses
resulting from the inability of customers to make required payments. When
evaluating the adequacy of an allowance for doubtful accounts, management bases
its estimates on the aging of accounts receivable balances and historical
write-off experience, customer credit worthiness and changes in customer payment
terms. If the financial condition of customers were to deteriorate, actual
write-offs might be higher than expected.
Income
taxes must be estimated for each of the jurisdictions in which the Group
operates, involving a specific calculation of the expected actual income tax
exposure for each tax object and an assessment of temporary differences
resulting from the different treatment of certain items for IFRS consolidated
financial and tax reporting purposes. Any temporary differences will generally
result in the recognition of deferred tax assets and liabilities in the
consolidated financial statements. Management judgment is required for the
calculation of actual and deferred taxes. Deferred tax assets are recognized to
the extent that their utilization is probable. The utilization of deferred tax
assets will depend on whether it is possible to generate sufficient taxable
income in the respective tax type and jurisdiction, taking into account any
legal restrictions on the length of the loss-carryforward period. Various
factors are used to assess the probability of the future utilization of deferred
tax assets, including past operating results, operational plans,
loss-carryforward periods, and tax planning strategies. If actual results differ
from these estimates or if these estimates must be adjusted in future periods,
results of operations, the financial position, and cash flows may be negatively
affected. In the event that the assessment of future utilization of deferred tax
assets changes, the recognized deferred tax assets must be reduced through
profit or loss or directly in equity, depending on how the deferred tax assets
were originally recognized. Conversely, previously unrecognized or impaired
deferred tax assets may be recognized through profit or loss or directly in
equity as a result of a reassessment.
Pension
obligations for benefits to non-civil servants are generally satisfied by plans
which are classified and accounted for as defined benefit plans. Pension benefit
costs for non-civil servants are determined in accordance with actuarial
valuation, which rely on assumptions including discount rates, life expectancies
and, if applicable, expected return on plan assets. Other key assumptions for
pension costs are based in part on actuarial valuations, which rely on
assumptions, including discount rates used to calculate the amount of the
pension obligation. The interest rate used to determine the present value of the
obligations was set on the basis of the yield on high-quality corporate bonds in
the respective currency area. In countries without a deep market for such bonds,
estimates based on the yield on government bonds were used instead. The
assumptions concerning the expected return on plan assets are determined on a
uniform basis, considering long-term historical returns, asset allocation and
future estimates of long-term investment returns. In the event that changes in
assumptions are required with respect to discount rates and expected returns on
invested assets, the future amounts of the pension benefit costs may be
materially affected.
We are
obligated, under the German Federal Posts and Telecommunications Agency
Reorganization Act (Gesetz zur Reorganisation der Bundesanstalt für Post und
Telekommunikation Deutsche Bundespost), to pay for our share of any operating
cost shortfalls between the income of the Civil Service Health Insurance Fund
(Postbeamtenkrankenkasse) and actual benefits paid. The Civil Service Health
Insurance Fund provides services mainly in cases of illness, birth, or death for
its members (and their dependents), who are civil servants employed by or
retired from Deutsche Telekom AG, Deutsche Post AG and Deutsche Postbank AG.
When “Post Reform II” came into effect, participation in the Civil Service
Health Insurance Fund was closed to new members. The insurance premiums
collected by the Civil Service Health Insurance Fund may not exceed the
insurance premiums imposed by alternative private health insurance enterprises
for comparable insurance benefits, and, therefore, do not reflect the changing
age distribution of the participants in the fund. We recognize provisions in the
amount of the actuarially determined present value of our share in the fund’s
future deficit, using a discount rate and making assumptions about life
expectancies and projections for contributions and future increases in general
health care costs in Germany. Since the calculation of these provisions involves
long-term projections over periods of more than 50 years, the present value of
the liability may be highly sensitive even to small variations in the underlying
assumptions.
We
exercise considerable judgment in measuring and recognizing provisions and the
exposure to contingent liabilities related to pending litigation or other
outstanding claims subject to negotiated settlement, mediation, arbitration or
government regulation, as well as other contingent liabilities. Judgment is
necessary in assessing the likelihood that a pending claim will succeed, or a
liability will arise, and to quantify the possible range of the final
settlement. Provisions are recorded for liabilities when losses are expected
from executory contracts, a loss is considered probable and can be reasonably
estimated. Because of the inherent uncertainties in this evaluation process,
actual losses may be different from the originally estimated provision. In
addition, significant estimates are involved in the determination of provisions
related to taxes, environmental liabilities and litigation risks. These
estimates are subject to change as new information becomes available, primarily
with the support of internal specialists, if available, or with the support of
outside consultants, such as actuaries or legal counsel. Revisions to the
estimates of these losses from executory contracts may significantly affect
future operating results.
Revenue
recognition for customer activation fees
The
operating segments Germany, United States, Europe and Southern and Eastern
Europe receive installation and activation fees from new customers. These fees
(and related directly attributable costs) are deferred and amortized over the
expected duration of the customer relationship. The estimation of the expected
average duration of the relationship is based on historical customer turnover.
If management’s estimates are revised, material differences may result in the
amount and timing of revenue recognized for any given period.
Revenue
recognition for service contracts
The
Systems Solutions operating segment conducts a portion of its business under
long-term contracts with customers. Under these contracts, revenue is recognized
as performance progresses. Depending on the methodology used to determine
contract progress, these estimates may include total contract costs, remaining
costs to completion, total contract revenues, contract risks and other
judgments. All estimates involved in such long-term contracts are subject to
regular reviews and adjusted as necessary.
Revenue
recognition for multiple-element arrangements
Arrangements
involving the delivery of bundled products or services shall be separated into
individual elements (units of accounting), each with its own separate earnings
process. Total arrangement consideration relating to the bundled contract is
allocated among the different units based on their relative fair values (i.e.,
the relative fair value of each of the accounting units to the aggregated fair
value of the bundled deliverables). The relative fair value of an individual
unit of accounting and thus the revenue recognized for this unit, however, is
limited by that proportion of the total arrangement consideration, the payment
of which does not depend on the delivery of additional elements. The fair values
of individual units of accounting of bundled products are complex to determine,
because some of the elements are price sensitive and, thus, volatile in a
competitive marketplace. Revisions to the estimates of these relative fair
values may significantly affect the allocation of total arrangement
consideration among the different units of accounting, affecting future
operating results.
The
following table presents information concerning our consolidated income
statements for the periods indicated:
For the years ended
December 31,
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
millions
|
|
|
millions
|
|
|
millions
|
|
|
%
change
|
|
|
%
change
|
|
|
Net
revenues
|
|
|
64,602 |
|
|
|
61,666 |
|
|
|
62,516 |
|
|
|
4.8 |
|
|
|
(1.4 |
) |
|
Cost
of sales
|
|
|
(36,259 |
) |
|
|
(34,592 |
) |
|
|
(35,337 |
) |
|
|
(4.8 |
) |
|
|
2.1 |
|
|
Gross
profit
|
|
|
28,343 |
|
|
|
27,074 |
|
|
|
27,179 |
|
|
|
4.7 |
|
|
|
(0.4 |
) |
|
Selling
expenses
|
|
|
(15,863 |
) |
|
|
(15,952 |
) |
|
|
(16,644 |
) |
|
|
0.6 |
|
|
|
4.2 |
|
|
General
and administrative expenses
|
|
|
(4,653 |
) |
|
|
(4,821 |
) |
|
|
(5,133 |
) |
|
|
3.5 |
|
|
|
6.1 |
|
|
Other
operating income
|
|
|
1,504 |
|
|
|
1,971 |
|
|
|
1,645 |
|
|
|
(23.7 |
) |
|
|
19.8 |
|
|
Other
operating expenses
|
|
|
(3,319 |
) |
|
|
(1,232 |
) |
|
|
(1,761 |
) |
|
|
n.a. |
|
|
|
30.0 |
|
|
Profit
from operations
|
|
|
6,012 |
|
|
|
7,040 |
|
|
|
5,286 |
|
|
|
(14.6 |
) |
|
|
33.2 |
|
|
Finance
costs
|
|
|
(2,555 |
) |
|
|
(2,487 |
) |
|
|
(2,514 |
) |
|
|
(2.7 |
) |
|
|
1.1 |
|
|
Share
of profit (loss) of associates and joint ventures accounted for using the
equity method
|
|
|
24 |
|
|
|
(388 |
) |
|
|
55 |
|
|
|
n.a. |
|
|
|
n.a. |
|
|
Other
financial income (expense)
|
|
|
(826 |
) |
|
|
(713 |
) |
|
|
(374 |
) |
|
|
(15.8 |
) |
|
|
(90.6 |
) |
|
Loss
from financial activities
|
|
|
(3,357 |
) |
|
|
(3,588 |
) |
|
|
(2,833 |
) |
|
|
6.4 |
|
|
|
(26.7 |
) |
|
Profit
before income taxes
|
|
|
2,655 |
|
|
|
3,452 |
|
|
|
2,453 |
|
|
|
(23.1 |
) |
|
|
40.7 |
|
|
Income
taxes
|
|
|
(1,782 |
) |
|
|
(1,428 |
) |
|
|
(1,373 |
) |
|
|
(24.8 |
) |
|
|
(4.0 |
) |
|
Profit
after income taxes
|
|
|
873 |
|
|
|
2,024 |
|
|
|
1,080 |
|
|
|
(56.9 |
) |
|
|
87.4 |
|
|
Profit
attributable to minority interests
|
|
|
520 |
|
|
|
541 |
|
|
|
509 |
|
|
|
(3.9 |
) |
|
|
6.3 |
|
|
Profit
(loss) attributable to owners of the parent (net profit
(loss))
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
|
(76.2 |
) |
|
|
n.a. |
|
| n.a.—not
applicable |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
One of the factors that causes period to period changes in our revenues and
expenses is movement in exchange rates. In the following discussion, we use the
term exchange rate effects to explain the variability caused by such movements.
We calculate the effects of changes in exchange rates by multiplying the revenue
and expense amounts in local currencies by the exchange rates in effect for the
prior year to derive a constant currency revenue or expense amount. We then
subtract this figure from the euro-denominated amount obtained from multiplying
the current year revenue and expense amounts in local currency by the current
year exchange rates. The difference between the two amounts is the currency or
exchange rate effect.
Net
Revenue (Revenue from customers outside of the Deutsche Telekom
Group)
The
first-time full consolidation of the Greek company OTE was the primary reason
for the rise in our net revenue in 2009, contributing EUR 5,426 million.
Without the effects of changes in the consolidated group (EUR 5,528
million), which were partially offset by negative exchange rate effects
(EUR 417 million), our net revenue would have decreased compared to the
prior-year level.
While the
Group’s net revenue in the United States and Southern and Eastern Europe
operating segments increased, net revenue in the Germany, Europe and Systems
Solutions operating segments declined. Net revenue in Deutsche Telekom’s
operating segments developed as follows:
The net
revenue increase in the United States operating segment was primarily the result
of positive exchange rate effects from the translation of U.S. dollars to euros
(EUR 763) million. Without these exchange rate effects, net
revenue in the United States would have declined, particularly as a result of
lower revenue per customer.
Net
revenue of the Southern and Eastern Europe operating segment increased
principally as a result of the full consolidation of OTE for the first time, as
indicated above. Exchange rate effects reduced the net revenue generated by the
Southern and Eastern Europe operating segment by EUR 210 million. The most
significant effect was from the translation of Hungarian forints to
euros.
The
decline in net revenue of the Germany operating segment was primarily a result
of intense competition and price intervention by the regulator.
Besides
the continued high level of competitive pressure, the decline in net revenue of
the Europe operating segment was mainly attributable to negative exchange rate
effects (EUR 901 million) from the translation of pounds sterling, Polish
zlotys, and Czech korunas to euros.
Net
revenue in the Systems Solutions operating segment decreased, particularly
within Germany, as a result of price erosion. Negative exchange rate effects had
a further negative impact (EUR 69 million) on net revenue.
In 2008,
our net revenue decreased by EUR 850 million, or 1.4%, to EUR 61,666
million, compared with 2007. Our net revenue was affected by negative exchange
rate effects (EUR 1,308 million), primarily from the translation of U.S. dollars
and pound sterling into euros. Net revenue in the United States operating
segment was EUR 14,957 million in 2008, an increase of EUR 882 million, or
6.3%, compared with 2007. The acquisition of SunCom Wireless contributed EUR 462
million to net revenue in 2008. Our net revenue was also affected by decreases
in our Germany operating segment (EUR 1,716 million, or 6.1%, as compared
with 2007) as a result of continuing decreases in the number of access lines,
growth in the popularity of Complete packages with flat rate tariff components,
and falling charges for usage-based products. Those decreases could not be fully
offset by increased net revenue from growth in the number of DSL lines and
unbundled local loop lines. Our net revenue was also negatively affected by
decreases in the Systems Solution operating segment (EUR 1,228 million, or
11.6%, as compared with 2007). Media&Broadcast was sold in January 2008 and
contributed EUR 399 million to net revenue in 2007.
For more
information on our net revenue development and trends at the segment level, see
“—Segment Analysis.”
Cost
of Sales
Our cost
of sales comprises the aggregate cost of products and services delivered. In
addition to directly attributable costs, such as direct material and labor
costs, it also includes indirect costs, such as depreciation and
amortization.
The
EUR 1,667 million increase in cost of sales in 2009 was mainly attributable
to the first-time full consolidation of OTE, which contributed EUR 3,201
million to the Group’s cost of sales in the financial year. Net exchange rate
effects decreased cost of sales in 2009 by EUR 394 million. In our Germany
operating segment, declines in personnel costs and interconnection costs were
partially offset by increases in the cost of goods purchased for resale. In our
Europe operating segment, declines in interconnection costs were driven by lower
service revenues. In addition, we reduced technology personnel and the related
costs at T-Mobile UK. Cost of sales at our Southern and Eastern Europe operating
segment declined slightly due to reduced headcounts and personnel costs. Cost of
sales declined at our Systems Solutions operating segment due to a decline in
revenues and to the consolidation of certain delivery platforms with its network
infrastructure.
Our cost
of sales decreased by EUR 745 million, or 2.1%, in 2008 to
EUR 34,592 million, compared with EUR 35,337 million in 2007.
This decrease was due in part to exchange rate effects of EUR 756 million caused
primarily by the strengthening of the euro against the U.S. dollar and to a
lesser extent the pound sterling. Cost of sales at our Germany operating segment
decreased due to the decline in revenues, as well as decreased personnel costs
resulting from a decrease in restructuring costs, and the sale of T-Online
France and T-Online Spain in 2007. Cost of sales at the USA operating segment
increased in both euros and in U.S. dollars, resulting from increases in
customer numbers and the consolidation of SunCom Wireless in the first quarter
of 2008. Cost of sales at our Europe operating segment was affected by the full
year consolidation of Orange Nederland in 2008 compared to only three months in
2007. Cost of sales, particularly interconnection and roaming fees, were lower
at T-Mobile UK due to the decline in revenue. Cost of sales in the Systems
Solutions operating segment decreased in 2008 compared with 2007 due primarily
to the disposal of Media&Broadcast on January 1, 2008, and lower equipment
and services costs.
Selling
Expenses
Our
selling expenses include all expenses for activities that do not directly
increase the value of our products or services, but help to secure sales.
Selling costs generally include all expenses relating to the sales (e.g.,
commissions), advertising and marketing departments and other sales promotion
activities.
Our
selling expenses remained near the prior-year level despite the effect of the
first-time full consolidation of OTE in 2009. This effect was offset in
particular by cost cuts in the Germany operating segment, primarily in
operational sales and receivables management. Selling costs at the USA operating
segment declined as a result of fewer commission costs due to a decrease in the
gross customer additions. This effect was partially offset by increases in
retail personnel costs. In addition, selling expenses decreased in the Europe
operating segment, due to lower costs all subsidiaries except
PTC.
Selling expenses decreased by EUR 692 million, or 4.2%, in 2008 compared to
2007. This decrease was due in part to exchange rate effects of EUR 443 million,
caused primarily by the strengthening of the euro against the U.S. dollar and to
a lesser extent the pound sterling. Selling expenses at our Germany operating
segment declined due in part to increases in allowances for bad debts, increases
in costs associated with Immobilien Scout and increased marketing and selling
expenses. The sale of T-Online Spain and T-Online France in 2007 led to a
decrease in selling expenses in 2008. Selling expenses at our United States
operating as segment result of an increase in gross customer additions in 2008
and the consolidation of SunCom Wireless in the first quarter of 2008. Selling
expenses at our Europe operating segment increased primarily as a result of the
acquisition of Orange Nederland in the fourth quarter of
2007.
General
and Administrative Expenses
Our
general and administrative expenses generally include all costs attributable to
the core administrative functions that are not directly attributable to
production or selling activities.
General
and administrative expenses decreased in 2009 as the effect from the first-time
full consolidation of OTE of EUR 456 million was more than offset by
savings measures at all segments.
General and administrative expenses decreased in 2008 due mainly to a decrease
in expenses incurred in connection with staff-related measures at Group
Headquarters and Shared Services. General and administrative expenses also
decreased in our Germany and Europe operating segments, offset in part by an
increase at our United States operating segment, primarily due to the
acquisition of SunCom, and Systems Solutions operating
segment.
Other
Operating Income
Other
operating income consists of reversals of provisions (if not allocated to
functional costs), income from transfer of costs and gains from disposals.
Miscellaneous other operating income encompasses a variety of income items for
which the individually recognized amounts are not material.
In 2009,
other operating income decreased mainly due to lower income from disposals,
which was affected by the sale of Media&Broadcast in 2008.
Other
operating income increased by EUR 326 million in 2008, mainly as a result
of the gain on the disposal of Media&Broadcast (EUR 500 million) in the
first quarter of 2008. Comparable, although slightly lower, gains were recorded
in 2007 from the disposals of T-Online France and T-Online Spain. Additional
income was also recorded in 2008 from the sale of an asset (EUR 0.1 billion) and
from the reclassification of real estate assets held for sale to non-current
assets (EUR 0.1 billion).
Other
Operating Expenses
Other
operating expenses consist of impairment of goodwill, additions to provisions
(if not allocated to functional costs) and losses on disposals. Miscellaneous
other operating expenses encompass a variety of expense items for which the
individually recognized amounts are not material.
In 2009,
other operating expenses increased by EUR 2,087 million year-on-year. This
was mainly attributable to impairment losses on goodwill amounting to
EUR 2,345 million that we recognized in the financial year. For further
details, please refer to note (5) to the Consolidated Financial
Statements.
Other
operating expenses decreased by EUR 529 million in 2008 compared to 2007. In
2008, goodwill impairment losses amounted to an aggregate of EUR 289 million,
whereas in 2007 the reduction in the carrying amount of goodwill recognized
amounted to EUR 327 million (at T-Mobile Netherlands, as described in detail
below). In 2008, we also incurred expenses relating to the disposal of DeTe
Immobilien, while in 2007 we incurred expenses in connection with the sale of
call centers of Vivento Customer Services and the transfer of operations of
Vivento Technical Services.
The
reduction of the carrying amount of goodwill of T-Mobile Netherlands was not the
result of an impairment test, but of the recognition of deferred tax assets for
tax loss carryforwards that were acquired in connection with the acquisition of
Ben Nederland (the predecessor of T-Mobile Netherlands) but were not considered
to meet the criteria for recognition at the time. Based on an assessment of all
available information and relevant accounting literature, we determined that it
had become probable that these previously unrecognized loss carryforwards would
be realizable in the near term and deferred taxes would have to be recognized
and the carrying amount of goodwill would have to be reduced
accordingly.
Profit
from Operations
Profit
from operations decreased by EUR 1,028 million, or 14.6%, in 2009 compared to
2008, primarily as a result of the factors set forth above.
Profit
from operations increased by EUR 1,754 million, or 33.2%, in 2008 compared to
2007, primarily as a result of the factors set forth above.
The
details are described in the individual items set forth above and in personnel
costs, depreciation, amortization and impairment losses set forth
below.
Loss
from Financial Activities
The
following table presents information concerning our loss from financial
activities:
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Finance
costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Interest
income
|
|
|
341 |
|
|
|
408 |
|
|
|
261 |
|
|
|
(16.4 |
) |
|
|
56.3 |
|
|
Interest
expense
|
|
|
(2,896 |
) |
|
|
(2,895 |
) |
|
|
(2,775 |
) |
|
|
n.a. |
|
|
|
(4.3 |
) |
|
|
|
|
(2,555 |
) |
|
|
(2,487 |
) |
|
|
(2,514 |
) |
|
|
(2.7 |
) |
|
|
1.1 |
|
|
Share
of profit of associates and joint ventures accounted for using the equity
method
|
|
|
24 |
|
|
|
(388 |
) |
|
|
55 |
|
|
|
n.a. |
|
|
n.a.
|
|
|
Other
financial income (expense)
|
|
|
(826 |
) |
|
|
(713 |
) |
|
|
(374 |
) |
|
|
(15.8 |
) |
|
|
(90.6 |
) |
|
Loss
from financial activities
|
|
|
(3,357 |
) |
|
|
(3,588 |
) |
|
|
(2,833 |
) |
|
|
6.4 |
|
|
|
(26.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Finance
costs
In 2009,
our finance costs increased slightly on 2009 compared to 2008. Finance costs
were subject to two offsetting effects. On the one hand, interest expense
increased in 2009 due to the first-time full consolidation of OTE in our
consolidated financial statements. On the other hand, the downgrade of Deutsche
Telekom’s rating in the prior year and the resulting adjustments to carrying
amounts for a number of bonds with rating-linked coupons had a one-time impact
on interest expense in the prior year.
Since
January 1, 2009, Deutsche Telekom has capitalized borrowing costs as part of the
cost of qualifying assets. EUR 27 million were recognized as a part of cost
in the financial year. The amount was calculated on the basis of an average
capitalization rate of 5.9 % applied across the Group. The figures for
prior-year periods have not been adjusted.
Accrued
interest payments from derivatives (interest rate swaps) that were designated as
hedging instruments in a fair value hedge in accordance with IAS 39 are netted
per swap contract and recognized as interest income or interest expense
depending on the net amount. Finance costs are assigned to the categories on the
basis of the hedged item; only financial liabilities were hedged in the
reporting period.
Our
finance costs remained almost unchanged in 2008 compared with 2007.
Substantially lower USD interbank rates had a positive impact on non-derivative
instruments and on interest rate derivatives used as part of interest rate
management, affecting both interest income and interest expense. This positive
effect was offset in part by an adjustment to the carrying amounts (EUR 202
million) of a number of bonds with rating-linked coupons due to a downgrade of
our credit ratings by certain rating agencies.
The
effective weighted average interest rate applicable to our outstanding
indebtedness related to bonds and debentures was 6.2% in 2009 , 6.1% in 2008 and
6.1% in 2007 . The effective weighted average interest rate applicable to our
outstanding indebtedness related to bank liabilities was 5.3% in 2009, 5.9% in
2008 and 5.7% in 2007. Some of our debt instruments have provisions that could
cause the interest rate on such investments to increase upon the occurrence of
certain downgrades in our long-term unsecured debt ratings. For more
information, see “—Liquidity and Capital Resources—Capital
Resources.”
Share
of profit of associates and joint ventures accounted for using the equity
method
In 2009,
the share of profit of associates and joint ventures accounted for using the
equity method increased by EUR 412 million to EUR 24 million compared to
2008. This increase was mainly due to the impairment loss of EUR 548
million that had to be recognized in the prior year on the carrying amount of
the shares in OTE. OTE has been fully consolidated since the beginning of
February 2009. For more information, please refer to note (7) to the
Consolidated Financial Statements.
The share of
profit of associates and joint ventures accounted for using the equity method in
2008 decreased by EUR 443 million, compared to 2007, primarily as result of the
impairment on the carrying amount of our investment in OTE (EUR 548 million),
offset in part by our share of OTE’s profit recognized (EUR 107 million),
subsequent to our acquisition in 2008.
Other
financial income (expense)
In
2009, the increase in other financial expense of EUR 113 million, as compared to
2008, was mainly attributable to higher interest rate expenses on provisions and
liabilities.
Other
financial expense increased by EUR 339 million in 2008, as compared to 2007, due
primarily to higher loss from financial instruments. The increase in loss from
financial instruments is mainly due to effects from cross-currency swaps used by
us to convert financial liabilities into one of the Group’s main currencies.
Different trends in interest rates and liquidity of the currencies involved in
these swaps contributed to the increase in other financial expense. For more
information, see “—Liquidity and Capital Resources—Capital
Resources.”
Number
of employees (average for the year)
|
Average
number of employees
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Group
(total)
|
|
|
257,601 |
|
|
|
234,887 |
|
|
|
243,736 |
|
|
Domestic
|
|
|
130,477 |
|
|
|
141,123 |
|
|
|
154,101 |
|
|
International
|
|
|
127,124 |
|
|
|
93,764 |
|
|
|
89,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-civil
servants
|
|
|
226,460 |
|
|
|
201,036 |
|
|
|
205,471 |
|
|
Civil
servants (domestic)
|
|
|
31,141 |
|
|
|
33,851 |
|
|
|
38,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trainees
and student interns
|
|
|
9,805 |
|
|
|
10,424 |
|
|
|
10,708 |
|
The number of employees in the Group increased year-on-year by 22,714. This
increase was largely a result of the first-time inclusion of the OTE staff in
early February 2009. The headcount also grew in the Systems Solutions and United
States operating segments. In the Systems Solutions operating segment, the
higher staff level was due to the expansion of international business. In the
United States operating segment, the increase in the average number of
employees resulted from retail distribution growth. These effects were
only partially offset by staff reductions in Germany.
Depreciation,
Amortization and Impairment Losses
The
following table provides a breakdown of the depreciation, amortization and
impairment losses contained in the functional cost line items (cost of sales,
selling expenses, general and administrative expenses and other operating
expenses):
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(millions
of €)
|
|
|
Amortization
and impairment of intangible assets
|
|
|
(5,657 |
) |
|
|
(3,397 |
) |
|
|
(3,490 |
) |
|
of
which: goodwill impairment losses
|
|
|
(2,345 |
) |
|
|
(289 |
) |
|
|
(327 |
) |
|
of
which: amortization of mobile telecommunications licenses
|
|
|
(905 |
) |
|
|
(1,013 |
) |
|
|
(1,017 |
) |
|
Depreciation
and impairment of property, plant and equipment
|
|
|
(8,237 |
) |
|
|
(7,578 |
) |
|
|
(8,121 |
) |
|
Total
depreciation, amortization and impairment losses
|
|
|
(13,894 |
) |
|
|
(10,975 |
) |
|
|
(11,611 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009,
depreciation, amortization and impairment losses increased mainly due to higher
impairment losses recognized on goodwill as well as the full inclusion of OTE
for the first time in early February 2009. The Group recognized an impairment
loss of EUR 1.8 billion on the goodwill of the cash-generating unit
T-Mobile UK in the first quarter of 2009. T-Mobile UK has been classified as
“held for sale” since September 8, 2009. The Group also recognized
impairment losses of EUR 528 million as of December 31, 2009 as a
result of the annual impairment test. For further details on impairment losses,
please refer to note (5) to the Consolidated Financial Statements. For further
details on the disclosure of T-Mobile UK, please refer to note (4) to the
Consolidated Financial Statements.
Depreciation
of property, plant and equipment increased by EUR 659 million in the
reporting year, mainly as a result of the full inclusion of OTE for the first
time. This increase was partially offset by lower depreciation of technical
equipment and machinery as well as lower impairment of land and buildings. In
addition, subsequent to the classification of T-Mobile UK as “held for sale” we
stopped depreciating and amortizing its assets. As a result, EUR 196 million of
scheduled depreciation and amortization, which absent the “held for sale
classification” would have been recorded, was not recorded in
2009.
Depreciation,
amortization and impairment losses decreased by EUR 636 million in
2008 as compared to 2007. The EUR 93 million decrease in amortization and
impairment of intangible asserts is mainly a result of lower amortization of
acquired intangible assets as well as reduced impairment losses. The decrease in
depreciation and impairment of property, plant and equipment of EUR 543 million
is mainly a result of lower deprecation of technical equipment as well as lower
impairment of land and buildings.
For
more information relating to our intangible assets, see note (5)
to the Consolidated Financial Statements.
The following
table provides a breakdown of impairment losses:
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
(millions
of €)
|
|
|
Intangible
assets
|
|
|
(2,354 |
) |
|
|
(340 |
) |
|
|
(378 |
) |
|
of
which: goodwill
|
|
|
(2,345 |
) |
|
|
(289 |
) |
|
|
(327 |
) |
|
of
which: U.S. mobile telecommunications licenses
|
|
|
- |
|
|
|
(21 |
) |
|
|
(9 |
) |
|
Property,
plant and equipment
|
|
|
(217 |
) |
|
|
(140 |
) |
|
|
(300 |
) |
|
of
which: land and buildings
|
|
|
(193 |
) |
|
|
(123 |
) |
|
|
(238 |
) |
|
of
which: technical equipment and machinery
|
|
|
(10 |
) |
|
|
(5 |
) |
|
|
(54 |
) |
|
of
which: other equipment, operating and office equipment
|
|
|
(3 |
) |
|
|
(8 |
) |
|
|
(4 |
) |
|
of
which: advance payments and construction in progress
|
|
|
(11 |
) |
|
|
(4 |
) |
|
|
(4 |
) |
|
Total
impairment losses
|
|
|
(2,571 |
) |
|
|
(480 |
) |
|
|
(678 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
impairment losses on land and buildings mainly result from the fair value
measurement of land and buildings intended for sale less costs to sell. The
amounts are reported in other operating expenses.
Profit
before Income Taxes
In 2009,
profit before income taxes decreased by EUR 797 million to EUR 2,655 million,
compared with 2008, mainly due to decreased profit from operations which was
partly offset by an increase in share of profit of associates and joint ventures
accounted for using the equity method.
In
2008, profit before income taxes increased by EUR 999 million to EUR
3,452 million, compared with 2007, mainly due to increased profit from
operations which was partly offset by an increase in loss from financial
activities.
Income
Taxes
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Income
taxes
|
|
|
1,782 |
|
|
|
1,428 |
|
|
|
1,373 |
|
|
|
24.8 |
|
|
|
4.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In
general, the amount of income taxes we recognize is a function of our profit
before income taxes and the various income tax rates applicable to profit before
income taxes, and the recognition or non-recognition of deferred income taxes.
However, the income tax expense recorded on our financial statements is not
necessarily reflective of the actual income taxes we paid.
Our
combined income tax rate for 2008 amounted to 30.5%, comprising corporate income
tax at a rate of 15%, the solidarity surcharge of 5.5% on corporate income tax,
and trade income tax at an average national rate (multiplier of 419%).The
combined income tax rate for 2008 and 2007 amounted to 30.5% and 39%,
respectively.
Despite
the significantly lower profit/loss before income taxes, income tax expense did
not decrease year-on-year; rather, it increased significantly. Income taxes
increased to EUR 1,782 million in 2009 compared to EUR 1,428 million in 2008
while our profit before income taxes decreased to EUR 2,655 million in 2009
compared to EUR 3,452 million in 2008. Our effective income tax rate increased
to 67% in 2009 compared to 41% in 2008.
This was
mainly attributable to higher impairment losses recognized on goodwill assets,
in particular at T-Mobile UK. Since these impairment losses are not to be
considered for tax purposes, income tax expense increased relative to profit
before income taxes.
The 2008
effective income tax rate was increased as well because certain expenses
recognized in arriving at profit before income taxes, including the share of
losses from associates and joint ventures and impairments of goodwill, are not
tax deductible.
Income
taxes in 2007 amounted to EUR 1,373 million relating to a profit
before income taxes of EUR 2,453 million. The main reason for the high
effective tax rate of 56% in 2007 was that adjustments were made to deferred tax
assets and deferred tax liabilities in response to the enactment of the
corporate tax reform legislation which went into effect on January 1, 2008. The
adjustment increased deferred income taxes in 2007 by EUR 0.7
billion.
Profit
(loss) attributable to owners of the parent (net profit
(loss))
In 2009,
our net profit decreased to EUR 353 million from EUR 1,483
million in 2008, primarily as a result of the impairment losses recognized on
goodwill and the other factors set forth above.
In 2008,
our net profit increased to EUR 1,483 million from EUR 571
million in 2007, primarily as a result of the factors set forth
above.
The
following table presents total revenues (the sum of external (net) revenues and
intersegment revenues), net revenues and intersegment revenues of our segments
for the years indicated.
|
millions
of €
|
Year
|
|
Net
revenue
|
|
|
Intersegment
revenue
|
|
|
Total
revenue
|
|
|
|
|
|
Germany
|
2009
|
|
|
23,813 |
|
|
|
1,610 |
|
|
|
25,423 |
|
|
|
|
|
|
2008
|
|
|
24,754 |
|
|
|
1,646 |
|
|
|
26,400 |
|
|
|
|
|
|
2007
|
|
|
26,134 |
|
|
|
1,982 |
|
|
|
28,116 |
|
|
|
|
|
United
States
|
2009
|
|
|
15,457 |
|
|
|
14 |
|
|
|
15,471 |
|
|
|
|
|
|
2008
|
|
|
14,942 |
|
|
|
15 |
|
|
|
14,957 |
|
|
|
|
|
|
2007
|
|
|
14,050 |
|
|
|
25 |
|
|
|
14,075 |
|
|
|
|
|
Europe
|
2009
|
|
|
9,486 |
|
|
|
548 |
|
|
|
10,034 |
|
|
|
|
|
|
2008
|
|
|
10,798 |
|
|
|
556 |
|
|
|
11,354 |
|
|
|
|
|
|
2007
|
|
|
10,675 |
|
|
|
559 |
|
|
|
11,234 |
|
|
|
|
|
Southern
and Eastern Europe
|
2009
|
|
|
9,510 |
|
|
|
175 |
|
|
|
9,685 |
|
|
|
|
|
|
2008
|
|
|
4,497 |
|
|
|
148 |
|
|
|
4,645 |
|
|
|
|
|
|
2007
|
|
|
4,458 |
|
|
|
142 |
|
|
|
4,600 |
|
|
|
|
|
Systems
Solutions
|
2009
|
|
|
6,083 |
|
|
|
2,715 |
|
|
|
8,798 |
|
|
|
|
|
|
2008
|
|
|
6,368 |
|
|
|
2,975 |
|
|
|
9,343 |
|
|
|
|
|
|
2007
|
|
|
6,911 |
|
|
|
3,660 |
|
|
|
10,571 |
|
|
|
|
|
Group
Headquarters and Shared Services
|
2009
|
|
|
253 |
|
|
|
2,157 |
|
|
|
2,410 |
|
|
|
|
|
|
2008
|
|
|
307 |
|
|
|
2,474 |
|
|
|
2,781 |
|
|
|
|
|
|
2007
|
|
|
288 |
|
|
|
2,855 |
|
|
|
3,143 |
|
|
|
|
|
Total
|
2009
|
|
|
64,602 |
|
|
|
7,219 |
|
|
|
71,821 |
|
|
|
|
|
|
2008
|
|
|
61,666 |
|
|
|
7,814 |
|
|
|
69,480 |
|
|
|
|
|
|
2007
|
|
|
62,516 |
|
|
|
9,223 |
|
|
|
71,739 |
|
|
|
|
|
Reconciliation
|
2009
|
|
|
- |
|
|
|
(7,219 |
) |
|
|
(7,219 |
) |
|
|
|
|
|
2008
|
|
|
- |
|
|
|
(7,814 |
) |
|
|
(7,814 |
) |
|
|
|
|
|
2007
|
|
|
- |
|
|
|
(9,223 |
) |
|
|
(9,223 |
) |
|
|
|
|
Group
|
2009
|
|
|
64,602 |
|
|
|
- |
|
|
|
64,602 |
|
|
|
|
|
|
2008
|
|
|
61,666 |
|
|
|
- |
|
|
|
61,666 |
|
|
|
|
|
|
2007
|
|
|
62,516 |
|
|
|
- |
|
|
|
62,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
Communications Revenues and Other Financial Information
The total
revenues of our mobile communications operations are mainly comprised of service
revenues. Service revenues are comprised of revenues generated by customers for
services, such as voice services, including incoming and outgoing calls and data
services, plus roaming revenues, monthly charges and revenues from visitor
roaming.
Revenues
from mobile termination fees are primarily generated in our operations outside
of the United States. Reduced mobile termination fees, as determined by the
regulatory authorities in several Euopean countries including, Germany, the
United Kingdom, the Czech Republic, Hungary, The Netherlands, Austria, Croatia,
the F.Y.R.O Macedonia, Montenegro, Poland and Slovakia negatively affected total
revenues in 2009. These decreased mobile termination fees will continue to have
a negative impact on total revenues in 2010 and beyond. We believe that mobile
termination fees will further decrease in our European markets in the
future.
Average
Revenue per User
Our
mobile communications subsidiaries in Germany, the United States, Europe and
Southern and Eastern Europe operating segments disclose information regarding
average revenue per user, or ARPU. We use ARPU to measure the average
monthly service revenues on a per customer basis. We believe that ARPU provides
management with useful information concerning prices, usage and acceptance of
our product and service offerings, and as an indicator of our ability to attract
and retain high-value customers. We calculate ARPU as revenues generated by
customers for services (i.e., voice services, including incoming and outgoing
calls, and non-voice services, including data services), plus roaming revenues,
monthly charges, and revenues from visitor roaming, divided by the average
number of customers in a month. Revenues from services do not include the
following: revenues from terminal equipment sales, revenues from customer
activations, revenues from MVNOs, and other revenues not generated directly by
our customers. We believe the inclusion of visitor revenues improves
comparability with our competitors. However, ARPU is neither uniformly defined
nor utilized by all companies in our industry group. Accordingly, such measures
may not be comparable to similarly titled measures and disclosures by other
companies. The calculations of ARPU numbers in this report have been based on
actual figures, expressed as a monthly average for each annual period. For a
more detailed breakdown of our customers by geographic area, see “Item 4.
Information on the Company – Description of Business.”
The
following table presents selected financial information concerning our Germany
operating segment:
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Fixed
Network revenues
|
|
|
18,736 |
|
|
|
19,782 |
|
|
|
21,309 |
|
|
|
(5.3 |
) |
|
|
(7.2 |
) |
|
Network
communications
|
|
|
5,733 |
|
|
|
6,736 |
|
|
|
8,305 |
|
|
|
(14.9 |
) |
|
|
(18.9 |
) |
|
IP/Internet
|
|
|
5,937 |
|
|
|
5,531 |
|
|
|
5,144 |
|
|
|
7.3 |
|
|
|
7.5 |
|
|
Wholesale
services
|
|
|
4,417 |
|
|
|
4,705 |
|
|
|
4,906 |
|
|
|
(6.1 |
) |
|
|
(4.1 |
) |
|
Other
services
|
|
|
2,648 |
|
|
|
2,810 |
|
|
|
2,954 |
|
|
|
(5.8 |
) |
|
|
(4.9 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications revenues
|
|
|
8,109 |
|
|
|
8,069 |
|
|
|
8,293 |
|
|
|
0.5 |
|
|
|
(2.7 |
) |
|
Service
revenues
|
|
|
7,008 |
|
|
|
7,045 |
|
|
|
7,156 |
|
|
|
(0.5 |
) |
|
|
(1.6 |
) |
|
Average
customers (in millions)
|
|
|
39.0 |
|
|
|
38.0 |
|
|
|
33.8 |
|
|
|
2.6 |
|
|
|
12.4 |
|
|
ARPU
(in €)
|
|
|
15 |
|
|
|
15 |
|
|
|
18 |
|
|
|
0.0 |
|
|
|
(16.7 |
) |
|
Sale
of terminal equipment
|
|
|
499 |
|
|
|
399 |
|
|
|
457 |
|
|
|
25.1 |
|
|
|
(12.7 |
) |
|
Other
|
|
|
602 |
|
|
|
625 |
|
|
|
680 |
|
|
|
(3.7 |
) |
|
|
(8.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intra-segment
revenues(1)
|
|
|
1,422 |
|
|
|
1,451 |
|
|
|
1,486 |
|
|
|
(2.0 |
) |
|
|
2.4 |
|
|
Total
revenues
|
|
|
25,423 |
|
|
|
26,400 |
|
|
|
28,116 |
|
|
|
(3.7 |
) |
|
|
(6.1 |
) |
|
Inter-segment
revenues
|
|
|
1,610 |
|
|
|
1,646 |
|
|
|
1,982 |
|
|
|
(2.2 |
) |
|
|
(17.0 |
) |
|
Net
revenues
|
|
|
23,813 |
|
|
|
24,754 |
|
|
|
26,134 |
|
|
|
(3.8 |
) |
|
|
(5.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(13,237 |
) |
|
|
(13,482 |
) |
|
|
(14,533 |
) |
|
|
1.8 |
|
|
|
7.2 |
|
|
Selling
expenses
|
|
|
(6,116 |
) |
|
|
(7,254 |
) |
|
|
(7,985 |
) |
|
|
15.7 |
|
|
|
9.2 |
|
|
General
and administrative expenses
|
|
|
(1,476 |
) |
|
|
(1,721 |
) |
|
|
(1,782 |
) |
|
|
14.2 |
|
|
|
3.4 |
|
|
Other
operating income
|
|
|
807 |
|
|
|
942 |
|
|
|
1,196 |
|
|
|
14.3 |
|
|
|
21.2 |
|
|
Other
operating expenses
|
|
|
(339 |
) |
|
|
(261 |
) |
|
|
(321 |
) |
|
|
(29.9) |
|
|
|
18.7 |
|
|
Profit
from operations
|
|
|
5,062 |
|
|
|
4,624 |
|
|
|
4,691 |
|
|
|
9.5 |
|
|
|
(1.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
|
|
(3,158 |
) |
|
|
(3,038 |
) |
|
|
(3,014 |
) |
|
|
(3.9 |
) |
|
|
(0.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Intra-segment
revenues includes revenues between our fixed network and mobile
communication business.
|
Overview
For
reporting purposes, our Germany operating segment separately presents its fixed
network and mobile communications operations. Since November 2007,
ImmobilienScout has been fully consolidated. ActiveBilling was transferred to
the Germany operating segment effective January 1, 2008. In addition,
since January 1, 2009, fixed network has been responsible for the small- and
medium-sized business customers that were previously included in our System
Solutions operating segment.
In 2009,
the Germany operating segment continued to be affected by fierce competition and
regulatory measures.
Fixed
Network
Germany’s
fixed network revenues primarily consist of revenues from network
communications, IP/Internet services, wholesale services, and other
services.
Beginning
January 1, 2009, we changed our reporting structure for fixed network revenues
in Germany. Previously the broadband component of Complete Package revenues was
reported under IP/Internet and the basic telephony services component was
reported under network communications. Under the new reporting structure, all
revenues from Complete Packages with broadband access are reported under
IP/Internet and all revenues from Complete Packages without broadband access are
reported under network communications.
Network
Communications
Network
communications revenues consist of revenues from network access products and
calling services. Revenues from network access products include monthly access
charges and installation fees. Revenues from calling services include call
charges relating to local, regional and long-distance calls, international
calls, calls to mobile networks and calls to dial-up ISPs.
The
decrease in the network communications revenues in 2009 and 2008 was due in part
to the continuing fixed-network access line losses, lower usage-related charges,
and to a lesser extent, competitive pressure from fixed-to-mobile
substitution. The lower usage-related charges resulted from an increased
acceptance of Complete Packages (telephony and Internet) with a flat-rate
component as a consequence of the competitive environment in
Germany.
We expect
that the network communications revenues and market share will continue to
decrease, primarily as a result of substitution by cable network operators,
increased competition from other fixed-network providers with fully integrated
bundled packages and fixed-to mobile substitution. Technological developments as
well as regulatorily mandated price reductions are expected to further adversely
affect network communications revenues.
IP/Internet
IP/Internet
revenues mainly consist of retail subscription fees, usage fees, online
advertising and business-to-business services. Subscription fees comprise fixed
monthly payments under subscription plans and DSL access revenues for customers
with a broadband access line. Usage fees include all non-subscription products,
including per-minute or volume-based access rate components and products, such
as products made available on a pay-per-use basis. Online advertising and
business-to-business services revenues consist of revenues from hosting and
security products and from content management services for business clients
operating traffic-intensive portals.
The
increase in IP/Internet revenues in 2009 and 2008 primarily resulted from an
increase in the number of broadband lines in operation and the number of
customers choosing Complete Packages. The volume driven increase in revenues
from business customers and, to a lesser extent, the growth in revenues from
ImmobilienScout, were also contributing factors . The increase in IP/Internet
revenues in 2008 was also due to the first full time consolidation of
ImmobilienScout in October 2007, as full-year revenues were realized for the
first time .
We expect
that our IP/Internet revenues will continue to increase, primarily as a result
of increased acceptance of Complete Packages and Entertain product portfolio
with new features and new rates in response to customer demand, although the
pressure on prices is expected to continue.
Wholesale
services
Wholesale
services include revenues from national and international interconnection,
access to the unbundled local loop, (ULL) resale access products and network
services, such as carrier-specific transmission paths and networks.
Revenues
from wholesale services decreased in 2009 and 2008 primarily due to a decline in
revenues from interconnection minutes caused by lower volumes. This decrease was
also due to lower revenues from wholesale bundled products generated from
customer migration to the lower priced product alternative, and losses in
collocation revenues due to a fall in demand. The decrease in revenues from
wholesale services was partially offset by an increase in revenues from
unbundled local loop lines. We expect
that our wholesale services revenues will continue to decrease as a result of
decreases in interconnection and collocation revenues, regulatorily mandated
price reductions, as well as customer migration to the lower priced wholesale
bundled product alternative.
Other
services
Other
services revenues mainly consist of revenues from value-added services, terminal
equipment and data communications, as well as revenue from other
services. Other services includes publishing services , call-center services and
the sale of products and services through our Telekom Shop outlets, as well as
services for energy-based products used to operate telecommunications systems
reliably.
The
decrease in revenues from other services in 2009 was mainly due to a decline in
terminal equipment sales and data communication . Terminal equipment sales were
down as a result of customer acceptance of service packages that include
software updates, remote maintenance and installation support, and are rented
for a monthly fee. In 2008, the decrease in revenues for value-added services
resulted from lower demand for services such as public payphones, T-Vote Call
and 0180 calls.
Mobile
Communications
The
mobile communications business offers mobile voice and data services to consumer
and retail customers in Germany. Terminal equipment and other hardware are sold
in connection with the services offered. In addition, T-Mobile services are sold
to resellers and third-party providers. The figures for the mobile
communications operations include T-Mobile Deutschland and also Deutsche
Funkturm GmbH. DFMG is a management company for radio towers and sites. The
company leases roof tops and properties and is responsible for construction,
operating and maintenance of radio towers. The company is leasing spare capacity
on the radio towers to third parties.
Total
revenues increased by EUR 40 million in 2009, or 0.5%, compared to 2008.
The increase in total revenues was attributable to an increase in terminal
equipment and other revenues, which was partially offset by a decline in service
revenue. Total revenues declined by EUR 224 million in 2008, or
2.7%, compared to 2007. This decline was primarily attributable to a decrease in
service revenues and in terminal equipment revenues.
Service
revenues decreased by EUR 37 million, or 0.5%, to
EUR 7,008 million in 2009, compared to EUR 7,045 million in
2008. A more restrictive regulatory environment, in particular lower termination
charges from April 1, 2009 and new roaming regulation had a negative impact on
revenues as well as further intense competition. This decrease was mainly offset
by continued growth in revenues from non-voice services, in particular, due to
the increased use of data services. Intelligent smartphones and attractive
high-value double-play rate plans (combining voice and data components) boosted
mobile Internet use and increased data revenues. Service revenues decreased by
EUR 111 million, or 1.6%, to EUR 7,045 million in 2008,
compared to EUR 7,156 million in 2007. This decrease was primarily
attributable to lower voice revenues primarily as a result of lower prices due
to competitive pressures and regulation of mobile termination fees. This
decrease was partially offset by an increase in non-voice revenues.
ARPU
remained stable in 2009 despite the decrease in mobile termination rates. This
development was caused by an increase in the number of contract customers in the
total customer base, ARPU decreased to EUR 15 in 2008, compared to
EUR 18 in 2007. This decline was mainly driven by lower tariffs and
lower mobile termination fees as a result of competitive and regulatory
pressures. Furthermore, the change in T-Mobile Deutschland’s prepay churn policy
in 2007 resulted in a higher average customer base.
Other
revenues mainly consist of revenues from national roaming, activation revenues,
disconnection fees and tower rental. National roaming revenues accounted for 32%
of total other revenues in 2009 and 2008, compared to 38% in 2007. National
roaming revenues reflect revenues from the agreement with O2, which are generated
by O2 traffic being routed
through T-Mobile Deutschland’s network.
In 2009,
other revenues decreased by EUR 23 million to EUR 602 million, compared to
EUR 625 million in 2008 and EUR 680 million in 2007. The decrease in
2009 was primarily a result of lower revenues from tower rental. The
decrease in 2008 was primarily due to lower MVNO revenues which was the result
of lower voice usage of O2 customers being
routed through T-Mobile Deutschland’s network. The roaming agreement with O2 expired at the end
of 2009. In 2009, this agreement contributed EUR 190 million to Other
revenues.
Revenues
from sales of terminal equipment increased by EUR 100 million, to EUR 499
million in 2009, compared to EUR 399 million in 2008, mainly due to an increase
in the number of terminal equipment devices sold, like the iPhone. Revenues from
sales of terminal equipment decreased by EUR 58 million, to
EUR 399 million in 2008, compared to EUR 457 million in
2007, mainly due to the lower number of terminal equipment devices
sold.
Intersegment
Revenues
Intersegment
revenues, which include revenues from our Group’s other operating segments,
decreased in 2009 and 2008 primarily due to the reduced intersegment revenues
from System Solutions as a result of lower quantities of services
purchased. This decrease was partly offset by increased revenues from
Europe operating segment , a slight increase at Group Headquarters and
Shared Service, as well as the as a result of increased demand for Germany’s
fixed network services.
Operating
Expenses and Profit from Operations
Cost of
sales decreased in 2009 mainly due to reduced personnel costs as a result of
staff reductions and, in part, due to the transfer of certain departments to
Group Headquarters and Shared Services. Other contributing factors include
reduced costs for rental and utility as a result of more efficient use of floor
space in 2009. Cost of sales also decreased due to reduced interconnection costs
resulting from lower demand and price reductions for interconnection services.
This decrease was partly offset by an increase in revenue related costs such as
the costs of goods purchased for resale.
Cost of
sales in 2008 decreased primarily due to lower personnel costs resulting from a
decrease in restructuring costs and lower revenue related costs such as goods
purchased for resale, interconnection and roaming fees. Cost of sales also
decreased due to a decline in depreciation and amortization costs and the
divestiture of T-Online France and T-Online Spain in 2007.
Selling
expenses decreased in 2009 primarily due to lower commission expenses. A
decline in allowances for bad debts resulting from the sale of receivables in
the third quarter of 2009, lower personnel expenses, decreased billing expenses,
and lower costs due to the sale of CAP Customer Advantage Program GmbH as of
January 30, 2009 were also contributing factors.
The
decrease in selling expenses in 2008 was primarily due to a decrease in costs
resulting from the divestiture of T-Online France and T-Online Spain in 2007.
These decreases were offset, in part, by an increase in allowances for bad
debts, increases in costs associated with the initial consolidation of the
activities of ImmobilienScout, as well as a slight increase in fixed network
marketing costs and increased mobile communication selling
expenses.
General
and administrative expenses decreased in 2009 primarily as a result of lower
personnel costs, due to staff reductions, and, in part, to the
transfer of certain departments to Group Headquarters and Shared Services. In
addition, further cost reductions in various areas contributed to the decrease
in general and administrative expenses. This decrease was partly offset by a
slight increase in IT costs as well increased depreciation costs.
General
and administrative expenses decreased in 2008 due to a decline
in support and IT costs for services primarily provided from the
Systems Solutions operating segment and reduced personnel costs, due, in part,
to the transfer of certain departments to Group Headquarters and Shared
Services. These decreases were partially offset by increased costs related to
the reassignment of ActiveBilling to the Germany operating segment in 2008 and
the initial consolidation of ImmobilienScout in October 2007.
Other
operating income decreased in 2009 primarily due to a decrease in gain on
disposal of an intangible asset and lower quantities of services delivered to
the Systems Solutions operating segment. This decrease was partly offset by a
gain resulting from the free replacement of old mobile communication technology
as well as an increase due to the sale of equity interest in CAP Customer
Advantage Program GmbH, as of January 30, 2009.
Other
operating income decreased in 2008 primarily due to a gain on disposal of assets
in 2008. The gains on the sale of T-Online Spain and T-Online France in 2007
were larger than the gain realized on the sale of a mobile communication asset
in 2008.
Other
operating expenses increased in 2009 as a result of the discount and service
liability in connection with the sale of receivables in the third quarter of
2009. Other operating expenses declined in 2008 due to lower losses on disposal
of assets.
Profit
from operations increased in 2009 as a result of the effects described
above. Profit from operations decreased in 2008 as a result of the effects
described above.
Capital
expenditures
An
increase in capital expenditures in 2009 is attributable to expenditures
relating to the fixed network, stemming mainly from investments in the IP
transport platform, broadband roll-out, and IT systems. Capital expenditures in
mobile communications mainly consist of network expansions with a focus on UMTS
sites, capacity expansion and expenditures in IT products. We intend to focus
our investment priorities in Germany on growth and innovation, particularly
further integrated and value-enhanced broadband expansion in fixed-network and
mobile communications as well as quality and service
initiatives.
The
following table presents selected financial information concerning the United
States operating segment:
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Total
revenues
|
|
|
15,471 |
|
|
|
14,957 |
|
|
|
14,075 |
|
|
|
3.4 |
|
|
|
6.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(8,051 |
) |
|
|
(7,582 |
) |
|
|
(7,109 |
) |
|
|
(6.2 |
) |
|
|
(6.7 |
) |
|
Selling
expenses
|
|
|
(4,654 |
) |
|
|
(4,513 |
) |
|
|
(4,381 |
) |
|
|
(3.1 |
) |
|
|
(3.0 |
) |
|
General
and administrative expenses
|
|
|
(512 |
) |
|
|
(567 |
) |
|
|
(507 |
) |
|
|
9.7 |
|
|
|
(11.8 |
) |
|
Other
operating income
|
|
|
14 |
|
|
|
19 |
|
|
|
11 |
|
|
|
(26.3 |
) |
|
|
72.7 |
|
|
Other
operating expenses
|
|
|
(35 |
) |
|
|
(15 |
) |
|
|
(72 |
) |
|
|
n.a. |
|
|
|
79.2 |
|
|
Profit
from operations
|
|
|
2,233 |
|
|
|
2,299 |
|
|
|
2,017 |
|
|
|
(2.9 |
) |
|
|
14.0 |
|
|
Capital
expenditures
|
|
|
(2,666 |
) |
|
|
(2,540 |
) |
|
|
(1,958 |
) |
|
|
(5.0 |
) |
|
|
(29.7 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Total
revenues
|
|
|
15,471 |
|
|
|
14,957 |
|
|
|
14,075 |
|
|
|
3.4 |
|
|
|
6.3 |
|
|
Service
revenues
|
|
|
13,337 |
|
|
|
12,813 |
|
|
|
12,017 |
|
|
|
4.1 |
|
|
|
6.6 |
|
|
Equipment
sales
|
|
|
1,718 |
|
|
|
1,550 |
|
|
|
1,478 |
|
|
|
10.8 |
|
|
|
4.9 |
|
|
Other
|
|
|
416 |
|
|
|
594 |
|
|
|
580 |
|
|
|
(30.0 |
) |
|
|
2.4 |
|
|
Average
customers (in millions)
|
|
|
33.3 |
|
|
|
31.2 |
|
|
|
26.8 |
|
|
|
6.7 |
|
|
|
16.4 |
|
|
ARPU
(in €)
|
|
|
33 |
|
|
|
34 |
|
|
|
37 |
|
|
|
(2.9 |
) |
|
|
(8.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Revenues
Due to a
positive currency translation effect in 2009, total revenues at T-Mobile USA
grew year-on-year by EUR 514 million, or 3.4 % compared to 2008. In
U.S. dollars, the operating segment total revenues decreased due primarily to
lower service revenues.
In 2008,
total revenues at T-Mobile USA increased by EUR 882 million, or 6.3 % compared
to 2007, primarily due to an increase in the average customer base. The
consolidation of SunCom following its acquisition in February 2008 contributed
EUR 462 million in consolidated revenues in 2008. In local currency, 2008 total
revenues increased significantly more.
Service
Revenues
Service
revenues increased in 2009 by EUR 524 million, or 4.1 % from 2008, due to a
positive currency translation effect. In U.S. dollars, service revenues
decreased due primarily to a decrease in T-Mobile USA branded customers
(wireless customers excluding MVNO and machine-to-machine customers).
Additionally, variable voice revenues declined due to lower roaming revenues and
an increase in the proportion of customers on unlimited rate
plans. These decreases were partially offset by strong growth in
revenues from non-voice services, as customers adopt 3G converged devices and
utilize web access plans.
In 2008,
service revenues increased by EUR 796 million, or 6.6 % from 2007, mainly as a
result of an increase in the average customer base. Revenues from non-voice
services increased at a greater rate than the increase in the average customer
base in 2008 compared to 2007, due to increased usage of messaging and data
services.
Equipment
Sales
The
increase in equipment sales revenues in 2009 by EUR 168 million, or 10.8 % from
2008, was driven in part by currency translation impacts and an increased sales
volume of more expensive 3G devices in 2009, compared to 2008.
In 2008,
equipment sales increased by EUR 72 million, or 4.9% from 2007, driven by an
increased volume of equipment sales as a result of increased gross customer
additions and higher volumes of handset upgrade sales in 2008, compared to
2007.
Other
Revenues
Other
revenues decreased year-on-year by EUR 178 million, or 30.0 % due to lower
customer activation revenues compared to 2008 and completing the transition of
certain AT&T customers to the AT&T network in 2009, related to a network
sharing agreement implemented in the first quarter of 2005.
Other
revenues were EUR 594 million in 2008, a slight increase compared to other
revenues of EUR 580 million in 2007.
Operating
Expenses and Profit from Operations
Cost
of Sales
Cost of
sales includes the cost of goods sold from the sale of equipment as well as
costs related to operating the network, such as customer roaming, cell site and
line leases, and depreciation of network assets.
In 2009,
cost of sales increased by EUR 469 million, or 6.2 %, compared to
2008. Exchange rate effects increased cost of sales in 2009. In local
currency, the increase in cost of sales in 2009 related primarily to increased
cost of goods sold associated with higher volumes of more expensive 3G handset
sales. Additionally, network costs increased due to the upgrade of
the 2G network and expansion of the 3G network, partially offset by lower
roaming costs.
In 2008,
cost of sales increased by EUR 473 million, or 6.7 %, compared to 2007. This
increase was partially offset by exchange rate movements between the U.S. dollar
and the euro. The increase in cost of sales between 2007 and 2008 was
considerably higher in local currency. Most of this increase was due to
increased network costs associated with a larger customer base. A higher volume
of handset sales, driven by increased subscriber gross additions, increased the
cost of goods sold within cost of sales year on year.
Selling
Expenses
Selling
expenses include all expenses relating to sales, including, among other things,
commissions and other compensation paid to retail sales employees and
third-party dealers, call center and customer care expenses, marketing costs and
billing services.
In 2009,
selling expenses increased by EUR 141 million compared to the prior year due to
the impact of exchange rate movements between the U.S. dollar and the
euro. In local currency, selling expenses decreased due primarily to
lower commission costs related to a decrease in T-Mobile USA branded customer
additions. This decrease was offset partially by an increase in
personnel costs as a result of retail distribution growth
In 2008,
selling expenses increased by EUR 132 million, or 3.0 % compared to 2007. The
main reasons for this increase was growth in gross customer additions compared
to the prior year and an increase in selling-related personnel
costs. This increase was partially offset by exchange rate movements
between the U.S dollar and the euro.
General
and Administrative Expenses
General
and administrative expenses include all costs allocated to core administrative
functions that are not directly attributable to the cost of sales or selling
activities, including, among other items, costs relating to support functions
such as finance, human resources, general management, communications, strategy
and legal.
In 2009,
the decrease in general and administrative expenses by EUR 55 million, or 9.7 %
compared to 2008, was due primarily to lower variable compensation
expense.
In 2008,
general and administrative expenses increased by EUR 60 million, or 11.8 %
compared to 2007. This increase is primarily due to an increase in
the number of employees.
Other
Operating Income and Expenses
Other
operating income was higher in 2008 than both 2009 and 2007 due to insurance
proceeds received in 2008.
In 2009,
other operating expenses increased due to higher losses on the disposition of
non-current assets, in particular the disposal of obsolete technical equipment
and machinery. The decrease in 2008 as compared with 2007 relates to higher
disposition losses in 2007.
Profit
from operations decreased in 2009 by 2.9 % due to the factors described
above.
In 2010,
T-Mobile USA will focus on attracting and retaining a loyal customer base.
Results are expected to be positively impacted primarily by growth in non-voice
services and a continued focus on cost saving initiatives, offset by market
driven declines in voice revenues per customer. Revenue and profit are
expected to be broadly stable in 2010 in an increasingly mature U.S. market.
However, exchange rate changes, regulatory changes, and competitive pressures
may significantly affect revenues and profits in euros.
Capital
Expenditures
Capital
expenditures increased year-on-year to EUR 2.7 billion from EUR 2.5 billion. In
U.S. dollars, cash capex decreased slightly year-on-year driven by decreases in
information technology and spectrum purchases. Network-related capex
remained consistent year-on-year due to the continued focus on the improvement
of network quality and expansion of network coverage as well as the roll-out of
the 3G (UMTS/HSPA) network. By the end of 2009, T-Mobile USA’s 3G
network covered over 205 million people, almost doubling the coverage of
T-Mobile USA’s 3G network in 2008.
Total
Revenues
Total
revenues include both net revenues from external customers and revenues from
other entities within the Deutsche Telekom Group. Total revenues are mainly
comprised of service revenues. Service revenues are comprised of revenues
generated by customers for services, such as voice services, including incoming
and outgoing calls and non-voice services, such as messaging SMS and data
services, as well as roaming revenues, monthly charges and revenues from visitor
roaming.
Reduced
mobile termination fees, as determined by the regulatory authorities in the
United Kingdom, The Netherlands, the Czech Republic, Austria and Poland
negatively affected total revenues in 2009. These decreased mobile termination
fees will continue to have a negative impact on total revenues in 2010 and
beyond. We believe that mobile termination fees will further decrease in our
European markets in the future. In response, our Europe operating segment
intends to stimulate increased demand for voice usage and data products and
services in order to counter expected industry price decreases.
Our
markets in the Europe operating segment are relatively mature and saturated with
a very high rate of mobile telephone penetration. As a result, we expect that
the growth in the number of our customers in these markets will be significantly
lower than in past years, and that the focus of competition will continue to
shift from customer acquisition to customer retention.
The
following table presents selected financial information for our Europe operating
segment:
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Revenues
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
United
Kingdom(1)
|
|
|
3,390 |
|
|
|
4,051 |
|
|
|
4,812 |
|
|
|
(16.3 |
) |
|
|
(15.8 |
) |
|
Poland(1)
|
|
|
1,757 |
|
|
|
2,260 |
|
|
|
1,965 |
|
|
|
(22.3 |
) |
|
|
15.0 |
|
|
The
Netherlands(1)(2)
|
|
|
1,807 |
|
|
|
1,806 |
|
|
|
1,318 |
|
|
|
0.1 |
|
|
|
37.0 |
|
|
Czech
Republic(1)(3)
|
|
|
1,191 |
|
|
|
1,329 |
|
|
|
1,171 |
|
|
|
(10.4 |
) |
|
|
13.5 |
|
|
Austria(1)(4)
|
|
|
1,038 |
|
|
|
1,085 |
|
|
|
1,182 |
|
|
|
(4.3 |
) |
|
|
(8.2 |
) |
|
Other(5)
|
|
|
909 |
|
|
|
896 |
|
|
|
858 |
|
|
|
1.5 |
|
|
|
4.4 |
|
|
Reconciliation(6)
|
|
|
(58 |
) |
|
|
(73 |
) |
|
|
(72 |
) |
|
|
20.5 |
|
|
|
(1.4 |
) |
|
Total
revenues
|
|
|
10,034 |
|
|
|
11,354 |
|
|
|
11,234 |
|
|
|
(11.6 |
) |
|
|
1.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(6,684 |
) |
|
|
(7,984 |
) |
|
|
(8,105 |
) |
|
|
16.3 |
|
|
|
1.5 |
|
|
Selling
expenses
|
|
|
(2,223 |
) |
|
|
(2,479 |
) |
|
|
(2,489 |
) |
|
|
10.3 |
|
|
|
0.4 |
|
|
General
and administrative expenses
|
|
|
(359 |
) |
|
|
(421 |
) |
|
|
(416 |
) |
|
|
14.7 |
|
|
|
(1.2 |
) |
|
Operating
income
|
|
|
270 |
|
|
|
241 |
|
|
|
272 |
|
|
|
12.0 |
|
|
|
(11.4 |
) |
|
Other
operating expenses
|
|
|
(1,943 |
) |
|
|
(215 |
) |
|
|
(410 |
) |
|
n.a.
|
|
|
|
47.6 |
|
|
Profit
(loss) from operations
|
|
|
(905 |
) |
|
|
496 |
|
|
|
86 |
|
|
n.a.
|
|
|
n.a.
|
|
|
Capital
expenditures
|
|
|
(879 |
) |
|
|
(1,152 |
) |
|
|
(1,148 |
) |
|
|
23.7 |
|
|
|
(0.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
These
amounts relate to each subsidiary’s respective, separate financial
statements (single-entity financial statements adjusted for uniform group
accounting policies and reporting currency), without taking into
consideration consolidation effects at the operating segment level (which
effects are included under “Reconciliation” in the table) or at the
Deutsche Telekom Group level.
|
|
(2)
|
Includes
Orange Nederland fully consolidated as of October 1, 2007 and
Online Netherlands as of June 1,
2008.
|
|
(3)
|
Includes
fixed line retail business from Czeske Radiokomunikace consolidated as of
December 2009.
|
|
(4)
|
Investments
in property, plant and equipment and intangible assets (excluding
goodwill) as shown in the cash flow
statement.
|
|
(5)
|
Other
includes mainly International Carrier Sales and Solutions (ICSS) and to a
lesser extent certain support functions provided to our other mobile
communications subsidiaries. As a result of the new structure of our
operating segments from July 1, 2009, ICSS became part of the Europe
operating segment. Prior-year figures have been adjusted accordingly. ICSS
is responsible for our international wholesale business. It provides
telecommunications and other companies with worldwide direct access to our
international telecommunications network. In each of the last three years,
almost 60% of ICSS revenues were generated with Deutsche Telekom
subsidiary companies and were thus eliminated in the consolidation on a
Deutsche Telekom group level.
|
|
(6)
|
Reconciliation
line includes intra-segment revenues at the Europe operating segment
level.
|
United
Kingdom
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Service revenues(1)
|
|
|
3,080 |
|
|
|
3,678 |
|
|
|
4,350 |
|
|
|
(16.3 |
) |
|
|
(15.4 |
) |
|
Sales
of terminal equipment
|
|
|
142 |
|
|
|
188 |
|
|
|
225 |
|
|
|
(24.5 |
) |
|
|
(16.4 |
) |
|
Other
|
|
|
168 |
|
|
|
185 |
|
|
|
237 |
|
|
|
(9.2 |
) |
|
|
(21.9 |
) |
|
Total
revenues
|
|
|
3,390 |
|
|
|
4,051 |
|
|
|
4,812 |
|
|
|
(16.3 |
) |
|
|
(15.8 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)(2)
|
|
|
12.2 |
|
|
|
11.9 |
|
|
|
11.8 |
|
|
|
2.5 |
|
|
|
0.8 |
|
|
ARPU
(in €)(2)
|
|
|
21 |
|
|
|
26 |
|
|
|
31 |
|
|
|
(19.2 |
) |
|
|
(16.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Does
not include revenues earned from Virgin Mobile customers. These revenues
are not included in the service revenues component of the ARPU
calculation.
|
|
(2)
|
Does
not include Virgin Mobile customers in the average number of customers
component of the ARPU calculation.
|
Total
revenues in the United Kingdom decreased by EUR 661 million, or 16.3%, to EUR
3,390 million in 2009, from EUR 4,051 million in 2008. The decrease in revenues
in the United Kingdom was predominantly a result of the significant negative
currency translation effect resulting from the development of the pound sterling
to the euro. In local currency, service revenues and terminal equipment revenues
decreased, while other revenues increased slightly. Total revenues in the United
Kingdom decreased by EUR 761 million, or 15.8%, to EUR 4,051
million in 2008, from EUR 4,812 million in 2007. This decrease was
predominantly due to the significant negative currency translation effect from
the development of the pound sterling to the euro. In local currency, service
revenues, terminal equipment revenues and other revenues decreased
slightly.
Service
revenues declined by EUR 598 million, or 16.3%, to EUR 3,080 million in
2009, compared to EUR 3,678 million in 2008. Aside from the
significant negative currency translation effect, the decrease in service
revenues was attributable to lower revenues from voice services, which was
caused by decreasing prices as a result of regulatory decisions and competitive
pressure. This decrease was partially offset by an increase in revenues from
non-voice services caused by an increased usage of these services. Service
revenues declined by EUR 672 million, or 15.4%, to EUR 3,678 million in
2008, compared to EUR 4,350 million in 2007. Aside from the
significant negative currency translation effect, the decrease in service
revenues was attributable to lower voice revenues primarily as a result of price
reductions due to competitive pressures. This decrease was partially offset by
an increase in non-voice revenues with a growing number of customers using
non-voice services and a growing non-voice usage per subscriber.
ARPU in
the United Kingdom declined to EUR 21 in 2009 compared to EUR 26 in 2008,
predominantly as a result of the unfavorable currency translation effect
resulting from the development of the pound sterling to the euro. Furthermore
declining prices as a result of regulatory decisions and competitive pressures
impacted the ARPU. A higher proportion of contract customers in the total
average customer base partially offset the overall decline. ARPU in the United
Kingdom declined to EUR 26 in 2008, compared to EUR 31 in 2007,
primarily as a result of the significant negative currency translation effect
from the development of the pound sterling to the euro. In addition, the
decrease was attributable to a slight decrease in revenues from voice services,
partially offset by an increase in the usage of non-voice services.
Revenues
from sales of terminal equipment decreased in 2009 compared with 2008. In
addition to the negative currency translation effect, this decline was mainly
influenced by focusing on SIM card-only sales. In 2008, revenues from sales of
terminal equipment decreased compared with 2007 primarily due to negative
currency translation effects.
Other
revenues decreased in 2009 compared with 2008 mainly as a result of the negative
currency translation effect resulting from the development of the pound sterling
to the euro. Other revenues decreased by EUR 52 million, to
EUR 185 million in 2008, compared to EUR 237 million in
2007, mainly due to the negative currency translation effects.
Poland
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Service
revenues
|
|
|
1,696 |
|
|
|
2,196 |
|
|
|
1,889 |
|
|
|
(22.8 |
) |
|
|
16.3 |
|
|
Sales
of terminal equipment
|
|
|
42 |
|
|
|
37 |
|
|
|
48 |
|
|
|
13.5 |
|
|
|
(22.9 |
) |
|
Other
|
|
|
19 |
|
|
|
27 |
|
|
|
28 |
|
|
|
(29.6 |
) |
|
|
(3.6 |
) |
|
Total
revenues
|
|
|
1,757 |
|
|
|
2,260 |
|
|
|
1,965 |
|
|
|
(22.3 |
) |
|
|
15.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
13.4 |
|
|
|
13.0 |
|
|
|
12.6 |
|
|
|
3.1 |
|
|
|
3.2 |
|
|
ARPU
(in €)
|
|
|
11 |
|
|
|
14 |
|
|
|
12 |
|
|
|
(21.4 |
) |
|
|
16.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues in Poland decreased by EUR 503 million, or 22.3%, to EUR
1,757 million in 2009, compared to EUR 2,260 million in 2008, mainly
as a result of lower service revenues, primarily driven by negative currency
translation effect between the Polish zloty and the euro. In local currency,
revenues decreased as well. Total revenues in Poland increased by EUR
295 million, or 15.0%, to EUR 2,260 million in 2008, compared to EUR
1,965 million in 2007. The development between the Polish zloty and the
euro had a positive currency translation effect. In local currency, revenues
also increased, primarily due to an increase of service revenues.
Service
revenues decreased by EUR 500 million to EUR 1,696 million in 2009
compared to 2008 mainly as a result of the negative translation effect. In
addition, the decline resulted from regulatory decisions lowering termination
rates. In local currency, service revenues also decreased. Service revenues
increased by EUR 307 million to EUR 2,196 million in 2008, compared to
2007 as a result of a larger average customer base and a higher average usage
per customer as well as a higher proportion of contract customers in the overall
average customer base. In local currency, service revenues also
increased.
ARPU
decreased to EUR 11 in 2009 from EUR 14 in 2008, primarily as a result of a
negative currency translation effect and lower price per minute, primarily due
to termination rates cut. Both effects were partially offset by an increase in
usage per customer as well as an increase of contract customers in the overall
average customer base. ARPU increased to EUR 14 in 2008 from EUR 12 in 2007.
ARPU was positively affected by a higher share of contract customers, as well as
a positive currency translation effect.
Revenues
from sales of terminal equipment increased in 2009 compared to 2008 due to the
introduction of wholesale sales of terminal equipment in 2009. In local
currency, revenues from sales of terminal equipment also increased. Revenues
from sales of terminal equipment decreased by EUR 11 million in 2008, compared
to 2007 due to a decrease in number of mobile devices sold. In local currency,
revenues from sales of terminal equipment also decreased.
The
Netherlands
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Service
revenues
|
|
|
1,512 |
|
|
|
1,558 |
|
|
|
1,223 |
|
|
|
(3.0 |
) |
|
|
27.4 |
|
|
Sales
of terminal equipment
|
|
|
106 |
|
|
|
87 |
|
|
|
53 |
|
|
|
21.8 |
|
|
|
64.2 |
|
|
Other
|
|
|
189 |
|
|
|
161 |
|
|
|
42 |
|
|
|
17.4 |
|
|
n.a.
|
|
|
Total
revenues
|
|
|
1,807 |
|
|
|
1,806 |
|
|
|
1,318 |
|
|
|
0.1 |
|
|
|
37.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
5.3 |
|
|
|
5.3 |
|
|
|
3.2 |
|
|
|
0.0 |
|
|
|
65.6 |
|
|
ARPU
(in €)
|
|
|
24 |
|
|
|
24 |
|
|
|
32 |
|
|
|
0.0 |
|
|
|
(25.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
In 2009,
total revenues remained stable compared with 2008. Increases in terminal
equipment revenues and other revenues offset the decline in service revenues.
Total revenues at T-Mobile Netherlands increased by EUR 488 million, or
37.0%, to EUR 1,806 million in 2008, compared to
EUR 1,318 million in 2007. The full-year consolidation of Orange
Nederland excluding internal revenues between Orange Nederland and T-Mobile
Netherlands contributed net EUR 397 million to this increase in revenues. The
full-year consolidation of Online Netherlands contributed EUR 23 million to this
increase in revenues.
Service
revenues decreased by EUR 46 million, to EUR 1,512 million in 2009
compared to EUR 1,558 million in 2008. This decrease was primarily a
result of price reductions due to competitive pressures and regulatory mandated
roaming and termination price cuts. Service revenues increased by
EUR 335 million, to EUR 1,558 million in 2008, compared to
EUR 1,223 million in 2007. The full-year consolidation of Orange
Nederland contributed EUR 374 million to this increase. This effect was
partially offset by a lower usage by contract customers and a lower share of
contract customers in the overall customer base.
ARPU
remained stable in 2009 compared with 2008. Increased revenues from non-voice
services and an increased share of contract customers in the overall customer
base compensated for the negative effect resulting from price reductions. ARPU
decreased by EUR 8 to EUR 24 in 2008, compared with EUR 32 in 2007. The
full-year consolidation of Orange Nederland had a negative impact on T-Mobile
Netherlands’ ARPU development primarily due to the lower ARPU of Orange
customers. Another factor in the decline was a decrease in contract ARPU at
T-Mobile Netherlands.
The
increase in sales of terminal equipment in 2009 compared with 2008 and in 2008
compared with 2007 was mainly due to an increased volume and the sale of higher
value terminal equipment.
Other
revenues mainly consist of revenues from Online Netherlands and MVNOs. In 2009,
other revenues increased mainly as a result of an increase in Online Netherlands
broadband revenues due to the first time full-year consolidation of Online
Netherlands. Overall, MVNO revenues slightly decreased mainly as a result of the
termination of our contract with Lycamobile. In 2009, T-Mobile Netherlands
entered into an agreement with Tele2 Netherlands Holding N.V., which is a MVNO.
As a result, Tele2 migrated its customers’ traffic from KPN Mobile to the
T-Mobile Netherlands network. Although this contract with Tele2 positively
contributed to the development of other revenues from MVNOs, it only partially
offset the negative effect of the termination of the contract with Lycamobile.
Other revenues increased by EUR 119 million, to EUR 161 million
in 2008, compared to EUR 42 million in 2007, primarily due to an
increase in MVNO revenues as a result of calls from Lycamobile customers being
routed through the T-Mobile Netherlands network. The first-time inclusion of
revenues from Online Netherlands’ customers further contributed to the increase
in 2008.
Czech
Republic
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Service
revenues
|
|
|
1,142 |
|
|
|
1,283 |
|
|
|
1,116 |
|
|
|
(11.0 |
) |
|
|
15.0 |
|
|
Sales
of terminal equipment
|
|
|
39 |
|
|
|
40 |
|
|
|
49 |
|
|
|
(2.5 |
) |
|
|
(18.4 |
) |
|
Other
|
|
|
10 |
|
|
|
6 |
|
|
|
6 |
|
|
|
66.7 |
|
|
|
0.0 |
|
|
Total
revenues
|
|
|
1,191 |
|
|
|
1,329 |
|
|
|
1,171 |
|
|
|
(10.4 |
) |
|
|
13.5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
5.4 |
|
|
|
5.3 |
|
|
|
5.2 |
|
|
|
1.9 |
|
|
|
1.9 |
|
|
ARPU
(in €)
|
|
|
18 |
|
|
|
20 |
|
|
|
18 |
|
|
|
(10.0 |
) |
|
|
11.1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues in the Czech Republic decreased by EUR 138 million, or 10.4%,
to EUR 1,1,91 million from EUR 1,329 million in 2008 primarily as a
result of a decrease in service revenues. The development of the Czech koruna in
relation to the euro had a major negative impact on our revenues in 2009
compared with 2008. Total revenues in the Czech Republic increased by
EUR 158 million, or 13.5%, to EUR 1,329 million in 2008,
compared to EUR 1,171 million in 2007. The increase in total revenues
was mainly related to a positive currency translation effect from the
development of the Czech koruna and the euro and increased service revenues, as
a result of having a larger average customer base. In local currency, total
revenues also increased.
Service
revenues decreased by EUR 141 million in 2009, to
EUR 1,142 million. The decrease in service revenues was mainly a
result of a negative currency translation effect of the Czech koruna in relation
to the euro. In addition, negative price effects from competition and regulation
contributed to the decline in service revenues. Service revenues increased by
EUR 167 million in 2008, to EUR 1,283 million. This increase
was mainly a result of a larger average customer base and a higher share of
contract customers in the overall average customer base.
ARPU in
the Czech Republic decreased to EUR 18 in 2009, compared to EUR 20 in 2008.
Negative currency translation effects as well as negative price effects were
only partly offset by an increased voice usage per customer and a higher
proportion of contract customers in the total average customer base. ARPU in the
Czech Republic increased to EUR 20 in 2008, compared to EUR 18 in 2007. Negative
effects from regulation of roaming fees imposed by the European Commission were
offset by favorable foreign exchange rate effects between the Czech koruna and
the euro, and increased voice usage per customer as a result of a higher
proportion of contract customers in the total average customer
base.
The
decline in revenues from sales of terminal equipment in 2009 was mainly driven
by the unfavorable foreign exchange rate effects between the Czech koruna and
the euro. Revenues from sales of terminal equipment decreased by
EUR 9 million, to EUR 40 million in 2008, compared to
EUR 49 million in 2007, corresponding with a lower volume of handsets
sold.
In
December 2009, T-Mobile Czech Republic acquired the fixed line retail business
from Czeske Radiokomunikace and has therefore fully consolidated this fixed line
retail business as of December 1, 2009. The acquisition lead to an increase in
other revenues compared with 2008.
Austria
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Service
revenues
|
|
|
989 |
|
|
|
1,038 |
|
|
|
1,111 |
|
|
|
(4.7 |
) |
|
|
(6.6 |
) |
|
Sales
of terminal equipment
|
|
|
21 |
|
|
|
22 |
|
|
|
26 |
|
|
|
(4.5 |
) |
|
|
(15.4 |
) |
|
Other
|
|
|
28 |
|
|
|
25 |
|
|
|
45 |
|
|
|
12.0 |
|
|
|
(44.4 |
) |
|
Total
revenues
|
|
|
1,038 |
|
|
|
1,085 |
|
|
|
1,182 |
|
|
|
(4.3 |
) |
|
|
(8.2 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
3.4 |
|
|
|
3.3 |
|
|
|
3.2 |
|
|
|
3.0 |
|
|
|
3.1 |
|
|
ARPU
(in €)
|
|
|
24 |
|
|
|
26 |
|
|
|
29 |
|
|
|
(7.7 |
) |
|
|
(10.3 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
revenues in Austria decreased by EUR 47 million in 2009, or 4.3%, to EUR
1,038 million from EUR 1,085 million in 2008. This decline was a
result of a decline in service revenues. Total revenues in Austria decreased by
EUR 97 million in 2008, or 8.2%, to EUR 1,085 million, from
EUR 1,182 million in 2007. This decrease was mainly the result of
lower service revenues and other revenues.
Service
revenues decreased by EUR 49 million in 2009, to
EUR 989 million. This decrease was mainly due to the regulatory
reduction of roaming fees, further reductions of mobile termination rates and
lower tariffs as a result of competitive pressure in the Austrian market.
Service revenues decreased by EUR 73 million in 2008, to
EUR 1,038 million. This decrease was mainly due to the regulatory
reduction of roaming fees, further reductions of mobile termination rates and
lower tariffs as a result of aggressive competitive pressures in the Austrian
market.
ARPU in
Austria decreased to EUR 24 in 2009, compared to EUR 26 in 2008. This
decrease was due to regulatory reductions of roaming fees, further reductions of
mobile termination rates and lower tariffs as a result of competitive pressure
in the Austrian market. These effects could not be offset by increased usage by
our customers or the slightly higher proportion of contract customers in the
total average customer base in 2009. ARPU in Austria decreased to EUR 26 in
2008, compared to EUR 29 in 2007. This decrease was due to lower tariffs as
a result of competitive pressures, which could not be offset by the higher usage
or higher proportion of contract customers in the total average customer base in
2008.
Revenues
from sales of terminal equipment slightly decreased in 2009 compared with 2008.
Revenues from sales of terminal equipment decreased in 2008, primarily due to
lower gross customers additions in 2008 compared with 2007, which were
particularly influenced by the introduction in 2007 of the Fairplay (flat rate)
portfolio.
Other
revenues increased in 2009 primarily due to higher revenues from net activation,
disconnection and alteration fees. Other revenues decreased in 2008 compared
with 2007 primarily as a result of the lack of fixed-line revenues generated by
fixed-line business due to the sale of the tele.ring fixed-line network in
2007.
Operating
Expenses and Profit from Operations
In 2009,
the cost of sales decreased compared with 2008 as a result of declines in all
mobile network operators in the Europe operating segment. Almost one half of the
decline in cost of sales was attributable to currency translation effects. The
development of the pound sterling, the Polish zloty and the Czech koruna in
relation to the euro positively influenced the cost of sales. On a local
currency basis, the cost of sales declined as well, which was mainly driven by
T-Mobile Netherlands and PTC, and to a lesser extent by T-Mobile Austria,
T-Mobile UK and T-Mobile Czech Republic. In T-Mobile Netherlands, the main
driver for the decline in cost of sales was lower depreciation as well as lower
interconnection costs, which were related to lower service revenues. In Poland,
the decline in interconnection costs was the main driver for the decline in cost
of sales. Lower interconnection costs related to the decline in service revenues
also supported the year on year cost of sales reduction in the other affiliates.
Furthermore, in the UK lower personnel costs as a result of a lower year on year
headcount in technology supported the decline in cost of sales in 2009 compared
with 2008.
The
slight decline in cost of sales in 2008 compared with 2007 was mainly
attributable to favorable overall currency translation effects, which were
attributable to the development of the pound sterling in relation to the euro.
Unfavorable developments of the Polish zloty and the Czech koruna in relation to
the euro partly offset the effect resulting from the pound sterling development.
On a local currency basis, the cost of sales of the Europe operating segment
slightly increased. This increase was mainly attributable to T-Mobile
Netherlands, where cost of sales increased mainly due to the full-year
consolidation of Orange Nederlands, including Online Netherlands, in 2008
compared to three months in 2007. The full-year consolidation of Orange
Nederland contributed EUR 338 million to cost of sales in 2008. Lower cost of
sales at T-Mobile Austria, T-Mobile UK and PTC partly offset the increase in
cost of sales in T-Mobile Netherlands. In the United Kingdom the declining
revenues were accompanied by lower revenue related costs, in particular,
interconnection and roaming fees. In addition, depreciation of property, plant
and equipment was lower in the United Kingdom, Austria and Poland compared with
2007.
In 2009,
overall selling expenses decreased compared to 2008. This decline was mainly
attributable to favorable effects resulting from the development of the pound
sterling, the Polish zloty and the Czech koruna in relation to the euro. On a
local currency basis, the year on year reduction in selling expenses was
partially caused by T-Mobile UK due to lower commissions paid to dealers as well
as lower call center and customer care costs as a result of a lower headcount.
T-Mobile Czech Republic recorded a year on year reduction in selling
expenses mainly due to a decrease in the valuation allowances for accounts
receivables. T-Mobile Austria achieved reductions in selling expenses mainly by
reducing call center and customer care costs as well as indirect selling
expenses. At T-Mobile Netherlands, the main driver for the decline was lower
marketing and billing costs. In Poland, selling expenses increased year on year
in local currency mainly due to a change in dealer contracts which resulted in
prepay voucher commissions being recorded as cost in 2009 whereas they were
shown as reductions in revenue in 2008.
In 2008,
overall selling expenses remained stable compared to 2007. Lower selling
expenses at T-Mobile UK were offset by higher selling expenses at T-Mobile
Netherlands and PTC. In the United Kingdom, the lower selling expenses were the
result of currency translation effects of the pound sterling in relation to the
euro. In local currency, T-Mobile UK’s selling expenses increased slightly. The
higher selling expenses at T-Mobile Netherlands were due to the full-year
consolidation of Orange Nederland, compared with three months in 2007. The
full-year consolidation of Orange Nederland, including Online Netherlands,
contributed EUR 62 million to this increase. In addition, higher
commissions for indirect sales channels contributed to the increase. At PTC,
selling expenses increased as a result of higher personnel expenses due to an
increase in headcount and as a result of currency translation effects resulting
from the development of the Polish zloty in relation to the euro.
In 2009,
general and administrative expenses decreased compared to 2008. This decline was
mainly attributable to favorable currency translation effects resulting from the
development of the pound sterling, the Polish zloty and to a lower extent to the
Czech koruna in relation to the euro. On a local currency basis, slight
increases in general and administrative expenses at T-Mobile UK were compensated
by declining general and administrative expenses at PTC.
In 2008,
general and administrative expenses slightly increased compared to 2007. Cost
efficiencies at PTC and T-Mobile Austria were offset largely by higher costs
from T-Mobile Netherlands. In The Netherlands, the increase in general and
administrative expenses was due to the full-year consolidation of Orange
Nederland compared with three months in 2007. The full-year consolidation of
Orange Nederland, including Online Netherlands, contributed EUR 31 million to
this increase.
Other
operating income consists of a number of items, such as income from the disposal
of non-current assets, cost reimbursements from Group Headquarters and Shared
Services, external lease income and insurance compensation. Other operating
income increased in 2009 compared with 2008. The increase was mainly a result of
a slightly higher income from third parties at T-Mobile Austria in 2009 compared
with 2008.
In 2008,
other operating income decreased mainly due to lower other operating income at
T-Mobile Austria as a result of lower income from the disposal of non-current
assets.
In 2009,
other operating expenses increased mainly due to the goodwill impairment loss of
EUR 1.8 billion recognized on goodwill of the cash generating unit T-Mobile UK
in the first quarter of 2009, mainly as a consequence of the significant
economic slowdown, fierce competition, and regulatory decisions in the United
Kingdom. Furthermore, an impairment on goodwill at T-Mobile Austria of EUR 47
million was recognized in 2009 as a result of an increased discount rate. In
2008 we recorded a goodwill impairment of EUR 128 million relating to T-Mobile
Austria.
Other
operating expenses decreased in 2008 compared to 2007 mainly due to the
recognition of a goodwill impairment of EUR 128 million relating to T-Mobile
Austria in fiscal year 2008, while 2007 included a goodwill reduction of EUR 327
million at T-Mobile Netherlands.
Capital
Expenditures
Capital
expenditures in the operating segment Europe decreased by EUR 0.3
billion to EUR 0.9 billion in 2009 compared to 2008. Capital expenditures
decreased in Poland, the United Kingdom, Austria and in The Netherlands, which
offset higher year on year capital expenditures in the Czech
Republic
In 2008
capital expenditure slightly increased by EUR 4 million to EUR 1.2 billion
compared to 2007 as the result of increased capital expenditures in Poland and
in The Netherlands, which were almost wholly offset by lower capital
expenditures in the United Kingdom, Austria and the Czech
Republic.
The
Southern and Eastern Europe operating segment generates revenues from mobile
communication services and fixed-line network, data communications, wholesale,
IP/Internet and other services, such as multimedia broadcasting. The following
table presents selected financial information concerning the Southern and
Eastern Europe operating segment.
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Hungary
|
|
|
1,682 |
|
|
|
2,006 |
|
|
|
2,047 |
|
|
|
(16.2 |
) |
|
|
(2.0 |
) |
|
Croatia
|
|
|
1,161 |
|
|
|
1,223 |
|
|
|
1,202 |
|
|
|
(5.1 |
) |
|
|
1.7 |
|
|
Slovakia
|
|
|
974 |
|
|
|
994 |
|
|
|
932 |
|
|
|
(2.0 |
) |
|
|
6.7 |
|
|
Greece
(3)
|
|
|
3,899 |
|
|
|
- |
|
|
|
- |
|
|
n.a.
|
|
|
|
n.a. |
|
|
Romania
|
|
|
1,104 |
|
|
|
- |
|
|
|
- |
|
|
n.a.
|
|
|
|
n.a. |
|
|
Bulgaria
|
|
|
423 |
|
|
|
- |
|
|
|
- |
|
|
n.a.
|
|
|
|
n.a. |
|
|
Other1
|
|
|
553 |
|
|
|
435 |
|
|
|
436 |
|
|
|
27.1 |
|
|
|
(0.2 |
) |
|
Intra-segment
revenues (2)
|
|
|
(111 |
) |
|
|
(13 |
) |
|
|
(17 |
) |
|
n.a.
|
|
|
|
23.5 |
|
|
Total
revenues
|
|
|
9,685 |
|
|
|
4,645 |
|
|
|
4,600 |
|
|
n.a.
|
|
|
|
1.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(5,488 |
) |
|
|
(2,504 |
) |
|
|
(2,611 |
) |
|
n.a.
|
|
|
|
4.1 |
|
|
Selling
expenses
|
|
|
(1,910 |
) |
|
|
(729 |
) |
|
|
(717 |
) |
|
n.a.
|
|
|
|
(1.7 |
) |
|
General
and administrative expenses
|
|
|
(817 |
) |
|
|
(408 |
) |
|
|
(394 |
) |
|
n.a.
|
|
|
|
(3.6 |
) |
|
Operating
income
|
|
|
81 |
|
|
|
82 |
|
|
|
143 |
|
|
|
(1.2 |
) |
|
|
(42.7 |
) |
|
Other
operating expenses
|
|
|
(514 |
) |
|
|
(171 |
) |
|
|
(11 |
) |
|
n.a.
|
|
|
n.a.
|
|
|
Profit
from operations
|
|
|
1,037 |
|
|
|
915 |
|
|
|
1,010 |
|
|
|
13.3 |
|
|
|
(9.4 |
) |
|
Capital
expenditures
|
|
|
(1,610 |
) |
|
|
(865 |
) |
|
|
(732 |
) |
|
(86.1
|
) |
|
|
(18.2 |
) |
|
n.a.—not
applicable
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Other
includes Albania, the F.Y.R.O. Macedonia and
Montenegro.
|
|
(2)
|
Intra-segment
revenues includes revenues among our fixed network and mobile
communication businesses in the Southern and Eastern Europe operating
segment.
|
(3)
OTE-Group consolidated from February 2009.
The
revenue development in our Southern and Eastern Europe operating segment was
impacted by two main effects in 2009. The first time full consolidation of OTE
in February 2009 resulted in a revenue increase of EUR 5,455 million compared to
2008. That increase was partially offset by negative exchange rate
effects, particularly in Hungary, of EUR 210 million. Revenues were also
adversely affected by competitive pressure and regulatory
developments.
Hungary
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Fixed
network revenues
|
|
|
762 |
|
|
|
923 |
|
|
|
976 |
|
|
|
(17.4 |
) |
|
|
(5.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues
|
|
|
860 |
|
|
|
1,006 |
|
|
|
1,004 |
|
|
|
(14.5 |
) |
|
|
0.2 |
|
|
Sales
of terminal equipment
|
|
|
68 |
|
|
|
77 |
|
|
|
81 |
|
|
|
(11.7 |
) |
|
|
(4.9 |
) |
|
Other
|
|
|
32 |
|
|
|
34 |
|
|
|
33 |
|
|
|
(5.9 |
) |
|
|
3.0 |
|
|
Total
mobile communications revenues
|
|
|
960 |
|
|
|
1,117 |
|
|
|
1,118 |
|
|
|
(14.1 |
) |
|
|
(0.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
5.3 |
|
|
|
5.1 |
|
|
|
4.6 |
|
|
|
3.9 |
|
|
|
10.9 |
|
|
ARPU
(in €)
|
|
|
14 |
|
|
|
16 |
|
|
|
18 |
|
|
|
(12.5 |
) |
|
|
(11.1 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other revenues
|
|
|
98 |
|
|
|
122 |
|
|
|
123 |
|
|
|
(19.7 |
) |
|
|
(0.8 |
) |
|
Reconciliation
(1)
|
|
|
(138 |
) |
|
|
(156 |
) |
|
|
(170 |
) |
|
|
11.5 |
|
|
|
8.2 |
|
|
Total
revenues
|
|
|
1,682 |
|
|
|
2,006 |
|
|
|
2,047 |
|
|
|
(16.2 |
) |
|
|
(2.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reconciliation
includes the elimination of revenues between the fixed network, mobile
communications business and other.
|
Fixed
network
The
decrease in fixed network revenues in 2009 was mainly a result of significant
negative currency translation effects from the Hungarian forint to the euro. In
local currency, fixed-network revenues also decreased, primarily as a result of
the decline in the number of fixed-network access lines and lower prices
resulting from competitive pressure. In addition, wholesale services revenues
were slightly lower as a result of decreasing traffic. The decrease in revenues
was partially offset by an increase in IP/Internet revenues, as a result of a
larger number of broadband access lines. The launch of satellite TV services in
November 2008 also partially offset the decline in revenues in
2009.
The
decrease in fixed network revenues in 2008 was due to intense competition in the
traditional fixed-network business and mobile substitution as well as a decline
in wholesale revenues as a result of decreased wholesale traffic. The decrease
in revenues was only partially offset by increases in IP/ Internet revenues
resulting from increased demand for broadband products.
Mobile
communications
Total
mobile communications revenues in Hungary declined in 2009 compared to 2008,
mainly as a result of significant negative currency translation effects from the
Hungarian forint to the euro. In local currency, total revenues decreased
slightly, mainly as a result of regulatory pressure such as the reduction in
mobile termination and roaming rates and to a lesser extent, lower prices due to
the intense competition in the market. These decreases were partly offset by
higher data revenues due to increasing mobile Internet usage. Total revenues in
Hungary declined slightly in 2008 compared to 2007. In 2008, the increasing
usage of mobile Internet contributed positively to revenues. This effect was
largely offset by lower revenues caused by interconnection and roaming
regulatory impact and lower voice revenues from retail customers caused by lower
per minute fees.
ARPU in
Hungary decreased in 2009 compared to 2008, primarily as a result of the
negative currency translation effect. This decline was partially offset by an
increase in the number of contract customers, which tend to have higher ARPU
than prepay customers. ARPU in Hungary decreased in 2008 compared to 2007 due to
decreasing tariffs and lower mobile termination fees, which were partly offset
by higher mobile internet usage per customer.
Revenues
from sales of terminal equipment decreased in 2009 and 2008 due to a reduction
in the number of gross customer additions and, therefore, equipment units sold
compared to 2008. Gross additions declined due to the economic situation in
Hungary and the high mobile penetration rate in a saturated
market. The main reason for the decrease from 2008 to 2007 was less
revenue from upgrades, and also lower average price of phone sets sold to new
customers.
Croatia
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Fixed
network revenues
|
|
|
687 |
|
|
|
720 |
|
|
|
742 |
|
|
|
(4.6 |
) |
|
|
(3.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues
|
|
|
504 |
|
|
|
564 |
|
|
|
541 |
|
|
|
(10.6 |
) |
|
|
4.3 |
|
|
Sales
of terminal equipment
|
|
|
35 |
|
|
|
29 |
|
|
|
27 |
|
|
|
20.7 |
|
|
|
7.4 |
|
|
Other
|
|
|
32 |
|
|
|
23 |
|
|
|
13 |
|
|
|
39.1 |
|
|
|
76.9 |
|
|
Total
mobile communications revenues
|
|
|
571 |
|
|
|
616 |
|
|
|
581 |
|
|
|
(7.3 |
) |
|
|
6.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
2.8 |
|
|
|
2.5 |
|
|
|
2.2 |
|
|
|
12.0 |
|
|
|
13.6 |
|
|
ARPU
(in €)
|
|
|
15 |
|
|
|
19 |
|
|
|
20 |
|
|
|
(21.1 |
) |
|
|
(5.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation
(1)
|
|
|
(97 |
) |
|
|
(113 |
) |
|
|
(121 |
) |
|
|
14.2 |
|
|
|
6.6 |
|
|
Total
revenues
|
|
|
1,161 |
|
|
|
1,223 |
|
|
|
1,202 |
|
|
|
(5.1 |
) |
|
|
1.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reconciliation
includes the elimination of revenues between the fixed network and mobile
communications business.
|
Fixed
network
Fixed
network revenue in 2009 decreased as a result of further competition in
traditional fixed-network business, including fixed-to-mobile substitution, and
a slightly negative exchange rate effect. Revenues from wholesale services also
decreased due to lower volumes. The decline in revenues was partially offset by
an increase in IP/Internet revenues, resulting from a higher number of broadband
and IPTV customers.
In 2008,
fixed network revenue decreased as a result of intense competition in
traditional fixed-network communication and fixed-to-mobile substitution. This
decline in revenue was partially offset by positive exchange rate effects as
well as higher IP/ Internet revenues due to increased demand for broadband
products.
Mobile
communications
Total
revenues in Croatia decreased in 2009 primarily due to a decline in lower
service revenues, partially offset by higher revenues from the sale of terminal
equipment and other revenues. Total revenues in Croatia increased in 2008 mainly
due to an increase in service revenues and, to a lesser extent, to an increase
in revenues from sales of terminal equipment and other revenues. In 2008, the
development of the Croatian kuna and the euro resulted in a positive currency
translation effect.
Service
revenues decreased in 2009. This decrease was caused by lower usage and the
effect of the newly introduced tax on mobile revenue, which was not passed on to
the customers. These impacts were partially offset by a positive currency
translation effect. Service revenues increased in 2008 primarily due to the
larger average customer base.
Other
revenues increased in 2009 and 2008 mainly due to revenues generated via
national roaming agreement with Tele2.
ARPU in
Croatia decreased to EUR 15 in 2009, compared to EUR 19 in 2008,
mainly due to a decrease in usage. ARPU in Croatia decreased to EUR 19 in
2008, compared to EUR 20 in 2007, mainly due to a decrease in contract ARPU
as a result of lower tariffs and competitive pressures.
Slovakia
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Fixed
network revenues
|
|
|
449 |
|
|
|
460 |
|
|
|
459 |
|
|
|
(2.4 |
) |
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues
|
|
|
517 |
|
|
|
537 |
|
|
|
476 |
|
|
|
(3.7 |
) |
|
|
12.8 |
|
|
Sales
of terminal equipment
|
|
|
11 |
|
|
|
9 |
|
|
|
11 |
|
|
|
22.2 |
|
|
|
(18.2 |
) |
|
Other
|
|
|
28 |
|
|
|
25 |
|
|
|
23 |
|
|
|
12.0 |
|
|
|
8.7 |
|
|
Total
mobile communications revenues
|
|
|
556 |
|
|
|
571 |
|
|
|
510 |
|
|
|
(2.6 |
) |
|
|
12.0 |
|
|
Average
customers (in millions)
|
|
|
2.3 |
|
|
|
2.3 |
|
|
|
2.3 |
|
|
|
0.0 |
|
|
|
0.0 |
|
|
ARPU
(in €)
|
|
|
19 |
|
|
|
19 |
|
|
|
17 |
|
|
|
0.0 |
|
|
|
11.8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reconciliation(1)
|
|
|
(31 |
) |
|
|
(37 |
) |
|
|
(37 |
) |
|
|
16.2 |
|
|
|
0.0 |
|
|
Total
revenues
|
|
|
974 |
|
|
|
994 |
|
|
|
932 |
|
|
|
(2.0 |
) |
|
|
6.7 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reconciliation
includes the elimination of revenues between the fixed network and mobile
communications business.
|
Fixed
network
The
decrease in fixed network revenues in 2009 was primarily a result of increased
competition in the traditional fixed-network business. This decrease was
partially offset by an increase in IP/Internet revenues, mainly resulting from
an increase in customers using online- and IPTV-services and an increase in
wholesale revenues due to an increase in the carrier service transit business
..
The
decrease in fixed network revenues in 2008 was due to intense competition in the
traditional fixed-network business and fixed-to-mobile substitution. This
decrease in revenues was partially offset by positive exchange rate effects as
well as by an increase in IP/ Internet revenues resulting from increased demand
for broadband products and, to a lesser extent, an increase in wholesale
revenues due to increased wholesale traffic.
Mobile
communications
Total
mobile communications revenues in Slovakia decreased in 2009 primarily as a
result of a decline in service revenues, which was partially offset by increases
revenues from the sale of terminal equipment and other revenues. Total revenues
in Slovakia increased in 2008 due in part to a positive currency translation
effect. In local currency, revenues also increased, mainly related to an
increase in service revenues. Service
revenues decreased in 2009 primarily as a result of the significant decline in
termination rates. Service revenues increased in 2008 due in part to a positive
currency translation effect. In local currency, service revenues also increased
mainly as a result of a higher proportion of contract customers in the overall
average customer base, which tend to have a higher usage and generate higher
service revenues than prepay customers.
ARPU
remained stable in 2009 compared to 2008. A significant decline in termination
rates was offset by a higher percentage of contract customers in the total
customer base. ARPU increased in 2008 due to a higher share of contract
customers, as well as a positive currency translation effect.
Greece
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Fixed
network revenues
|
|
|
2,311 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Mobile
communications
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Service
revenues
|
|
|
1,535 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Sales
of terminal equipment
|
|
|
273 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Other
|
|
|
38 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
mobile communications revenues |
|
|
1,846 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Average
customers (in millions)
|
|
|
8.9 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
ARPU
(in €)
|
|
|
16 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
Revenues
|
|
|
72 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Reconciliation(1)
|
|
|
(330 |
) |
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Total
revenues(2)
|
|
|
3,899 |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Reconciliation
includes the elimination of revenues between the fixed network , mobile
communications business and other.
|
|
(2)
|
OTE-Group
consolidated from February 2009.
|
Our
revenues in Greece increased in 2009 due to the full consolidation of OTE
beginning in February 2009. From May 2008 until February 2009 we accounted for
our investment in OTE using the equity method.
In 2009,
fixed-network revenues in Greece were affected by growth in the number of
broadband lines and ULLs, the introduction of IPTV and increasing
competition. In 2009, mobile service revenues in Greece were affected
by intense competition, mainly among prepaid customers, following aggressive
competitive moves early in the year. Furthermore, Greek mobile revenues were
heavily impacted by the decline in termination rates.
Operating
Expenses and Profit from Operations
In 2009,
all of the operating expenses for our Southern and Eastern Europe segment were
primarily influenced by the full consolidation of OTE beginning in February
2009. In addition, cost of sales as well as the other categories were
significantly influenced by the currency translation effect of the Hungarian
forint, and to a lesser extent, the Croatian kuna, which lowered our costs on an
euro-basis. Head count reduction in fixed-network businesses and additional cost
cutting programs, such as lower marketing expenses and lower consultancy costs,
further reduced operating costs.
The other
operating expenses include the recognition of goodwill impairments in Greece,
Romania, the F.Y.R.O. Macedonia and Slovakia in the total amount of EUR 481
million. The impairment losses were largely due to the country-specific risk in
connection with the current financial and national crisis in Greece. Other
impairment losses were primarily recognized as a result of the negative
developments in connection with the financial market crisis.
Profit
from operations increased in 2009 due to the first time full consolidation of
OTE. That increase was offset in part by the goodwill impairment charges
recognized in 2009.
Cost of
sales declined in 2008 primarily due to declines in Hungary, which were offset
by increases in Slovakia. The other significant change in operating expenses was
the recognition of impairments totaling EUR 161 million in Hungary and the
F.Y.R.O. Macedonia. Profit from operations declined in 2008 as a result of the
effects described above.
Capital
Expenditures
In 2009,
capital expenditures increased compared with 2008 mainly due to the full
consolidation of OTE. This increase was offset by a negative currency
translation effect, in particular in Hungary. Slightly higher capital
expenditures in Croatia and Montenegro were related to broadband
expansion. In 2008, capital expenditures increased compared to 2007
mainly as a result of currency translation effects in Croatia and Slovakia and
by higher investments in broadband networks.
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Net
revenues
|
|
|
6,083 |
|
|
|
6,368 |
|
|
|
6,911 |
|
|
|
(4.5 |
) |
|
|
(7.9 |
) |
|
Intersegment
revenues
|
|
|
2,715 |
|
|
|
2,975 |
|
|
|
3,660 |
|
|
|
(8.7 |
) |
|
|
(18.7 |
) |
|
Total
revenues
|
|
|
8,798 |
|
|
|
9,343 |
|
|
|
10,571 |
|
|
|
(5.8 |
) |
|
|
(11.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cost
of sales
|
|
|
(7,167 |
) |
|
|
(8,005 |
) |
|
|
(9,166 |
) |
|
|
10.5 |
|
|
|
12.7 |
|
|
Selling
expenses
|
|
|
(1,036 |
) |
|
|
(1,085 |
) |
|
|
(1,039 |
) |
|
|
4.5 |
|
|
|
(4.4 |
) |
|
General
and administrative expenses
|
|
|
(728 |
) |
|
|
(812 |
) |
|
|
(712 |
) |
|
|
10.3 |
|
|
|
(14.0 |
) |
|
Other
operating income
|
|
|
153 |
|
|
|
739 |
|
|
|
164 |
|
|
|
(79.3 |
) |
|
n.a.
|
|
|
Other
operating expenses
|
|
|
(31 |
) |
|
|
(99 |
) |
|
|
(47 |
) |
|
|
68.7 |
|
|
n.a.
|
|
|
Profit
(loss) from operations
|
|
|
(11 |
) |
|
|
81 |
|
|
|
(229 |
) |
|
n.a.
|
|
|
n.a.
|
|
|
Capital
expenditures
|
|
|
(681 |
) |
|
|
(823 |
) |
|
|
(903 |
) |
|
|
17.3 |
|
|
|
8.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
Systems
Solutions’ net revenues (total revenues excluding intersegment revenues) in 2009
amounted to EUR 6,083 million, a decrease of 4.5% compared to 2008. This
decrease was mainly attributable to lower net revenues in Systems Integration,
the Telecommunication unit and Computing & Desktop Services, primarily
caused by decreases in prices and volumes. This decrease was offset in part by
an increase in net revenues at the Computing & Desktop Services unit, (CDS).
This increase at CDS was a result of new contracts won during 2009, which offset
falling prices in the IT business. Due to this additional business, CDS was able
to grow in the international area, partially offsetting the decline in CDS’
business in Germany.
In 2008,
Systems Solutions’ net revenues amounted to EUR 6,368 million, a decrease of
7.8% compared to 2007. This decrease was mainly attributable to changes in the
composition of the Group, especially the sale of Media&Broadcast, and to
lower net revenues in Systems Integration and Telecommunication unit, primarily
caused by decreases in prices and volumes. This decrease was offset in part by
an increase in net revenues at CDS. This increase was a result of additional
contracts won during 2008, which offset falling prices in the IT
business.
Total
Revenues
Systems
Solutions’ total revenues include both net revenues from external customers and
revenues from the Group’s other operating segments and affiliates. In addition
to providing data processing, other information technology services, such as the
provision of computer center services, desktop services and application services
to third parties, T-Systems is the primary provider of such services to the
Deutsche Telekom Group.
The
decrease in total revenues in 2009 compared to 2008 was due to lower external
and intersegment revenues, particularly at CDS and the Telecommunication unit,
primarily as a result of intense competition. The decrease in intersegment
revenues is mainly attributable to the group wide efficiency measures and
personnel reduction program.
The
decrease in total revenues in 2008 compared to 2007 was primarily a result of
the changes in the composition of the group, primarily the divestiture of
Media&Broadcast and transfer of ActiveBilling to the Germany operating
segment and, to a lesser extent, from the decline in total revenues from
telecommunications services as a result of pricing pressure and lower volumes.
In addition, revenues from CDS declined due to lower intersegment revenues,
which primarily resulted from deconsolidation effects.
Intersegment
revenues amounted to EUR 2,715 million in 2009 compared to EUR 2,975 million in
2008, representing an 8.7% decrease. Intersegment revenues decreased primarily
at CDS and the Telecommunications unit in 2009, primarily as a result of reduced
prices and volumes, offset in part by an increase in intersegment revenues at
Systems Integration. Intersegment
revenues amounted to EUR 2,975 million in 2008 compared to EUR 3,667 million in
2007, representing an 18.9% decrease. This decrease was primarily a result of
the transfer of ActiveBilling to the Germany operating segment. Intersegment
revenues decreased primarily at CDS and the Telecommunications unit in 2008,
partially offset by an increase at Systems Integration.
In 2009,
30.9% of total revenues were attributable to intersegment revenues, compared to
31.8% in 2008 and 34.7% in 2007.
In 2009,
domestic operations contributed 69.9% of Systems Solutions’ total revenues,
compared to 71.0% in 2008 and 76.1% in 2007. Domestic total revenues amounted to
EUR 6,153 million in 2009, a decrease of EUR 481 million, or 7.3%, as compared
with EUR 6,634 million in 2008. This decrease was a result of the intense
competition in Germany, particularly in the Telecommunication and CDS business,
and to a lesser extent, in the Systems Integration business. International
revenues amounted to EUR 2,645 million in 2009, a decrease of EUR 64 million, or
2.4%, as compared with EUR 2,709 million in 2008. This decrease was primarily
attributable to lower revenues in the Telecommunication unit and to a lesser
extent in the Systems Integrations unit. This decrease was offset in part by an
increase in the CDS unit, mainly caused by the impact of several international
contracts.
Domestic
total revenues amounted to EUR 6,634 million in 2008, a decrease of EUR 1,411
million, or 17.5%, compared with EUR 8,045 million in 2007. This decrease was a
result of the intense competition in Germany, which affected the CDS business,
and to a lesser extent, the Telecommunications business. International revenues
amounted to EUR 2,709 million in 2008, an increase of EUR 183 million, or 7.2%,
as compared with EUR 2,526 million in 2007. This increase was primarily the
result of the internationalization strategy of T-Systems.
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Computing
& Desktop Services
|
|
|
3,835 |
|
|
|
3,877 |
|
|
|
4,331 |
|
|
|
(1.1 |
) |
|
|
(10.5 |
) |
|
Systems
Integration
|
|
|
1,595 |
|
|
|
1,741 |
|
|
|
1,750 |
|
|
|
(8.4 |
) |
|
|
(0.5 |
) |
|
Telecommunications
|
|
|
3,368 |
|
|
|
3,725 |
|
|
|
4,490 |
|
|
|
(9.6 |
) |
|
|
(17.0 |
) |
|
Total
revenues
|
|
|
8,798 |
|
|
|
9,343 |
|
|
|
10,571 |
|
|
|
(5.8 |
) |
|
|
(11.6 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computing
& Desktop Services
Computing
& Desktop Services revenues are comprised of revenues from:
|
·
|
Desktop
Services & Solutions, which delivers, operates and maintains desktop
systems for customers; and
|
|
·
|
Computing
Services & Solutions, which operates customers’ data centers and
manages customer servers, systems, databases and applications. The
Deutsche Telekom Group was CDS’ largest customer in 2009, 2008, and
2007.
|
In 2009,
35.7% of CDS’ total revenues were intersegment revenues, compared with 38.3% in
2008 and 46.4% in 2007. CDS’
total revenues decreased in 2009, due to lower revenues from PC
workstation-related services within the Deutsche Telekom Group, primarily as a
result of a decrease in prices from cost cutting measures and a decrease in
volumes resulting from a decrease in personnel at Deutsche Telekom in
Germany.
CDS’
total revenues decreased in 2008, due to changes in the composition of the group
and lower revenues from PC workstation-related services within the Deutsche
Telekom Group, primarily as a result of a decrease in prices resulting from cost
cutting measures and a decrease in volumes resulting from a decrease in
personnel at Deutsche Telekom in Germany.
Systems
Integration
Systems
Integration receives revenues from providing advice and assistance for an
enterprise’s entire “plan-build-run” lifecycle. Revenues from Detecon are also
reported under Systems Integration. In 2009, 39.1% of Systems Integration’s
total revenues were intersegment revenues, compared with 35.6% in 2008 and 32.9%
in 2007.
The
decrease in Systems Integration total revenues in 2009 compared to 2008 was
primarily the result of lower external revenues, offset in part due to higher
revenue from Deutsche Telekom Group companies. The decrease in external revenues
was mainly attributable to decreasing prices and lower demand. Additional
business with new customers was not sufficient to compensate for the
price-driven decrease in revenue with existing customers.
The
decrease in Systems Integration total revenues in 2008 compared to 2007 was
primarily the result of lower external revenues, offset in part due to higher
revenues from Deutsche Telekom Group companies. In 2008, net revenues were 64.4%
of Systems Integration’s total revenues, compared to 67.1% in 2007. Initial
successes from the cooperation with Cognizant were not sufficient to compensate
for the price-driven decrease in revenue at Systems Integration.
Telecommunications
Telecommunications
revenues consist of sales of telecommunications products and services to
T-Systems’ customers. In 2009, 21.4% of the Telecommunications unit’s total
revenues were intersegment revenues, compared with 23.4% in 2008 and 24.1% in
2007.
The
decrease in Telecommunications Services’ total revenues in 2009 compared to 2008
was primarily the result of extreme pricing pressure in the overall voice and
data business. The decrease in Telecommunications Services’ total revenues in
2008 compared to 2007 was primarily the result of the sale of
Media&Broadcast in January 2008 and a decrease in prices and
volumes.
Operating
Expenses and Profit from Operations
The
decrease in cost of sales in 2009 compared to 2008 was due to lower
revenue-related costs as a result of lower revenues in 2009. In addition, the
consolidation of certain delivery platforms within T-Systems’ network
infrastructure led to the decrease in cost of sales. The decrease in cost of
sales in 2008 compared to 2007 was due to lower revenue related costs as a
result of lower revenues in 2008. In addition, cost of revenue declined in 2008
due to changes in the composition of the Group and, to a lesser extent, lower
equipment and service costs.
The
decrease in selling expenses in 2009 compared to 2008 was primarily due to lower
marketing and billing costs. The increase in selling expenses in 2008 compared
to 2007 was primarily the result of higher marketing expenses and the ongoing
implementation of the sales and internationalization strategy, partially offset
by decreased personnel costs related to the personnel reduction
initiative.
The
decrease in general and administrative expenses in 2009 compared to 2008 was
primarily the result of several efficiency measures combined with lower
personnel expenses, mainly driven by lower headcount in Germany. The increase in
general and administrative expenses in 2008 compared to 2007 was primarily the
result of increased consulting costs, partially offset by decreased personnel
costs related to the personnel reduction initiative and other efficiency
programs.
The
development of other operating income in 2009 and 2008 was primarily a result of
the sale of Media&Broadcast in 2008.
Other
operating expenses decreased in 2009 primarily as a result of lowering
restructuring costs. Other operating expenses increased in 2008 primarily as a
result of higher losses on disposals of assets and an increase in miscellaneous
other operating expenses. This
increase was partially offset by lower restructuring costs.
Capital
Expenditures
Capital
expenditures at Systems Solutions decreased in 2009 compared with 2008,
primarily as a result of lower investments in our CDS business. In 2008, capital
expenditures decreased compared with 2007, primarily as a result of lower
investments due to the sale of Media&Broadcast. This however was offset by a
higher investment in our CDS business.
The
following table presents selected financial information concerning our Group
Headquarters and Shared Services operating segment:
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Net
revenues
|
|
|
253 |
|
|
|
307 |
|
|
|
288 |
|
|
|
(17.6 |
) |
|
|
6.6 |
|
|
Intersegment
revenues
|
|
|
2,157 |
|
|
|
2,474 |
|
|
|
2,855 |
|
|
|
(12.8 |
) |
|
|
(13.3 |
) |
|
Total
revenues
|
|
|
2,410 |
|
|
|
2,781 |
|
|
|
3,143 |
|
|
|
(13.3 |
) |
|
|
(11.5 |
) |
|
Loss
from operations
|
|
|
(1,249 |
) |
|
|
(1,266 |
) |
|
|
(2,243 |
) |
|
|
1.3 |
|
|
|
43.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Revenues
In 2009,
net revenues from Group Headquarters and Shared Services amounted to
EUR 253 million, a decrease of EUR 54 million, compared to
2008. Most of the net revenues in 2009 were derived from fleet services and real
estate services. The decrease in 2009 was mainly attributable to lower net
revenues from real estate services as a result of the deconsolidation of
DeTeImmobilien effective September 30, 2008.
In 2008,
net revenues from Group Headquarters and Shared Services amounted to
EUR 307 million, an increase of EUR 19 million, compared to
2007. Most of the net revenues in 2008 were derived from real estate services
and, to a lesser extent, from fleet services. The slight increase in 2008 was
mainly attributable to higher net revenues from fleet services, and offset, in
part, by lower net revenues at Vivento.
Total
Revenues
In 2009,
total revenues amounted to EUR 2,410 million, which were principally derived
from our real estate operations (EUR 1.7 billion), fleet services
(EUR 0.4 billion) and our functions in the areas of technology, IT and
mobile communications that are assigned to our Chief Operating Officer
(EUR 0.2 billion). Total revenues in 2009 decreased by
EUR 371 million compared to 2008. The decrease was primarily
attributable to the deconsolidation of DeTeImmobilien effective
September 30, 2008 and the more efficient use of rented floor space by
our operating segments. In addition, lower revenues from our Group-wide
technology operations and Vivento due to lower prices and quantities sold and
lower proceeds from vehicle sales contributed to the decrease in total revenues.
However, these revenue decreases were partially offset by growth in revenues
from accounting services provided to the operating segments by Deutsche Telekom
Accounting GmbH, which was established as of April 1, 2008.
In 2008,
total revenues amounted to EUR 2,781 million, which were principally derived
from our real estate operations (EUR 2.0 billion), fleet services
(EUR 0.4 billion) and our functions in the areas of technology, IT and
mobile communications that are assigned to our Chief Operating Officer
(EUR 0.3 billion). Total revenues in 2008 decreased by
EUR 362 million, compared to 2007. The decrease was primarily
attributable to lower revenues at Vivento due to the sale of Vivento Technical
Services operations in 2007, the disposal of call center locations of Vivento
Customer Services, and price reductions in the call center unit. Total revenues
from real estate activities declined primarily as a result of the sale of DeTe
Immobilien and a lower volume of facility management activities billed to the
operating segments. However, these revenue decreases were partially offset by
revenue growth at fleet services due to higher proceeds from vehicle sales
within the regular replacement process. Deutsche Telekom Accounting GmbH,
which was established in 2008, generated revenue from charging our operating
segments for accounting services.
Loss
From Operations
Loss from
operations amounted to EUR 1,249 million in 2009, a decrease of
EUR 17 million compared to 2008. In 2008, expenses related to the
disposal of DeTeImmobilien and call centers negatively affected loss from
operations. In addition, loss from operations benefited from the reversal of
provisions, mainly related to the Civil Service Health Insurance Fund. The
decrease in loss from operations resulting from these effects was partially
offset by higher expenses for staff-related measures, primarily for early
retirement arrangements for civil servants. Additionally, the more efficient use
of rented floor space by the operating segments, especially for technical
facilities, and the increase in depreciation and amortization, which mainly
related to our real estate property, had a negative impact. Further factors
partially offsetting the decline in the loss from operations included higher
maintenance costs, decreased revenues at our Group-wide technology operations
and Vivento and the positive contribution of DeTeImmobilien in 2008, which was
deconsolidated effective September 30, 2008.
Loss from
operations amounted to EUR 1,266 million in 2008, a decrease of
EUR 977 million compared to 2007. The decrease in loss from operations
was mainly attributable to lower expenses for staff-related measures, primarily
for early retirement arrangements for civil servants. In 2007, loss from
operations was also negatively affected by expenses related to the sale of
Vivento Technical Services operations. The disposal of call center locations and
the improvement in loss from operations following the sale of Vivento Technical
Services operations and the disposal of call center locations were among the
factors positively influencing loss from operations. Additional positive impacts
resulted from lower depreciation and amortization, which mainly related to our
real estate property, and earnings due to the reclassification of real estate
from assets held for sale to non-current assets. Furthermore, a decrease in
provisions compared with 2007 and the reduced number of Vivento staff leading to
a reduction in personnel costs contributed to the improvement in loss from
operations. These positive developments were partially offset by expenses
related to the disposal of DeTeImmobilien and lower earnings from property
sales. Revenue decreases resulting from price reductions in the call center unit
were another factor negatively impacting loss from operations.
Liquidity
Generally,
we centrally manage the liquidity and capital resources for each operating
segment within our consolidated Group. The tables and discussion included in
this section present a summary of the significant financing and investing events
and transactions that have affected our liquidity over the past three years and
that may influence our future liquidity needs.
Net
Cash from Operating Activities
Net cash
from operating activities amounted to EUR 15.8 billion in 2009,
an increase of EUR 0.4 billion over the prior year. Cash generated from
operations improved by EUR 0.6 billion, which was partially
offset by an increase of EUR 0.2 billion in net interest paid.
The increase in cash generated from operations is the result of several factors,
some of which offset each other.Profit from operations decreased by EUR 1.0
billion compared with 2008. In 2009, depreciation, amoritization and impairment
losses increased by EUR 2.9 billion compared to 2008. The effects of the
disposal of fully consolidated subsidiaries increased by
EUR 0.4 billion. The change in assets carried as working capital
increased by EUR 1.7 billion, mainly as a result of inflows of
EUR 0.8 billion from the sale of receivables (factoring) and as a result of
the decrease of EUR 0.5 billion in trade receivables (excluding receivables
from construction contracts) which is due to improved receivables management. By
contrast, the changes in provisions and other liabilities carried as working
capital decreased by EUR 3.1 billion year-on-year, mainly due to lower
additions to provisions for restructuring measures in combination with higher
cash outflows for restructuring measures, increased utilization of provisions
for personnel costs and provisions for litigation risks, as well as a reduction
in trade payables. In addition, income tax payments increased by EUR 0.4
billion year-on-year, in particular as a result of the first-time full inclusion
of OTE from February 2009. The increase in net interest paid is also largely
attributable to this effect.
Net cash
from operating activities amounted to EUR 15.4 billion in 2008, compared with
EUR 13.7 billion in 2007. The increase was primarily attributable to lower
payments for restructuring, positive developments in working capital and lower
interest payments. The higher interest payments in 2007 resulted in part due to
final interest payments of maturing bonds and medium term notes with
historically high coupon rates. In the first part of 2008, we used lower
interest rate short-term financing to replace them. Later in 2008, this
short-term financing was replaced by the issuance of long-term debt where no
interest payments were due in 2008. Income tax payments had an offsetting
effect, however. Income tax payments of EUR 0.5 billion were recorded in 2008,
compared with net refunds of EUR 0.2 billion in the prior year.
Net
Cash Used in Investing Activities
Net cash
used in investing activities totaled EUR 8.6 billion in 2009 as compared
with EUR 11.4 billion in 2008. This development was mainly due to the
addition of OTE’s cash and cash equivalents amounting to EUR 1.6 billion as
part of the first-time full inclusion of OTE, whereas the prior year saw
outflows for the acquisition of shares in OTE amounting to EUR 3.1 billion.
A EUR 0.5 billion increase in cash outflows for intangible assets and property,
plant and equipment and EUR 0.3 billion increase in cash outflows for
the deposit of cash collateral in 2009 for the acquisition of Strato AG had an
offsetting effect. In particular, the outflows for the cash collateral in 2009
contrast cash inflows of EUR 0.6 billion in 2008, primarily from short-term
cash deposits.
The net
cash outflows for investments in fully consolidated companies and business units
increased by EUR 0.6 billion. Whereas cash outflows amounting to
EUR 1.0 billion for the acquisition of SunCom and cash inflows of
EUR 0.8 billion from the sale of Media&Broadcast were recorded
in 2008, the 2009 financial year saw cash outflows of EUR 1.0 billion
in particular for the acquisition of additional shares in OTE in connection with
put option I, and the acquisition of Zapp in Romania, and cash inflows of
EUR 0.1 billion from the sale of Cosmofon.
Net cash
used in investing activities totaled EUR 11.4 billion in 2008 as compared
with EUR 8.1 billion in 2007. This change was primarily the result of cash
outflows for the acquisition of SunCom in the amount of EUR 1.0 billion and
for the acquisition of shares in OTE in the amount of EUR 3.1 billion
as compared with outflows totaling EUR 1.5 billion for Orange Nederland and
Immobilien Scout in 2007. In addition, cash outflows for intangible assets and
property, plant and equipment increased by EUR 0.7 billion, primarily
as a result of the 2G and 3G network roll-out in the United States, while
inflows for property, plant and equipment decreased by
EUR 0.4 billion, in particular as a result of lower real estate
disposals.
Lower
cash outflows of EUR 0.7 billion for acquisitions and higher cash inflows
of EUR 0.9 billion from disposals of businesses compared with the previous
year also had a positive impact on net cash used in investing activities. In
2007, the acquisition of Orange Nederland and Immobilien Scout resulted in cash
outflows of EUR 1.5 billion and the disposal of T-Online France, T-Online
Spain, and TBDS contributed cash inflows of EUR 0.9 billion, whereas
in 2006, cash outflows for tele.ring, PTC, gedas, and MakTel totaled
EUR 2.2 billion.
Net
Cash Used in Financing Activities
Net cash
used in financing activities amounted to EUR 5.1 billion in 2009, compared
with EUR 3.1 billion in 2008.
This
change was mostly attributable to EUR 1.1 billion lower year-on-year
proceeds from the issuance of non-current financial liabilities and EUR 0.6
billion higher net repayments of current financial liabilities. In addition,
dividend payments increased by EUR 0.3 billion compared with 2008, in
particular as a result of the first-time full inclusion of OTE in February 2009
and higher dividend payments at Slovak Telekom. The considerable decrease in the
net issuance and repayment of current financial liabilities year-on-year is
primarily attributable to the issuance of commercial paper in 2009 to finance
short-term liquidity needs. This contrasts with the drawdown of several
short-term credit lines in 2008.
The
issuance of financial liabilities in the 2009 financial year consisted in
particular of the issue of a tranche of Eurobonds for EUR 2.0 billion,
medium-term notes for EUR 2.0 billion, a U.S. dollar bond for EUR 1.1
billion, and promissory notes for EUR 0.2 billion. Medium-term
notes in an amount of EUR 3.7 billion, a U.S. dollar bond issue
of EUR 0.7 billion, commercial paper in a net amount of EUR 0.6
billion, a medium-term notes of OTE in an amount of EUR 0.6 billion and
promissory notes and other loans for EUR 0.4 billion were repaid during the
same period.
Net cash
used in financing activities in 2008 totaled EUR 3.1 billion, compared
with EUR 6.1 billion in 2007. This change was mostly attributable to
higher proceeds from the issue of non-current financial liabilities of
EUR 4.9 billion, while repayments decreased by
EUR 0.9 billion. Current financial liabilities, on the other hand,
included a year-on-year net increase in repayments amounting to EUR 2.6
billion. In addition, dividend payments increased by EUR 0.2 billion
year-on-year, mainly as a result of an increase in dividend payments of Deutsche
Telekom AG.
The issue
of financial liabilities in 2008 included the issue of medium-term notes
totaling EUR 1.8 billion, the issue of Eurobonds totaling
EUR 1.5 billion, the issue of USD bonds totaling EUR 1.0
billion, and the issue of Samurai bonds totaling EUR 0.3 billion.
In addition, EUR 1.4 billion of promissory notes (shown as liabilities to banks)
were issued, commercial paper was issued for a net amount of EUR 0.6
billion, and a loan of EUR 0.5 billion was taken out with the European
Investment Bank. A benchmark bond issue of EUR 2.0 billion, medium-term
notes of EUR 1.5 billion, U.S. dollar bonds amounting to EUR 0.5
billion, as well as bonds issued and credit lines drawn by SunCom amounting to
EUR 0.7 billion, were repaid during 2008. Net repayments of drawdowns under
short-term credit lines amounting to EUR 1.4 billion were also made, and a
loan of EUR 0.2 billion from Kreditanstalt für Wiederaufbau was
repaid.
Capital
Resources
The
following table summarizes our total financial liabilities as of
December 31, 2009, and December 31, 2008:
|
|
|
As
of December 31,2009
|
|
|
As
of December 31,2008
|
|
|
Change
|
|
|
% Change
|
|
|
|
|
(millions
of €, except where indicated)
|
|
|
Bonds
|
|
|
38,508 |
|
|
|
34,302 |
|
|
|
4,206 |
|
|
|
12.3 |
|
|
Liabilities
to banks
|
|
|
4,718 |
|
|
|
4,222 |
|
|
|
496 |
|
|
|
11.7 |
|
|
Promissory
notes
|
|
|
1,057 |
|
|
|
887 |
|
|
|
170 |
|
|
|
19.2 |
|
|
Liabilities
from derivatives
|
|
|
979 |
|
|
|
1,088 |
|
|
|
(109 |
) |
|
|
(10.0 |
) |
|
Lease
liabilities
|
|
|
1,909 |
|
|
|
2,009 |
|
|
|
(100 |
) |
|
|
(5.0 |
) |
|
Other
financial liabilities
|
|
|
4,020 |
|
|
|
4,086 |
|
|
|
(66 |
) |
|
|
(1.6 |
) |
|
Total
|
|
|
51,191 |
|
|
|
46,594 |
|
|
|
4,597 |
|
|
|
9.9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
financial liabilities increased as of December 31, 2009, as compared with
December 31, 2008, primarily as a result of the full consolidation of OTE
and the issuance of bonds equivalent to EUR 3.1 billion (EUR 2.0
billion, USD 1.5 billion) and medium term notes equivalent to EUR 2.0
billion (EUR 1.0 billion, CHF 0.4 billion and GBP 0.7 billion). This was
partially offset by redemptions of EUR 5.3 billion.
The
material terms of the liabilities issued in 2009 are as follows:
|
|
|
Nominal
|
|
Contractual and expected maturity
|
|
Interest
Rate
|
|
|
|
|
(in billions of €)
|
|
|
Fixed
Rate Bonds
|
|
|
2.0 |
|
January
20, 2017
|
|
|
6.00 |
% |
|
Fixed
Rate Bonds
|
|
|
0.52 |
|
July
8, 2014
|
|
|
4.88 |
% |
|
Fixed
Rate Bonds
|
|
|
0.52 |
|
July
8, 2019
|
|
|
6.00 |
% |
|
Medium-Term
Notes
|
|
|
0.79 |
|
April
8, 2022
|
|
|
6,50 |
% |
|
Medium-Term
Notes
|
|
|
0.27 |
|
April
22, 2014
|
|
|
3.75 |
% |
|
Medium-Term
Notes
|
|
|
0.10 |
|
May
19, 2017
|
|
|
5.13 |
% |
|
Medium-Term
Notes
|
|
|
0.50 |
|
June
2, 2014
|
|
|
4.38 |
% |
|
Medium-Term
Notes
|
|
|
0.35 |
|
July
27. 2021
|
|
|
5.38 |
% |
|
Medium-Term
Notes
|
|
|
0.05 |
|
November
20, 2018
|
|
|
4.38 |
% |
|
|
|
|
|
|
|
|
|
|
|
Cash and
cash equivalents at December 31, 2009 increased by EUR 1,996 million,
or 66.0%, to EUR 5,022 million, compared to EUR 3,026 million at
December 31, 2008. For further information concerning the development of
our liquid assets and debt, see notes (1) and (9) to the Consolidated
Financial Statements.
At
December 31, 2009, the Federal Republic was the guarantor of EUR
1.9 billion of our liabilities, which were outstanding on January 1, 1995.
For further details, see “Item 7. Major Shareholders and Related Party
Transactions.”
We employ
a variety of financing sources to fund our operations and liquidity needs. The
principal financial instruments we use are bonds, medium-term notes and
commercial paper issued in various jurisdictions and in various currencies, and
committed credit facilities. We believe that our existing liquid assets, cash
flows from operations, available credit lines and ability to access the capital
markets will be sufficient to meet our anticipated liquidity requirements during
2010.
For a
discussion of funding and treasury policies, see note (36) to the
Consolidated Financial Statements and “Item 11. Quantitative and Qualitative
Disclosures about Market Risk.”
Credit
Ratings
Our
long-term corporate credit rating with Fitch Ratings was changed to BBB+ on
April 23, 2009. Our long-term corporate credit ratings with Standard &
Poor’s Ratings Services and Moody’s Investors Service are unchanged at BBB+ and
Baa1 respectively. The outlook for all ratings is stable.
Definitions
of the rating agencies are as follows:
Fitch: Fitch Ratings has eight
generic long-term ratings, ranging from AAA to C. The BBB rating is the fourth
highest of the generic ratings. According to Fitch Ratings, Ratings Delivery
Service Overview, “BBB” ratings indicate that expectations of credit risk are
currently low. The capacity for payment of financial commitments is considered
adequate but adverse business or economic conditions are more likely to impair
this capacity. The suffixes “+” or “–” may be appended to a rating to denote
relative status within the major rating categories. Such suffixes are not added
to the “AAA” long-term rating category or to categories below “B.”
Moody’s:
Moody’s has nine generic long-term debt ratings, ranging from Aaa to C. Issuers
rated Baa offer adequate financial security. However, certain protective
elements may be lacking or may be unreliable over any great period of time.
Moody’s appends numerical modifiers 1, 2 and 3 to each generic rating
classification from Aa through Caa. The modifier 1 indicates that the obligation
ranks in the higher end of its generic rating category; the modifier 2 indicates
a mid-range ranking; and the modifier 3 indicates a ranking in the lower end of
that generic rating category.
Standard &
Poor’s: Standard & Poor’s has eleven generic long-term issuer
credit ratings, ranging from AAA to SD or D. An obligor rated 'BBB' has adequate
capacity to meet its financial commitments. However, adverse economic conditions
or changing circumstances are more likely to lead to a weakened capacity of the
obligor to meet its financial commitments.
Plus
(+) or minus (–): the ratings from “AA” to “CCC” may be modified by the
addition of a plus or minus sign to show relative standing within the major
rating categories.
A
securities rating is not a recommendation to buy, sell or hold securities and is
subject to revision or withdrawal at any time by the assigning rating
organization. Each rating should be evaluated independently of any other
rating.
Step-up
Provisions
An
improvement of our long-term senior unsecured debt ratings to A3 by Moody’s and
A- by Standard & Poor’s would result in a 50 basis point decrease in
interest rates due to relevant step-up provisions on bonds with an aggregate
principal amount of approximately EUR 6.3 billion at December 31,
2009.
A
lowering of our long-term senior unsecured debt ratings below Baa1 by Moody’s
and BBB+ by Standard & Poor’s would result in a 50 basis point increase
in interest rates due to relevant step-up provisions on bonds and medium-term
notes with an aggregate principal amount of approximately EUR 4.2 billion at
December 31, 2009.
Lines
of Credit
Deutsche
Telekom’s liquidity reserve consists of credit lines and cash, if necessary. On
December 31, 2009, we had standardized bilateral lines of credit with 24 banks,
totaling EUR 14.4 billion. As of December 31, 2009, there were no borrowings
outstanding under these agreements.
According
to the loan agreements the terms and conditions depend on our credit rating. The
bilateral credit agreements have an original maturity of 36 months and can,
after each period of 12 months, be extended by mutual agreement for a further 12
months to renew the maturity of 36 months. The financial market crisis affected
the extension of bilateral credit lines. In particular, certain institutions
that have been split up, taken over by other banks or lack sufficient equity
have not extended their credit lines in 2008 and until February 2009. In 2009
bilateral credit facilities with four merged banks were cancelled. Those merged
banks are still engaged with one bilateral line. As a result of these
cancellations, the number of credit lines available to us decreased from 28 to
24 year on year, of which 19 lines have been extended at the time of the last
extension request. In accordance with their terms, each of the these 19 credit
lines is available to us for two years, from the date of notification that the
relevant credit line will not be further extended.
Our
bilateral lines of credit do not include any financial covenants or material
adverse change clauses. However, in the event we are taken over by a
third-party, the individual lenders under these bilateral lines of credit and
certain loan agreements to which we are also a party have the right to terminate
the credit line and, if necessary, serve notice on it or demand repayment of the
loans. A takeover is assumed when a third party, which can also be a group
acting jointly, acquires control over us.
Capital
Expenditures and Investments
The
following table provides information concerning our capital expenditures,
investments in subsidiaries and non-current financial assets as well as proceeds
from the sale of non-current assets and investments.
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Capital
expenditures
|
|
|
9,202 |
|
|
|
8,707 |
|
|
|
8,015 |
|
|
|
5.7 |
|
|
|
8.6 |
|
|
Investments
in subsidiaries and non-financial assets
|
|
|
1,183 |
|
|
|
4,291 |
|
|
|
1,811 |
|
|
|
(72.4 |
) |
|
n.a.
|
|
|
Proceeds
from sales of non-current assets and investments
|
|
|
(591 |
) |
|
|
(1,252 |
) |
|
|
(1,782 |
) |
|
|
52.8 |
|
|
|
29.7 |
|
|
Net change in cash and cash equivalents due to the first-time full
consolidation of OTE |
|
|
1,558 |
|
|
|
- |
|
|
|
- |
|
|
n.a. |
|
|
- |
|
|
Other
|
|
|
(413 |
) |
|
|
(362 |
) |
|
|
10 |
|
|
(14.1
|
) |
|
n.a.
|
|
|
Net
cash used in investing activities
|
|
|
8,649 |
|
|
|
11,384 |
|
|
|
8,054 |
|
|
|
(24.0 |
) |
|
|
41.3 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
Expenditures
The
following table provides information about our capital expenditures by operating
segment for the periods presented.
|
|
|
For
the years ended December 31,
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
2009/2008 |
|
|
|
2008/2007 |
|
|
|
|
(millions
of €)
|
|
|
(%
change)
|
|
|
Germany
|
|
|
3,158 |
|
|
|
3,038 |
|
|
|
3,014 |
|
|
|
3.9 |
|
|
|
0.8 |
|
|
United
States
|
|
|
2,666 |
|
|
|
2,540 |
|
|
|
1,958 |
|
|
|
5.0 |
|
|
|
29.7 |
|
|
Europe
|
|
|
879 |
|
|
|
1,152 |
|
|
|
1,148 |
|
|
|
(23.7 |
) |
|
|
0.3 |
|
|
Southern
and Eastern Europe
|
|
|
1,610 |
|
|
|
865 |
|
|
|
732 |
|
|
|
86.1 |
|
|
|
18.2 |
|
|
Systems
Solutions
|
|
|
681 |
|
|
|
823 |
|
|
|
903 |
|
|
|
(17.3 |
) |
|
|
(8.9 |
) |
|
Group
Headquarters and Shared Services
|
|
|
449 |
|
|
|
426 |
|
|
|
340 |
|
|
|
5.4 |
|
|
|
25.3 |
|
|
Reconciliation
|
|
|
(241 |
) |
|
|
(137 |
) |
|
|
(80 |
) |
|
|
(75.9 |
) |
|
|
(71.3 |
) |
|
Total capital expenditures(1)
|
|
|
9,202 |
|
|
|
8,707 |
|
|
|
8,015 |
|
|
|
5.7 |
|
|
|
8.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Capital
expenditures determined on a cash flow
basis.
|
The
increase in total capital expenditures in 2009, compared to 2008, mainly relates
to the first-time consolidation of OTE. In addition, capital expenditure of the
Germany operating segment increased by EUR 120 million, mainly as a result of
investment in the IP transport platform, broadband roll-out and IT
systems.
The
increase in total capital expenditures in 2008, compared to 2007, mainly relates
to the purchase of networks 2G and 3G in the United States, as well as
investments in operating software and next generation network infrastructure
technologies.
Investments
Investments
in subsidiaries and non-current financial assets amounted to EUR
1.2 billion in 2009, a decrease of EUR 3.1 billion, compared with
2008. This significant decrease was mainly attributable to the acquisition of
OTE-shares in 2008.
Investments
in subsidiaries and non-current financial assets amounted to EUR
4.3 billion in 2008, an increase of EUR 2.5 billion, compared with
2007. This significant increase was mainly attributable to the acquisition
of OTE-shares and SunCom Wireless.
Contractual
Obligations and Other Commitments
Our
contractual obligations and other commitments relate to other financial
obligations, operating leases, payments to a special pension fund and purchase
commitments, as more fully described below.
Contractual
Cash Obligations
The
following table summarizes our financial liabilities, as well as our obligations
and commitments to make future payments under contracts, as of December 31,
2009:
|
|
|
Payments
due by period
|
|
|
|
|
Total
|
|
|
Less
than
1
Year
|
|
|
1-3
Years
|
|
|
3-5
Years
|
|
|
More
than
5
Years
|
|
|
|
|
(millions
of €)
|
|
|
Interest-bearing
liabilities(1)
|
|
|
46,639 |
|
|
|
5,608 |
|
|
|
11,826 |
|
|
|
9,794 |
|
|
|
19,411 |
|
|
of
which: bonds
|
|
|
38,508 |
|
|
|
4,406 |
|
|
|
10,339 |
|
|
|
7,665 |
|
|
|
16,098 |
|
|
of
which: liabilities to banks
|
|
|
4,718 |
|
|
|
974 |
|
|
|
1,123 |
|
|
|
1,641 |
|
|
|
980 |
|
|
of
which: lease liabilities
|
|
|
1,909 |
|
|
|
131 |
|
|
|
210 |
|
|
|
236 |
|
|
|
1,332 |
|
|
Other
financial liabilities
|
|
|
4,552 |
|
|
|
3,783 |
|
|
|
307 |
|
|
|
241 |
|
|
|
221 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
financial liabilities
|
|
|
51,191 |
|
|
|
9,391 |
|
|
|
12,133 |
|
|
|
10,035 |
|
|
|
19,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Obligations
arising from non-cancelable operating leases (including rental agreements
and leases)
|
|
|
24,549 |
|
|
|
2,553 |
|
|
|
4,196 |
|
|
|
3,325 |
|
|
|
14,475 |
|
|
Present
value of payments to special pension fund
|
|
|
6,555 |
|
|
|
700 |
|
|
|
1,127 |
|
|
|
945 |
|
|
|
3,783 |
|
|
Purchase
commitments and similar obligations
|
|
|
5,804 |
|
|
|
4,150 |
|
|
|
1,425 |
|
|
|
146 |
|
|
|
83 |
|
|
Purchase
commitments for interests in other companies
|
|
|
224 |
|
|
|
219 |
|
|
|
2 |
|
|
|
- |
|
|
|
3 |
|
|
Miscellaneous
other obligations
|
|
|
2,551 |
|
|
|
359 |
|
|
|
619 |
|
|
|
550 |
|
|
|
1,023 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
financial obligations
|
|
|
39,683 |
|
|
|
7,981 |
|
|
|
7,369 |
|
|
|
4,966 |
|
|
|
19,367 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
contractual obligations
|
|
|
90,874 |
|
|
|
17,372 |
|
|
|
19,502 |
|
|
|
15,001 |
|
|
|
38,999 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Future
interest payments relating to bonds and liabilities to banks are as
follows: less than 1 year: EUR 2,349 million, 1-3 years:
EUR 3,715 million, 3-5 years: EUR 2,610 million, more than
5 years: EUR 7,390 million. Capital lease obligations are shown at
present value and exclude interest payments as follows: less than
1 year: EUR 110 million, 1-3 years: EUR
202 million, 3-5 years: EUR 154 million, more than
5 years: EUR 502 million.
|
For more
information regarding our long-term debt, see “—Capital Resources” and note
(9) to the Consolidated Financial Statements. For more information
regarding our lease obligations, see note (33) to the consolidated
financial statements.
In 2008,
we granted the HR two put options for an additional 5% (first put
option) and 10% (second put option) of the shares in OTE. The HR was able to
exercise the first put option at a total price of EUR 0.7 billion for
a period of twelve months beginning in November 2008. HR exercised the first put
option on July 31, 2009.
Beginning
in November 2009, the HR is able to exercise the second put option at market
price plus a premium initially of 20% for a period of twelve months, after which
it can be exercised at market price plus a premium of 15% until December 31,
2011. The second put option is for 10% of the outstanding shares in OTE. Should
we be taken over by another company that is not a telecommunications company
based in the European Union or the United States of a similar size and stature
to our company, the HR has the right to purchase from us all the shares we own
in the OTE. For this purpose, we shall be deemed to have been taken
over if one or several entities, with the exception of the Federal Republic,
directly or indirectly acquires 35 % of the voting rights in our
company.
Contingencies
The
following table summarizes our contingent liabilities relating to lawsuits and
other proceedings and other contingent liabilities, as of December 31,
2009:
|
|
|
Payments
due by period
|
|
|
|
|
Total
|
|
|
Less
than
1
Year
|
|
|
1-3
Years
|
|
|
3-5
Years
|
|
|
More
than
5
Years
|
|
|
|
|
(millions
of €)
|
|
|
Contingent
liabilities relating to lawsuits and other proceedings
|
|
|
682 |
|
|
|
253 |
|
|
|
429 |
|
|
|
- |
|
|
|
- |
|
|
Other
contingent liabilities
|
|
|
42 |
|
|
|
18 |
|
|
|
1 |
|
|
|
1 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
724 |
|
|
|
271 |
|
|
|
430 |
|
|
|
1 |
|
|
|
22 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Toll
Collect
In
connection with a project to create and operate an innovative system for the
collection of toll charges for the use by heavy vehicles of the German highway
system, we entered into an agreement dated September 2002 (together with all
amendments thereto, the “operating agreement”) with an agency of the Federal
Republic, Daimler Financial Services AG (“Daimler Services”) and Compagnie
Financiere et Industrielle des Autoroutes S.A. (“Cofiroute”). We refer to this
project as the “Toll Collect project.” The partners are responsible for the
development and operation of the toll collection system, which has been built
and operated by the joint venture Toll Collect GmbH (“Toll Collect”). Daimler
Services and we each hold a 45% stake in Toll Collect, with the remaining 10%
being held by Cofiroute.
Our
investments in the Toll Collect project include our equity interests therein,
which are recognized in our consolidated financial statements using the equity
method of accounting, and certain financial guarantees. We and Daimler Services
have agreed to indemnify Cofiroute against certain financial obligations in
excess of EUR 70 million. In addition, Daimler
Services and Cofiroute have a call option in the event that our
company's ownership structure changes such that over 50% of our share capital or
voting rights are held by a new shareholder and this change was not approved by
Daimler Services and Cofiroute.
Commencement
of operations of the toll collection system was delayed beyond the originally
planned date of August 31, 2003. Operations began in February 2004 and
full technical performance was phased-in in accordance with a schedule agreed to
by Toll Collect and the Federal Republic.
Breaches
of the operating agreement may result in contractual penalties, revenue
reductions or damages claims that could be significant. However, following the
commencement of full technical operations on January 1, 2006, contractual
penalties and revenue reductions are capped at EUR 75 million through
the period ended September 30, 2006, and at EUR 150 million per
year thereafter until the permanent operating permit has been issued, and at
EUR 100 million per year following issuance of the final operating
permit. Such amounts are subject to a 3% increase per annum. The final operating
permit has not yet been issued.
Although
the Toll Collect project had commenced Phase 1 operations on
January 1, 2005, such commencement of operations was initially scheduled
for August 31, 2003. On December 2, 2003, the Toll Collect partners
paid, under protest, contractual-related penalties relating to the purported
delay in the amount of EUR 250,000 per day until March 2, 2004, and
EUR 500,000 per day thereafter until and including December 31, 2004.
Upon commencement of Phase 1 operations on January 1, 2005, Toll
Collect began receiving remuneration from the Federal Republic as stipulated by
the operating agreement, which amounted to 95% of the originally agreed upon
fees less certain offset payments claimed by the Federal Republic.
Significant
offset payments claimed by the Federal Republic could have a material adverse
effect on revenues generated by Toll Collect, and, in certain circumstances, we,
along with our partners, might be required to provide additional funds to Toll
Collect pursuant to an Equity Maintenance Undertaking, which is an obligation of
the partners (through August 31, 2015, the termination date of the
operating agreement or earlier if the operating agreement is terminated sooner)
contained in the operating agreement to contribute, on a joint and several
basis, funds necessary to maintain a minimum equity of 15% of total assets of
Toll Collect. Beginning in July 2006, the Federal Republic reduced monthly
payments to Toll Collect by EUR 8 million as a partial offset against
amounts claimed by the Federal Republic in an arbitration proceeding initiated
against Daimler Services, Deutsche Telekom AG and the consortium. As a
result, it may become necessary for the consortium members to provide Toll
Collect with further liquidity. The Federal Republic is claiming damages
resulting from the delay in the commencement of operations and contractual
penalties. For more information relating to the arbitration proceeding and
subsequent claims, see “Item 8—Financial Information—Legal
Proceedings.”
In
addition, we guarantee to third-parties bank loans of up to a maximum amount of
EUR 230 million granted to Toll Collect GmbH. This amount
corresponds to Deutsche Telekom's 50% stake in Toll Collect’s borrowing volume
that is guaranteed by shareholders.
Year-end
bonus for civil servants
In
November 2004, the Federal Republic adopted a law abolishing the requirement for
Deutsche Telekom, and other private corporations, to make certain special
payments to civil servants. This law was subsequently challenged in various
courts and in December 2008 the Federal Administrative Court
(Bundesverwaltungsgericht) decided to refer the case to the Federal
Constitutional Court (Bundesverfassungsgericht) for a judicial review. However,
it is uncertain when the Federal Constitutional Court will announce its ruling.
If the law is found unconstitutional, it is possible that all civil servants
affected by this law would be entitled to retroactive payments, the cost of
which could be up to EUR 211.6 million. However, we believe that the
ultimate resolution of this matter will validate the law as adopted by the
Federal Republic.
Other
Contingent Obligations
In 2002,
T-Mobile Deutschland and four other investors concluded U.S. Qualified Technical
Equipment Leases for goods in the area of mobile telephony/cellular phone
networks with an aggregate value of USD 826 million. The leases involve
significant parts of the cellular phone network, including software. T-Mobile
Deutschland has leased the goods to a U.S. trust through a long-term lease
agreement with a 30-year term. Simultaneously, with the conclusion of the
long-term lease agreement, the U.S. trust leased the goods back to T-Mobile
Deutschland for a term of approximately 16 years. Except for extending an
option to purchase, the lease between the U.S. trust and T-Mobile Deutschland
provides arrangements for insurance, maintenance, operation, subleasing and
other provisions. All T-Mobile Deutschland obligations based on U.S. lease
agreements are guaranteed by Deutsche Telekom AG. This guarantee applies to
operative duties (operation, maintenance, insurance, alterations) and payment
obligations (including recourse in the event of any claims arising out of a
letter of credit provided in connection with this arrangement). The guarantee
given is limited in term and subject to certain thresholds and
conditions.
In March
2007, the IASB issued an amendment to IAS 23 “Borrowing Costs.” The amendment to
the standard mainly relates to the elimination of the option of immediately
recognizing borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as an expense. An entity is
therefore required to capitalize borrowing costs as part of the cost of the
qualifying assets. A qualifying asset in this context is an asset
that takes a substantial period of time to get ready for its intended use or
sale. The revised standard does not allow the capitalization of borrowing costs
relating to assets measured at fair value, and inventories that are manufactured
or produced in large quantities on a repetitive basis, even if they take a
substantial period of time to get ready for use or sale. The standard applies to
borrowing costs relating to qualifying assets for which the commencement date
for capitalization is on or after January 1, 2009. Previously, we
recognized these costs directly as an expense. In accordance with our accounting
policy, construction projects and other assets that take at least twelve months
to get ready for its intended use or sale, are deemed qualifying assets. For
further information, see note 21 to the Consolidated Financial
Statements.
In June
2007, the IFRIC issued IFRIC 13 “Customer Loyalty Programs.” The Interpretation
addresses the accounting of customer loyalty programs that grant customers
points (credits) that allow them to acquire free or discounted goods or services
from the seller or a third-party. The question to be clarified was whether the
award credits are a liability in the context of a completed sale or an advance
payment for a future sales transaction. The interpretation now issued requires
the proceeds of the sale to be divided into two components. One component is
attributable to the transaction which resulted in the credit awards. The other
component is allocable to the future sales transaction resulting from the credit
awards to be redeemed. The portion of the proceeds allocated to the goods or
service already delivered is recognized as revenue. The portion of the proceeds
allocated to the award credits is deferred as an advance payment until the
customer redeems the credit awards, or the obligation in respect of the awards
credit is fulfilled. The interpretation is to be applied for financial years
beginning on or after July 1, 2008. Since the guidance under IFRIC 13
deviates from our previous accounting policy, the accounting method has been
adjusted. The adoption of IFRIC 13 has not had a material impact on the
presentation of our results of operations, financial position or cash
flows.
In July
2007, the IFRIC issued IFRIC 14 “IAS 19—The Limit on a Defined Benefit Asset,
Minimum Funding Requirements and their Interaction.” The interpretation
addresses the measurement of an asset resulting from the fair value of the plan
assets exceeding the present value of the defined benefit obligation. The
interpretation specifies how to determine whether a surplus in a pension plan
represents an economic benefit for the entity. In addition, it addresses how to
determine the present value of the asset in the case of a future refund or
reduction in future contributions when a minimum funding requirement exists, as
well as how to measure a defined benefit asset or defined benefit liability in
the case of a minimum funding requirement. The interpretation is to be applied
for financial years beginning on or after January 1, 2008. The adoption of
IFRIC 14 has not had a material impact on the presentation of our results of
operations, financial position or cash flows.
In
September 2007, the IASB issued an amendment to IAS 1 “Presentation of Financial
Statements: A Revised Presentation.” IAS 1 (revised) uses the terms “statement
of financial position” (previously “balance sheet”) and “statement of cash
flows” (previously “cash flow statement”) and introduces a new element of
financial statements termed “statement of comprehensive income.” Use of the new
terminology, however, is not mandatory. The amendment to IAS 1 requires entities
to disclose comparative information in respect of the previous period. The
revised standard also stipulates the presentation of a further financial
statement—statement of financial position—at the beginning of the first
comparative period presented if the entity changed its accounting policies
retrospectively or made retrospective restatements. Revised IAS 1 also
provides:
|
·
|
All
changes in shareholders’ equity resulting from transactions with owners
must be presented separately from such changes in shareholders’ equity not
resulting from transactions with owners (non-owner
changes).
|
|
·
|
Income
and expenses are reported separately from transactions with owners either
in one statement of comprehensive income or in two statements—a separate
income statement and a statement of comprehensive
income.
|
|
·
|
The
components of other comprehensive income must be presented in the
statement of comprehensive income.
|
|
·
|
The
total comprehensive income must be
disclosed.
|
The
amendment to IAS 1 also requires the relevant amount of income tax per component
of other comprehensive income to be stated and the amounts reclassified as other
comprehensive income to be presented. Reclassification amounts arise from the
reclassification of amounts formerly reported under other comprehensive income
as profit or loss. In addition, amounts reported as distributed dividends and
corresponding per share amounts must be presented either in the statement of
changes in equity or in the notes to the financial statements. The provisions of
IAS 1 are effective for annual periods beginning on or after January 1,
2009. We have adopted the amendments to IAS 1 in the 2009 financial year and
changed the presentation of its financial statements accordingly.
In
January 2008, the IASB published the revised standards IFRS 3 “Business
Combinations” and IAS 27 “Consolidated and Separate Financial Statements.” These
standards are the result of the second phase of the project carried out together
with the FASB to reform the accounting methodology for business combinations.
The main changes revised IFRS 3 will provide are as follows:
|
·
|
The
revised standard gives the option of measuring non-controlling interests
either at fair value or at the proportionate share of the identifiable net
assets. This choice can be exercised for each business combination
individually.
|
|
·
|
In
a business combination achieved in stages (step acquisition), the acquirer
shall remeasure its previously held equity interest in the acquiree at the
date the acquirer obtains control. Goodwill shall then be determined as
the difference between the remeasured carrying amount plus consideration
transferred for the acquisition of the new shares, minus net assets
acquired.
|
|
·
|
Contingent
consideration shall be measured at fair value at the acquisition date and
classified either as equity, or as asset or liability at the acquisition
date. Agreed contingent consideration shall be recognized subsequently in
accordance with the classification determined at the acquisition
date.
|
|
·
|
Acquisition-related
costs incurred in connection with business combinations shall be
recognized as expenses.
|
|
·
|
For
changes in contingent consideration classified as a liability at the
acquisition date, goodwill cannot be remeasured
subsequently.
|
|
·
|
According
to the revised IFRS 3, effects from the settlement of relationships
existing prior to the business combination shall not be part of the
exchange for the acquiree.
|
|
·
|
In
contrast to the previous version of IFRS 3, the revised standard governs
the recognition and measurement of rights that were granted to another
entity prior to the business combination and which are now reacquired as
part of the business combination (reacquired
rights).
|
The main
changes that revised IAS 27 will make to the existing requirements are as
described below:
|
·
|
Changes
in a parent’s ownership interest in a subsidiary that do not result in the
loss of control shall only be accounted for within
equity.
|
|
·
|
If
a parent loses control of a subsidiary it shall derecognize the
consolidated assets and liabilities. The new requirement is that any
investment retained in the former subsidiary shall be recognized at fair
value at the date when control is lost; any differences resulting from
this shall be recognized in profit or
loss.
|
|
·
|
When
losses attributed to the minority (non-controlling) interests exceed the
minority’s interests in the subsidiary’s equity, these losses shall be
allocated to the non-controlling interests even if this results in a
deficit balance.
|
The
revised IFRS 3 shall be applied prospectively to business combinations for which
the acquisition date is on or after the beginning of the first annual reporting
period beginning on or after July 1, 2009. Earlier application is
permitted, however, at the earliest from the beginning of an annual reporting
period that begins on or after June 30, 2007. The provisions of IAS 27
shall be effective for annual reporting periods beginning on or after
July 1, 2009. Earlier application is permitted. However, the earlier
application of one of these two standards requires that the other standard is
also applied at the same earlier time. We will adopt the amendments to IFRS 3
and IAS 27 for business combinations and transactions with subsidiaries
beginning on January 1, 2010.
In
January 2008, the IASB published the revised standard IFRS 2 “Share-based
Payment – Vesting Conditions and Cancellations.” The main changes and
clarifications of this revision are as follows:
|
·
|
Vesting
conditions relate to service conditions and performance conditions
only.
|
|
·
|
All
cancellations, whether by the entity itself or by employees, should
receive the same accounting
treatment.
|
The
amendments to IFRS 2 are effective for annual periods beginning on or after
January 1, 2009. The adoption of the amendments did not have a material
impact on the presentation of our results of operations, financial position or
cash flows and are not expected to have a material impact in the
future.
In
February 2008, the IASB amended IAS 32 “Financial Instruments: Presentation” and
IAS 1 “Presentation of Financial Statements” with respect to the balance sheet
classification of puttable financial instruments and obligations arising only on
liquidation as equity or liabilities. As a result of the amendments, some
financial instruments that currently meet the definition of a financial
liability will be classified as equity. The amendments have detailed criteria
for identifying such instruments, but they generally would include:
|
·
|
Puttable
instruments that are subordinate to all other classes of instruments and
that entitle the holder to a pro rata share of the entity’s net assets in
the event of the entity’s liquidation. A puttable instrument is a
financial instrument that gives the holder the right to put the instrument
back to the issuer for cash or another financial asset or is automatically
put back to the issuer on the occurrence of an uncertain future event or
the death or retirement of the instrument
holder.
|
|
·
|
Instruments,
or components of instruments, that are subordinate to all other classes of
instruments and that impose on the entity an obligation to deliver to
another party a pro rata share of the net assets of the entity only on
liquidation.
|
The
amendments to IAS 32 and IAS 1 are effective for annual periods beginning on or
after January 1, 2009. The adoption of the amendments did not have a material
impact on the presentation of our results of operations, financial position or
cash flows.
In May
2008 the IASB issued a collection of necessary, but non-urgent amendments to
various IFRS/IAS under its first “Annual Improvement Process” project. The
amendments issued are presented in two parts:
|
·
|
Amendments
that involve accounting changes for presentation, recognition and
measurement purposes, and
|
|
·
|
Amendments
that involve terminology or editorial changes with minimal effect on
accounting.
|
Unless
otherwise specified, the amendments are effective for annual periods beginning
on or after January 1, 2009. By amending IAS 1 “Presentation of Financial
Statements” the IASB clarified that derivative financial instruments classified
as “held for trading” do not necessarily have to be presented as current.
Therefore, beginning on January 1, 2009, we present our derivative financial
instruments classified as “held for trading” as either current or non-current,
depending on their maturity date. The balance sheet presentation and disclosures
for comparison periods have been adjusted accordingly. For more information,
please see “Summary of accounting policies,” contained in the notes to the
consolidated financial statements. Other amendments have not had a material
impact on the presentation of our results of operations, financial position or
cash flows.
In May
2008, the IASB published amendments to IFRS 1 “First-time Adoption of
International Financial Reporting Standards” and IAS 27 “Consolidated and
Separate Financial Statements.” The amendments to IFRS 1 allow
first-time adopters a series of simplifications to measure the initial cost of
investments in subsidiaries, jointly controlled entities and associates in
separate financial statements. The amendments to IAS 27 relate to
reorganizations within a group and provide for the new parent to measure the
cost of its investment in the previous parent at the carrying amount of its
share of the equity items shown in the separate financial statements of the
previous parent at the date of the reorganization. The amendments are effective
for annual periods beginning on or after January 1, 2009. The amendments
did not have an impact on the presentation of our results of operations,
financial position or cash flows.
In July
2008, the IFRIC released IFRIC 15 “Agreements for the Construction of Real
Estate.” IFRIC 15 relates to accounting for revenue and associated
expenses by entities that undertake the construction of real estate and sell
these items before construction is completed. The interpretation defines
criteria for accounting in accordance with either IAS 11 “Construction
Contracts” or IAS 18 “Revenue.” The provisions of IFRIC 15 are
effective for annual periods beginning on or after January 1, 2009. The
adoption of IFRIC 15 did not have a material impact on the presentation of our
results of operations, financial position or cash flows.
In July
2008, the IFRIC issued IFRIC 16 “Hedges of a Net Investment in a Foreign
Operation.” IFRIC 16 relates to the application of net investment
hedges. Basically, the interpretation states which risks can be defined as
hedged risk and where the hedging instrument can be held. Hedge accounting may
be applied only to the foreign exchange differences arising between the
functional currency of the foreign operation and the parent entity's functional
currency. The derivative or non-derivative hedging instrument(s) may be held by
any entity or entities within the group (except the foreign operation that
itself is being hedged), as long as the designation, documentation and
effectiveness requirements of IAS 39.88 that relate to a net investment hedge
are satisfied. The provisions of IFRIC 16 are effective for annual periods
beginning on or after October 1, 2008. The adoption of IFRIC 16 did not
have a material impact on the presentation of our results of operations,
financial position or cash flows.
In July
2008, the IASB published an amendment to IAS 39 “Financial Instruments:
Recognition and Measurement.” The amendment "Eligible Hedged Items"
explicitly allows designating only changes in the cash flows or fair value of a
hedged item above or below a specified price or other variable. The amendment
sets forth the conditions for such a partial designation. The amendment shall be
applied retrospectively for annual periods beginning on or after July 1,
2009. The amendment is not expected to have a material impact on the
presentation of our results of operations, financial position or cash
flows.
In
October 2008, the IASB published amendments to IAS 39 "Financial Instruments:
Recognition and Measurement" and IFRS 7 "Financial Instruments: Disclosures."
“Reclassification of Financial Assets” to IAS 39 and IFRS 7 in October 2008. The
amendments to IAS 39 basically relate to the reclassification of certain
financial instruments measured at fair value through profit or loss into another
category. Based on the new rules, if a reclassification is presented, additional
disclosures will be required under IFRS 7. The amendments were effective
retrospectively on July 1, 2008. The adoption of the amendments to IAS 39 and
IFRS 7 did not have a material impact on the presentation of our results of
operations, financial position or cash flows.
In
November 2008, the IASB issued the revised standard IFRS 1 “First-time Adoption
of International Financial Reporting Standards”. The revised provisions of IFRS
1 are effective for annual periods beginning on or after July 1, 2009. In
addition, IFRS 1 has been amended in July 2009 and January 2010 adding
additional exceptions for first-time adopters. All amendments to IFRS 1 are not
relevant for our financial reporting.
In
November 2008, the IFRIC published IFRIC 17 “Distributions of Non-Cash Assets to
Owners.” The interpretation relates to the timing of recognition of
liabilities in connection with non-cash dividends paid (e.g. property, plant and
equipment) and how to measure them. In addition, the interpretation relates to
how to account for differences between the carrying amount of the assets
distributed and the carrying amount of the dividend payable. The provisions of
IFRIC 17 are effective for annual periods beginning on or after July 1,
2009. The adoption of IFRIC 17 is not expected to have a material impact on the
presentation of our results of operations, financial position or cash
flows.
In
January 2009, the IFRIC released IFRIC 18 “Transfers of Assets from Customers”.
The interpretation clarifies the requirements of IFRSs for agreements in which
an entity receives from a customer an item of property, plant and equipment (or
cash to be used explicitly for the acquisition of property, plant and equipment)
that the entity must then use either to connect the customer to a network or to
provide the customer with ongoing access to a supply of goods or services. The
Interpretation is effective for transfers of assets from customers received on
or after July 1, 2009 and applies prospectively. Earlier application is
permitted under certain circumstances. The adoption of IFRIC 18 did not have a
material impact on the presentation of our results of operations, financial
position or cash flows.
In March
2009, the IASB issued amendments to IFRS 7 "Financial Instruments: Disclosures."
The amendments are entitled "Improving Disclosures about Financial Instruments –
Amendments to IFRS 7" and also contain minor changes to IFRS 4 "Insurance
Contracts." The amendments to IFRS 7 relate to disclosures about fair value
measurements and disclosures about liquidity risk. The disclosures about fair
value measurements specify that a table must be provided for each clas of
financial instruments on the basis of a three-level fair value hierarchy. The
scope of the disclosure requirements is also expanded. A distinction is made
between three measurement categories:
|
·
|
Level
1: At the top level of the fair value hierarchy, fair values are
determined based on quoted prices because the best objective evidence of
the fair value of a financial asset or financial liability is quoted
prices in an active market.
|
|
·
|
Level
2: If the market for a financial instrument is not active, an entity can
establish fair value by using a valuation technique. Valuation techniques
include using recent arm's length market transactions between
knowledgeable, willing parties, reference to the current fair value of
another instrument that is substantially the same, discounted cash flow
analysis and option pricing models. Fair value is estimated on the basis
of the results of a valuation technique that makes maximum use of market
inputs, and relies as little as possible on entity-specific
inputs.
|
|
·
|
Level
3: The valuation techniques used at this level are not based on observable
market data.
|
Disclosures about liquidity risk are also clarified and expanded. For example,
the maturity analysis must be divided into disclosures about derivative and
non-derivative financial liabilities. The amendments shall be applied for
financial years beginning on or after January 1, 2009. The adoption of the
amendments had a material impact on the presentation of our results of
operations, financial position or cash flows.
In March
2009, the IASB issued amendments to IFRIC 9 “Reassessment of Embedded
Derivatives” and IAS 39 “Financial Instruments: Recognition and Measurement”.
The amendments refer to the accounting treatment of embedded derivatives for
entities that make use of the reclassification amendment issued by the IASB in
October 2008. The amendments clarify that on reclassification of a financial
asset out of the “at fair value through profit or loss” category all embedded
derivatives have to be assessed and, if necessary, separately accounted for in
financial statements. The amendments shall be applied retrospectively for annual
periods ending on or after June 30, 2009. The adoption of the amendments to
IFRIC 9 and IAS 39 did not have a material impact on the presentation of our
results of operations, financial position or cash flows.
In April
2009 the IASB issued a collection of necessary, but non-urgent amendments to
twelve existing standards and interpretations under its second “Annual
Improvement Process” project. Unless otherwise specified, the amendments are
effective for annual periods beginning on or after January 1, 2010. The
amendments are not expected to have a material impact on the presentation of our
results of operations, financial position or cash flows.
In June
2009, the IASB issued amendments to IFRS 2 “Share-based Payment”. The amendments
relate to the accounting for group-settled share-based payment transactions,
stating that an entity that receives goods or services in a share-based payment
arrangement must account for those goods or services irrespective of which
entity within the group settles the transaction. The amendments to IFRS 2 also
incorporate guidance previously included in IFRIC 8 “Scope of IFRS 2” and IFRIC
11 “Group and Treasury Share Transactions”. As a result, the IASB has withdrawn
IFRIC 8 and IFRIC 11. The amendments to IFRS 2 shall be applied retrospectively
for annual periods beginning on or after January 1, 2010. The amendments are not
expected to have a material impact on the presentation of our results of
operations, financial position or cash flows.
In
October 2009, the IASB issued an amendment to IAS 32 “Financial Instruments:
Presentation”. The amendment clarifies the classification of rights issues as
equity or liabilities in cases where rights issues are denominated in a currency
other than the functional currency of the issuer. As hitherto such rights issues
were recorded as derivative liabilities. The amendment requires that rights
issues offered pro rata to all of an entity’s existing shareholders are
classified as equity, irrespective of the currency in which the exercise price
is denominated. The amendment to IAS 32 shall be applied for annual periods
beginning on or after February 1, 2010. The amendment is not expected to have a
material impact on the presentation of our results of operations, financial
position or cash flows.
In
November 2009, the IASB issued amendments to IAS 24 “Related Party Disclosures”.
Until now, entities being controlled or significantly influenced by a government
were required to disclose all transactions with other entities being controlled
or significantly influenced by the same government. The amendments only require
disclosures about individually or collectively significant transactions. The
amendments to IAS 24 shall be applied retrospectively for annual periods
beginning on or after January 1, 2011. The amendments are not expected to have a
material impact on the presentation of our results of operations, financial
position or cash flows.
In
November 2009, the IASB issued IFRS 9 “Financial Instruments”. The standard
incorporates the first part of a three-phase project to replace IAS 39
“Financial Instruments: Recognition and Measurement”. IFRS 9 prescribes the
classification and measurement of financial assets. The remaining phases of the
project, dealing with the classification and measurement of financial
liabilities, impairment of financial instruments and hedge accounting, as well
as a further project regarding derecognition, have not yet been finalized. The
IASB expects to completely replace IAS 39 by the end of 2010. IFRS 9 requires
that financial assets are subsequently measured either “at amortized cost” or
“at fair value”, depending on whether certain conditions are met. In addition,
IFRS 9 permits an entity to designate an instrument, that would otherwise have
been classified in the “at amortized cost” category, to be “at fair value” if
that designation eliminates or significantly reduces measurement or recognition
inconsistencies. The prescribed category for equity instruments is at fair value
through profit or loss, however, an entity may irrevocably opt for presenting
all fair value changes of equity instruments not held for trading in Other
Comprehensive Income. Only dividends received from these investments are
reported in profit or loss. IFRS 9 shall be applied retrospectively for annual
periods beginning on or after January 1, 2013. Earlier adoption is permitted. We
are currently analyzing the resulting effects on the presentation of our results
of operations, financial position or cash flows.
In
November 2009, the IASB issued “Prepayments of a Minimum Funding Requirement”,
an amendment to IFRIC 14, which is an interpretation of IAS 19 “Employee
Benefits”. The amendment applies under the limited circumstances that an entity
is subject to minimum funding contributions and refers to voluntary prepayments
meeting the requirements of such contributions. The amendment permits an entity
to treat the benefit of such an early payment as an asset. The amendment has an
effective date for mandatory adoption of January 1, 2011. Retrospective adoption
is required. We are currently analyzing the resulting effects on the
presentation of our results of operations, financial position or cash
flows.
In
November 2009, the IASB issued IFRIC 19 “Extinguishing Financial Liabilities
with Equity Instruments”. The interpretation gives guidance in interpreting IFRS
when an entity renegotiates the terms of a financial liability with its creditor
and the creditor agrees to accept the entity’s shares or other equity
instruments to fully or partially settle the financial liability. IFRIC 19
clarifies that the entity’s equity instruments issued to a creditor are part of
the consideration paid to fully or partially extinguish the financial liability.
In addition, the equity instruments issued are measured at their fair value. If
the fair value can not be reliably measured, the equity instruments should be
measured to reflect the fair value of the financial liability extinguished. Any
difference between the carrying amount of the financial liability extinguished
and the initial measurement amount of the equity instruments issued is included
in the entity’s profit or loss for the period. IFRIC 19 shall be applied
retrospectively for annual periods beginning on or after July 1, 2010. The
adoption of IFRIC 19 is not expected to have a material impact on the
presentation of our results of operations, financial position or cash
flows.
ITEM 6. Directors, Senior Management and
Employees
In
accordance with the Stock Corporation Act, we have a Supervisory Board and a
Management Board (together, the “Boards”). The two Boards are separate, and
according to the Stock Corporation Act, no individual may simultaneously be a
member of both Boards. The Management Board is responsible for managing our
company and representing us in our dealings with third parties. The Supervisory
Board appoints and removes the members of the Management Board and generally
oversees the management of our company, but is not permitted to make management
decisions.
Both the
members of the Management Board and the members of the Supervisory Board owe a
duty of loyalty and a duty of care to our company and its constituents. In
carrying out their duties, members of both the Management Board and the
Supervisory Board must exercise the standard of care of a prudent and diligent
business person. Our constituent interests are deemed to include the interests
of our shareholders, the interests of our employees and, to some extent, the
interests of the community. The Boards must take all of these interests into
account when taking actions or making decisions. Although there is no explicit
obligation to act solely in the interests of shareholders, the Management Board
is required to respect our shareholders’ rights to receive equal treatment and
equal information.
Our
Supervisory Board has comprehensive monitoring functions. To ensure that these
functions are carried out properly, our Management Board must, among other
things, regularly report to our Supervisory Board with regard to current
business operations and future business planning, including any deviation of
actual developments from formerly reported goals. The Supervisory Board is also
entitled to request special reports from the Management Board at any time. Under
German law, our Management Board is required to ensure appropriate risk
management within our company and to establish an internal monitoring
system.
Pursuant
to our Articles of Incorporation (Satzung), the rules of procedure for our
Supervisory Board and the rules of procedure for our Management Board contain a
provision requiring the Management Board to obtain the consent of the
Supervisory Board for certain actions, including decisions or measures that
fundamentally change the asset, financial, earnings or risk situation of our
company, and measures concerning the corporate structure and acquisitions or
dispositions of equity investments above a limit determined by our Supervisory
Board. In addition, under the Stock Corporation Act, the Supervisory Board is
authorized to subject other actions of the Management Board to its
consent.
Under
German law, shareholders, like other persons, are prohibited from using their
influence on us to cause a member of our Boards to act in a way that is harmful
to our company. A controlling enterprise may not cause us to take measures
disadvantageous to us unless any resulting disadvantage is compensated. An
individual shareholder or any other person exerting influence on us to cause a
member of our Boards, or holders of special proxies, to act in a way that is
unfavorable to us or our shareholders is liable for damages to us and our
shareholders. Board members who have neglected their duties in taking such
actions are, likewise, jointly and severally liable for damages.
As a
general rule, under German law, a shareholder has no direct recourse against the
members of the Management Board or the Supervisory Board in the event that they
are believed to have breached a duty to our company. Generally, under German
law, only the company has the right to claim damages from the members of the
Boards. We may only waive such damages or settle such claims if at least three
years have passed and our shareholders so approve at a shareholders’ meeting
with a simple majority of the votes, provided that the opposing shareholders do
not hold, in the aggregate, one-tenth or more of our nominal share capital and
do not formally express their opposition at the shareholders’ meeting by having
their opposition noted in the minutes of the meeting.
In
accordance with the Stock Corporation Act and the Co-Determination Act of 1976
(Mitbestimmungsgesetz), our Supervisory Board consists of twenty members, ten of
whom represent our shareholders and ten of whom represent our employees. Members
of the Supervisory Board may be elected for a term of up to five years and
re-election is permitted. The Chairman and the Deputy Chairman are elected by
the Supervisory Board in accordance with the rules of the Co-Determination
Act.
Supervisory
Board members representing our shareholders are elected at the annual
shareholders’ meeting. The present shareholder representatives were elected at
shareholders’ meetings held in 2005, 2006, 2007, 2008 and 2009. The terms of
office of the shareholder representatives expire at the end of the shareholders’
meeting at which the shareholders discharge the Supervisory Board members in
respect of the fourth financial year following the member’s commencement of
tenure of office. The financial year in which tenure of office commences is not
counted for this purpose.
Supervisory
Board members representing our employees were last elected on November 4,
2008, by the employees in accordance with the provisions of the Co-Determination
Act. Employees elect ten representatives, made up of workers, regular employees,
at least one senior management employee and three union representatives. Under
the laws that governed our privatization, civil servants, who are not otherwise
covered by the Co-Determination Act, are included in these groups of employee
representatives for purposes of these elections.
A member
of the Supervisory Board elected by our shareholders may be removed by a
shareholders’ resolution by simple majority of the votes cast. A member of the
Supervisory Board elected by our employees may be removed by a majority of at
least three-quarters of the votes cast by the relevant class of employees or
union representatives who elected the relevant Supervisory Board members in
accordance with the Co-Determination Act.
The
Supervisory Board is required by law to meet at least twice every six months. To
achieve a quorum, at least ten of the members of the Supervisory Board must be
present or cast their votes in writing. Except in situations in which a
different majority is required by law, such as the appointment of Management
Board members or the election of the Chairman and Deputy Chairman, the
Supervisory Board makes decisions by simple majority of the votes cast. If, in
the event of a deadlock, a second vote again results in a tie, the chairman of
the Supervisory Board can cast the deciding vote.
Members
of the Supervisory Board of Deutsche Telekom
The
Supervisory Board met six times in 2009. No member attended less than 50% of the
meetings of the Supervisory Board. For 2009, the members of our Supervisory
Board, the years in which they were appointed, the years of the shareholders’
meetings at which their current terms expire and their principal occupations
were as follows:
|
Prof.
Dr. Ulrich Lehner
Chairman
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
April
17, 2008 (Chairman since April 25, 2008)
Shareholders’
Meeting 2013
Member
of the Shareholders’ Committee, Henkel AG & Co. KGaA,
Düsseldorf
|
|
|
Supervisory
Board Memberships/Directorships:
|
E.ON
AG, Düsseldorf
Henkel
Management AG, Düsseldorf
HSBC
Trinkaus & Burkhardt AG, Düsseldorf
Novartis
AG, Basel, Switzerland, Board of Directors
Dr.
August Oetker KG, Bielefeld, Advisory Board
Dr.
Ing. h.c. F. Porsche AG, Stuttgart
Porsche
Automobil Holding SE, Stuttgart
ThyssenKrupp
AG, Düsseldorf
|
|
Lothar
Schröder
Deputy
Chairman
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
June 22,
2006
Shareholders’
Meeting 2013
Member
of the ver.di National Executive Board, Berlin
|
|
|
Supervisory
Board Memberships/Directorships:
|
T-Mobile
Deutschland GmbH, Bonn,
Deputy
Chairman of the Supervisory Board
|
|
Jörg
Asmussen
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
July
1, 2008
Shareholders’
Meeting 2014
State
Secretary in the Federal Ministry of Finance
(Bundesministerium
der Finanzen), Berlin
|
|
|
Supervisory
Board Memberships/Directorships:
|
Deutsche
Bahn AG, Berlin (April until November 2009)
DB
Mobility Logistics AG, Berlin (June until November 2009)
Deutsche
Gesellschaft für Technische Zusammenarbeit GmbH (GTZ),
Frankfurt/Main
|
|
Hermann
Josef Becker
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
January
1, 2008
Shareholders’
Meeting 2013
Member
of the management Deutsche Telekom Direct Sales and Consulting as well as
Chairman of the Group Executive Staff Representation Committee and
Executive Staff Representation Committee, Deutsche Telekom AG,
Bonn
|
|
|
Supervisory
Board Memberships/Directorships:
|
None
|
|
Dr.
Wulf H. Bernotat
|
Member
since:
Expiration
of current term:
Principal
Occupation:
|
January
1, 2010
Shareholders’
Meeting 2010
Chairman
of the Board of Management, E.ON AG, Düsseldorf
|
|
|
Supervisory
Board Memberships/Directorships:
|
Allianz
SE, Munich *
Bertelsmann
AG, Gütersloh
E.ON
Energie AG**, Munich, Chairman of the Supervisory Board
E.ON
Ruhrgas AG**, Essen, Chairman of the Supervisory Board
E.ON
Sverige AB**, Malmö, Sweden, Chairman of the Board of
Directors
E.ON
US Investments Corp.**, Delaware, USA,
Chairman
of the Board of Directors
Metro
AG, Düsseldorf *
(*listed
company outside of the E.ON group)
(**
mandates within the E.ON group)
|
|
Monika
Brandl
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2002
Shareholders’
Meeting 2013
Chairwoman
of the Central Works Council at Group Headquarters,
Deutsche
Telekom AG, Bonn
|
|
|
Supervisory
Board Memberships/Directorships:
|
None
|
|
Hans
Martin Bury
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
Shareholders’
Meeting 2008
Shareholders’
Meeting 2013
Managing
Partner, Hering Schuppener Strategieberatung für Kommunikation GmbH,
Düsseldorf (from April 1, 2009)
Managing
Director, Nomura Bank (Deutschland) GmbH,
Frankfurt/Main
(until March 31, 2009)
|
|
|
Supervisory
Board Memberships/Directorships:
|
None
|
|
Josef
Falbisoner
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
1997
Shareholders’
Meeting 2013
Chairman
of the Bavarian District of the Union ver.di
|
|
|
Supervisory Board
Memberships/Directorships:
|
PSD-Bank e.G.,
Munich, Augsburg office
|
|
Dr. Hubertus
von Grünberg
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2000
Shareholders’
Meeting 2011
Serves
as member of several supervisory boards
|
|
|
Supervisory
Board Memberships/Directorships:
|
ABB
Ltd., Zürich, Switzerland, President of the Board of
Directors
Allianz-Versicherungs
AG, Munich
Continental
AG, Hanover, Chairman of the Supervisory Board
(until
March 2009)
Schindler
Holding AG, Hergiswil, Switzerland, Administrative
Board
|
|
Lawrence
H. Guffey
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2006
Shareholders’
Meeting 2012
Senior
Managing Director, The Blackstone Group International Ltd.,
London
|
|
|
Supervisory
Board Memberships/Directorships:
|
Axtel
Ote, San Pedro Gaza Garcia, Nuevo Leon, Mexico
Cineworld
Corp., London, UK (until November 2009)
TDC
AS, Copenhagen, Denmark
Paris
Review, New York, USA
|
|
Ulrich
Hocker
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2006
Shareholders’
Meeting 2012
Manager
in Chief of Deutsche Schutzvereinigung für Wertpapierbesitz
e.V.
(DSW),
Düsseldorf
|
|
|
Supervisory
Board Memberships/Directorships:
|
Arcandor
AG, Essen, (until October 2009)
E.ON
AG, Düsseldorf
Feri
Finance AG, Bad Homburg,
Deputy
Chairman of the Supervisory Board
Gartmore
SICAV, Luxembourg
Phoenix
Mecano AG, President of the Administrative Board
ThyssenKrupp
Stainless AG, Duisburg (until September 2009)
|
|
Lothar
Holzwarth
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2002
Shareholders’
Meeting 2013
Chairman
of the Central Works Council Deutsche Telekom Geschäftskunden,
Bonn
|
|
|
Supervisory
Board Memberships/Directorships:
|
PSD
Bank RheinNeckarSaar e.G.,
Deputy
Chairman of the Supervisory Board
T-Systems
Business Services GmbH, Bonn (until April
2009)
|
|
Hans-Jürgen
Kallmeier
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
October
15, 2008
Shareholders’
Meeting 2013
Chairman
of the Central Works Council, T-Systems International GmbH,
Frankfurt/Main
|
|
|
Supervisory
Board Memberships/Directorships:
|
None
|
|
Sylvia
Kühnast
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
Shareholders’
Meeting 2007
Shareholders’
Meeting 2013
Consulting
function to the Central Works Council,
T-Mobile
Deutschland GmbH, Hanover
|
|
|
Supervisory
Board Memberships/Directorships:
|
None
|
|
Waltraud
Litzenberger
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
1999
Shareholders’
Meeting 2013
Chairwoman
of the Group Works Council and the European
Works
Council of Deutsche Telekom AG, Bonn
|
|
|
Supervisory
Board Memberships/Directorships:
|
PSD-Bank
eG, Koblenz (until June 2009)
|
|
Michael
Löffler
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
1995
Shareholders’
Meeting 2013
Member
of the Works Council of Deutsche Telekom Netzproduktion GmbH, Bonn,
Technical Infrastructure Branch Office, Central/Eastern
District
|
|
|
Supervisory
Board Memberships/Directorships:
|
None
|
|
Prof.
h. c. (CHN), Dr.-Ing.
E.h. Dr.
Ulrich
Middelmann
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
January
1, 2010
Shareholders’
Meeting 2010
Former
Deputy Chairman of the Board of Management, ThyssenKrupp AG,
Duisburg
and Essen
|
|
|
Supervisory
Board Memberships/Directorships:
|
Commerzbank
AG *, Frankfurt
E.ON
Ruhrgas AG, Essen
Hoberg
& Driesch GmbH, Düsseldorf, Chairman of the Advisory
Board
LANXESS
AG *, Leverkusen
LANXESS
Deutschland GmbH, Leverkusen
ThyssenKrupp
Acciai Speciali Terni S.p.A.**, Terni, Italy ThyssenKrupp
(China)
Ltd.**, Beijing, People’s Republic of China
ThyssenKrupp
Elevator AG**, Düsseldorf
ThyssenKrupp
Marine Systems AG**, Hamburg
ThyssenKrupp
Materials International GmbH**, Düsseldorf
ThyssenKrupp
Nirosta GmbH**, Krefeld
ThyssenKrupp
Steel Europe AG**, Duisburg
(*listed
company outside of the ThyssenKrupp group)
(**mandates
within the ThyssenKrupp group)
|
|
Dr.
Ulrich Schröder
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
October
1, 2008
Shareholders’
Meeting 2014
Chairman
of the Managing Board KfW, Frankfurt/Main
|
|
|
Supervisory
Board Memberships/Directorships:
|
DEG
– Deutsche Investitions- und Entwicklungsgesellschaft mbH*, Cologne
(since October 2009)
Deutsche
Post AG, Bonn
KfW
IPEX-Bank GmbH*, Frankfurt/Main (since October 2009)
ProHealth
AG, Munich
(*mandates
within the KfW group)
|
|
Michael
Sommer
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2000
Shareholders’
Meeting 2013
President
of the Trade Union Council, Berlin
|
|
|
Supervisory
Board Memberships/Directorships:
|
Deutsche
Postbank AG, Bonn, Deputy Chairman of the Supervisory Board
KfW,
Frankfurt/Main, Board of Supervisory Directors
|
|
Dr.
h.c. Bernhard Walter
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
1999
Shareholders’
Meeting 2011
Former
Speaker of the Management Board, Dresdner Bank
AG, Frankfurt
|
|
|
Supervisory
Board Memberships/Directorships:
|
BilfingerBerger AG,
Mannheim, Chairman of the Supervisory Board
Daimler
AG, Stuttgart
Henkel
AG & CO KGaA, Düsseldorf
Hypo
Real Estate Holding AG, Munich, Deputy Chairman of the Supervisory Board
(until August 2009)
|
|
|
|
|
The
following individuals resigned from the Supervisory Board during
2009:
|
Prof.
Dr. Wolfgang Reitzle
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
2005
December
31, 2009
Chairman
of the Management Board, Linde AG, Munich
|
|
|
Supervisory
Board Memberships/Directorships:
|
Continental
AG, Hanover (since September 2009),
Chairman
of the Supervisory Board (since October 2009)
KION
Group GmbH, Wiesbaden (until December 2009)
The
BOC Group plc.*, Guildford, UK
(*mandate
within Linde group)
|
|
Prof. Dr. Wulf von
Schimmelmann
|
Member
since:
Expiration
of Current Term:
Principal
Occupation:
|
Shareholders’
Meeting 2006
December
31, 2009
Former
Chairman of the Management Board, Postbank AG, Bonn
|
|
|
Supervisory
Board Memberships/Directorships:
|
accenture
Corp., Irving, Texas, USA
BAWAG
P.S.K. AG, Vienna, Austria, Chairman of the Supervisory Board
(until
October 2009)
Deutsche
Post AG, Bonn, Chairman of the Supervisory Board
maxingvest
ag, Hamburg
Western
Union, Denver, USA (since July 2009)
|
|
|
|
|
KfW is a
state-owned bank. The Federal Republic of Germany holds 80% of KfW’s share
capital, and the German federal states hold the remaining 20%. As of December
31, 2009, KfW holds a stake of approximately 30.5% in Deutsche Post AG. The
Federal Ministry of Finance is a ministry of the Federal Republic. Among our
Supervisory Board members in 2009, Mr. Becker, Ms. Brandl,
Mr. Holzwarth, Mr. Kallmeier, Ms. Kühnast, Ms. Litzenberger and
Mr. Löffler are employees of Deutsche Telekom Group companies.
The
shareholder representatives currently on our Supervisory Board are: Mr.
Asmussen, Dr. Bernotat (since January 1, 2010), Mr. Bury, Dr. von Grünberg,
Mr. Guffey, Mr. Hocker, Prof. Dr. Lehner, Prof. h. c. (CHN)
Dr.-Ing. E.h. Dr. Middelmann (since January 1, 2010), Dr. Schröder and
Dr. h. c. Walter, Prof. Dr. Reitzle and Prof.
Dr. von Schimmelmann resigned with the end of December 31,
2009.
The
Supervisory Board maintains the following committees, which are governed by the
Rules of Procedure of the Supervisory Board as to their composition and
responsibilities in compliance with statutory requirements:
|
·
|
The
General Committee is responsible for deciding the terms of the service
contracts and other contractual arrangements between Deutsche Telekom AG
and the members of the Management Board. In particular, the General
Committee determines salaries and incentive compensation awards for
members of the Management Board and establishes goals for
performance-based compensation plans. Members of the General Committee
are: Prof. Dr. Ulrich Lehner (Chairman), Jörg Asmussen, Waltraud
Litzenberger and Lothar Schröder. The General Committee met seven times in
2009. Additionally, the General and the Finance Committees met once in
2009 for a joint meeting.
|
|
·
|
The
Audit Committee is responsible for oversight of accounting and risk
management, auditor independence, questions regarding the issuing of the
audit mandate to the auditors, the determination of auditing focal points
and the fee agreement with the auditors following approval of the auditors
by the shareholders, and matters that the audit committee of a NYSE-listed
foreign private issuer is required to be responsible for pursuant to the
SEC and NYSE regulations and under U.S. law, including the U.S.
Sarbanes-Oxley Act of 2002 (the “Sarbanes-Oxley Act”). The current members
of the Audit Committee are Dr. h. c. Bernhard Walter (Chairman), Hermann
Josef Becker, Hans Martin Bury, Lawrence H. Guffey, Lothar Holzwarth and
Waltraud Litzenberger. The Audit Committee met five times in
2009.
|
|
·
|
The
Finance Committee is responsible for reviewing and consulting on complex
finance and business matters concerning Deutsche Telekom. Those matters
are delegated by the Chairman of the Supervisory Board, or the Supervisory
Board itself, to the Finance Committee. In addition, the Finance Committee
also reviews our Annual Reports during meetings with our auditors in
advance of the meeting of the Supervisory Board relating to the approval
of our financial statements pursuant to the Stock Corporation Act. The
membership of the Finance Committee is the same as that of the Audit
Committee. The Finance Committee met once in 2009. The Finance Committee
and General Committee met once for a joint meeting in
2009.
|
|
·
|
The
Personnel Committee is responsible for the personnel-related matters of
Deutsche Telekom AG, in particular with respect to staff structure and
human resources development and planning. The members of this committee
are: Lothar Schröder (Chairman), Dr. Hubertus von Grünberg, Prof. Dr.
Ulrich Lehner and Waltraud Litzenberger. The Personnel Committee met twice
in 2009.
|
|
·
|
The
Nomination Committee was established in December 2007 in accordance with
the German Corporate Governance recommendations. The Nomination Committee
is responsible for nominating candidates as shareholder representatives on
the Supervisory Board to be elected at the shareholders’ meeting. Members
of the Nomination Committee are the shareholder representatives of the
General Committee. The Nomination Committee prepared the Supervisory
Board’s nomination of shareholder representatives who were elected at the
Shareholders’ Meeting 2009 and who are nominated for the Shareholders’
Meeting 2010.
|
In
addition to the committees mentioned above, the Supervisory Board has a
Mediation Committee. This committee’s function is to assist the Supervisory
Board by making proposals for Management Board member nominees in the event that
the two-thirds majority of employee votes needed to appoint a Management Board
member is not obtained. The current members are Prof. Dr. Ulrich Lehner,
Dr. Hubertus von Grünberg, Waltraud Litzenberger and Lothar Schröder. The
Mediation Committee did not meet in 2009.
In
addition, a special committee has been established as of January 1, 2010 to
monitor the company's participation in the spectrum auction for the fourth
generation of mobile communications in Germany. The members are Prof.
Dr. Ulrich Lehner (Chairman), Waltraud Litzenberger, Lothar Schröder und Dr. h.
c. Bernhard Walter.
Each of
the committees of the Supervisory Board (with the exception of the Nomination
Committee) has an equal number of shareholder representatives and employee
representatives. The chairman of the Supervisory Board also serves as chairman
of the General Committee. The chairman has the deciding vote in case of a
deadlock on matters voted on in the General Committee. The chairman of the Audit
Committee and the Finance Committee is a representative of the shareholders. The
chairman of the Personnel Committee is a representative of the
employees.
Pursuant
to our Articles of Incorporation, the Supervisory Board determines the size of
the Management Board, subject to the requirement that the Management Board must
have at least two members. The Supervisory Board may appoint a Chairman of the
Management Board as well as a Deputy Chairman. The Supervisory Board appoints
the members of the Management Board for terms of up to five years, and members
may be re-appointed or have their terms extended for one or more terms of up to
five years each. Under certain circumstances, such as a material breach of duty
or a bona fide vote of “no confidence” by our shareholders, the Supervisory
Board may remove a member of the Management Board prior to the expiration of
that member’s term. A member of the Management Board may not deal with, or vote
on, matters relating to proposals, arrangements or contracts between himself and
our company. The Management Board takes action by simple majority, unless
otherwise provided by law, as in the case of a vote on the adoption of rules of
procedure. In the event of a deadlock, the Management Board member into whose
area of responsibility the resolution falls has the deciding vote. If the
resolution falls into an area that is not allocated to a particular Management
Board member, the Chairman of the Management Board has the deciding vote. The
Management Board generally meets on a weekly basis.
Members
of the Management Board of Deutsche Telekom
The name,
age, term of office, current position and business experience of the members of
our Management Board in 2009 are set forth below. The current members of the
Management Board may be contacted at our registered address.
René
Obermann, born in 1963, has been Chairman of the Management Board of
Deutsche Telekom AG since November 13, 2006. From December 1, 2002
until November 12, 2006, he was in charge of mobile operations on the
Management Board, served as CEO of T-Mobile International and was responsible
for the Mobile Communications strategic business area. Mr. Obermann became
a member of the Management Board of T-Mobile International in June 2001,
responsible for European Operations. From April 2000 until March 2002,
Mr. Obermann was Chief Executive Officer of T-Mobile Deutschland. Between
April 1998 and March 2000, Mr. Obermann was Managing Director of
Sales at T-Mobile Deutschland. He started his career by setting up the company
ABC Telekom, in Muenster after completing a business traineeship with BMW AG in
Munich between 1984 and 1986. In 1991, he became Managing Partner of Hutchison
Mobilfunk, successor of ABC Telecom. From 1993 to 1998, he was Chairman of that
company’s management board. Mr. Obermann was also Chairman of the former
German Association of Mobile Communication Service Providers during 1995 and
1996.
Expiration
of current term: October 31, 2011
Other
board memberships outside Deutsche Telekom: None
Dr.
Manfred Balz, born in 1944, has been a Member of the Management Board of
Deutsche Telekom AG since October 22, 2008. From April 1997 until October 21,
2008 he was Head of Deutsche Telekom’s Legal Department. From 1974 until 1990
Dr. Balz was in charge of corporate law, insolvency law and international
treaties and organizations, with the German Federal Ministry of Justice. From
1990 until 1993 he was General Counsel of Treuhandanstalt, the German government
instrumentality for privatizing the former East German socialist economy. From
1993 until 1997 he was a partner of the international law firm Wilmer, Cutler
& Pickering, heading the firm’s Berlin office.
Expiration
of current term: October 21, 2012
Other
board memberships outside Deutsche Telekom: Arcandor AG (insolvent),
Essen
Reinhard
Clemens, born in 1960, was appointed on December 1, 2007 to the
Management Board of Deutsche Telekom AG responsible for the T-Systems operating
segment and as Chief Executive Officer (CEO) of T-Systems International
GmbH.
He
graduated with a degree in electrical engineering from the RWTH Aachen
University in Aachen, Germany. Mr. Clemens began his career as General
Manager of the Association for Industry Automation in 1990. In 1994,
Mr. Clemens started his career at IBM, holding various positions in sales,
service and outsourcing until he left the company in 2001 to join Systematics
AG. There he served as member of the Management Board responsible for sales. In
2001, Mr. Clemens began working for EDS in Germany. As the Chairman of the
Executive Board, he was responsible for sales, business operations and strategy
in Central and Eastern Europe.
Expiration
of current term: November 30, 2012
Other
board memberships outside Deutsche Telekom: None
Niek
Jan van Damme, born in 1961, has been a member of the Board of Management
of Deutsche Telekom AG since March 2009. As of July 2009 he is responsible for
Germany - i. e. sales, marketing and service for fixed and mobile communications
in Germany. Furthermore he is Chairman of the T-Home Board of Management and
since October 2009 Chairman of the Managing Board T-Mobile in
Germany.
From
January 2004 to 2009, Niek Jan van Damme was Chairman of the Managing Board of
T-Mobile Netherlands where his successes included the integration of the mobile
communications and fixed-network activities of Orange Netherlands into T-Mobile
Netherlands (October 2007). In that position, he represented one of the core
mobile communications markets on the Executive Committee of the T-Mobile
International group.
Niek Jan
van Damme studied Economics at the Vrije Universiteit Amsterdam. He started his
career with Procter & Gamble in 1986 before joining the Dutch retailer Ahold
in 1993. Niek Jan van Damme was a Managing Partner at Floor Heijn Retail from
1997 until he joined Ben Nederland, later T-Mobile Netherlands, as Director for
Marketing Communications in June 1999.
Expiration
of current term: February 28, 2014
Other
board memberships outside Deutsche Telekom: None
Timotheus
Höttges, born in 1962, has been member of the Board of Management of
Deutsche Telekom AG responsible for Finance and Controlling since March 1,
2009.
From
December 2006 until his appointment as Chief Financial Officer, he was the Group
Board of Management member responsible for the T-Home unit. In this position, he
was in charge of fixed-network and broadband business, as well as integrated
sales and service in Germany. Under his leadership, T-Home became the market
leader in terms of new DSL customers and developed its Internet TV service,
Entertain, into a mass-market product while at the same time stabilizing its
profitability.
After
successfully implementing various cost-cutting programs at T-Home and in the
European mobile communications subsidiaries, Mr. Höttges became responsible for
the Group-wide Save for Service efficiency enhancement program. From 2005 until
being appointed to the Group Board of Management, Mr. Höttges headed European
operations as member of the Board of Management, T-Mobile International. From
2000 until the end of 2004, he was Managing Director, Finance and Controlling,
before becoming Chairman of the Managing Board of T-Mobile
Deutschland.
Mr.
Höttges studied business administration at Cologne University, after which he
spent three years with a business consulting company, latterly as a project
manager. At the end of 1992, he moved to the VIAG Group in Munich. He became
divisional manager in 1997 and, later, a member of the extended management board
responsible for controlling, corporate planning, and mergers and acquisitions.
As project manager, he played a central role in the merger of VIAG AG and VEBA
AG to form E.ON AG, which became effective on September 27, 2000.
Expiration
of current term: February 28, 2014
Other
board memberships outside Deutsche Telekom: FC Bayern München AG, München (since
February 2010)
Guido
Kerkhoff, born in 1967, has been Member of the Board of Management of
Deutsche Telekom AG responsible for Southern and Eastern Europe since March
2009. In this position, he is responsible for managing Deutsche Telekom’s
subsidiaries in Southern and Eastern Europe, which offer both fixed-network and
mobile communications services. This region includes the companies OTE (Greece),
Magyar Telekom (Hungary), Slovak Telekom (Slovakia) and T-Hrvatski Telekom
(Croatia), with additional subsidiaries in Albania, Macedonia, Montenegro and
Romania.
Since
April 2002, Guido Kerkhoff has held various management positions in Deutsche
Telekom’s Finance department and was Head of Group Accounting and Controlling
since mid-2006.
Having
graduated with a degree in Business Administration, Guido Kerkhoff began his
career in the Group Accounting department of VEW AG from 1995 through 1996. He
then moved to Bertelsmann AG, where he most recently headed up the department
responsible for projects and general corporate accounting and controlling issues
for over three years.
Expiration
of current term: February 28, 2014
Other
board memberships outside Deutsche Telekom: None
Thomas
Sattelberger, born in 1949, has been Chief Human Resources Officer of
Deutsche Telekom AG since May 3, 2007. He also held positions on the boards of
management of Continental AG and Deutsche Lufthansa AG. Prior to these positions
he was responsible for various management functions at Daimler-Benz AG. His
areas of focus are the strategic orientation of human resources, corporate
restructuring, education policy, international talent management and global
labor cost management. Thomas Sattelberger is a member of management committees
at business schools in various countries, is Vice President of the European
Foundation for Management Development (Brussels) and chairman of the council on
university-business cooperation of the German Employers’ Federation and the
German Rectors’ Conference.
Expiration
of current term: May 2, 2012
Other
board memberships outside Deutsche Telekom: None
Changes
to the Board of Management
Hamid
Akhavan, born in 1961, has been Member of the Management Board of
Deutsche Telekom from December 5, 2006 until February 14, 2010. Mr.
Akhavan asked the Supervisory Board of Deutsche Telekom in December 2009 to
terminate his position, which was not due to expire until 2011. Mr. Akhavan has
been Chief Operating Officer (COO) of the Deutsche Telekom Group since July
2009. As COO, Hamid Akhavan has continued to remain responsible for the
operation of the mobile markets in Europe. In addition his group wide
responsibilities have included Products and Innovation as well as the areas of
Technology, IT and Procurement. He has been responsible for mobile
communications companies on the Board of Management of Deutsche Telekom since
December 5, 2006, when he was appointed Chief Executive Officer of T-Mobile
International AG.
Hamid
Akhavan was previously Chief Technology and Information Officer (CTO) on the
Management Board of T-Mobile International. Following a strategic realignment,
he was also appointed CTO of the Deutsche Telekom Group in September 2006.
Mr. Akhavan has been working at T-Mobile International since September 2001
and was appointed to the Management Board in December 2002. Before that, he was
Chief Technical Officer and Chief Information Officer at Teligent Inc., an
international broadband fixed and wireless access company, and held various
positions at other technology companies. Hamid
Akhavan graduated from the California Institute of Technology (CALTECH) with a
Bachelor of Science degree in Electrical Engineering and Computer Science. He
received a Master’s degree from the Massachusetts Institute of Technology (MIT)
in the same fields.
Other
board memberships outside Deutsche Telekom: None
Dr.
Karl-Gerhard Eick, born in 1954, was Head of the Finance Department and a
member of the Management Board of Deutsche Telekom AG from January 2000 until
February 28, 2009. Dr. Eick asked the Supervisory Board of Deutsche Telekom in
December 2008 to terminate his position as Chief Financial Officer, which was
not due to expire until 2012. In November 2002, he was appointed Deputy Chairman
of the Management Board of Deutsche Telekom AG. From January 1, 2007 to May 2,
2007, Dr. Eick provisionally took over responsibility for Human Resources on the
Board. From June 1, 2007 to November 30, 2007, he was also acting Board member
for Business Customers, responsible for T-Systems. After studying business
administration and earning a doctorate, Dr. Eick worked in various positions for
BMW AG between 1982 and 1988. From 1989 to 1991 he acted as head of Controlling
at WMF AG in Geislingen. In 1991, he became head of the Controlling, Planning
and IT Division for the Carl Zeiss group. From 1993 to 1999, he held top
management positions with the Haniel Group, where he was responsible for the
Controlling, Business Administration and IT Division of the strategic management
holding company of Franz Haniel & Cie. GmbH.
Other
board memberships outside Deutsche Telekom until the expiration of his term:
CORPUS SIREO Holding GmbH & Co. KG, Cologne, (Chairman of the Supervisory
Board); Deutsche Bank AG, Frankfurt am Main (Supervisory Board); FC Bayern
München AG, Munich (Supervisory Board); STRABAG Property and Facility Services
GmbH (Supervisory Board); Thomas Cook Group plc (Group
Board/Director)
At its
meeting on February 26, 2009, the Supervisory Board appointed Timotheus
Höttges as the new Board of Management member responsible for finance and Niek
Jan van Damme as the new Board of Management member for T-Home and, Sales and
Service. Both appointments became effective March 1, 2009. The Supervisory Board
also established a new Board of Management department for Southern and Eastern
Europe with effect from March 1, 2009 to account for the growing
significance of the Southern and Eastern European region and to bundle
responsibility for the existing operations in the region. Guido Kerkhoff was
selected to head this department and was appointed to the Board of Management
effective March 1, 2009.
On
January 29, 2010, the Supervisory Board approved the proposal by the Board of
Management to reassign Hamid Akhavan's responsibilities on a temporary basis.
Board of Management members Guido Kerkhoff and Reinhard Clemens assumed Hamid
Akhavan’s responsibilities in an acting capacity. Effective February 15, 2010,
Guido Kerkhoff assumed temporary responsibility for the Europe region (United
Kingdom, Netherlands, Austria, Poland and Czech Republic) and International
Sales and Service. Reinhard Clemens, also in an acting capacity, assumed
Group-wide responsibility for the remaining COO units, such as Products &
Innovation, Technology, IT and Procurement effective the same date. On
February 24, 2010 the Supervisory Board of Deutsche Telekom approved the
proposal by the Board of Management to extend Board Member Guido Kerkhoff’s area
of responsibility on a permanent basis. As of April 1, 2010, he will assume
additional responsibility for the mobile-centric companies in Austria, the Czech
Republic, the Netherlands, Poland and the United Kingdom, as well as for
International Sales and Service.
Supervisory
Board Compensation
Our
Articles of Incorporation provide each member of our Supervisory Board with
compensation comprised of:
|
·
|
fixed
annual remuneration amounting to EUR
20,000;
|
|
·
|
short-term
success remuneration; and
|
|
·
|
long-term
success remuneration.
|
The
short-term success remuneration amounts to EUR 300 for each whole EUR 0.01 that
the net profit per share of Deutsche Telekom AG exceeds EUR 0.50 in the
financial year for which the remuneration is paid.
The
long-term success remuneration amounts to EUR 300 for every 4.0% that the net
profit per share of Deutsche Telekom AG in the second financial year (the
reference year) following the measurement year exceeds the net profit per share
in the measurement year. The long-term success remuneration for a particular
measurement year may not exceed the long-term success remuneration for the year
preceding that measurement year, unless the net revenues of the Deutsche Telekom
Group in the reference year exceeds the net revenues of the Deutsche Telekom
Group in the financial year preceding the measurement year.
Neither
the short-term nor the long-term success remuneration payment may exceed the
fixed annual remuneration amount of EUR 20,000. Additionally, the short-term
success remuneration may not exceed a total of 0.02% of Deutsche Telekom’s
unappropriated net profit reported in the approved annual financial statements
of the measurement year, reduced by an amount equivalent to 4.0% of the
contributions made on the lowest issue price of the shares at the end of the
financial year.
The
Chairman of the Supervisory Board receives two times, and the Deputy Chairman
one-and-a-half times, the amount of remuneration described above.
Remuneration
is increased by 0.5 times the above amounts for each membership on a Supervisory
Board committee, and by an additional 0.5 times for each chairmanship held on a
Supervisory Board committee, but in no case by more than two times the above
amounts. Membership on, or chairmanship of, a committee formed pursuant to
Section 27(3) of the Co-Determination Act, as well as membership or
chairmanship of the Nomination Committee, is not taken into
account.
In
addition, members of the Supervisory Board are entitled to reimbursement of
actual out-of-pocket expenses and receive an attendance fee amounting to EUR 200
for each meeting of the Supervisory Board or its committees attended. The VAT
payable on this compensation is borne by us.
Members
of the Supervisory Board who are on the Supervisory Board for only part of the
year receive one-twelfth of the above remuneration for each month of membership
or part thereof. The same applies to the increases in remuneration for the
Supervisory Board Chairman and Deputy Chairman, and to the increases in
remuneration for Supervisory Board committee membership or chairmanship, as set
forth above.
None of
the members of the Supervisory Board has a service contract with us, or any of
our subsidiaries, providing for benefits upon termination of
employment.
The
annual remuneration in 2009 for members of our Supervisory Board amounted to an
aggregate of EUR 817,890.00 inclusive of attendance fees (including
VAT, according to Article 13 of our Articles of
Incorporation).
The total
remuneration in 2009 for members of our Supervisory Board amounted to EUR
1,724,389.61 (inclusive of EUR 896,017.61 reflecting the salaries and EUR
10,482.00 reflecting the amount set aside or accrued by Deutsche Telekom to
provide pension, retirement or similar benefits in 2009 of Supervisory Board
members in their capacity as employees of Deutsche Telekom AG or its affiliated
companies). Of the amount of the total remuneration, EUR 817,890.00 (including
attendance fees and VAT) will be paid following the shareholders’ meeting on May
3, 2010.
The
compensation (exclusive of VAT) of the individual members of the Supervisory
Board for their services as Supervisory Board members in 2009 was as follows:
|
Members
of the Supervisory
Board 2009
|
|
Fixed
Remuneration
Plus Attendance Fees
|
|
|
Short-Term
Variable
|
|
|
Total
(net)
|
|
|
Imputed
Long-Term
Remuneration
Entitlement(1)
|
|
|
Jörg
Asmussen
|
|
|
32,400.00 |
|
|
|
0.00 |
|
|
|
32,400.00 |
|
|
|
0.00 |
|
|
Hermann
Josef Becker
|
|
|
42,800.00 |
|
|
|
0.00 |
|
|
|
42,800.00 |
|
|
|
0.00 |
|
|
Monika
Brandl
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
Hans
Martin Bury
|
|
|
42,000.00 |
|
|
|
0.00 |
|
|
|
42,000.00 |
|
|
|
0.00 |
|
|
Josef
Falbisoner
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
Dr. Hubertus
von Grünberg
|
|
|
31,400.00 |
|
|
|
0.00 |
|
|
|
31,400.00 |
|
|
|
0.00 |
|
|
Lawrence
H. Guffey
|
|
|
42,600.00 |
|
|
|
0.00 |
|
|
|
42,600.00 |
|
|
|
0.00 |
|
|
Ulrich
Hocker
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
Lothar
Holzwarth(2)
|
|
|
42,400.00 |
|
|
|
0.00 |
|
|
|
42,400.00 |
|
|
|
0.00 |
|
|
Hans-Jürgen
Kallmeier
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
Sylvia
Kühnast
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
Prof.
Dr. Ulrich Lehner
|
|
|
73,400.00 |
|
|
|
0.00 |
|
|
|
73,400.00 |
|
|
|
0.00 |
|
|
Waltraud
Litzenberger
|
|
|
64,600.00 |
|
|
|
0.00 |
|
|
|
64,600.00 |
|
|
|
0.00 |
|
|
Michael
Löffler
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
|
21,400.00 |
|
|
|
0.00 |
|
|
Prof.
Dr. Wolfgang Reitzle
|
|
|
20,800.00 |
|
|
|
0.00 |
|
|
|
20,800.00 |
|
|
|
0.00 |
|
|
Prof.
Dr. Wulf von Schimmelmann
|
|
|
21,000.00 |
|
|
|
0.00 |
|
|
|
21,000.00 |
|
|
|
0.00 |
|
|
Lothar
Schröder(3)
|
|
|
63,400.00 |
|
|
|
0.00 |
|
|
|
63,400.00 |
|
|
|
0.00 |
|
|
Dr.
Ulrich Schröder
|
|
|
21,000.00 |
|
|
|
0.00 |
|
|
|
21,000.00 |
|
|
|
0.00 |
|
|
Michael
Sommer
|
|
|
20,600.00 |
|
|
|
0.00 |
|
|
|
20,600.00 |
|
|
|
0.00 |
|
|
Dr.
h.c. Bernhard Walter
|
|
|
62,600.00 |
|
|
|
0.00 |
|
|
|
62,600.00 |
|
|
|
0.00 |
|
|
Total
|
|
|
709,400.00 |
|
|
|
0.00 |
|
|
|
709,400.00 |
|
|
|
0.00 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
In
determining the amount to be recognized as provision it was assumed that
net profit per no par value share in 2011 would equal that in 2009. Based
on this assumption, each ordinary member is entitled to EUR 0.0 for
the total year for the period 2008 to 2011. Upon application of the
multiplying factor, the provision amount totals
EUR 0.00.
|
|
(2)
|
During
2009, Mr. Holzwarth received Supervisory Board compensation of EUR
3,173.33 (including VAT) from T-Systems Business Services GmbH, Bonn, a
wholly-owned subsidiary of Deutsche Telekom AG, for his mandate as a
member of the Supervisory Board of T-Systems Business Services until April
1, 2009. On April 1, 2009, T-Systems Business Services GmbH was merged
into Deutsche Telekom AG.
|
|
(3)
|
During
2009, Mr. Schröder received Supervisory Board compensation of EUR
20,706.00 (including VAT) from T-Mobile Deutschland GmbH, Bonn, a
wholly-owned subsidiary of Deutsche Telekom AG, for his mandate as a
member of the Supervisory Board of T-Mobile Deutschland
GmbH.
|
Compensation
of the Management Board
The
compensation of the members of the Management Board is comprised of various
components. Under the terms of their service contracts, members of the
Management Board are entitled to annual fixed and variable remuneration,
long-term variable remuneration (Mid-Term Incentive Plan, or MTIP) and fringe
benefits and deferred benefits based on company pension obligations. The
structure of the compensation system and the appropriateness of compensation for
the Management Board are established and reviewed on a periodic basis by the
Supervisory Board.
Fixed
remuneration, variable incentive-based remuneration and fringe
benefits
Total
compensation is generally two-thirds variable and one-third fixed if targets are
achieved in full. The non-performance-based components are comprised of a fixed
salary, fringe benefits and pension obligations, while the performance-based
components are split into variable performance-based remuneration and a
long-term incentive component.
Fixed
remuneration is determined for all members of the Management Board based on
market conditions in accordance with the requirements of the Stock Corporation
Act.
The
annual variable remuneration for each of the members of the Management Board is
based on the achievement of targets set by the Supervisory Board prior to
commencement of the financial year. The targets comprise Group objectives and
individual objectives for each member of the Management Board, including
adjusted EBITDA, free cash-flow and adjusted net profit.
At its
discretion and after due consideration, the Supervisory Board may also reward
individual or all Management Board members for extraordinary performance with a
special bonus.
Based on
market-oriented and industry standards, we grant all members of the Management
Board additional benefits under their service contracts, some of which are
non-cash benefits, which are taxed accordingly. These benefits mainly include
the use of a car at our expense, accident and disability insurance, and
maintaining a business-related second household.
We make
contributions, including the payment of related taxes, for term life insurance
with standard coverage (EUR 1.3 million) for several of our Management
Board members. The related expenses are included in the Total Compensation table
below under “Other Compensation.”
Ancillary
employment generally requires prior approval. Generally no additional
compensation is paid for being a member of the Management Board or Supervisory
Board of other Group companies.
Arrangements
in the event of termination of a position on the Management Board
Severance
arrangements
The terms
of the service agreements of the members of the Management Board are linked to
their terms of appointment as Management Board members. If we terminate the
appointment of a member of the Board of Management without being entitled to
terminate simultaneously for cause the service agreement under civil law, the
Management Board member is entitled to a contractually determined severance
payment. This severance payment is calculated, subject to present value
discounting, on the basis of the imputed remaining term of appointment in the
current term of office (up to a maximum of 36 months) and 100% of the fixed
annual salary and 75% of the variable remuneration based on an assumed 100%
achievement of performance targets.
Change
of control
The
service agreements for the members of the Management Board do not confer any
entitlements to benefits in the event of the termination of Management Board
membership as the result of a change of control of our Company.
Severance
Cap
Beginning
in 2009, new contracts for Management Board members include a severance cap in
the event of premature termination without cause allowing a compensation payment
which, in line with the recommendations of the German Corporate Governance Code,
is restricted to a maximum of two year’s remuneration and may not be higher than
the compensation for the remaining period of the contract.
Post-contractual
prohibition of competition
The
contracts of the members of the Management Board include generally a
post-employment prohibition on competition. Unless otherwise agreed, members of
the Management Board are prohibited from rendering services to or on behalf of a
competitor for one year following their departure. As compensation for this
restricted period, they receive a payment in the amount of the annual fixed
compensation last received.
Company
pension entitlement
The
members of the Management Board are entitled to receive a company pension from
us. The pension amount is based on final salary, which means that members of the
Management Board receive a pension based on a fixed percentage of their last
fixed annual salary for each year of service rendered prior to their date of
retirement. The key features of the pension plan for members of the Management
Board active in 2009 are described below.
Members
of the Management Board become entitled to pension payments in the form of a
life-long retirement pension upon reaching the age of 62, and a disability
pension or an early retirement pension upon reaching the age of 60 (subject to
certain actuarial deductions). The amount of the pension is calculated on the
basis of the eligible period of service rendered as a member of the Management
Board until the date of departure.
The
annual retirement pension is comprised of a base percentage (6% for
Mr. Obermann and Dr. Eick and 5% for the remaining Management Board
members) of the fixed annual salary upon termination of the service relationship
multiplied by the eligible service period expressed in years. After 10 years of
Management Board membership, the maximum percentage of the pension level is
achieved (60% for Mr. Obermann and Dr. Eick and 50% for the remaining
Management Board members). Pension payments are subject to a standard annual
adjustment (3% for Mr. Obermann and Dr. Eick and 1% for the remaining members of
the Management Board). In the event of a permanent inability to work
(invalidity), the respective period of service through the scheduled end of the
current period of appointment serves as the basis for the period of service
eligible for calculating the pension.
Due to
his U.S. citizenship and the different taxation regulations applicable in
Germany and the United States, a “pension plan substitute” was agreed with
Mr. Akhavan in lieu of such a pension commitment. For each full year of
service rendered as a member of the Management Board, Mr. Akhavan will
receive a compensation payment corresponding to the pension contribution for
that year. The resulting annual payment which he receives for each full year of
service rendered is recorded under “Other compensation” in the table “Management
Board Total Compensation.”
Dr. Balz
is not covered by the Board of Management pension entitlements described above.
Dr. Balz´s pension arrangement under his previous employment contract as General
Counsel (Deutsche Telekom AG capital account plan) remains in place. Mr.
Kerkhoff and Mr. van Damme are also not covered by the pension entitlement
described above. Subject to Supervisory Board approval, both will participate in
a new pension entitlement, which will be effective from the beginning of their
term as members of the Board of Management. Both members have been guaranteed
that the new entitlement will not leave them in a worse position than their
current pension entitlement as employees of our Company.
In
addition, the pension agreements include arrangements for pensions for surviving
dependents in the form of entitlements for widows and children. In certain
specific cases, entitlement to a widow’s pension is excluded. We believe that
the standard criteria for eligibility in the pension arrangements are in line
with market standards.
Mid-
and long-term incentives
Mid-Term
Incentive Plan
Members
of the Management Board participate in the MTIP, which was introduced in 2004.
Similar to earlier MTIP tranches, in the 2009 tranche, awards are based on two
performance targets. Each member of the Board of Management is eligible to
receive an incentive payment of 15% (if one performance target is met) or 30%
(if both performance targets are met) of his contractually agreed target
remuneration as of January 1, 2009 (fixed annual salary compensation plus
annual variable remuneration assuming 100% target achievement). If neither
performance target is met at the end of the measurement term, no incentive
remuneration under the MTIP is paid. For more information, see “—Mid-Term
Incentive Plan Description” below and note (34) to the Consolidated
Financial Statements.
Mr.
Akhavan and Mr. Höttges participate in the 2006 MTIP based on their prior
activities as members of the Board of Management of T-Mobile International
AG.
The
General Committee of the Supervisory Board decided at its meeting on February 4,
2009 that the relative plan target for the 2006 tranche of the MTIP has been
achieved. Consequently, 15% of the contractually agreed target remuneration as
of January 1, 2006 was paid out in February 2009. The relative plan target for
the 2007 tranche of the MTIP has also been achieved. The Supervisory Board
decided at its meeting on February 24, 2010 that 15% of the target remuneration
as of January 2007 will be paid out in March 2010.
The
following table shows the fair value of the 2009 MTIP for Management Board
members calculated using the “Monte Carlo” valuation model:
|
|
|
Compensation
from the Mid-Term-Incentive Plans (in €)
|
|
|
|
|
MTIP
2009
Maximum
award
amount
|
|
|
MTIP
2009
Fair
value on the date of the grant
|
|
|
Total accrual:
share-based
compensation
for 2009
|
|
|
MTIP
2008
Maximum
award
amount
|
|
|
MTIP
2008
Fair
value
on
the date
of
the grant
|
|
|
Total accrual:
share-based
compensation
for 2008
|
|
|
René
Obermann
|
|
|
750,000 |
|
|
|
76,613 |
|
|
|
257,518 |
|
|
|
750,000 |
|
|
|
116,738 |
|
|
|
444,591 |
|
|
Hamid
Akhavan
|
|
|
480,000 |
|
|
|
49,032 |
|
|
|
164,812 |
|
|
|
480,000 |
|
|
|
74,712 |
|
|
|
275,023 |
|
|
Dr.
Manfred Balz
|
|
|
330,000 |
|
|
|
33,710 |
|
|
|
62,004 |
|
|
|
168,000 |
|
|
|
26,149 |
|
|
|
122,830 |
|
|
Reinhard
Clemens
|
|
|
420,000 |
|
|
|
42,903 |
|
|
|
63,869 |
|
|
|
420,000 |
|
|
|
65,373 |
|
|
|
44,580 |
|
|
Dr.
Karl-Gerhard Eick(1)
|
|
|
0 |
|
|
|
0 |
|
|
|
(250,939 |
) |
|
|
630,000 |
|
|
|
98,060 |
|
|
|
439,520 |
|
|
Timotheus
Höttges
|
|
|
450,000 |
|
|
|
45,968 |
|
|
|
154,511 |
|
|
|
450,000 |
|
|
|
70,043 |
|
|
|
240,435 |
|
|
Guido
Kerkhoff(2)
|
|
|
360,000 |
|
|
|
36,774 |
|
|
|
70,366 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Thomas
Sattelberger
|
|
|
515,000 |
|
|
|
52,607 |
|
|
|
173,887 |
|
|
|
515,000 |
|
|
|
80,160 |
|
|
|
152,452 |
|
|
Niek
Jan van Damme(2)
|
|
|
295,000 |
|
|
|
30,134 |
|
|
|
41,502 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Computed
total value
|
|
|
3,600,000 |
|
|
|
367,741 |
|
|
|
737,530 |
|
|
|
3,413,000 |
|
|
|
531,235 |
|
|
|
1,719,431 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Due
to his departure in February 2009, a 2009 MTIP tranche was not awarded to
Dr. Eick. The tranches awarded for 2007 and 2008 were terminated without
compensation. Therefore, the existing accruals were reversed and are shown
in the table above as a negative number in the Total Accrual: share based
compensation for 2009 column.
|
|
(2)
|
Mr.
Kerkhoff and Mr. van Damme continue to participate in the 2008 tranche of
the MTIP due to their previous positions as employees of our
Company.
|
Stock
Option Plan 2001
Our 2001
Stock Option Plan was terminated by resolution of the shareholder’s meeting of
May 18, 2004. No stock options have been granted to members of our Management
Board in their capacity as such after 2001. Stock options granted
during 2001 remain exercisable provided the exercise conditions are met as
required. For more information, see “—Stock Option Plans” below and note (34) to
the Consolidated Financial Statements.
Mr. Akhavan,
Mr. Höttges and Mr. Obermann continue to participate in the 2002
tranche of the 2001 Stock Option Plan as a result of their prior activities at
T-Mobile. Dr. Manfred Balz and Guido Kerkhoff continue to participate in the
Stock Option Plan as a result of their previous positions as employees of
Deutsche Telekom AG.
The stock
options that have been granted can be exercised under the terms of the 2001
stock option plan. However, none of such options has yet been exercised. The
number of stock options held by the members of the Management Board who were in
office during 2009 has remained unchanged as compared to the prior
year.
The
following table sets forth the number and value of options granted
to members of our Management Board who were in office during
2009:
|
|
Incentive-based
compensation from stock option plans
|
|
|
|
Options
Outstanding as of
December 31,
|
|
Number of
options:
2001
SOP
tranche
2001
|
|
|
Value per
option upon
issuance
(2001)
|
|
|
Number of
options:
2001
SOP
tranche
2002
|
|
|
Value per
option upon
issuance
(2002)
|
|
|
Weighted
average of the
exercise
prices of all stock options
|
|
|
|
|
|
|
|
|
(€)
|
|
|
|
|
|
(€)
|
|
|
(€)
|
|
|
René
Obermann
|
2009
|
|
|
48,195 |
|
|
|
4.87 |
|
|
|
28,830 |
|
|
|
3.79 |
|
|
|
23.40 |
|
|
|
2008
|
|
|
48,195 |
|
|
|
|
|
|
|
28,830 |
|
|
|
|
|
|
|
|
|
|
Hamid
Akhavan
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
19,840 |
|
|
|
3.79 |
|
|
|
12.36 |
|
|
|
2008
|
|
|
0 |
|
|
|
|
|
|
|
19,840 |
|
|
|
|
|
|
|
|
|
|
Dr.
Manfred Balz
|
2009
|
|
|
32,130 |
|
|
|
4.87 |
|
|
|
17,360 |
|
|
|
3.79 |
|
|
|
23.81 |
|
|
|
2008
|
|
|
32,130 |
|
|
|
|
|
|
|
17,360 |
|
|
|
|
|
|
|
|
|
|
Reinhard
Clemens
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dr.
Karl-Gerhard Eick
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(until
February 28, 2009)
|
2008
|
|
|
163,891 |
|
|
|
4.87 |
|
|
|
0 |
|
|
|
|
|
|
|
30.00 |
|
|
Timotheus
Höttges
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
17,050 |
|
|
|
3.79 |
|
|
|
12.36 |
|
|
|
2008
|
|
|
0 |
|
|
|
|
|
|
|
17,050 |
|
|
|
|
|
|
|
|
|
|
Guido
Kerkhoff (1)
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
4,650 |
|
|
|
3,79 |
|
|
|
12.36 |
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
4,650 |
|
|
|
|
|
|
|
|
|
|
Thomas
Sattelberger
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Niek
Jan van Damme
|
2009
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
|
|
|
Total
|
2009
|
|
|
80,325 |
|
|
|
|
|
|
|
87,730 |
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
244,216 |
|
|
|
|
|
|
|
87,730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Guido
Kerkhoff participates in the Stock Option Plan due to his previous
position as employee of Deutsche Telekom AG. His inclusion in the table
above led to a year-on-year increase in the number of options issued to
members of the Management Board, as Guido Kerkhoff was not a
member of the Management Board in
2008.
|
The range
of exercise prices of the options held by Mr. Obermann and Dr. Balz varied
between EUR 12.36 and EUR 30.00. For
additional information, see note (34) to the Consolidated Financial
Statements.
Management
Board total compensation for 2009
Total
2009 compensation for those persons who served as members of the Management
Board during the 2009 financial year was EUR 13,913,554. Included in the
total compensation amount is the fixed annual salary, other benefits, non-cash
benefits, remuneration in kind, variable remuneration for 2009, and the fair
value of the 2009 MTIP-Tranche as of December 31, 2009. The pension costs
resulting from the company pension plan are recorded under service costs. Other
compensation is comprised of non-performance-based compensation.
The
compensation received by the individual members of the Management Board for
their services as Management Board members in 2009 is shown in the following
table.
|
Members
of the Management Board
|
Compensation(1)
(in €)
|
|
|
|
Year
|
|
Fixed
annual
salary
|
|
|
Other
compensation
|
|
|
Variable
remuneration
|
|
|
MTIP
(fair
value
on
the date
of the grant)
|
|
|
Total
|
|
|
Pension
expense
(service
costs)
|
|
|
René
Obermann
|
2009
|
|
|
1,250,000 |
|
|
|
37,233 |
|
|
|
1,365,000 |
|
|
|
76,613 |
|
|
|
2,728,846 |
|
|
|
549,326 |
|
|
|
2008
|
|
|
1,250,000 |
|
|
|
86,262 |
|
|
|
1,762,500 |
|
|
|
116,738 |
|
|
|
3,215,500 |
|
|
|
495,302 |
|
|
Hamid
Akhavan
|
2009
|
|
|
800,000 |
|
|
|
611,878 |
(1) |
|
|
789,600 |
|
|
|
49,032 |
|
|
|
2,250,510 |
|
|
|
0 |
|
|
|
2008
|
|
|
800,000 |
|
|
|
613,588 |
(1) |
|
|
1,178,400 |
|
|
|
74,712 |
|
|
|
2,666,700 |
|
|
|
0 |
|
|
Dr.
Manfred Balz
|
2009
|
|
|
660,000 |
|
|
|
19,204 |
|
|
|
468,600 |
|
|
|
33,710 |
|
|
|
1,181,514 |
|
|
|
423,373 |
|
|
(from
October 22, 2008)
|
2008
|
|
|
127,742 |
|
|
|
4,641 |
|
|
|
122,485 |
|
|
|
26,149 |
|
|
|
281,017 |
|
|
|
117,570 |
|
|
Reinhard Clemens
|
2009
|
|
|
658,333 |
|
|
|
31,531 |
|
|
|
825,750 |
|
|
|
42,903 |
|
|
|
1,558,517 |
|
|
|
302,817 |
|
|
|
2008
|
|
|
650,000 |
|
|
|
33,463 |
|
|
|
1,106,250 |
|
|
|
65,373 |
|
|
|
1,855,086 |
|
|
|
261,469 |
|
|
Dr.
Karl-Gerhard Eick
|
2009
|
|
|
183,750 |
|
|
|
17,371 |
|
|
|
183,750 |
|
|
|
0 |
|
|
|
384,871 |
|
|
|
753,839 |
|
|
(until
February 28, 2009)
|
2008
|
|
|
1,054,375 |
|
|
|
49,290 |
|
|
|
1,513,028 |
|
|
|
98,060 |
|
|
|
2,714,753 |
|
|
|
704,526 |
|
|
Timotheus
Höttges
|
2009
|
|
|
750,000 |
|
|
|
21,583 |
|
|
|
803,250 |
|
|
|
45,968 |
|
|
|
1,620,801 |
|
|
|
244,599 |
|
|
|
2008
|
|
|
750,000 |
|
|
|
24,506 |
|
|
|
1,116,000 |
|
|
|
70,043 |
|
|
|
1,960,549 |
|
|
|
204,936 |
|
|
Guido
Kerkhoff
|
2009
|
|
|
433,333 |
|
|
|
11,874 |
|
|
|
692,250 |
|
|
|
36,774 |
|
|
|
1,174,231 |
|
|
|
230,190 |
|
|
(from
March 1, 2009)
|
2008
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Thomas
Sattelberger
|
2009
|
|
|
800,000 |
|
|
|
5,687 |
|
|
|
976,250 |
|
|
|
52,607 |
|
|
|
1,834,544 |
|
|
|
865,667 |
|
|
|
2008
|
|
|
800,000 |
|
|
|
44,221 |
|
|
|
1,292,500 |
|
|
|
80,160 |
|
|
|
2,216,881 |
|
|
|
948,713 |
|
|
Niek
Jan van Damme
|
2009
|
|
|
366,667 |
|
|
|
31,538 |
|
|
|
549,450 |
|
|
|
30,134 |
|
|
|
977,789 |
|
|
|
231,583 |
|
|
(from
March 1, 2009)
|
2008
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Total
|
2009
|
|
|
5,902,083 |
|
|
|
787,899 |
|
|
|
6,653,900 |
|
|
|
367,741 |
|
|
|
13,711,623 |
|
|
|
3,601,394 |
|
|
|
2008
|
|
|
5,432,117 |
|
|
|
855,971 |
|
|
|
8,091,163 |
|
|
|
531,235 |
|
|
|
14,910,486 |
|
|
|
2,732,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Due
to his U.S. citizenship and the different taxation regulations applicable
in Germany and the United States, Mr. Akhavan received a monthly lump
sum as a tax adjustment, in addition to the “pension substitute”
amount.
|
The
allocations to the pension provisions in 2009 amounted to EUR 4,081,024. This
figure comprises service costs in the amount of EUR 3,601,394 and interest costs
in the amount of EUR 479,630.
In the
termination contract of Dr. Eick, all stock options and entitlements, if any,
for the 2007 and 2008 MTIP tranches were terminated without compensation. For
the period from January 1, 2009 until February 28, 2009, Dr. Eick received his
regular fixed monthly compensation and a pro rata compensation for the 2009
variable remuneration, calculated on a target achievement of 100%. Dr. Eick’s
pension entitlement has vested and cannot be forfeited.
No member
of the Management Board received benefits or related commitments from a
third-party for his activity as a Management Board member during the past
financial year.
Former
members of the Management Board
A total
of EUR 4,249,734 was recorded for payments to and entitlements for former
members of the Management Board (for periods after the term of their Management
Board service) and their surviving dependents.
The
provisions established for current pensions and vested rights to pensions for
this group of persons and their surviving dependents amounted to
EUR 96,259,798 as of December 31, 2009.
Mid-Term
Incentive Plan Description
In 2004,
we introduced our first MTIP to promote competitive total compensation for
members of the Management Board and senior executives of the Deutsche Telekom
Group as well as other beneficiaries, mainly in the United States and the United
Kingdom. The MTIP is a global, Group-wide compensation instrument for Deutsche
Telekom AG and other participating Group companies, which is designed to
encourage mid- and long-term value creation in the Group, and therefore align
the interests of management and shareholders.
The plan
has a measurement term of three years. The intention is to launch a similar plan
annually. A decision will be taken each year on whether to launch the plan for
that year, as well as on the specific terms of the plan, in particular the
performance targets.
The MTIP
is a cash-based plan. A certain amount is set as an award to the beneficiaries
by the relevant employer, and this amount is paid out to the beneficiaries after
the end of the measurement period for the relevant tranche of the plan (three
years), subject to the achievement of the two performance targets set forth in
the plan. In 2008 and 2009, we introduced MTIP tranches five and six, with the
same design features as the MTIP 2004.
The 2006,
2007, 2008 and 2009 MTIP tranches are tied to two equally weighted, stock-based
performance parameters—one absolute and one relative. If both performance
targets are achieved, then the total amount of the award is paid out. If only
one performance target is achieved, 50% of the amount is paid out. If neither
performance target is achieved, no payment is made.
The
absolute performance target will be reached if, at the end of the three-year
measurement period for the respective plan, Deutsche Telekom’s share price has
risen by at least 30% compared with its share price at the beginning of the
measurement period. The benchmark for the assessment is the non-weighted average
closing prices of Deutsche Telekom shares in Deutsche Börse AG’s Xetra®
trading during the last 20 trading days prior to the beginning and end of the
plan. For the 2007 MTIP, the performance target will be achieved if an average
closing share price of at least EUR 17.73 is reached during the defined 20
trading day period preceding the end of the measurement period. For the 2008
MTIP it is EUR 19.64 and for the 2009 MTIP it is EUR 14.31.
The
relative performance target is achieved if the total return of Deutsche Telekom
shares has outperformed the Dow Jones EURO STOXXSM
Total Return Index on a percentage basis over the same period during the term of
the individual plan. The benchmark is the non-weighted averages of Deutsche
Telekom shares (based on the closing prices of Deutsche Telekom shares in
Xetra®
trading) plus the value of dividends paid and reinvested in Deutsche Telekom
shares, bonus shares, etc., and the non-weighted averages of the Dow Jones EURO
STOXXSM
Total Return Index during the last 20 trading days prior to the beginning and
end of the individual MTIP. For the 2006 MTIP, the index’s starting value was
452.02 points. The starting value for the total return of Deutsche Telekom
shares, which corresponds to their share price at the beginning of the plan, was
EUR 14.00. For the 2007 MTIP, the index’s starting value was 551.91 points. The
starting value of the total return for Deutsche Telekom shares was EUR 13.64 and
for the MTIP 2008, the index’s starting value was 601.59 and the starting value
for the total return of Deutsche Telekom shares was EUR 15.11. For the 2009
MTIP, the index’s starting value was 328.55 points, the starting value for the
total return of Deutsche Telekom shares was EUR 11.01.
The goals
and strategic relevance of the performance targets will be reviewed and adjusted
if necessary prior to the launch of each new plan. The nature or thresholds of
the performance targets for the plan cannot be changed once the plan has
begun.
At the
end of the term of the plan, the General Committee of our Supervisory Board, and
since August 5, 2009, the Supervisory Board as a whole, is responsible for
establishing whether the absolute and relative performance targets for the
Management Board have been achieved. Based on these findings, the Management
Board will establish whether the targets have been achieved for Deutsche Telekom
AG and all participating companies as a whole and will communicate this
decision. Once it has been established that one or both targets have been
achieved, the payments will be made to the beneficiaries.
For the
2006 MTIP, the General Committee of the Supervisory Board decided at its meeting
on February 4, 2009 that the relative performance target has been achieved.
Consequently 50% of the awarded amount was paid out in February
2009.
The 2007
MTIP also achieved the relative performance target. The Supervisory Board
decided at its meeting on February 24, 2010 that 50% of the awarded amount will
paid out in March 2010.
Stock
Option Plans
Since our
inception as a privatized company in 1995, we established two compensatory stock
option plans in which our senior management and key employees, as well as those
of our subsidiaries, were granted option rights to purchase our shares. The only
remaining plan, Stock Option Plan 2001, is described below. No additional
options are available for grant under Stock Option Plan 2001. In addition,
options are available for grant under the T-Mobile USA stock option plans
described below.
Stock
Option Plan 2001
At the
shareholders’ meeting on May 29, 2001, an amendment to our Articles of
Incorporation was approved, which conditionally increased our registered capital
by up to a nominal amount of EUR 307.2 million, through the issuance of up
to 120 million new shares, which we refer to as Stock Option Plan 2001. The
shareholders’ resolution authorized our Supervisory Board to determine the
detailed terms for the issuance of shares from this conditional share capital,
and for the granting of option rights provided to Management Board members. In
all other cases, our Management Board had been authorized to make these
determinations.
At the
shareholders’ meeting on May 18, 2004, our shareholders adopted a
resolution that revoked the authorization to grant option rights given to our
Boards under Stock Option Plan 2001, but only to the extent that the Boards had
not yet granted option rights pursuant to the authorization. Further, our
shareholders adopted a resolution on the partial cancellation of the conditional
capital approved at the shareholders’ meeting on May 29, 2001, with respect
to 107 million shares (with a nominal value of EUR 273,920,000). As a
result, conditional capital in the aggregate amount of EUR 33,280,000 remained,
exclusively to allow for the issuance of 13 million new no par value
registered shares relating to option rights already granted prior to
December 31, 2003, under Stock Option Plan 2001, to members of our
Management Board, executives at levels below the Management Board, other
executives, managers and specialists of Deutsche Telekom AG, and managing board
members and other executives of second- and lower-tier domestic and foreign
Group companies. The remaining conditional capital is to be implemented only to
the extent option right holders exercise their option rights.
The term
of these option rights runs until August 12, 2011 (Tranche 2001) and
July 14, 2012 (Tranche 2002). All option rights that have been granted
pursuant to Stock Option Plan 2001 are currently exercisable.
New
shares issued pursuant to this stock option plan participate in profits from the
beginning of the fiscal year in which they are issued. If new shares are issued
after the end of a fiscal year, but before the shareholders’ meeting at which a
resolution on the appropriation of net profit for the preceding fiscal year is
adopted, the new shares will participate in the profits as of the beginning of
the previous fiscal year.
For
further information regarding our stock-based compensation plans, including the
number of options granted, exercise prices and expiration dates, see note (34)
to the Consolidated Financial Statements.
T-Mobile
USA Stock Option Plans
Before
its acquisition on May 31, 2001, VoiceStream Wireless Corporation
(“VoiceStream,” now T-Mobile USA) had granted stock options to its employees and
certain other persons under its Management Incentive Stock Option Plan (MISOP).
On May 31, 2001, all outstanding options of VoiceStream option holders were
converted from the right to acquire VoiceStream common shares into the right to
acquire Deutsche Telekom ordinary shares (or an equal number of Deutsche Telekom
ADSs provided Deutsche Telekom maintains an ADS Program in the United States) at
a ratio determined by multiplying the maximum number of VoiceStream common
shares subject to such VoiceStream options by 3.7647. The exercise price for
each Deutsche Telekom ordinary share equaled the exercise price per VoiceStream
common share in effect immediately prior to the acquisition divided by
3.7647.
Before
its acquisition on May 31, 2001, Powertel, Inc. (“Powertel,” now included
in T-Mobile USA) had granted stock options to its employees. On May 31,
2001, as a consequence of the acquisition, all outstanding Powertel options were
converted from the right to acquire Powertel common shares into the right to
acquire Deutsche Telekom ordinary shares ADSs at a ratio determined by
multiplying the maximum number of shares of Powertel common stock subject to
such options by 2.6353. The exercise price for each Deutsche Telekom ordinary
share equaled the exercise price per share of Powertel common stock in effect
immediately prior to the acquisition divided by 2.6353. After the May 31,
2001 acquisition, no further options were granted under any other Powertel stock
option plans.
In
connection with the merger, Deutsche Telekom deposited ordinary shares equal to
the number of then outstanding VoiceStream and Powertel common shares subject to
the outstanding options as of the date of the acquisitions at the conversion
ratios set forth above, plus an additional 8,000,000 Deutsche Telekom ordinary
shares. The options typically vest for a period of up to four years. All such
options have a term of up to ten years. No options were permitted to be issued
after December 31, 2004.
A total
of 5,403,000 Deutsche Telekom ADSs underlying such options were outstanding at
December 31, 2009.
For more
information, see note (34) to the Consolidated Financial
Statements.
Loans
to Supervisory Board and Management Board Members
Pursuant
to the Stock Corporation Act, a Supervisory Board member may not receive a loan
from us unless approved by the Supervisory Board. A Management Board member may
only receive a loan from us upon prior approval by the Supervisory Board. As a
reporting issuer in the United States, we are subject to certain prohibitions on
loans to our officers and directors. We have not extended any loans to current
or former Management Board or Supervisory Board members.
The
members of our Management Board in 2009 owned a total of 116,585 Deutsche
Telekom shares and options exercisable for a total of 168,055 Deutsche Telekom
shares, as of January 18, 2010. No individual member of our Management
Board beneficially owned 1% or more of our outstanding shares as of
January 18, 2010.
On an
individual basis, the members of our Management Board in 2009 beneficially owned
the following amount of Deutsche Telekom shares as of January 18,
2010:
|
Name
|
|
No.
of Shares
Subject to Options
|
|
|
No.
of Shares
Beneficially Owned
|
|
|
Current
members:
|
|
|
|
|
|
|
|
René
Obermann
|
|
|
48,195 |
(1) |
|
|
71,040 |
|
|
|
|
|
28,830 |
(2) |
|
|
|
|
|
Hamid
Akhavan
|
|
|
19,840 |
(2) |
|
|
19,500 |
|
|
Dr.
Manfred Balz
|
|
|
32,130 |
(1) |
|
|
8,245 |
|
|
|
|
|
17,360 |
(2) |
|
|
|
|
|
Reinhard
Clemens
|
|
|
0 |
|
|
|
0 |
|
|
Niek
Jan van Damme
|
|
|
0 |
|
|
|
0 |
|
|
Timotheus
Höttges
|
|
|
17,050 |
(2) |
|
|
17,800 |
|
|
Guido
Kerkhoff
|
|
|
4,650 |
(2) |
|
|
0 |
|
|
Thomas
Sattelberger
|
|
|
0 |
|
|
|
0 |
|
|
Total
|
|
|
168,055 |
|
|
|
116,585 |
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Stock
Option Plan 2001, tranche 1—exercise price: EUR 30.00;
expiration date: August 12,
2011.
|
|
(2)
|
Stock
Option Plan 2001, tranche 2—exercise price: EUR 12.36;
expiration date: July 14,
2012.
|
The
members of our Supervisory Board in 2009 owned a total of 3,654 shares as of
January 18, 2010. No individual member of our Supervisory Board in 2009
beneficially owned 1% or more of our outstanding shares as of January 18,
2010.
On an
individual basis, the members of our Supervisory Board in 2009 beneficially
owned Deutsche Telekom shares as of January 18, 2010 as
follows:
|
Name
|
|
No.
of Shares
Beneficially Owned
|
|
|
Current
members:
|
|
|
|
|
Jörg
Asmussen
|
|
|
0 |
|
|
Hermann
Josef Becker
|
|
|
957 |
|
|
Dr.
Wulf H. Bernotat
|
|
|
306 |
|
|
Monika
Brandl
|
|
|
774 |
|
|
Hans
Martin Bury
|
|
|
0 |
|
|
Josef
Falbisoner
|
|
|
556 |
|
|
Dr. Hubertus
von Grünberg
|
|
|
0 |
|
|
Lawrence
H. Guffey(1)
|
|
|
0 |
|
|
Ulrich
Hocker
|
|
|
0 |
|
|
Lothar
Holzwarth
|
|
|
730 |
|
|
Hans-Jürgen
Kallmeier
|
|
|
0 |
|
|
Sylvia
Kühnast
|
|
|
37 |
|
|
Prof.
Dr. Ulrich Lehner
|
|
|
0 |
|
|
Waltraud
Litzenberger
|
|
|
144 |
|
|
Michael
Löffler
|
|
|
150 |
|
|
Dr.
Ulrich Middelmann
|
|
|
0 |
|
|
Lothar
Schröder
|
|
|
0 |
|
|
Dr.
Ulrich Schröder
|
|
|
0 |
|
|
Michael
Sommer
|
|
|
0 |
|
|
Bernhard
Walter
|
|
|
0 |
|
|
Former
members who served on our Supervisory Board during 2009:
|
|
|
|
|
|
Prof.
Dr. Wolfgang Reitzle
|
|
|
0 |
|
|
Prof.
Dr. Wulf von Schimmelmann
|
|
|
0 |
|
|
Total
|
|
|
3,654 |
|
|
|
|
|
|
|
|
(1)
|
Mr. Guffey
does not own any ordinary shares of Deutsche Telekom AG. Blackstone
Capital Partners (Cayman) V L.P., and Blackstone Capital Partners (Cayman)
V-A L.P. (collectively, the “BCP Cayman Funds”), for which Blackstone
Management Associates (Cayman) V L.P. (“BMA Cayman”) is the general
partner, and Blackstone DT Capital Partners V-S L.P., Blackstone
Participation Partnership V L.P., Blackstone Family Investment Partnership
V L.P. and Blackstone Family Investment Partnership V-A L.P.
(collectively, the “BCP Funds”), for which Blackstone Management
Associates V L.L.C. (“BMA”) is the general partner, and Blackstone GT
Communications Partners L.P. and Blackstone Family Communications
Partnership I L.P. (collectively, the “BCOM Funds” and, together with the
BCP Cayman Funds and the BCP funds, the “Blackstone Funds”), for which
Blackstone Communications Management Associates I L.L.C. (“BCMA”) is the
general partner, collectively beneficially own 191.700,000 million
shares of Deutsche Telekom AG. BMA Cayman, BMA and BCMA, as the
general partners of such respective Blackstone Funds, have indirect voting
and investment power over the shares in Deutsche Telekom AG held or
controlled by the Blackstone Funds. Mr. Guffey is a member of
BMA Cayman, BMA and BCMA and disclaims any beneficial ownership of the
shares beneficially owned by BMA Cayman, BMA or BCMA, except to the extent
of his pecuniary interest therein.
|
No
individual member of our Supervisory Board beneficially holds options to
purchase Deutsche Telekom shares in an amount that exceeds 1% of the total
shares outstanding.
Employees
As of
December 31, 2009, the companies within the Deutsche Telekom consolidated
Group employed a workforce of 259,920 people worldwide, excluding interns and
apprentices. This represented an increase of 14.1% compared to December 31,
2008 which is primarily due to the first time consolidation of
OTE. The number of employees also grew in the Systems Solution
operating segment due to the expansion of business outside of Germany, while the
increase in the number of employees at the United States operating segment
resulted from further retail distribution growth.
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Deutsche
Telekom Group employees(1)
|
|
|
259,920 |
|
|
|
227,747 |
|
|
|
241,426 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche
Telekom AG
|
|
|
49,122 |
|
|
|
44,645 |
|
|
|
51,863 |
|
|
Of
which: Civil Servants
|
|
|
29,188 |
|
|
|
32,113 |
|
|
|
35,559 |
|
|
Of
which: Salaried employees and wage earners(2)
|
|
|
19,934 |
|
|
|
12,532 |
|
|
|
16,304 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Breakdown
by operating segment
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
81,336 |
|
|
|
85,637 |
|
|
|
91,337 |
|
|
United
States
|
|
|
40,697 |
|
|
|
38,031 |
|
|
|
33,750 |
|
|
Europe
|
|
|
17,631 |
|
|
|
18,255 |
|
|
|
18,043 |
|
|
Southern
and Eastern Europe
|
|
|
53,532 |
|
|
|
20,885 |
|
|
|
22,491 |
|
|
Systems
Solutions
|
|
|
46,021 |
|
|
|
45,862 |
|
|
|
49,835 |
|
|
Group
Headquarters and Shared Services
|
|
|
20,703 |
|
|
|
19,077 |
|
|
|
25,970 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Breakdown
by geographic area
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Germany
|
|
|
127,487 |
|
|
|
131,713 |
|
|
|
148,938 |
|
|
International
|
|
|
132,433 |
|
|
|
96,034 |
|
|
|
92,488 |
|
|
Of
which: other EU Member States
|
|
|
76,196 |
|
|
|
45,115 |
|
|
|
45,709 |
|
|
Of
which: rest of Europe
|
|
|
10,061 |
|
|
|
7,908 |
|
|
|
8,179 |
|
|
Of
which: North America
|
|
|
41,235 |
|
|
|
38,621 |
|
|
|
34,297 |
|
|
Of
which: rest of world
|
|
|
4,941 |
|
|
|
4,390 |
|
|
|
4,303 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Employees,
excluding interns and apprentices.
|
|
(2)
|
Thereof, 6,597
“civil servants temporarily without civil servant status” at
December 31, 2009. Civil servants temporarily without civil servant
status have voluntarily suspended their civil servant status in order to
take positions, or accept employment conditions within the Group, that are
for legal or practical reasons incompatible with civil servant status.
They have the right to reclaim civil servant status and the benefits
associated with that status when they have concluded their non-civil
servant assignments. The figures in this table also include an
additional 13,267 civil servants temporarily without civil servant
status who work at our
subsidiaries.
|
Employee
Relations
In
Germany, works councils (Betriebsräte), whose members are elected by the
employees, represent the interests of the employees in accordance with the Works
Council Act (Betriebsverfassungsgesetz). Works councils are established locally,
as well as at the subsidiary level and at the Group level. Works councils must
be notified in advance of, and have the right to comment on, proposed employee
terminations, relocations and other matters, and have co-determination rights in
respect of certain social matters, including work schedules and rules of
conduct. In April 2004, we established an EU-wide works council, which complies
with the EU Works Council Directive. It has the right to be informed and
consulted regarding our EU employees, but does not have the right to participate
in the decision-making process. Traditionally, we have had a good relationship
with our works councils and the unions.
Civil
Servants
As of
December 31, 2009, approximately 29,200 of our employees had active civil
servant status in Germany. No employees hired after January 1, 1995, have
been granted civil servant status. Pursuant to the law governing our
privatization, our civil servant employees retained their civil servant status.
Accordingly, the terms and conditions of their employment and the benefits owed
to them continue to be governed by German regulations regarding civil servants.
In particular, civil servant salaries are set by statute and not by us or by
collective bargaining agreements. In addition, civil servants are tenured
employees and may not be unilaterally terminated except in extraordinary,
statutorily defined circumstances. Civil servants are not permitted to
participate in work-related actions such as strikes, but are permitted to join
labor unions. Although we are authorized, pursuant to the law governing our
privatization, to exercise generally the rights and duties of the Federal
Republic as the employer of civil servants, the Federal Postal and
Telecommunication Agency (Bundesanstalt für Post und Telekommunikation or the
Federal Agency) has a right of consultation in the implementation of certain
aspects of the terms under which we employ civil servants.
Under the
German Postal Employees Act (Postpersonalrechtsgesetz), which governs the legal
position of civil servants at Deutsche Telekom AG, we have been given greater
flexibility with respect to our relationship with our civil servants. Among
other things, this law allowed for the complete elimination of the Christmas
bonus, making it possible for us to finance the reduction in weekly working
hours from 38 to 34 under our employment alliance, which also applied to civil
servants from April 2004. The agreement provides the option of assigning tasks
in companies within or outside the Group to active civil servants. The civil
servants’ compensation, healthcare and pension entitlements have been
maintained. Under certain circumstances, civil servants may also be transferred,
even without their consent, to companies in which Deutsche Telekom AG has a
direct or indirect majority shareholding. However, there is a risk that civil
servants temporarily without civil servant status may return to Deutsche Telekom
AG, for example, after the completion of their work at one of our subsidiaries.
Although we attempt to reduce this risk through compensation payments from the
subsidiaries to Deutsche Telekom AG, we cannot eliminate it
completely.
Since
2004, the collective bargaining agreement between Deutsche Telekom AG and the
ver.di union has been funded for civil servants by various measures, including
the elimination of year-end bonuses (Christmas bonuses) based on an amendment of
the Legal Provisions for the German Postal Employees Act. Civil servants have
raised objections and taken legal action against this amendment. For more
information, see “Item 8. Financial Information—Legal Proceedings – Civil
Servants.”
Civil
servants employed by us are entitled to pension benefits provided by the German
federal government pursuant to the Civil Servants’ Benefits Act
(Beamtenversorgungsgesetz). Pursuant to the law governing our privatization, we
are required to make annual contributions to a special pension fund established
to fund such pension obligations. The special pension fund was merged in 2000
with the special pension funds of Deutsche Post AG and Deutsche Postbank AG to
form a joint pension fund, the Federal Pension Service for Post and
Telecommunication (Bundes-Pensions-Service für Post und Telekommunikation e.V.,
the “BPS-PT”). The BPS-PT works for the funds of all three companies and also
handles financial administration for the Federal Republic on a trust basis. All
transactions for pension and allowance payments to employees are made by BPS-PT
for the companies Deutsche Post AG, Deutsche Postbank AG and Deutsche Telekom
AG.
In
accordance with the provisions of the Post and Telecommunications Reorganization
Act (Postneuordnungsgesetz), the special pension fund makes pension and
allowance payments to retired employees and their surviving dependents who are
entitled to pension payments as a result of civil servant status. Since 2000, we
have been legally obligated to make an annual contribution to the special
pension fund of 33% of the gross remuneration of active civil servants of
Deutsche Telekom AG and the imputed gross remuneration of civil servants
temporarily without civil servant status of Deutsche Telekom AG entitled to
pension payments. These contributions amounted to EUR 684 million in 2009, EUR
762 million in 2008 and EUR 772 million in 2007.
The
Federal Republic compensates the special pension fund for differences between
the ongoing payment obligations of the special pension fund, amounts received
from us and returns on assets, and guarantees that the special pension fund is
always in a position to fulfill the obligations it has assumed. The Federal
Republic cannot require reimbursement from us for amounts paid by it to the
special fund.
Provisions
for civil servants in the Deutsche Telekom Group
On
November 16, 2006, the “Second Bill to Amend the Act for the Improvement of
the Staff Structure at the Residual Special Asset of the Federal Railways and
the Successor Companies of the Former Deutsche Bundespost” (Zweites Gesetz zur Änderung des
Gesetzes zur Verbesserung der personellen Struktur beim Bundeseisenbahnvermögen
und in den Unternehmen der Deutschen Bundespost) entered into force.
Among other things, this Act was intended to help correct the negative
consequences of a structural feature of the successor companies to Deutsche
Bundespost (Deutsche Telekom AG, Deutsche Post AG, Deutsche Postbank AG). These
successor companies employ a high proportion of civil servants in Western
Germany, while staff covered by collective agreements make up the majority of
the workforce in Eastern Germany. On the basis of the 2006 law, we became able
to include civil servants in staff restructuring measures. Civil servants of all
service grades, who are working in areas where there is a surplus of staff and
for whom employment in another area is not possible or cannot reasonably be
expected in line with civil service legislation, have been able to apply for
early retirement from the age of 55.
Provisions
for civil servants in the Deutsche Telekom Group.
The Act
for the Reform of Civil Service Law (Dienstrechtsneuordnungsgesetz) came into
force on February 12, 2009 and the related remuneration schedule for civil
servants was adjusted effective July 1, 2009. This Act includes a gradual
postponement of the retirement age of federal civil servants to 67. This
postponement does not apply, however, to those civil servants who choose to take
early retirement, meaning civil servants who are eligible can still take early
retirement upon reaching the age of 55.
Although
the Act provides an opportunity to extend the early retirement option until
December 31, 2012, this arrangement is currently limited until December 31,
2010. Exercise of the early retirement option after December 31, 2010 is subject
to a decision by the Board of Management that is scheduled to be made in the
second half of 2010. Civil servants who fulfill certain conditions
may elect to apply for early retirement under the early retirement option until
December 31, 2010. With the entry into force of the Act for the Reform of
Civil Service Law, the German Legislature has given our Board of Management the
choice to extend the early retirement option to December 31, 2012, in which
case a Board of Management resolution is required. A decision is
expected from the Board of Management in the second half of 2010 on whether the
application of the early retirement option is to be extended beyond
December 31, 2010.
Other
Employees
As of
December 31, 2009, approximately 98,300 of our employees in Germany were
non-civil servants. The majority of these employees are covered by collective
bargaining agreements, but non-civil servant employees in Germany with a
continuous labor contract of more than six months are covered by the Dismissal
Protection Act (Kündigungsschutzgesetz), which imposes various restrictions
on the involuntary termination of employment. In particular, the Dismissal
Protection Act contains regulations that limit the fundamental right in German
civil law to terminate long-term contracts (known as “continuing obligations”)
in favor of employees to “socially justified dismissals.”
Many of
our employees in Germany are organized in unions, principally the union “ver.di”
(Vereinte Dienstleistungsgewerkschaft). We also have labor contracts negotiated
with smaller unions. Due to our acquisition of debis Systemhaus GmbH in 2002,
the union IG Metall (Industriegewerkschaft Metall) represents some employees of
T-Systems. The terms and conditions of employment and salary increases for
non-civil servant employees are negotiated between the unions and us. Pursuant
to the law governing our privatization, the Federal Agency is responsible for
concluding collective bargaining agreements relating to certain statutorily
defined non-wage benefits, rules of conduct and other general terms of
employment. Such agreements only become effective with our consent. For more
information regarding agreements between the Federal Agency and us, see “Item 7.
Major Shareholders and Related Party Transactions—Related Party
Transactions.”
Collective
bargaining in the Deutsche Telekom Group.
Collective
bargaining for Deutsche Telekom AG, for the service companies Deutsche Telekom
Netzproduktion (DT NP), Deutsche Telekom Technischer Service (DT TS) and
Deutsche Telekom Kundenservice (DT KS), as well as for Vivento Customer Services
(VCS), T-Direkt, Deutsche Funkturm Management GmbH, Telekom Shop
Vertriebsgesellschaft, and DeTeFleetServices GmbH were concluded in the 2009
reporting year.
On
March 13, 2009, the negotiating parties reached an agreement in the
arbitration proceedings governing the 2009 collective bargaining for certain
employees of Deutsche Telekom AG and three of its German service subsidiaries
Deutsche Telekom Netzproduktion, Deutsche Telekom Technischer Service and
Deutsche Telekom Kundenservice. Salaries for employees at Deutsche Telekom and
those companies will gradually increase by a total of 5.5 % over a total of
24 months, with a 3 % increase with retroactive effect as of January 1,
2009 and an increase of an additional 2.5 % of January 1, 2010. In
addition, protection from compulsory redundancy for the affected employees was
extended by another year. Pay-scale employees at Deutsche Telekom AG are
guaranteed jobs up until the end of 2010, while their counterparts in the three
service companies have job security until the end of 2013. A year’s extension
was also agreed for the commitment not to sell the service companies. As a
result, the commitment not to sell the service companies will not expire until
the end of 2011.
Employees
of the three service companies who personally contributed to the companies’
improved cost efficiency by accepting a pay cut negotiated with ver.di in 2007
as part of the process of establishing the service companies will receive an
additional top-up of 3.1 %, comprising 2 % initially for 2009, and a
further 1.1 % for 2010.
Staff
Restructuring in Germany
The
higher quality and service requirements imposed by business customers and
consumers are one of the most important factors in determining how we utilize
our employees. The rapid pace of technological advances, which are intensifying
competition and thus cost pressure both on the national and international level,
present a further challenge. In Germany and other European countries, regulatory
authorities pursue policies of redistributing market share in favor of our
competitors and at cost structures that do not reflect our actual costs or
investments in infrastructure.
To this
end, we have adopted a broad-based approach to staff restructuring, comprised of
measures to reduce overall headcount while avoiding compulsory redundancies,
alongside demand-driven skills development and employee advancement programs, as
well as the targeted recruitment of junior staff with relevant skills. In
existing core markets, such as the fixed-line business, we are committed to
downsizing the workforce in order to remain competitive, while in areas with
direct customer contact, such as our Telekom shops, and in certain growth
markets, new jobs are being created.
Offsetting
the necessary reductions, growth in new business areas has resulted in staff
restructuring and expansion. The Group recruited 3,664 new staff as part of the
hiring initiatives in 2009.
In 2009,
expenses for our personnel measures totaled approximately EUR 529 million. These
measures relate mainly to severance and other incentive payments that will
continue to have an effect after 2009. In particular, this relates to expenses
in connection with the rules for the early-retirement of civil servants in the
amount of EUR 113 million, as well as expenses for severance payments and
early retirement for non civil servants both in and outside of Germany in the
amount of EUR 416 million.
When
Group companies or operations are sold or otherwise deconsolidated, some civil
servants generally choose to continue working at the relevant companies or
operations. In this event, for the civil servants (who have
temporarily given up their civil servant status to work outside of Deutsche
Telekom AG) have the right to return to Deutsche Telekom AG if they so chose.
For example, as of December 31, 2009, the total number of civil servants that
can avail themselves of this right of return to the Deutsche Telekom AG was
approximately 3,500, which represented a considerable decrease over the 2008
year-end figure, as a result of approximately 400 civil servants actually
returning to the Deutsche Telekom Group mainly from Nokia Siemens Networks,
Strabag and the cable network operators.
Vivento
In June
2002, we and ver.di signed a collective agreement concerning employee
rationalization matters. This agreement contains provisions providing protection
in the case of rationalization-related job cuts affecting employees covered by
collective agreements and trainees who have successfully completed their
training. In accordance with these provisions, we established Vivento, our
personnel services agency. This agency has as its primary task the placement of
employees affected by rationalization measures and, after appropriate
retraining, if necessary, the placement of those employees in vacant positions
inside and outside of the Group.
Vivento
made an important contribution to the personnel restructuring in the Group in
2009 by locating external employment opportunities, in particular within the
public sector. At December 31, 2009, the workforce at Vivento totaled
around 9,600 employees. This included around 4,200 employees who were deployed
externally, mainly in the public sector, for example at the Federal Employment
Agency. In addition, approximately 2,600 people were employed within the Group,
especially in call centers, and around 2,800 employees were placed in Vivento’s
operational and strategic units or otherwise supported by Vivento.
During
2009, 2,300 employees left Vivento, with around half pursuing new employment
opportunities outside our Company. This brings the total number of employees
that have found jobs outside of Vivento since its formation to 35,211. Around
3,700 employees were transferred to Vivento during 2009, bringing the
number of staff transferred to Vivento since its formation to 44,776. During
2009, around 78 % of the 9,200 employees in Vivento (excluding
Vivento's management) were in alternative employment or undergoing
training.
ITEM 7. Major Shareholders and Related Party
Transactions
MAJOR
SHAREHOLDERS
Prior to
1989, we were part of Deutsche Bundespost, a state-owned special asset
(Sondervermögen des Bundes). In 1989, Deutsche Bundespost was divided into three
distinct entities—Deutsche Bundespost Telekom, Deutsche Bundespost Postbank and
Deutsche Bundespost Postdienst. Deutsche Bundespost Telekom was transformed,
effective January 1, 1995, into Deutsche Telekom AG, a private stock
corporation, which initially remained wholly owned by the Federal Republic. Our
first offering of equity securities to the public was in November 1996,
followed by a second offering of equity securities to the public in
June 1999. Each of the 1996 and 1999 offerings included U.S. public
tranches.
According
to information supplied to us by the Federal Republic, at December 31,
2009, the Federal Republic’s direct ownership interest in our company was
14.83%. KfW, a development bank that is 80% owned by the Federal Republic and
20% owned by the German federal states, owned 16.87% of our shares at
December 31, 2009.
The
Federal Republic administers its shareholdings and exercises its rights as a
shareholder of Deutsche Telekom through the German Finance Ministry. In their
capacities as shareholders, the Federal Republic and KfW may exercise only those
rights that they have under the Stock Corporation Act and our Articles of
Incorporation, which are the same for all of our shareholders. For more
information regarding our Articles of Incorporation, see “Item 10.
Additional Information—Articles of Incorporation.”
At
present, the Finance Ministry and KfW each have one representative on our
Supervisory Board. Additionally, the Finance Ministry has one representative on
the supervisory boards of our subsidiaries, T-Systems International GmbH and
T-Mobile Deutschland GmbH. For a description of the rights and responsibilities
of the members of the Supervisory Board, see “Item 6. Directors, Senior
Management and Employees—Supervisory Board.”
The table
below sets forth the number of our ordinary shares held by holders of more than
5% of our ordinary shares and their percentage of ownership, based on
information supplied to us by such holders, as of the dates
indicated.
|
|
|
For
the years ended December 31,(1)
|
|
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
|
|
Shares
owned
|
|
|
%
|
|
|
Shares
owned
|
|
|
%
|
|
|
Shares
owned
|
|
|
%
|
|
|
Federal
Republic
|
|
|
646,575,126 |
|
|
|
14.83 |
|
|
|
646,575,126 |
|
|
|
14.83 |
|
|
|
646,575,126 |
|
|
|
14.83 |
|
|
KfW
|
|
|
735,661,686 |
(2) |
|
|
16.87 |
|
|
|
735,661,686 |
|
|
|
16.87 |
|
|
|
735,667,390 |
|
|
|
16.87 |
|
|
|
|
|
|
|
|
|
31.70 |
|
|
|
|
|
|
|
31.70 |
|
|
|
|
|
|
|
31.70 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Percentages
calculated based on total outstanding shares as of the period end, which
do not give effect to shares to be delivered in connection with the
maturity of certain exchangeable bonds.
|
|
(2)
|
Of
which, approximately 200.9 million shares are subject to transfer to
KfW security holders in accordance with the terms of outstanding KfW
securities maturing in 2011.
|
The
Blackstone Group holds 191,700,000 shares, which represents 4.4% of our
outstanding shares. In addition, BlackRock holds 145,762,000 shares, which
represents 3.3% of our outstanding shares.
Major Shareholders do not have different voting rights from any of
our other shareholders.
As noted
above, KfW is 80% owned by the Federal Republic. The Federal Republic has
publicly stated its intention to reduce its holdings of Deutsche Telekom shares.
We do not expect that a reduction in the holdings of our shares by the Federal
Republic or KfW will have a material negative effect on our governance or
business.
Based on
our share register, as of February 24, 2010, we had approximately 1,760,762
registered holders of our ordinary shares, including 1,624 registered holders of
our shares with addresses in the United States. As of December 31, 2009,
there were 4,361,319,993 total outstanding shares.
As of
February 24, 2010, there were 140,079,903 of our ADSs outstanding, with
1,319 registered holders of record of our ADSs with addresses in the United
States and 45 holders of record of our ADSs with addresses outside the
United States.
Relationship
with the Federal Republic
For as
long as the Federal Republic is a shareholder with controlling influence
(beherrschender Einfluss), our Management Board is required to produce a report
(Abhängigkeitsbericht) setting forth the relationships and the transactions
entered into between us and the Federal Republic or its affiliated agencies and
enterprises. This “related-party report,” which is intended to protect minority
shareholders and creditors, must include a declaration by the Management Board
as to the fairness of transactions and dealings with the Federal Republic. Our
independent auditors are required to confirm the accuracy of this report. The
Supervisory Board is then required to review the related-party report and the
auditor’s findings thereon and inform the shareholders as to the conclusions of
both. In the 2009 related-party report, our Management Board declared that,
under the circumstances known to the Management Board at the time we performed
the specified business transactions with the Federal Republic or its affiliated
enterprises (including the Federal Agency), we received appropriate remuneration
in respect of these transactions, and that we did not perform or omit any
actions on behalf of, or on the instructions of, the controlling shareholder, in
its capacity as such, or of its affiliated enterprises. Our independent auditors
have confirmed the accuracy of our 2009 related-party report regarding the
relationships between our controlling shareholder and us.
Coordination
and Administrative Responsibilities of the Federal Agency
Pursuant
to German law, the Federal Agency provides certain services to Deutsche Telekom,
Deutsche Postbank and Deutsche Post and has certain rights and responsibilities
with respect to the administration of the common affairs of these companies. For
example, the Federal Agency is responsible for concluding general collective
bargaining agreements (Manteltarifverträge) on behalf of these entities with
employees relating only to certain non-wage benefits, rules of conduct and other
general terms of employment. These agreements only become effective with the
consent of the affected entity. The Federal Agency’s right to conclude these
agreements does not affect our right to negotiate particular terms of
employment, including wages, salaries and conditions of employment,
independently on our own behalf. The Federal Agency also administers the health
insurance fund for civil servants (Postbeamtenkrankenkasse) and the pension fund
for non-civil servants (Versorgungsanstalt der Deutschen Bundespost) employed by
Deutsche Postbank, Deutsche Post, others and us. The Federal Agency has certain
additional responsibilities and rights with respect to civil servants employed
by Deutsche Post, Deutsche Postbank and us. The Federal Agency has the right to
provide advice concerning the coordination of the activities of our Company,
Deutsche Postbank and Deutsche Post, particularly, with respect to their public
image, issues that may arise if the business plans of these entities conflict
and, upon request, with respect to certain personnel issues.
Services
provided by the Federal Agency pursuant to applicable law are rendered on the
basis of service agreements between us, Deutsche Postbank or Deutsche Post and
the Federal Agency. Because German law currently requires that each of Deutsche
Telekom, Deutsche Postbank and Deutsche Post enter into a service agreement with
the Federal Agency covering the services described above, we have not considered
entering into arrangements with third parties for the provision of these
services. Costs of the Federal Agency incurred in connection with providing
these services are financed out of fees agreed upon with us, Deutsche Post and
Deutsche Postbank. We made a payment of EUR 56 million for these
services in 2009 (2008: EUR 55 million; 2007
EUR 52 million).
In 2009
the total costs of the Federal Agency, consisting mainly of personnel costs for
its employees, were allocated pursuant to a cost plus 2% attribution system of
the Federal Agency on the basis of the actual expenses of the Federal
Agency.
Federal
Republic as Regulator
The
Federal Republic’s role as regulator is independent and distinct from its role
as shareholder. This regulatory function is exercised by the Federal Network
Agency. Our telecommunications licenses held in Germany were acquired from the
Federal Republic or its agencies. For more information, see “Item 4.
Information on the Company—Regulation.”
Federal
Republic and Affiliated Entities as Customers
The
Federal Republic is one of our largest customers and purchases services on an
arm’s length basis. We deal with the various departments and agencies of the
Federal Republic as separate customers, and the provision of services to any one
department or agency does not constitute a material part of our revenues. We
enter into contracts to provide telecommunications services to the Federal
Republic and its agencies and instrumentalities (including corporations owned,
controlled by, or affiliated with, the Federal Republic) on an arm’s length
basis in the ordinary course of our business.
We also
purchase goods and services, primarily distribution and transportation,
printing, warehousing and other services, from Deutsche Post World Net group
(“Deutsche Post”), 30.5% of whose shares are owned by the KfW. Deutsche
Post also purchases goods and services, primarily consisting of information
technology and corporate network services from us. Two of our current
Supervisory Board members are members of the Supervisory Boards of Deutsche Post
AG and Deutsche Postbank AG.
We and
Deutsche Postbank have entered into a master credit agreement in the amount of
EUR 600 million. As of December 31, 2009, no amounts were drawn down under this
credit line. The interest rate of this credit is a reference rate
(Euribor/Eonia) plus a margin that depends on our credit rating. The margin is
currently 60 basis points per year. In the ordinary course of business, we
engage in a variety of other routine commercial banking relationships with
Deutsche Postbank. In 2009, we deposited cash with Deutsche Postbank at normal
market rates of interests and maturities.
Our Dutch
finance subsidiary, Deutsche Telekom International Finance B.V., is party to one
loan agreement with KfW in the amount GBP 150 million, which is guaranteed
by Deutsche Telekom AG. The level of the interest rates depends on our credit
rating. The loan will mature on July 13, 2010.
We are a
partner in a consortium that has contracted with the Federal Republic to develop
and operate an innovative system for the collection of toll charges from heavy
vehicles for their use of the German high-speed highway system. Pursuant to this
arrangement, we have, along with our partners, undertaken certain obligations,
including financial and performance obligations. For more information, see
“Item 5. Operating and Financial Review and Prospects—Liquidity and Capital
Resources—Capital Resources—Contractual Obligations and Other Commitments” and
“Item 8. Financial Information—Legal Proceedings.”
Pension
Contributions for Civil Servants
Civil
servants (Beamte) employed by us are entitled to pension benefits provided by
the Federal Republic. Under German law, we are required to make annual
contributions to a special pension fund (Unterstützungskasse) established to
fund these pension obligations. For more information, see “Item 6.
Directors, Senior Management and Employees—Employees and Labor Relations” and
“Item 5. Operating and Financial Review and Prospects—Segment
Analysis—Broadband/Fixed Network—Operating Expenses.”
Federal
Republic Guarantees
Under
German law, all of our liabilities outstanding as of January 1, 1995, the
date of Deutsche Telekom’s registration in the Commercial Register
(Handelsregister) in Bonn, became guaranteed by the Federal Republic. This
guarantee replaced the Federal Republic’s obligations with respect to our
liabilities when it was a state-owned special asset. The Federal Republic does
not guarantee liabilities we incurred after January 1, 1995. These
guarantees amounted to an aggregate of EUR 1.9 billion as of
December 31, 2009 (December 31, 2008: EUR 2.1 billion).
DT 3
Offering
In
connection with the global offering of our securities by KfW in June 2000
(the “DT 3 Offering”), we agreed to bear certain offering-related expenses
in view of the benefits to be accrued by us from the offering. We, the Federal
Republic and KfW agreed to indemnify the underwriters of that offering against
certain liabilities, including liabilities under the U.S. Securities Act of
1933, as amended, in the manner provided for in the underwriting agreement. The
underwriting agreement allocated among us, the Federal Republic and KfW
indemnification responsibility for particular sections of the disclosure
materials, with us taking responsibility vis-а-vis the underwriters for, among
other things, the parts of the disclosure materials concerning our
business and financial statements. Additionally, we agreed with KfW to assume
responsibility for errors, if any, in the translation of some of the
prospectuses and in certain supplementary disclosure items that were required
under local law in some offering jurisdictions. Moreover, as the issuer of the
shares that were offered, we became subject to the prospectus liabilities, if
any, associated with the registering or listing of the securities offered in
various jurisdictions. The underwriting agreement provided that its underwriter
indemnification provisions were in addition to, and did not affect, any
liability that we, KfW, the Federal Republic or the underwriters may otherwise
have had. For more information, see “Item 8. Financial Information—Legal
Proceedings – Reimbursement Proceedings against the Federal Republic and
KfW.”
Other
Transactions
We
provide telecommunications services to numerous companies, mainly throughout
Europe, in the ordinary course of our business, including firms in which we hold
an ownership interest and firms with which certain members of the Supervisory
Board are affiliated.
Mr. Guffey,
a member of our Supervisory Board, does not own any ordinary shares of Deutsche
Telekom AG. Blackstone Capital Partners (Cayman) V L.P., and Blackstone
Capital Partners V-A L.P. (collectively, the “BCP Cayman Funds”), for which
Blackstone Management Associates (Cayman) V L.P. (“BMA Cayman”) is the general
partner, and Blackstone DT Capital Partners V-S L.P., Blackstone Participation
Partnership V L.P., Blackstone Family Investment Partnership V L.P. and
Blackstone Family Investment Partnership V-A L.P. (collectively, the “BCP
Funds”), for which Blackstone Management Associates V L.L.C. (“BMA”) is the
general partner, and Blackstone GT Communications Partners L.P. and Blackstone
Family Communications Partnership I L.P. (collectively, the “BCOM Funds” and,
together with the BCP Funds, the “Blackstone Funds”), for which Blackstone
Communications Management Associates I L.L.C. (“BCMA”) is the general partner,
collectively beneficially own 191.7 million shares of Deutsche Telekom
AG. BMA Cayman, BMA and BCMA, as the general partners of such respective
Blackstone Funds, have indirect voting and investment power over the shares in
Deutsche Telekom AG held or controlled by the Blackstone
Funds. Mr. Guffey is a member of BMA Cayman, BMA and BCMA and
disclaims any beneficial ownership of the shares beneficially owned by BMA
Cayman, BMA or BCMA, except to the extent of his pecuniary interest
therein.
For more
information, see “Item 18. Financial Statements.”
See note
(31) to the Consolidated Financial Statements for a presentation of our revenues
by geographic area.
The
companies in our Group are involved in a number of legal proceedings in the
ordinary course of our business. In addition, proceedings involving alleged
abuse of a market-dominant position by us and other alleged antitrust
violations, as well as other regulatory controversies, are pending before
competition and regulatory authorities. For additional information concerning
pending proceedings before or involving competition and regulatory authorities,
see “Item 4. Information on the Company—Regulation.”
Securities
and Corporate Law-Related Proceedings
German
Prospectus Liability Suits
Since
2001, purported purchasers of our shares sold pursuant to prospectuses dated
June 25, 1999, and May 26, 2000, have filed more than 2,600 lawsuits in
Germany predominantly alleging that the book values of our real property
portfolio were improperly established and maintained under German GAAP and that
we allegedly failed to adequately disclose detailed information relating to
merger negotiations between us and VoiceStream Wireless Corporation (the
predecessor of T-Mobile USA). These lawsuits are pending before the Regional
Court (Landgericht) in Frankfurt am Main. The aggregate amount of all
shareholders’ claims filed in Germany in these lawsuits is approximately EUR 80
million.
On July
11, 2006 (with respect to the offering prospectus dated May 26, 2000) and on
November 22, 2006 (with respect to the prospectus dated May 28, 1999), the court
issued orders for model proceedings (Vorlagebeschlüsse) with respect to these
lawsuits based on the Act on Model Case Proceedings in Disputes under Capital
Markets Law (Kapitalanleger-Musterverfahrensgesetz) seeking a decision of the
Frankfurt Court of Appeals (Oberlandesgericht ) as to common questions of law
and fact with respect to the above-mentioned allegations. The master decision by
the Court of Appeals will be binding for all parties in the main
proceedings.
The
Frankfurt Court of Appeals held oral hearings during 2008 and 2009 and heard
witnesses in Germany and in the United States in connection with the
Voice Stream-related allegations. An oral hearing on the merits scheduled for
December 2009 was postponed on procedural grounds. It is currently
uncertain when the proceedings before the Frankfurt Court of Appeals will
recommence. We are
contesting the aforementioned lawsuits vigorously, but we are not in a position
to predict the outcome of the lawsuits at this time.
Prospectus
Liability Conciliation Proceedings
In
addition, many purported shareholders have initiated conciliation proceedings
with a state institution in Hamburg (Oeffentliche Rechtsauskunfts- und
Antragsstelle der Freien und Hansestadt Hamburg, the “OeRA”), in our view,
mainly as an effort to stay the statute of limitations. The claims made in these
conciliation proceedings are analogous to those made in the prospectus liability
lawsuits described above. Our participation in these conciliation proceedings
would be voluntary, and we have declined to participate. The OeRA has closed the
majority of the proceedings because of the lack of participation of either or
both parties. About 4,000 conciliation proceedings, however, have not been
finally closed. In 2005, we asked the competent court in the State of
Hamburg to order the closing of these pending proceedings. A decision on our
motion may be granted in 2010. Upon the closing of the conciliation proceedings,
the statute of limitations with respect to the time within which to bring a
civil action is stayed for six months. A number of applicants have already filed
civil proceedings, and we cannot rule out that a number of additional applicants
will file lawsuits analogous to those made in the prospectus liability lawsuits
described above.
Reimbursement
Proceedings against the Federal Republic and KfW
In
December 2005, we filed lawsuits against the Federal Republic and KfW for the
reimbursement of expenses in connection with a June 2000 offering of our shares,
in the amount of approximately EUR 112 million. We claim that the Federal
Republic and KfW are obliged to reimburse us for legal expenses and settlement
costs that we incurred in connection with the resolution of U.S. class action
lawsuits relating to that offering. Our claim includes a demand for
reimbursement of our D&O insurers in the aggregate amount of EUR 46
million. In June 2007, the Regional Court in Bonn held that the claim is
justified on the merits. However, all parties have filed appeals against various
aspects of the decision. The Cologne Court of Appeals dismissed our claims in
May 2009. We filed an appeal with the Federal Court of Justice
(Bundesgerichtshof) regarding substantive points of law (Revision) on June 15,
2009 and filed our brief on November 13, 2009. The Court now has to decide
whether to accept the case.
PTC
Proceedings
In
December 2000, T-Mobile Deutschland GmbH (“T-Mobile Deutschland”) commenced
arbitration proceedings in Vienna, Austria, against Elektrim S.A.
(“Elektrim”) and Elektrim Telekomunikacja Sp. z o.o. (“Telco”) claiming that
Elektrim and Telco breached the deed of formation and the shareholders’
agreement of Polska Telefonia Cyfrowa Sp. z o. o. (“PTC”) by
attempting to transfer all but one of Elektrim’s shares in PTC to Telco, a
limited company under Polish law jointly owned by Elektrim and Vivendi S.A.
(“Vivendi”).
In
November 2004, the arbitration tribunal held that the attempted transfer of the
PTC shares to Telco was ineffective because it had not satisfied the
requirements of the deed of formation and the shareholders’
agreement. The tribunal thus found that the shares had remained with
Elektrim at all material times. The tribunal further held that the attempted
transfer of the shares to Telco would qualify as a material default if Elektrim
did not recover those shares within two months. Under the PTC
shareholders’ agreement, such material default gives rise to a call option in
favor of T-Mobile Deutschland over Elektrim’s shares in PTC at a price equal to
their book value.
Since
Elektrim, in our opinion, failed to recover these shares within the two-month
period, T-Mobile Deutschland provided notice of exercise of its call option
regarding such shares upon expiration of the two-month period. Elektrim disputed
the validity of our exercise of such call option, and claimed that it had
recovered the shares within the two-month period set by the tribunal. We
initiated further arbitration proceedings against Elektrim, seeking a
declaration that we had validly exercised the call option, and, as a result, had
acquired the shares that Elektrim owned. In two decisions of a Vienna
arbitration tribunal (dated June 6 and October 2, 2006, respectively), it was
held that T-Mobile Deutschland validly exercised the call option and that it
acquired the disputed shares with effect as of February 15, 2005, upon payment
of the then book value and upon provision of an undertaking to pay any
additional purchase price the tribunal might award to Elektrim. As consideration
for the additional 48% of the shares in PTC, T-Mobile Deutschland has paid
approximately EUR 0.7 billion to date. Any further payments to be made will
depend on the course of future events, including in particular the outcome of
bankruptcy proceedings relating to Elektrim. For more information, see “Notes to
the Consolidated Financial Statements—Summary of accounting policies—Business
combinations.”
Telco
sought annulment of the November 2004 award before the Austrian courts. On
December 20, 2005, the Vienna Commercial Court (first instance) partially
annulled the November 2004 award. However, an appeal against this decision by
Elektrim and T-Mobile Deutschland before the Vienna Court of Appeals was
successful and subsequently confirmed by the Austrian Supreme Court on December
18, 2006. Accordingly, in our view, the ruling of the arbitration tribunal can
no longer successfully be challenged or annulled. In December 2007, Telco, and
two small PTC shareholders (Carcom Warszawa Sp. z o. o. (“Carcom”)
and Elektrim Autoinvest S.A. (“Autoinvest”)) controlled by Vivendi, filed a
claim with the Austrian courts seeking a declaration that the November 2004
award is a non-award. The court of first instance rejected the claim on February
16, 2009. Telco, Carcom and Autoinvest have filed an appeal against the
decision, which was rejected by the Vienna Court of Appeals on November 12,
2009. Telco, Carcom and Autoinvest have filed a further appeal against such
decision with the Austrian Supreme Court.
Telco,
Carcom and Autoinvest also brought annulment proceedings against the two awards
(dated June 6 and October 2, 2006) regarding T-Mobile Deutschland's call option.
The Vienna Commercial Court at first instance rejected these annulment claims.
Telco, Carcom and Autoinvest filed an appeal against each of the two decisions.
On January 21, 2009, the Court of Appeals rejected the appeal regarding the
October award. Telco, Carcom and Autoinvest did not file an appeal with the
Austrian Supreme Court, with the result that the decision of the Court of
Appeals is final. To date, there has been no decision of the Vienna Commercial
Court regarding the June award.
Elektrim,
with the participation of T-Mobile Deutschland, further sought recognition of
the November 2004 award before the Polish courts, which was granted by the
Warsaw court of first instance in February 2005. On March 29, 2006, the Warsaw
Court of Appeals confirmed the lower court decision recognizing the Vienna
arbitration award of November 2004 as binding and enforceable in Poland. This
decision was then subject to a further appeal by Telco to the Polish Supreme
Court, which sent the case back to the court of first instance to be
reconsidered due to a procedural error made by the Warsaw court of first
instance. On June 18, 2008, the court of first instance again recognized the
award. Upon Telco’s appeal, however, the Warsaw Court of Appeals
reversed this decision on September 24, 2009. T-Mobile Deutschland and Elektrim
have filed an appeal against the decision of the Warsaw Court of Appeals with
the Polish Supreme Court. T-Mobile Deutschland and Elektrim have filed an appeal
against the decision of the Warsaw Court of Appeals with the Polish Supreme
Court.
On
December 7, 2004, Telco filed a lawsuit against PTC before the District Court in
Warsaw seeking a court decision declaring that Telco is a valid shareholder of
48% of PTC shares. On June 24, 2008, the Court of Appeals in Warsaw issued a
decision stating that Polish courts have jurisdiction in this case. The case was
remanded to the District Court in Warsaw, where it is still
pending.
Other
litigation among the parties, including Vivendi, Elektrim and Telco, continues.
In particular, in April 2005, Vivendi filed a claim against T-Mobile
International AG (formerly T-Mobile International AG & Co. KG) and Deutsche
Telekom AG with the Tribunal de Commerce de Paris seeking (i) a declaration that
T-Mobile International AG and Deutsche Telekom AG had wrongfully terminated
contractual negotiations with Vivendi in September 2004, and (ii) damages of
more than EUR 2.4 billion. On March 18, 2008, the Tribunal de Commerce de Paris
held that Deutsche Telekom had not wrongfully terminated the negotiations, and
thus dismissed Vivendi’s claim for damages. Vivendi appealed the decision in
August 2008, reducing the damages sought to approximately EUR 1.9
billion. In October 2009, Vivendi withdrew its main claim, thus
further reducing the damages sought to EUR 53 million for costs, expenses and
alleged reputational damage.
Additionally,
Telco initiated tort actions in the Warsaw court of first instance against,
among others, six employees of Deutsche Telekom and affiliated companies who
were nominated to, or have acted as nominees of T-Mobile Deutschland and its
affiliates in, the governing bodies of PTC, T-Mobile Deutschland and T-Mobile
Poland Holding No. 1 B.V. (“T-Mobile Poland Holding”) claiming 3 million Polish
zloty (approximately EUR 690,000) and an additional as yet undetermined amount,
in damages.
On
September 4, 2009, Vivendi and it's subsidiary VTI filed a motion for
settlement against Deutsche Telekom, T-Mobile Deutschland and certain parties
affiliated with Elektrim concerning the alleged claim of Vivendi and VTI
for damages (in the amount of approximately EUR 3 billion) in connection with an
alleged participation in asset stripping of Elektrim and asserting tortious
interference with the agreements between Elektrim and Vivendi. We rejected
the claim in full and refused to conclude such settlement. It is possible that
the motion for settlement will be followed by a suit for damages by Vivendi and
VTI
In
February 2006, we were informed that Telco had filed a lawsuit before the
District Court in Warsaw, seeking to exclude T-Mobile Deutschland GmbH, T-Mobile
Poland Holding and Polpager Sp. z o.o. (“Polpager”) from ownership in PTC and to
obtain summary relief freezing T-Mobile Deutschland’s shareholder rights. Such
summary relief was not granted. The proceedings are currently
suspended.
On August
21, 2007, Elektrim was declared bankrupt with the possibility of reorganization.
On November 26, 2007, T-Mobile Deutschland filed its claims, as well as claims
of T-Mobile Poland Holding, Polpager and PTC that had been transferred to
T-Mobile Deutschland on a fiduciary basis, against Elektrim in the aggregate
amount of approximately 14.2 billion Polish zloty (EUR 3.3 billion). These
damage claims relate to interference by Telco, which was supported by Elektrim
at that time, in the business of PTC. The claims were rejected by the insolvency
court (first instance) in Warsaw but T-Mobile Deutschland has appealed this
decision.
We have
also sought redress for the damage caused to us and PTC in civil proceedings
against Telco that T-Mobile Deutschland initiated in the Polish courts and which
are still pending, as well as in arbitration proceedings in Vienna under the
Vienna Rules against Vivendi, Carcom and Autoinvest in 2007. T-Mobile
Deutschland is seeking an award of damages in excess of EUR 1.2 billion,
incurred as a result of Vivendi’s and its affiliates’ tortious conduct and
Carcom’s and Autoinvest’s breaches of the PTC deed of formation and the
shareholders’ agreement. We also initiated two separate arbitration proceedings
in Vienna under the Vienna Rules against Carcom and Autoinvest, seeking a
declaration of material default against each of these entities. These
proceedings are still pending.
On April
13, 2006, Vivendi filed arbitration proceedings against Deutsche Telekom
AG, T-Mobile International, Telco and other defendants under the Rules of the
International Chamber of Commerce (with the place of arbitration located in
Geneva, Switzerland), asserting a breach of an alleged oral agreement that
purportedly caused Vivendi to incur damage in an amount of more than EUR 3
billion. Vivendi alleges that it and the defendants had reached an oral
agreement to end, among others, all legal disputes concerning the equity
interests in PTC. The proceedings are still pending.
On
October 23, 2006, T-Mobile USA, Inc., T-Mobile Deutschland, T-Mobile
International AG and Deutsche Telekom AG (the “DT Defendants”) were named as
defendants in a lawsuit filed by Vivendi in the United States District Court for
the Western District of Washington. Vivendi and a U.S. subsidiary, Vivendi
Holding I Corp., alleged violations of the Racketeer Influenced and Corrupt
Organizations provisions of the Organized Crime Control Act of 1970 (“RICO”),
and common law fraud in connection with the DT Defendants’ acquisition of a
controlling stake in PTC. On June 5, 2008, the district court granted
the DT Defendants’ motion to dismiss the plaintiffs’ action in its entirety on
grounds of forum non conveniens. On November 2, 2009, the United States Court of
Appeals for the Ninth Circuit affirmed the district court’s dismissal of
plaintiffs’ claims.
In
addition to the foregoing, there are other disputes and proceedings stemming
from the conflict over the ownership of PTC and related matters.
We are
contesting the PTC-related controversies vigorously. We can offer no
assurances as to the duration or outcome of the proceedings described above,
including with regard to whether they can be resolved by settlement or
otherwise. Furthermore, if the proceedings described above were
determined in a manner adverse to our interests or us, our current and future
investments in PTC could be put at risk.
Proceedings
Relating to the Merger with T-Online International AG (T-Online)
Release
Proceedings Relating to the T-Online Merger
Some
former shareholders of T-Online filed lawsuits with the Regional Court in
Darmstadt, Germany, challenging the validity of the resolution approving the
merger agreement of March 8, 2005, between T-Online and Deutsche Telekom AG,
adopted at the T-Online Shareholders’ Meeting on April 29, 2005. Even if the
plaintiffs prevail, these lawsuits would not lead to an annulment of the merger,
and the court could only find Deutsche Telekom liable for damages. On August 23,
2006, the Regional Court in Frankfurt am Main rejected the transfer of the
lawsuits from the Regional Court in Darmstadt to the Regional Court in Frankfurt
am Main. On October 20, 2006, the Regional Court in Darmstadt decided to have
the Court of Appeals in Frankfurt am Main determine the competent court. On
December 28, 2007, the Court of Appeals in Frankfurt am Main decided in an
interlocutory proceeding that the Regional Court in Frankfurt am Main is the
competent court. The lawsuits challenging the validity of the merger resolution
(main proceedings) are still pending. We believe that they are without
merit.
Proceedings
Relating to the Merger Exchange Ratio
Several
former T-Online shareholders filed requests for judicial review of the
appropriateness of the merger exchange ratio set forth in the merger agreement
of March 8, 2005, between T-Online and Deutsche Telekom with the District Court
in Frankfurt am Main. Under the German Transformation Act (Umwandlungsgesetz)
former shareholders of T-Online, whose shares have been exchanged for Deutsche
Telekom shares in the course of the merger, may request a judicial review of the
appropriateness of the merger exchange ratio by the District Court in Frankfurt
am Main in appraisal proceedings. If in these appraisal proceedings there is a
final and binding determination that the exchange ratio was too low for the
T-Online shares, the competent court would assess an additional cash payment,
which Deutsche Telekom would pay to all former T-Online shareholders whose
shares had been exchanged for Deutsche Telekom shares in the course of the
merger. The exchange ratio set forth in the merger agreement was determined on
the basis of company evaluations conducted by Deutsche Telekom and T-Online with
the assistance of two audit firms. In addition, after the conclusion of the
merger agreement, the independent merger auditor selected and appointed by order
of the court had stated that, according to his findings, the exchange ratio is
appropriate. The court scheduled a first oral hearing in the case for February
12, 2008 and took evidence by hearing of witnesses. In May 2008, the court
decided in a procedural order to request the independent merger auditor to give
an opinion upon the objections of the plaintiffs and the joint representative
(appointed by the court for those former minority shareholders of T-Online not
directly party to the proceedings) regarding the determination of the
capitalized value based on the planning. In his written opinion, the independent
merger auditor confirmed that the enterprise valuations of Deutsche Telekom and
T-Online are not objectionable; in particular, he found that the plaintiffs’
objections are without merit. A further oral hearing took place on February 17,
2009, where the plaintiffs had the opportunity to ask the independent merger
auditor questions concerning his written opinion. On March 13, 2009, the
court decided that the exchange ratio was too low and assessed an additional
cash payment of EUR 1.15 per share ( approximately EUR 140 million plus interest
in aggregate) in favor of former T-Online shareholders. The decision is not yet
final. We have filed an appeal with the Court of Appeals in Frankfurt am
Main.
Information
Proceedings Relating the Voluntary Public Offer for T-Online Shares
In 2006,
two shareholders of T-Online International AG who had tendered their T-Online
shares in the voluntary public offer by Deutsche Telekom to acquire T-Online
shares filed an application with the Regional Court in Frankfurt am Main
requesting additional disclosure with regard to information in connection with
the voluntary public offer. They allege that T-Online had provided incomplete
information in the 2006 ordinary meeting of the shareholders of T-Online. The
court rejected the application on September 12, 2006. The plaintiffs have filed
appeals with the Court of Appeals in Frankfurt am Main which are still pending.
We believe that these lawsuits are without merit.
Competition
Law
The
German Act against Restraints of Competition (Gesetz gegen
Wettbewerbsbeschränkungen) prohibits the abuse of a market-dominant position as
well as the distortion of competition through agreements or collusive behavior
by market participants. Mergers, including the creation of joint ventures, must
be notified to the Federal Cartel Office before they can be executed if the
concerned undertakings’ turnover reaches a certain threshold, but remains below
the threshold above which mergers must be notified to the EU Commission. The
Federal Cartel Office is obligated to prohibit a merger if it creates or
strengthens a market-dominant position.
The
Federal Cartel Office is empowered to enforce these provisions and may impose
sanctions if its orders are violated. However, before taking action against
abuses of market-dominant position in the telecommunications sector, the Federal
Cartel Office must consult with the Federal Network Agency. Market participants
damaged by abusive practices of a market-dominant provider may claim damages
under the Telecommunications Act as well as under the Act Against Restraints of
Competition.
In
December 2006, Communication Services Tele2 GmbH (“Tele2”) filed a lawsuit with
the Regional Court in Düsseldorf requesting an injunction ordering us to refrain
from:
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·
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offering
product bundles consisting of an option tariff and T-DSL broadband access
and broadband online tariffs to the extent that the price advantage for
the bundled offer compared to the sum of the charges for the individual
elements exceeds EUR 48 during a subscription period of 12 months,
or
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·
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granting
option tariff subscribers a voucher that is worth more than EUR 85
and which may be used in connection with a subscription for an additional
T-DSL broadband access or broadband online
tariff.
|
In
September 2007, Tele2 amended its pleadings by requesting an injunction ordering
us to refrain from:
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·
|
offering
product bundles to the extent the price advantage exceeds EUR 9.94 per
month as well as to refrain from offering bundles containing a minimum
contract term (or containing a minimum contract term of 12 months or more
with an automatic extension for another 12 months),
and
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·
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granting
subscribers of bundled offers a credit of more than EUR 40 and marketing
this credit as a “welcome gift” or as “start
credit”.
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In
addition, Tele2 sought a declaratory judgment that it is entitled to obtain
compensation for all material and immaterial damages resulting from the bundled
offers described above. Tele2 bases its claims on the assumption that we hold a
market dominant position in the relevant market and alleges that bundled offers
with price discounts exceeding the described thresholds would be abusive and,
therefore, prohibited. The court dismissed the claims on December 5, 2007. Tele2
appealed the judgment to the Court of Appeals in Düsseldorf (Oberlandesgericht).
Tele2, however, limited its appeal by seeking a judgment ordering us to refrain
from offering bundles containing a minimum contract term of 12 months or more
(alternatively 24 months or more) with an automatic extension for another 12
months. In addition, Tele2 sought in its appeal a declaratory judgment awarding
of compensation for all material and immaterial damages resulting from the
bundled offers with the described minimum term. The Court of Appeals in
Düsseldorf overturned the judgment of the Regional Court and ordered us in its
judgment of October 14, 2009, to refrain from offering bundles containing a
minimum contract term of 12 months or more and an automatic extension for
another 12 months. In addition, the Court of Appeals delivered a declaratory
judgment awarding of compensation for all material and immaterial damages
resulting from the bundled offers with the described minimum term. The Court of
Appeals allowed a further appeal on law to the Federal Supreme Court
(Bundesgerichtshof), which was filed on November 23, 2009. In parallel, TELE2
applied for an amendment of the original judgment of the Court of Appeals
seeking an amended judgment (i) ordering us to refrain from bundled offers
containing a minimum contract term of 12 months or more and (ii) awarding of
compensation for all material and immaterial damages resulting from bundled
offers with a minimum contract term of 12 months or more. The proceedings before
the Federal Court and the court of appeals concerning the amendment are still
pending.
Tele2 has
sued us for damages of approximately EUR 170 million alleging we denied
accepting voice-files as sufficient documentation for Tele2 pre-selection orders
in 2002 through 2005. The Federal Court of Justice decided in 2006 that the
claim is justified on the merits. The expert appointed by the
court estimates the damages of approximately EUR 40 million. Each
party instructed independent experts to review this opinion. It is likely that
the court will decide the amount of damages in 2010.
For more
information, see “Item 4. Information on the Company—Regulation—The EU
Regulatory Framework—Competition Law.”
Proceedings
against Decisions of the Federal Network Agency, Wholesale Markets
Local
Loop
In 1999,
the Federal Network Agency issued a decision adjusting the rates we could charge
for access to the local loop during the period from April 1, 1999 to March 31,
2001. Certain of our competitors and we filed complaints with the Cologne
Administrative Court against this decision.
The legal
proceedings that followed led to a decision of the Federal Constitutional Court
(Bundesverfassungsgerichts) in March 2006 concerning constitutional rights of
Deutsche Telekom AG with regard to its business secrets in legal proceedings.
The Federal Constitutional Court stated that the Federal Administrative Court
had violated our constitutional rights by ordering the disclosure of our
business secrets. In February 2007, the Federal Administrative Court remanded
the case to the Cologne Administrative Court, which decided in the spring of
2008 in favor of Deutsche Telekom AG with regard to the business secrets
issue.
On
November 27, 2008, the Cologne Administrative Court vacated the decision of the
Federal Network Agency of 1999 concerning monthly rates for the local loop
during the period from April 1, 1999 to March 31, 2001. The court argued, based
on a decision of the European Court of Justice, that the Agency has incorrectly
determined the cost of local loop investment, which is the basis of the adjusted
charge. Both the Federal Network Agency and we appealed against this decision to
the Federal Administrative Court, which rejected the appeals on October 5, 2009.
The Federal Network Agency has to decide again on the monthly rates for the
mentioned period. These proceedings are still pending.
In 2001,
the Federal Network Agency issued a decision adjusting the monthly rate during
the period from April 1, 2001 to March 31, 2003 and charges for activation and
termination during the period from April 1, 2001 to March 31, 2002. In April
2001, certain of our competitors and we filed complaints against this decision
with the Cologne Administrative Court. We subsequently withdrew our complaint.
However, in February 2006, the Cologne Administrative Court submitted ten
questions related to the interpretation of the relevant EU local loop regulation
(EC/2887/2000) to the European Court of Justice and suspended several legal
proceedings concerning the local loop. In April 2008, the European Court of
Justice answered these questions in a decision. With regard to the question of
cost-orientation, the court specified that national regulatory authorities have
to take account of actual costs, namely costs already paid by the operator and
prospective costs, the latter being based, where relevant, on an estimation of
costs of replacing the network or certain parts thereof.
On August
27, 2009, the Cologne Administrative Court vacated the decision of the Federal
Network Agency of 2001 for the local loop. The court argued, based on the
decision of the European Court of Justice, that the Federal Network Agency had
incorrectly determined the cost of local loop investment, which is the basis of
the adjusted monthly charge. Both the Federal Network Agency and we appealed
against this decision to the Federal Administrative Court. These proceedings are
still pending.
In 2002,
the Federal Network Agency issued a decision adjusting the rates we could charge
for access to the local loop (in this case, relating to our activation and
termination charges) during the period from April 1, 2002 to June 30, 2003.
Certain of our competitors filed complaints against this decision. On November
19, 2009, the Cologne Administrative Court vacated the decision of the Federal
Network Agency of 2002. The court ruled that the Federal Network Agency has
incorrectly determined the hourly rate, which is a major part of the calculation
of the adjusted activation and terminations charges. Both the Federal
Network Agency and we appealed against this decision to the Federal
Administrative Court. These proceedings are still pending.
In 2003,
the Federal Network Agency issued a decision adjusting the monthly rates we
could charge for access to the local loop during the period from May 1, 2003 to
March 31, 2005 and another decision for activation and termination
rates during the period from July 1, 2003 to June 30, 2004. Certain
of our competitors and we filed complaints against these decisions with the
Cologne Administrative Court. These proceedings are still pending.
In 2004,
the Federal Network Agency issued a decision adjusting the rates we could charge
for access to the local loop (in this case, relating to our activation and
termination charges). Certain of our competitors filed complaints against this
decision and asked the Cologne Administrative Court for an injunction, but the
court rejected this request. The proceedings in the main action are still
pending.
In 2005,
the Federal Network Agency issued a decision adjusting the rates we could charge
for access to the local loop provided during the period from April 1, 2005 to
March 31, 2007. We filed a complaint against this decision with the Cologne
Administrative Court, claiming higher rates, and asked the court for an
injunction. The Cologne Administrative Court rejected the requested injunction.
In the main action, the proceedings are still pending. Certain of our
competitors also filed complaints against the Federal Network Agency’s decision
seeking lower rates. These proceedings are still pending.
In 2005,
the Federal Network Agency issued a decision adjusting the rates we could charge
for access to the local loop (relating to our activation and termination
charges). Certain of our competitors filed complaints with the Cologne
Administrative Court against this decision. These proceedings are still
pending.
In 2007,
the Federal Network Agency issued a decision regarding access to the local loop,
which permitted our competitors for the first time access to a portion of our
cable ducts between the Main Distribution Frame (Hauptverteiler) and the
Distribution Frame (Kabelverzweiger), or, if such access was not possible due to
capacity reasons, access to dark fiber. This access to the ducts is of
considerable importance since it would permit our competitors to benefit
indirectly from our investments in the newly built VDSL-network. We filed an
injunctive action with the Cologne Administrative Court against this decision,
which was dismissed. In April 2008, the Cologne Administrative Court dismissed
our claim in the main action. We filed an appeal to the Federal Administrative
Court .
In 2009,
the Federal Network Agency issued a decision adjusting the rates relating to the
activation and termination charges we could charge for access to the local loop.
The Federal Network Agency decisions concerning the local loop continue to be
the subject of new challenges by us and our competitors.
Mobile
Termination Rates
In 2006,
the Federal Network Agency issued a decision subjecting T-Mobile Deutschland’s
mobile termination rates to ex-ante regulation. As a consequence, T-Mobile
Deutschland will be required to obtain approval for new mobile termination rates
from the Federal Network Agency before such rates can be charged to competitors.
T-Mobile Deutschland, like the other major mobile network operators, filed
complaints with the Cologne Administrative Court and asked the Court for an
injunction against this decision. The request for an injunction was rejected.
Regarding the proceedings in the main action, the Cologne Administrative Court
partly ruled in our favor and thus dismissed the ex-ante regulation of mobile
termination rates. However, the Cologne Administrative Court permitted the
parties to appeal to the Federal Administrative Court. The Federal
Administrative Court rejected the claim of T-Mobile Deutschland as well as those
of the other major mobile network operators, and fully upheld the decision of
the Federal Network Agency.
Accordingly,
constitutional complaints before the Federal Constitutional Court have been
submitted by T-Mobile Deutschland and the other major network operators. These
proceedings are still pending.
In
addition, on the basis of this decision, the Federal Network Agency issued
decisions in 2006, 2007 and 2009 adjusting the rates we could charge for the
termination of calls into the mobile network of T-Mobile Deutschland during the
periods from November 23, 2006 to November 30, 2007, from November 30, 2007 to
March 31, 2009 and from April 2009 to November 2010 respectively. We
filed complaints against these decisions with the Cologne Administrative Court,
claiming higher rates, and asking the court for an injunction, which were
rejected. The proceedings relating to the main actions are still pending.
Certain of our competitors also filed complaints against the Federal Network
Agency’s decisions seeking lower rates. These proceedings are also still
pending.
Leased
Lines
In
October 2008, the Federal Network Agency issued a decision approving the rates
we could charge for our digital leased lines, which are based on a new tariff
structure. One of our competitors filed a complaint with the Cologne
Administrative Court against the approval of these tariffs. Most of the
plaintiffs have subsequently withdrawn their complaints which resolved the
matter. One proceeding is still pending.
In August
2009, the Federal Network Agency issued another decision approving the rates we
could charge for our digital leased lines complementing the approval of October
2008. Two of our competitors filed complaints against this decision arguing that
the Federal Network Agency was not allowed to issue a new decision while the
decision of October 2010 was still valid. One of the competitors also asked the
court for an injunction. The proceedings are still pending.
Other
Proceedings
Radio
Frequency Emissions
Beginning
in 2000, plaintiffs filed numerous state court class-action lawsuits against
T-Mobile USA and several other wireless service operators and wireless telephone
manufacturers, asserting product liability, breach of warranty and other claims
relating to radio frequency transmissions to and from wireless mobile devices.
The complaints seek substantial money damages (including punitive damages), as
well as injunctive relief. In 2006, the plaintiffs voluntarily dismissed without
prejudice three of the four lawsuits in which T-Mobile USA is involved. The
remaining case was removed to federal court and, on February 14, 2008, the court
denied the plaintiffs’ motion to remand the case to state court. On September 2,
2008, the court granted defendants’ motion to dismiss based on federal
pre-emption of the state law claims. The plaintiff has filed a notice of
appeal of the dismissal. T-Mobile USA will vigorously defend this case on
appeal. The matter has been fully briefed, but a date for oral argument has
not yet been set.
Consumer
Class Actions
A number
of substantially identical purported consumer class-action lawsuits have been
pending in various state and federal courts in the United States against
T-Mobile USA, as well as other major U.S. wireless carriers, alleging that each
of the defendants had violated federal and/or state antitrust laws by improperly
tying the sale of wireless mobile devices to the sale of wireless telephone
services. The complaints seek injunctive relief, compensatory damages, treble
damages, and attorneys’ fees. In August 2005, the federal district court granted
a motion for summary judgment in favor of all defendants, dismissing all claims
in the federal cases except the conspiracy claims, which had not been the
subject of the motion. In August 2006, in the federal cases, all claims were
settled for a minimal payment by the defendants. The remaining state law claims
were settled in 2009, with final court approval in November 2009.
CIF
In
October 2007, CIF Licensing LLC filed various suits with the Regional Court in
Düsseldorf against Deutsche Telekom AG for purported damages totaling EUR 120
million, alleging that Deutsche Telekom is infringing on four of the plaintiff’s
patents by using DSL technology. CIF is also pursuing a permanent injunction
with regard to one patent. We are contesting these proceedings
vigorously.
IPCom
In
2009, the German patent holder IPCom GmbH & Co. KG sued Deutsche
Telekom AG and T-Mobile Deutschland GmbH in the Regional Courts of Hamburg,
Mannheim and recently in Düsseldorf seeking compensation for an unspecified
amount of damages as well as applying for permanent injunctions, threatening to
shutdown certain T-Mobile Deutschland network services, such as Multimedia
Messaging Service (MMS). IPCom alleges that we infringe on several patents
supposedly essential for mobile standards such as UMTS and GSM. We are
defending ourselves vigorously against those allegations. Several handset and
network infrastructure suppliers are involved in the proceedings by third party
notice. Furthermore we have filed nullity actions before the Federal German
Patent Court and - where possible - initiated or joined opposition proceedings
before the European Patent Office. Meanwhile IPCom has withdrawn all actions
before the Regional Court of Hamburg. Initial rulings in the ongoing litigation
are expected in 2010.
Reimbursement
and Damages for Subscriber Data Costs
From
December 2004 to January 2009 a number of telephone directory service providers,
including among others telegate, datagate, klicktel and Vodafone, who received
from us data relating to subscribers for voice telephony services for the
purpose of providing their own directory services, filed lawsuits with the
Regional Courts in Cologne and Bonn in the aggregate amount of approximately EUR
118 million, plus interest, claiming reimbursement for payments made to us since
1998. The plaintiffs, referring to a decision by the European Court of Justice
(C-109\03; KPN vs. Onafhankelijke Post en Telecommunicatie Autoriteit), accused
us of having included inadmissible costs in our charges for providing customer
data.
In a
number of cases, the Regional Court in Cologne essentially ordered us to
reimburse the plaintiffs. The Court of Appeals in Düsseldorf basically confirmed
these decisions on appeal. We have appealed all the decisions of the Court of
Appeals to the Federal Court of Justice and, in one case, to the Federal
Constitutional Court. . In two cases (telegate, datagate) an oral hearing before
the Federal Court of Justice took place on October 13, 2009. The Federal Court
of Justice annulled the judgments and remanded the cases to the Court of
Appeals. The decisions in the other cases are still pending before the Regional
Courts or the Court of Appeals in Düsseldorf.
In a
related matter, on October 19, 2005, two lawsuits were served on us; one by
telegate for damages of approximately EUR 86 million, plus interest, and another
by telegate’s founding shareholder, Dr. Klaus Harisch, for damages of
approximately EUR 329 million, plus interest. In the latter claim, the claimant
subsequently increased the amount claimed to approximately EUR 612 million. Both
plaintiffs claim that they incurred losses, due to the alleged adverse effect
that our alleged inclusion of inadmissible costs in our provision of customer
data had on telegate’s position in the market, the resulting capital increases
that this required, and the weaker development of telegate’s share price and the
loss of shares of certain shareholders. Oral hearings at the Regional Court in
Cologne took place on June 26, 2006 and on February 15, 2008. On March 28, 2008,
the Regional Court in Cologne issued directions for the taking of evidence. On
January 23, 2009, the Regional Court appointed an expert (certified
accountant).
On
January 25, 2007, klicktel filed another lawsuit with the same court for damages
of approximately EUR 13 million based on analogous claims plus interest and
the determination to pay damages arising in the future until 2010. Subsequently
the claimant adjusted the damage claim and is now claiming payment of
approximately EUR 11 million plus interest and requesting a determination
that we are obliged to compensate for all damages arising from 2007 to 2010. An
oral hearing at the Regional Court in Cologne took place on November 13, 2007.
The Regional Court in Cologne adjourned the case for an indefinite time. We
intend to defend these lawsuits vigorously.
Damages
for Lost Profits/Price Squeeze
In
December 2005, Arcor filed a lawsuit with the Regional Court in Cologne in the
aggregate amount of approximately EUR 41.9 million, plus interest, claiming
damages for lost profit with retail analog access products as a result of an
alleged price squeeze between our wholesale tariffs for access to the local loop
and our retail access tariffs between January 1998 and September 2003. Arcor
bases its claim primarily on the EU Commission’s decision of May 21, 2003
against us for allegedly abusing our dominant position by charging our
competitors and end-users unfair monthly and one-off charges for access to our
local network. In July 2003, we filed a lawsuit with the Court of First Instance
of the European Communities (the “Court of First Instance”) to obtain reversal
of that decision. In February 2006, the original damage claim was increased to
an aggregate of EUR 223 million, purportedly based on customer relationships not
realized between September 2003 and June 2005 and a new calculation methodology
used by the plaintiff, which, in our view, deviates from the EU Commission’s
approach. On October 18, 2006, the Regional Court in Cologne suspended the
lawsuit until the European Courts have finally decided on the proceedings for
annulment of the EU Commission’s decision. In May 2007, a hearing took place
before the Court of First Instance and on April 10, 2008, the Court of First
Instance dismissed our lawsuit. We appealed the judgment of the Court of First
Instance to the European Court of Justice, where an oral hearing took place on
November 25, 2009. The proceedings before the European Court of Justice are
still pending.
Damage
claim by Eutelsat SA
On
October 31, 2006, Eutelsat SA filed against Deutsche Telekom AG, T-Systems
Business Services GmbH and SES SA a suit before the Commercial Court of Paris
claiming EUR 141.5 million in damages. Eutelsat, like SES, operates satellites
and markets transponders (i.e., satellite capacity) to customers worldwide.
Based on a preferential tariff, T-Systems has leased several transponders on a
Eutelsat satellite and has sub-leased six of these transponders to SES. Eutelsat
argues that this sub-lease constitutes a breach of contract by T-Systems and SES
based on the alleged undertaking by T-Systems to only use these transponders for
certain purposes and SES’ alleged breach of its undertaking to use certain
frequencies utilized on these transponders only outside of Europe. The damages
claimed by Eutelsat amount to the difference between the preferential and the
alleged market tariffs for each transponder for the remaining life span of the
Eutelsat satellite. Eutelsat waived its claim against SES before the Commercial
Court of Paris on October 16, 2007, reserving its right to sue SES before an
arbitration court . The Commercial Court in Paris on June 24, 2008 declared
itself, as requested by Deutsche Telekom AG and T-Systems Business Services
GmbH, an improper venue. Eutelsat unsuccessfully appealed against this decision.
Eutelsat did not file any further appeals by the deadline of April 10,
2009.
Toll
Collect
As
previously reported, the Federal Republic has initiated arbitration proceedings
against Daimler Financial Services AG, Deutsche Telekom AG and the Toll Collect
consortium for damages suffered as a result of the delay in the commencement of
operations of the German highway toll collection system and alleged breaches of
the related operating agreement.
The
Federal Republic, in its statement of claims received on August 2, 2005, asserts
claims for damages of approximately EUR 5.2 billion plus interest. This amount
includes contractual penalties of EUR 1.7 billion relating to the allegation
that the agreement of the Federal Republic was not sought prior to the execution
of certain subcontractor agreements. As some of the contractual penalties are
time-related and further claims for contractual penalties have been asserted by
the Federal Republic, the amount claimed as contractual penalties may increase.
Daimler Financial Services AG, Deutsche Telekom AG and the Toll Collect
consortium filed their answer to the claim on June 30, 2006 and to the
subsequent counterplea of the Federal Republic on October 1, 2007. The Federal
Republic has served further briefs on January 7, 2008, and February 16, 2008, to
which Daimler Financial Services AG, Deutsche Telekom AG and the Toll Collect
consortium answered by a further brief on May 16, 2008. The Federal Republic has
slightly modified its claims for damages, now amounting to EUR 4.99 billion plus
interest.
Additionally,
in December 2006, Toll Collect GmbH, the operating company of the Toll Collect
consortium, initiated an arbitration proceeding seeking a determination that the
Federal Republic’s basis for denying the issuance of the final operating permit
is unfounded and claiming that additional remuneration is due to Toll Collect in
accordance with the operating agreement. The Statement of Claims of Toll Collect
GmbH was served on the Federal Republic on May 25, 2007. The answer of the
Federal Republic together with a counterclaim claiming overpayment of
remuneration to Toll Collect GmbH was received on January 31, 2008. A further
exchange of briefs in this matter was submitted during 2008 and
2009.
A first
hearing regarding these proceedings was held in June 2008, during which the
Arbitration Panel considered certain legal issues without taking any
decision on the merits of the case. The Arbitration Panel ordered, that
certain documents of each party had to be exchanged by the end of September 2008
and that further briefs were exchanged between the parties in
November 2008 and April 2009. During 2009, the Arbitration Panel ordered, among
other things, an exchange of additional data and documents and the
submission of three additional expert opinions on the plausibility of the
parties´ expert opinions already introduced in the proceedings. On June 2009,
the Arbitration Panel scheduled a further oral hearing for October 2009 and
named several witnesses to give evidence. In August 2009, upon taking notice of
circumstances that give rise to doubts with regard to the objectivity, diligence
and impartiality of the arbitrator selected by the Federal Republic, the
defendants requested the dismissal of that arbitrator. In September 2009, the
Arbitration Panel decided to cancel the oral hearing and witness examination and
deferred the date for finalizing the plausibility expert opinions. By subsequent
decision, the Arbitration Panel repudiated the request for dismissal
(Ablehnungsgesuch). The defendants have filed a respective request for
revision of this decision and for dismissal of the respective arbitrator with
the Berlin Administrative Court (Verwaltungsgericht Berlin). On February 11,
2010, the Administrative Court Berlin rejected this request. The defendants have
initiated an examination of further legal action against the Administrative
Court’s decision.
Although
the outcome of these arbitration proceedings is difficult to predict, we believe
the Federal Republic’s claims presented in the arbitration notice and statement
of claims are unsustainable. We are contesting the Federal Republic’s claims
vigorously.
Magyar
Telekom
As
previously reported, in the course of conducting their audit of Magyar Telekom’s
2005 financial statements, Magyar Telekom’s independent auditors identified two
contracts entered into by Magyar Telekom’s Montenegrin subsidiary the nature and
business purposes of which were not readily apparent. In February 2006, Magyar
Telekom’s Audit Committee initiated an independent investigation into this
matter. In the course of the investigation, two further contracts entered into
by Magyar Telekom raised concerns. As previously disclosed, the independent
investigators preliminarily concluded that "there is insufficient evidence to
establish that the approximately EUR 7 million in expenditures made pursuant to
four consultancy contracts were made for legitimate business purposes", and
there is "affirmative evidence that these expenditures served improper
purposes." The independent investigators further identified
additional contracts and related issues that could warrant review. In February
2007, Magyar Telekom’s Board of Directors determined that these matters should
be reviewed and expanded the scope of the independent investigation to cover
these additional contracts and related issues. In May 2008, the
independent investigators reported that, among other things, they had found
“affirmative evidence of illegitimacy in the formation and/or performance”
of six additional contracts in Macedonia under which Magyar Telekom and/or
its affiliates paid a total of over EUR 6.7 million.
As
previously disclosed, the investigation, which was impeded by the destruction of
certain documents, revealed certain weaknesses in Magyar Telekom’s internal
controls and procedures, including the lack of consistent approval procedures
for procurement and third-party contracts, the lack of a comprehensive
compliance training program and the lack of the appropriate level of control
consciousness among certain senior managers at the top of the
organization.
On
December 2, 2009, the Magyar Telekom Audit Committee provided the Magyar Telekom
Board of Directors with a "Report of Investigation to the Audit Committee of
Magyar Telekom Plc." dated November 30, 2009 (the "Final Report"). The
Magyar Telekom Audit Committee indicated that it considers that, with the
preparation of the Final Report based on currently available facts, the
independent investigators have completed their investigation. The
Final Report affirmed the independent investigators’ preliminary findings,
discussed above, concerning the four contracts entered into by Magyar Telekom
and its Montenegrin subsidiary as well as the May 2008 findings concerning the
six contracts in Macedonia.
In
addition, the Final Report found that certain former executives at Magyar
Telekom and its Macedonian subsidiaries, including certain of our employees who
were previously assigned to these companies, authorized the expenditure of
approximately EUR 24 million through over twenty suspect consultancy, lobbying,
and other contracts (including the six identified in the May 2008 preliminary
report). In entering into these contracts and approving expenditures
under them, the Final Report found that these former executives knowingly
caused, structured, or approved transactions that: (i) intentionally
circumvented Magyar Telekom’s and its subsidiaries’ internal controls; (ii) were
reflected in false and misleading documents and records at these companies;
(iii) were entered into without adequate due diligence or monitoring of
performance of contractors and agents in circumstances carrying a high risk of
corruption; and (iv) resulted in expenditures by Magyar Telekom and its
subsidiaries that were not for the purposes stated in the contracts under which
they were made, but rather were intended to obtain benefits for the those
companies that could only be conferred by government action. The
Final Report further indicated that “the available evidence does not establish
that the contracts under which these expenditures were made were
legitimate." Although Final Report stated that "the Investigation did
not uncover evidence showing receipt of payments by any Macedonian government
officials or political party officials," the Final Report found “that, contrary
to their terms, a number of these contracts were undertaken to obtain specific
regulatory and other benefits from the government of
Macedonia.” Nothing in the Final Report implicates any current or
former Board member of the Company or any current Board member of Magyar Telekom
in connection with any wrongdoing.
As
described above, Magyar Telekom has already implemented remedial measures to
address weaknesses in its internal controls and procedures previously identified
in the independent investigation and we have also enhanced our compliance and
training programs. Magyar Telekom and we are considering whether and
to what extent additional remedial measures, compliance enhancements, or other
actions are warranted in view of the Final Report’s findings and
conclusions.
Magyar
Telekom has been in regular contact with the Hungarian Financial Supervisory
Authority, the Hungarian National Bureau of Investigation, the U.S. Securities
and Exchange Commission, the U.S. Department of Justice, and Macedonian law
enforcement authorities concerning the independent investigation and is
responding to inquiries in investigations being conducted by these
authorities. The Hungarian National Bureau of Investigation has
informed Magyar Telekom that it closed its investigation regarding Magyar
Telekom’s activities in Montenegro as of May 20, 2008 without identifying
any criminal activity. In December 2008, the Macedonian authorities
announced that criminal charges had been filed against four individuals,
including one of our employees, for “abuse of office and authorizations” to the
harm of the shareholders of Magyar Telekom’s Macedonian subsidiary, including
Magyar Telekom and the Government of Macedonia. The charges relate to
certain of the Macedonian contracts identified in the independent investigation.
No charges were filed against Magyar Telekom or any of its
subsidiaries.
On March
28, 2009, the Hungarian National Bureau of Investigation (the “NBI”) informed
Magyar Telekom that, based on a report received by the NBI, it had begun a
criminal investigation into alleged misappropriation of funds relating to
payments made in connection with Magyar Telekom’s ongoing internal investigation
into certain contracts entered into by members of the Magyar Telekom group and
related matters. The NBI has requested materials and information relating to
such payments from Magyar Telekom. On September 21, 2009, the NBI informed the
Company that it had extended the scope of its investigation to examine possible
misuse of personal data of employees in the context of the internal
investigation. Magyar Telekom is cooperating with the ongoing NBI
investigation.
We
continue to provide documents and information to the U.S. Securities and
Exchange Commission and the U.S. Department of Justice in connection with their
review of our role in certain matters relating to the Magyar Telekom
investigation, including the involvement of our employees or personnel
previously assigned to Magyar Telekom and its subsidiaries, and the actions
taken by Magyar Telekom and Deutsche Telekom in response to the findings of and
issues raised by the Magyar Telekom investigation.
Civil
Servants
In
November 2004, the Federal Republic adopted a law abolishing the requirement for
Deutsche Telekom, and other private corporations, to make certain special
payments to civil servants. This law was subsequently challenged in various
courts and in December 2008 the Federal Administrative Court
(Bundesverwaltungsgericht) decided to refer the case to the Federal
Constitutional Court (Bundesverfassungsgericht) for a final decision on its
legality. If the law is found unconstitutional, it is possible that all civil
servants affected by this law would be entitled to retroactive payments, the
cost of which could be up to EUR 211.6 million. However, we believe
that the ultimate resolution of this matter will validate the law as adopted by
the Federal Republic.
With the
entry into force of the reform of civil service law
(Dienstrechtsneuordnungsgesetz) on February 11, 2009, the legislature
integrated the amounts that previously represented the year-end bonus paid
annually in accordance with the Federal Act on Bonus Payments
(Bundessonderzahlungsgesetz) into the basic monthly salary for all federal civil
servants. The entitlement of civil servants employed by the Deutsche Bundespost
successor companies to the year-end bonus expired pursuant to the First Act to
Amend the Act on the Legal Provisions for the Former Deutsche Bundespost Staff
(Erstes Gesetz zur Änderung des Postpersonalrechtsgesetzes) dated
November 9, 2004. Accordingly, the year-end bonus was not integrated
into the basic monthly salary in this domain.
Numerous
civil servants have filed objections to these pay tables reduced by the year-end
bonus amount and approximately 300 litigation cases are already
pending.
In order
to avoid unnecessary administrative expense arising from objections and any
legal action taken, Deutsche Telekom AG has concluded an agreement with the
unions whereby Deutsche Telekom AG will pay the difference for remuneration
of all federal civil servants (including those who have not objected)
retroactively if the Federal Constitutional Court rules that the pay tables
applicable to the Deutsche Bundespost successor companies are unconstitutional.
Consequently, in order to avoid more objections and legal action, Deutsche
Telekom AG has decided not to plead the statute of
limitations.
In a
ruling on December 15, 2009, the Stuttgart Administrative Court decided in two
court proceedings to present the question of whether § 78 BbesG (Federal Civil
Service Remuneration Act) is constitutional to the Federal Constitutional Court
(Bundesverfassungsgericht) for decision. Should we
lose this legal dispute, we estimate that we have to pay approximately EUR 15
million for the period July 2009 to the end of December 2009.
The
following table sets forth the annual dividends paid per share in respect of
each of the financial years indicated. The dividends are paid during the year
following the year with respect to which they relate.
|
|
|
Dividend Paid per
Ordinary
Share
|
|
|
|
|
EUR
|
|
|
USD(1)
|
|
|
For
the years ended December 31,
|
|
|
|
|
|
|
|
2006
|
|
|
0.72 |
|
|
|
0.98 |
|
|
2007
|
|
|
0.78 |
|
|
|
1.21 |
|
|
2008
|
|
|
0.78 |
|
|
|
1.09 |
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Dividend
amounts have been converted into U.S. dollars using the exchange rates
published by the European Central Bank for the relevant dividend payment
date, which occurred during the second quarter of the following
year.
|
For the
2009 financial year, our Management Board and Supervisory Board are proposing a
dividend of EUR 0.78 (USD 1.12) for each Deutsche Telekom share carrying
dividend rights. This proposal is subject to approval by our shareholders at the
2009 annual general shareholders’ meeting scheduled to be held on May 3,
2010.
The vote
of a majority of the shares present and voting at the annual shareholders’
meeting is required to determine the amount and timing of dividend payments in
respect of the 2009 financial year. Since the Federal Republic and KfW (which is
controlled by the Federal Republic) control approximately 31.7% of our
outstanding shares, the Federal Republic may be able to exert significant
influence over the outcome of that vote.
Dividends
paid will generally be subject to German withholding tax. For more information
on German withholding tax, the exception related to Section 27 German
Corporate Income Tax Act, and related United States tax refund procedures, see
“Item 10. Additional Information—Taxation.”
We may
declare and pay dividends only from the distributable balance sheet profits
(Bilanzgewinn) of Deutsche Telekom AG, as determined in accordance with the
German Commercial Code, the accounting standards issued by the German Accounting
Standards Board and the German Stock Corporation Act, and as adjusted to reflect
losses or gains carried over from prior years as well as transfers to or from
retained earnings. Deutsche Telekom AG’s retained earnings in its
unconsolidated, stand-alone financial statements as of December 31, 2009
were EUR 15.9 billion. Certain reserves (Rücklagen) are required by
law to be made and deducted in calculating distributable balance sheet profits
available for distribution as dividends.
On
February 24, 2010, our Board of Management and Supervisory Board decided to
pursue a shareholder remuneration policy for the 2010 through 2012 financial
years that consists of the payment of an annual dividend of a minimum of EUR
0.70 per share and share repurchases for any remaining amount up to a total
combined outlay of around EUR 3.4 billion in respect of each financial
year.
Implementation of this policy is subject to the availability of sufficient
distributable balance sheet profits (Bilanzgewinn) of Deutsche
Telekom AG for the financial year in question and our ability to establish the
necessary reserves for any share repurchases. It is also contingent upon our
governing bodies adopting resolutions to this effect, taking into account the
company’s situation at the time. More generally, the payment of future dividends
or making of other outlays depends on our earnings, financial condition and
other factors, including cash requirements, our future prospects and tax,
regulatory and other legal considerations.
Except as
discussed elsewhere in this Annual Report, no significant change has occurred
since the date of the consolidated financial statements included in this Annual
Report.
ITEM 9. The Offer and Listing
The
principal trading market for our ordinary shares is the Frankfurt Stock
Exchange. Our ordinary shares also trade on the Berlin, Düsseldorf, Hamburg,
Hannover, München and Stuttgart stock exchanges in Germany, and on the Tokyo
Stock Exchange. Options relating to our ordinary shares trade on the German
options exchange (Eurex Deutschland) and other exchanges.
Our ADSs,
each representing one ordinary share, are listed on the NYSE and trade under the
symbol “DT.” Our ADSs are also traded on the Frankfurt Stock Exchange under the
title “DT Telekom ADR.” The depositary for our ADSs is Deutsche Bank Trust
Company Americas. For information on our ADS holders in the United States, see
“Item 7. Major Shareholders and Related Party Transactions—Major
Shareholders.”
Trading
on the Frankfurt Stock Exchange
Deutsche
Börse AG operates the Frankfurt Stock Exchange, which is the most significant of
the seven German stock exchanges. It accounts for the vast majority of the
turnover in exchange-traded shares in Germany. Our shares are listed in the
Prime Standard segment. The Prime Standard imposes transparency and disclosure
requirements, such as filing of quarterly reports, application of
internationally accepted accounting standards, publication of a corporate
calendar, covering key events of interest to investors, convening at least one
analyst conference per year, periodic disclosures and ongoing financial
communications in English.
Our
shares are traded on Xetra®, the electronic trading platform of the Frankfurt
Stock Exchange, through which most orders on the exchange are now traded. Xetra®
is available daily between 9:00 a.m. and 5:30 p.m., Central European
Time, to brokers and banks that have been admitted to Xetra® by the Frankfurt
Stock Exchange. Private investors can trade on Xetra® through their banks or
brokers.
Our
shares are also traded on the floor of the Frankfurt Stock Exchange, which
operates every business day between 9:00 a.m. and 8:00 p.m., Central
European Time.
Transactions
on the Frankfurt Stock Exchange (including transactions through the Xetra®
system) settle on the second business day following a trade. Transactions off
the Frankfurt Stock Exchange (for example, large trades or transactions in which
one of the parties is foreign) generally also settle on the second business day
following the trade, although the parties may agree to a different schedule.
Under the standard terms and conditions for securities transactions employed by
German banks, customers’ orders for listed securities must be executed on a
stock exchange unless the customer gives specific instructions to the
contrary.
The
Frankfurt Stock Exchange can suspend a quotation if orderly trading is
temporarily endangered or if a suspension is deemed to be necessary to protect
the public.
The
trading supervisory offices (Handelsüberwachungsstellen) at the stock exchanges
and the exchange supervisory authorities (Börsenaufsichtsbehörden) of the German
federal states monitor trading activities on the German stock exchanges. The
Federal Agency for Financial Services Supervision (Bundesanstalt für
Finanzdienstleistungsaufsicht) monitors compliance with insider trading
rules.
The table
below sets forth, for the periods indicated, the high and low closing sales
prices for our shares on the Frankfurt Stock Exchange, as reported by the
Frankfurt Stock Exchange’s Xetra®
trading system, together with the highs and lows of the DAX index:
|
|
|
Price
per
Ordinary
Share (€)
|
|
|
DAX(1)
|
|
|
|
|
High
|
|
|
Low
|
|
|
High
|
|
|
Low
|
|
|
Yearly
highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2005
|
|
|
16.84 |
|
|
|
13.80 |
|
|
|
5,458.58 |
|
|
|
4,677.80 |
|
|
2006
|
|
|
14.49 |
|
|
|
10.84 |
|
|
|
6,611.81 |
|
|
|
5,292.14 |
|
|
2007
|
|
|
15.28 |
|
|
|
12.18 |
|
|
|
8,105.69 |
|
|
|
6,447.70 |
|
|
2008
|
|
|
15.55 |
|
|
|
9.00 |
|
|
|
7,949.11 |
|
|
|
4,127.41 |
|
|
2009
|
|
|
11.39 |
|
|
|
7.93 |
|
|
|
6,011.55 |
|
|
|
3,666.41 |
|
|
Quarterly
highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
15.55 |
|
|
|
10.48 |
|
|
|
7,949.11 |
|
|
|
6,182.30 |
|
|
Second
Quarter
|
|
|
11.94 |
|
|
|
10.02 |
|
|
|
7,225.94 |
|
|
|
6,418.32 |
|
|
Third
Quarter
|
|
|
11.62 |
|
|
|
10.30 |
|
|
|
6,609.63 |
|
|
|
5,807.08 |
|
|
Fourth
Quarter
|
|
|
11.87 |
|
|
|
9.00 |
|
|
|
5,806.33 |
|
|
|
4,127.41 |
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
11.39 |
|
|
|
9.07 |
|
|
|
5,026.31 |
|
|
|
3,666.41 |
|
|
Second
Quarter
|
|
|
9.79 |
|
|
|
7.93 |
|
|
|
5,144.06 |
|
|
|
4,131.07 |
|
|
Third
Quarter
|
|
|
9.67 |
|
|
|
7.98 |
|
|
|
5,736.31 |
|
|
|
4,572.65 |
|
|
Fourth
Quarter
|
|
|
10.57 |
|
|
|
9.11 |
|
|
|
6,011.55 |
|
|
|
5,353.35 |
|
|
Monthly
highs and lows
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
August
|
|
|
9.41 |
|
|
|
8.78 |
|
|
|
5,557.09 |
|
|
|
5,201.61 |
|
|
September
|
|
|
9.67 |
|
|
|
9.10 |
|
|
|
5,736.31 |
|
|
|
5,301.42 |
|
|
October
|
|
|
9.69 |
|
|
|
9.11 |
|
|
|
5,854.14 |
|
|
|
5,414.96 |
|
|
November
|
|
|
9.88 |
|
|
|
9.19 |
|
|
|
5,804.82 |
|
|
|
5,353.35 |
|
|
December
|
|
|
10.57 |
|
|
|
10.02 |
|
|
|
6,011.55 |
|
|
|
5,647.84 |
|
|
2010
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
|
|
|
10.60 |
|
|
|
9.36 |
|
|
|
6,048.30 |
|
|
|
5,540.33 |
|
|
February
(through February 23, 2010)
|
|
9.75
|
|
|
9.21
|
|
|
5,722.05
|
|
|
5,434.34
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
The
DAX is a weighted performance index of the shares of thirty large German
corporations, as traded through Xetra®.
The composition of the DAX and the weighting of different companies in the
DAX has changed during the period covered by this table and may change in
the future. Because a significant number of institutional investors adjust
their stock portfolios to correspond to the composition of important stock
indices, changes in the weighting of our shares in these indices have led
to fluctuations in our share price in the past and could cause similar
fluctuations in the future.
|
On
February 23, 2010, the closing sales price per ordinary share of Deutsche
Telekom AG on Xetra® was EUR 9.50 which was equivalent to USD 12.90
per share, converted into U.S. dollars using the exchange rate published by the
European Central Bank, for February 23, 2010. On February 23, 2010, this
exchange rate was USD 1.3577 per EUR 1.00.
Trading
on the New York Stock Exchange
The table
below sets forth, for the periods indicated, the high and low closing sales
prices for our ADSs on the NYSE:
|
|
|
Price per ADS ($)
|
|
|
|
|
High
|
|
|
Low
|
|
|
Yearly
highs and lows
|
|
|
|
|
|
|
|
2005
|
|
|
22.37 |
|
|
|
16.35 |
|
|
2006
|
|
|
18.36 |
|
|
|
13.76 |
|
|
2007
|
|
|
22.65 |
|
|
|
16.28 |
|
|
2008
|
|
|
22.94 |
|
|
|
12.16 |
|
|
2009
|
|
|
15.62 |
|
|
|
10.87 |
|
|
Quarterly
highs and lows
|
|
|
|
|
|
|
|
|
|
2008
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
22.94 |
|
|
|
16.28 |
|
|
Second
Quarter
|
|
|
18.42 |
|
|
|
15.63 |
|
|
Third
Quarter
|
|
|
17.75 |
|
|
|
14.37 |
|
|
Fourth
Quarter
|
|
|
16.08 |
|
|
|
12.16 |
|
|
2009
|
|
|
|
|
|
|
|
|
|
First
Quarter
|
|
|
15.48 |
|
|
|
11.37 |
|
|
Second
Quarter
|
|
|
12.92 |
|
|
|
10.87 |
|
|
Third
Quarter
|
|
|
14.02 |
|
|
|
11.12 |
|
|
Fourth
Quarter
|
|
|
15.62 |
|
|
|
13.20 |
|
|
Monthly
highs and lows
|
|
|
|
|
|
|
|
|
|
2009
|
|
|
|
|
|
|
|
|
|
August
|
|
|
13.50 |
|
|
|
12.37 |
|
|
September
|
|
|
14.02 |
|
|
|
12.88 |
|
|
October
|
|
|
14.59 |
|
|
|
13.20 |
|
|
November
|
|
|
14.87 |
|
|
|
13.53 |
|
|
December
|
|
|
15.62 |
|
|
|
14.39 |
|
|
2010
|
|
|
|
|
|
|
|
|
|
January
|
|
|
15.17 |
|
|
|
12.87 |
|
|
February
(through February 23, 2010)
|
|
13.21
|
|
|
12.64
|
|
|
|
|
|
|
|
|
|
|
|
On
February 23, 2010, the closing sales price per ADS on the NYSE was
USD 12.80.
ITEM 10. Additional Information
The
following is a summary of certain information relating to our share capital and
certain provisions of our Articles of Incorporation and German law. This summary
is not complete and is qualified by reference to our Articles of Incorporation
and German law in effect at the date of this filing. Copies of our Articles of
Incorporation are publicly available at the Commercial Register in Bonn, and an
English translation is filed as Exhibit 1.1 to this Annual
Report.
Organization
and Register
We are a
stock corporation organized in the Federal Republic of Germany under the Stock
Corporation Act. We are entered in the Commercial Register maintained by the
local court in Bonn, Germany under the number “HRB 6794.”
Object
of Deutsche Telekom AG
According
to Section 2 of our Articles of Incorporation, our object is activity in
all areas of telecommunications, information technology, multimedia, information
and entertainment, as well as security services and any services connected to
these areas and also in related areas in Germany and abroad. We are entitled to
enter into all other transactions and take all other measures deemed appropriate
to serve the object of the enterprise. We may also set up, acquire and
participate in other undertakings of the same or similar kind in Germany and
abroad, as well as run such undertakings or confine ourselves to the
administration of our participations. We may spin-off our operations wholly or
partly to affiliated undertakings, provided that applicable legal requirements,
such as requisite shareholder resolutions, are satisfied.
Information
relating to our Supervisory Board and Management Board Members
Pursuant
to the Stock Corporation Act, no Supervisory Board member may receive a loan
from us unless approved by the Supervisory Board. A Management Board member may
only receive a loan from us upon prior approval by the Supervisory Board. For
more information regarding loans to Supervisory Board and Management Board
members, see “Item 6. Directors, Senior Management and
Employees—Compensation—Loans to Supervisory Board and Management Board
Members.”
Class
of Stock
As of
December 31, 2009, our capital stock consisted of 4,361,319,993 ordinary
shares in registered form with no par value (Stückaktien). These shares reflect
total share capital in the amount of EUR 11,164,979,182.08. The individual
shares do not have a par value as such, but they do have a notional par value,
which can be calculated by dividing share capital by the number of
shares.
Authorized
Capital
At the
shareholders’ meeting on April 30, 2009, our shareholders approved an amendment
to our Articles of Incorporation, which cancelled the “Authorized Capital 2004”
and created a new authorized capital of up to EUR 2,176,000,000 for the issuance
of up to 850,000,000 shares (“Authorized Capital 2009/I”). This authorization
may be exercised as a whole or on one or more occasions in partial amounts
during the period ending April 29, 2014.
Our
Management Board is authorized, subject to the approval of our Supervisory
Board, to exclude shareholders’ subscription rights when issuing new shares
for mergers or acquisitions of companies, parts thereof, or interests in
companies, including increasing existing investment holdings, or other
assets eligible for contribution for such acquisitions, including receivables
from the Corporation. Our Management Board is further authorized, subject to the
approval of our Supervisory Board, to determine the further content of share
rights and the conditions under which shares are to be issued.
At the
shareholders’ meeting on April 30, 2009, an amendment to our Articles of
Incorporation was approved, which cancelled the “Authorized Capital 2006” and
created a new authorized capital of up to EUR 38,400,000 for the issuance of up
to 15,000,000 shares (“Authorized Capital 2009/II”). This authorization may be
exercised as a whole or on one or more occasions in partial amounts during the
period ending April 29, 2014.
The
subscription rights of shareholders are excluded. The new shares may only be
issued to grant shares to employees of Deutsche Telekom AG and of lower-tier
affiliated companies (employee shares). The new shares can also be issued to a
bank or some other company meeting the requirements of Section 186 (5),
sentence 1 of the Stock Corporation Act that assumes the obligation to use these
shares exclusively for the purpose of granting employee shares. Where permitted
by law, the employee shares may also be issued in such a way that
the contribution to be paid in return is taken from the part of
the net income that the Board of Management and the Supervisory Board may
transfer to other retained earnings in accordance with Section 58 (2) of the
Stock Corporation Act. The shares to be issued as employee shares can also
be acquired in the form of a securities loan from a bank or some other company
meeting the requirements of Section 186 (5), sentence 1 of the Stock
Corporation Act and the new shares can be used to repay such securities
loan. Our Management Board is further authorized, subject to the approval of our
Supervisory Board, to determine the further content of share rights and the
conditions under which shares are to be issued.
Conditional
Capital
Conditional
Capital II
At the
shareholders’ meeting on May 29, 2001, our shareholders adopted a
resolution authorizing the Management Board to increase our capital stock by up
to EUR 307,200,000, divided into up to 120,000,000 shares (“Conditional Capital
II”), for the exclusive purpose of meeting subscription rights (preemptive
rights) to shares from stock options granted to members of our Management Board,
executives at levels below our Management Board and other executives, managers
and specialists of Deutsche Telekom AG, and to management board members and
other executives of second- and lower-tier affiliates, on the basis of Stock
Option Plan 2001.
At the
shareholders’ meeting on May 18, 2004, our shareholders adopted a
resolution canceling Conditional Capital II with respect to 107,000,000 shares
(equivalent to EUR 273,920,000), which left up to 13,000,000 shares, equivalent
to an amount of EUR 33,280,000, available for the exclusive purpose of meeting
subscription rights (preemptive rights) to shares from stock options granted
prior to December 31, 2003 to members of our Management Board, executives
at levels below our Management Board and other executives, managers and
specialists of Deutsche Telekom AG, and to management board members and other
executives of second- and lower-tier affiliates, on the basis of Stock Option
Plan 2001.
Accordingly,
Conditional Capital II will only be effective to the extent such options are
exercised. In 2009, we did not issue any shares pursuant to option exercises
under Conditional Capital II. Any new shares issued participate in profits
starting at the beginning of the fiscal year in which they are issued. If new
shares are issued after the end of a fiscal year but before the shareholders’
meeting at which the shareholders adopt a resolution appropriating net income
for the fiscal year ended, the new shares participate in the profits starting at
the beginning of the fiscal year ended.
Conditional
Capital IV
At the
shareholders’ meeting on April 26, 2005, our shareholders adopted a
resolution authorizing the Management Board to increase our capital stock by up
to EUR 600,000,000, divided into up to 234,375,000 new no-par value shares
(“Conditional Capital IV”). This conditional capital increase can be implemented
only to the extent that:
|
·
|
the
holders or creditors of convertible bonds or warrants arising as a result
of convertible bonds issued or guaranteed by Deutsche Telekom AG or its
direct or indirect majority holdings by April 25, 2010, on the basis
of the authorization resolution granted by the regular shareholders’
meeting in April 2005, make use of their conversion rights or option
rights; or
|
|
·
|
those
obligated as a result of convertible bonds or bonds with warrants granted
or issued by April 25, 2010, by Deutsche Telekom AG or its direct or
indirect majority holdings on the basis of the authorization granted by
resolution of the regular shareholders’ meeting in April 2005, fulfill
their conversion or option obligations;
and
|
|
·
|
the
conditional capital is required in accordance with the terms and
conditions of any bond issuance.
|
The new
shares shall participate in profits starting at the beginning of the financial
year in which they are issued as the result of the exercise of any conversion or
option rights or the fulfillment of any conversion or option obligations. The
Management Board is authorized, subject to the approval of the Supervisory
Board, to determine any other details concerning the implementation of the
conditional capital increase.
Voting
Rights and Shareholders’ Meetings
Each
share entitles its holder to one vote at our shareholders’ meetings. Voting
rights are restricted in relation to treasury shares (around two million
shares as of December 31, 2009) and trust shares (around
19 million as of December 31, 2009). The trust shares are connected
with the acquisitions of VoiceStream and Powertel in 2001. As part of these
acquisitions, we issued new shares from authorized capital to trustees for the
benefit of holders of warrants, options, and conversion rights, among others.
For the shares issued to trusts, the respective trustees waived voting rights
and subscription rights and, in general, dividend rights for the duration of the
trusts’ existence. The shares issued to the trusts can be sold on a stock
exchange at our instruction if the beneficiaries of the trusts do not exercise
their options or conversion rights or if these expire. In this event, we will
receive the proceeds from the sale.
Shareholders
may pass resolutions at a general meeting by a majority of the votes cast,
unless a higher vote is required by law or by our Articles of Incorporation.
Neither the Stock Corporation Act nor our Articles of Incorporation provide for
minimum quorum requirements for passing resolutions at shareholders’ meetings.
The Stock Corporation Act requires that significant resolutions be passed by a
majority of the votes cast, with at least three-quarters of the share capital
represented at a meeting.
These
significant resolutions include:
|
·
|
capital
increases that provide for an exclusion of preemptive
rights;
|
the
creation of authorized capital (genehmigtes Kapital) or conditional capital
(bedingtes Kapital);
|
·
|
our
merger into, or consolidation with, another
corporation;
|
|
·
|
split-off
or spin-off pursuant to the Transformation
Act;
|
|
·
|
transfer
of all of our assets;
|
conclusion
of intercompany agreements (Unternehmensverträge), including, in particular,
control and profit-transfer agreements (Beherrschungs- und
Gewinnabführungsverträge);
|
·
|
amendments
to the statement of corporate purpose in our Articles of Incorporation;
and
|
|
·
|
a
change in our corporate form.
|
A
shareholders’ meeting may be called by the Management Board or by shareholders
holding in the aggregate at least 5% of our issued share capital. In addition,
if required in our interest, the Supervisory Board must call a shareholders’
meeting. Shareholders holding in the aggregate at least EUR 500,000, or at least
5%, of our issued share capital, may require that particular items be placed on
the agenda provided that the Company receives the request no later than 30 days
in advance of the meeting. The annual shareholders’ meeting must take
place within the first eight months of the fiscal year and is called by the
Management Board, upon the receipt of the Supervisory Board’s report on our
annual financial statements. Under our Articles of Incorporation, eligible to
participate in and to exercise their voting rights at the shareholders’ meeting
shall be those shareholders who are included in the share register
(Aktienregister) and who have registered with the Corporation on time.
Shareholders may also register by fax or by using a password-protected Internet
Dialog that the Corporation provides for this purpose. The Corporation must
receive the registration at the address stipulated for this purpose when the
shareholders’ meeting is called no longer than six days in advance of the
meeting, not counting the date of the meeting and the date of receipt of the
registration. Convocation must be published in the electronic Federal Gazette
(elektronischer Bundesanzeiger) at least thirty days prior to the date by which
shareholders have to register for the shareholders’ meeting; the last date by
which shareholders have to register for the shareholders’ meeting shall not be
counted. If the deadline falls on a Sunday, a legally recognized public holiday
at the headquarters of the Company or on a Saturday, the preceding working day
shall take the place of this day. In addition, we must publish a notice in a
national, authorized stock exchange journal and on the Company’s homepage.
Shareholders
(but not ADS holders) need to provide to us their names, addresses and birth
dates (or, in the case of business entities, their names, business addresses and
registered offices) as well as the number of shares held, so that they can be
entered into our share register. ADEUS Aktienregister-Service-GmbH (a company
not related to us) is the transfer agent and registrar for our shares in
Germany.
There can
be no guarantee that ADS holders will receive notice of shareholders’ meetings
from our ADS depositary to enable such holders to return voting instructions to
the ADS depositary in a timely manner, or to make arrangements to be able to
exercise the voting rights themselves. In the event that instructions are not
received early enough by the ADS depositary with respect to the voting of
underlying shares, the depositary does not have any obligation to forward any
information or notice in respect to such meeting or solicitation of consents or
proxies to the respective ADS holders. Also, the depositary is not responsible
for failing to carry out voting instructions. It is possible that ADS holders,
or persons who hold their ADSs through brokers, dealers or other third parties,
will not have the effective opportunity to exercise any voting rights at
all.
Dividends
and Other Distributions
We may
pay dividends immediately following a resolution by our shareholders at the
annual shareholders’ meeting regarding the distribution of our profits.
Shareholders participate in profit distributions in proportion to their
shareholdings.
Under
German law, we may declare and pay dividends only from balance sheet profits as
shown in the annual financial statements of Deutsche Telekom AG. In determining
distributable balance sheet profits, our Management Board and Supervisory Board
may allocate to profit reserves (andere Gewinnrücklagen), either in whole or in
part, the annual surplus (Jahresüberschuss) that remains after allocation to
statutory reserves and losses carried forward. Under our Articles of
Incorporation, transferring more than one-half of our annual surplus to profit
reserves is not permissible if, following the transfer, the accumulated reserves
out of surplus would exceed one-half of our share capital. The shareholders, in
determining the distribution of profits, may allocate additional amounts to
profit reserves and may carry forward profits in part or in full. Our
shareholders may also decide by resolution to pay dividends in kind if the
assets to be distributed are such as can be traded on a market.
Dividends
approved at a shareholders’ meeting are payable on the first stock exchange
trading day after that meeting, unless otherwise decided at the shareholders’
meeting. Details regarding paying agents are published in the electronic version
of the Federal Gazette. Shareholders holding shares through Clearstream Banking
AG receive dividends by credit to their respective accounts.
Record
Dates
In
accordance with the Stock Corporation Act, the record date for determining which
holders of our ordinary shares are entitled to the payment of dividends, if any,
or other distributions, whether in cash, stock or property, is the date of the
general shareholders’ meeting at which such dividends or other distributions are
declared. Eligible to participate in and to exercise their voting rights at the
shareholders’ meeting shall be those shareholders who are included in the share
register and who have registered with the Corporation on time, i.e., the
Corporation must receive the registration at the address stipulated for this
purpose when the shareholders’ meeting is called no longer than six days in
advance of the meeting, not counting the date of the meeting and the date of
receipt of the registration.
German
Requirements to Disclose Shareholdings
The
German Securities Trading Act (Wertpapierhandelsgesetz, the “Securities Trading
Act”) requires each shareholder whose shareholding reaches, exceeds or after
exceeding, falls below the 3%, 5%, 10%, 15%, 20%, 25%, 30%, 50% or 75% voting
rights thresholds of a listed company to notify that issuer and the
Federal Agency for Financial Services Supervision (Bundesanstalt für
Finanzdienstleistungsaufsicht, the “BaFin”) in writing without undue delay, at
the latest within four trading days after they have reached, exceeded or fallen
below any such threshold. The voting rights attached to a third-party's
shares may have to be attributable to another shareholder if this
shareholder coordinates its behavior concerning the company on the basis of an
agreement or by other means with the third-party (acting in concert). In
addition, the Securities Trading Act contains various rules designed to ensurre
the attribution of shares to the person who has effective control over
the exercise of the voting rights attached to those shares. In their
notification, the shareholders must, among other things, state the number
of votes they have and the relative voting power that the number of shares they
hold represents. Such shareholders cannot exercise any rights, including voting
rights and the rights to receive dividends from those shares, until they
have satisfied this disclosure requirement. Failure to notify may also trigger a
penalty provided for by law. Moreover, anyone who holds, directly or indirectly,
financial instruments that result in an entitlement to acquire, on one’s own
initiative alone and under a legally binding agreement, shares in an issuer
whose home country is the Federal Republic of Germany that carry voting rights
and have already been issued, must, without undue delay, notify this to the
issuer and to the BaFin if the thresholds mentioned above have been reached,
exceeded or fallen below, with the exception of the 3% threshold. Voting rights
attached to such financial instruments and voting rights attached to shares are
to be aggregated in order to determine whether any of the relevant notification
thresholds have been triggered. The issuer shall publish the notifications
received without undue delay. In
addition, holders of voting rights reaching or exceeding the 10% threshold are
required to notify the issuer within 20 trading days about their intentions with
respect to their investment as well as the origin of the funds used for the
acquisition of voting rights. The issuer shall publish the notices received – or
the fact that the disclosure obligation has not been fulfilled – without undue
delay.
Moreover,
the German Takeover Act (Wertpapiererwerbs- und Übernahmegesetz)
requires the publication of the acquisition of “control,” which is defined
as the direct or indirect holding of at least 30% of the voting rights in
a target company.
Furthermore,
the Securities Trading Act stipulates that any dealings in shares or
financial instruments linked to such shares of Deutsche Telekom AG by
members of our Management Board or Supervisory Board, or any other executives
who have access to inside information on a regular basis and are authorized to
make significant management decisions, as well as any person closely associated
with such persons, must be disclosed to us and to the BaFin in writing within
five business days, provided their aggregate securities transactions within
one calendar year amount at least to EUR 5,000. We are obligated to publish such
securities transactions promptly, simultaneously notify the BaFin of
such publications and promptly, but not prior to its publication, submit the
publications to the company register (Unternehmensregister).
The Stock
Corporation Act contains an obligation of the holders of nominal shares
(Namensaktien) to notify us of personal data such as name, address and
birthday as well as the number of shares and the registration number. We are
entitled to request information from the registered shareholder whether he owns
his nominal shares as a beneficial or a nominee shareholder. In the latter case,
the nominee shareholder is obliged to provide personal data of the person he
holds the shares for. We are then entitled to request the personal data from the
person whose identity was disclosed by the nominee shareholder. In case the
registered shareholder does not provide the requested information, he will be
deprived by law of his voting rights until the information request is
fulfilled.
Repurchase
of Shares
Under the
Stock Corporation Act, we may not purchase our own shares, subject to certain
limited excemtions, including for example, the approval of our shareholders as
set forth below.
At the
shareholders’ meeting on April 30, 2009, our shareholders approved a resolution
authorizing us to purchase up to 436,131,999 of our own shares by October 29,
2010, which was 10% of our capital stock at the time of the shareholders’
meeting. Any such purchase is subject to various restrictions and conditions
relating to, among other things, the manner and timing of such purchase. The
treasury shares acquired may be, subject to certain restrictions and conditions,
sold through the stock exchange, offered to shareholders for subscription
on the basis of an offer sent to all shareholders, sold other than through
the stock exchange by offering them to all shareholders, used for the purpose of
listing the Company's shares on foreign stock exchanges, offered or granted to
third parties in the context of mergers or acquisition of companies, business
units, or shareholdings in companies, used to fulfill conversion or option
rights and obligations from convertible bonds or bonds with warrants issued,
offered and/or granted to employees of Deutsche Telekom AG and of
lower-tier affiliated companies (employee shares), sold other than in the stock
exchange or by way of an offer to all shareholders, to fulfill conversion or
option rights and obligations relating to convertible bonds or bonds with
warrants. The Board of Management is also authorized to redeem these
shares.
Preemptive
Rights
Under the
Stock Corporation Act, each shareholder generally has preemptive rights
(subscription rights) with respect to an issuance of new shares (including
securities convertible into shares, securities with warrants to purchase shares,
profit-sharing certificates and securities with a profit participation).
Preemptive rights are freely transferable and may be traded on the German stock
exchanges for a limited number of days prior to the final date for the exercise
of the rights. Shareholders may exclude preemptive rights through a resolution
passed by a majority of votes cast and a majority of at least three-quarters of
the share capital represented at the shareholders’ meeting. In addition, an
exclusion of preemptive rights requires a report by our Management Board
justifying the exclusion, by establishing that our interest in the exclusion
outweighs the shareholders’ interest in exercising their preemptive rights.
Preemptive rights related to the issuance of new shares may be excluded without
justification if:
|
·
|
we
increase our share capital in exchange for cash
contributions;
|
|
·
|
the
amount of the increase does not exceed 10% of our issued share capital;
and
|
|
·
|
the
shares are sold at a price not substantially lower than the current quoted
share price.
|
However,
preemptive rights may be unavailable to holders of our ADSs or holders of our
shares in the United States or other countries, in which case such holders could
be substantially diluted. Holders of our ADSs and our U.S. resident shareholders
may not be able to exercise these preemptive rights to acquire shares unless we
file a registration statement with the SEC or an exemption from
registration is available.
Rights
upon Liquidation
In
accordance with the Stock Corporation Act, upon a liquidation of Deutsche
Telekom AG, shareholders will receive, in proportion to the number of ordinary
shares held, any liquidation proceeds remaining after paying off all of our
liabilities.
Corporate
Governance
We are
obligated under German law to declare compliance
and non-compliance, with the Deutscher Corporate Governance Kodex (the
“German Corporate Governance Code”) at least once per year. In August 2009 and
January 2010, two declarations of conformity have been published. The
relevant declarations and the text of the German Corporate Governance Code are
published in the English language on our World Wide Web site , accompanied by a
short description of the German corporate governance concept.
On August
28, 2009, our Supervisory Board and our Management Board declared that, in the
periods since submission of the most recent declaration of conformity pursuant
to Section 161 of the Stock Corporation Act on December 4, 2008, our
company had complied without exception with the recommendations of the
Government Commission for a German Corporate Governance Code announced by the
Federal Ministry of Justice on August 8, 2008 in the official section of the
electronic Federal Gazette. In this declaration of conformity, our Supervisory
Board and our Management Board further declared that our company complies
without exception with the recommendations of the Government Commission for a
German Corporate Governance Code published by the Federal Ministry of Justice on
August 5, 2009 in the official section of the electronic Federal
Gazette.
On
January 5, 2010, our Supervisory Board and our Management Board declared
that, in the periods since submission of the most recent declaration of
conformity pursuant to Section 161 of the Stock Corporation Act on August
28, 2009, our company had complied without exception with the recommendations of
the Government Commission for a German Corporate Governance Code announced by
the Federal Ministry of Justice on August 5, 2009 in the official section of the
electronic Federal Gazette. In this declaration of conformity, our Supervisory
Board and our Management Board further declared that our company complies
without exception with the recommendations of the Government Commission for a
German Corporate Governance Code published by the Federal Ministry of Justice on
August 5, 2009 in the official section of the electronic Federal
Gazette.
Deutsche
Telekom AG does not impose any limits on the right of its domestic or foreign
shareholders to hold its shares.
There are
currently no legal restrictions in Germany on international capital movements
and foreign-exchange transactions, except in limited embargo circumstances
relating to certain areas, entities or persons as a result of applicable
resolutions adopted by the United Nations and the European Union. Restrictions
currently exist with respect to, among others, Zimbabwe, Sudan, Somalia and
Iraq. The German Central Bank (Deutsche Bundesbank) publishes information
concerning financial sanctions programs at
http://www.bundesbank.de/finanzsanktionen/finanzsanktionen.en.php.
For
statistical purposes, there are, however, limited reporting requirements
regarding transactions involving cross-border monetary transfers. With some
exceptions, every corporation or individual residing in Germany must report to
the German Central Bank (i) any payment received from, or made to, a
non-resident corporation or individual that exceeds EUR 12,500 (or the
equivalent in a foreign currency) and (ii) any claim against, or liability
payable to, a non-resident or corporation in excess of EUR 5 million (or
the equivalent in a foreign currency) at the end of any calendar month. Payments
include cash payments made by means of direct debit, checks and bills,
remittances denominated in euro and other currencies made through financial
institutions, as well as netting and clearing arrangements.
German
residents are also required to report annually to the German Central Bank any
shares or voting rights of 10% or more they hold in non-resident corporations
with total assets of more than EUR 3 million. Corporations residing in
Germany with assets in excess of EUR 3 million must report annually to the
German Central Bank any shares or voting rights of 10% held by a non-resident.
Further details on reporting requirements may be obtained at
http://www.bundesbank.de/meldewesen/mw.en.php.
The
following is a summary of the material German tax and U.S. federal income tax
considerations relating to the ownership and disposition of our ADSs or shares
by a U.S. Holder. In general, a U.S. Holder, as referred to herein, is
any beneficial owner of ADSs or shares (1) that is a resident of the United
States for purposes of the income tax treaty between the United States and
Germany (referred to herein as the “Treaty”); (2) that is not also a
resident of the Federal Republic of Germany for purposes of the Treaty;
(3) that owns the ADSs or shares as capital assets; (4) that does not
hold ADSs or shares as part of the business property of a permanent
establishment or a fixed base in Germany and (5) that is entitled to
benefits under the Treaty with respect to income and gain derived in connection
with the ADSs or shares.
The
following is not a comprehensive discussion of all German and U.S. tax
consequences that may be relevant for U.S. Holders. Therefore, each U.S. Holder
is strongly urged to consult his or her own tax advisers regarding the United
States federal income and German tax consequences of the purchase, ownership and
disposition of our ADSs or shares in light of his or her particular
circumstances, including the effect of any state, local, or other foreign or
domestic laws.
This
summary is based on German tax laws in effect on the date hereof and is subject
to changes in German tax laws or treaties.
Taxation
of the Company in Germany
German
corporations are subject to German corporate income tax at a flat rate of 15%,
regardless of whether such income is distributed or not. The solidarity
surcharge of 5.5% (which was instituted to finance costs associated with the
unification of Germany) is imposed on the net assessed corporate income tax
liability, resulting in an aggregate German corporate income tax rate of
15.825%, which does not include German local trade tax.
In
addition, German resident companies are subject to profit-related trade tax,
which is levied on taxable income for trade tax purposes. The rate of the trade
tax depends on the rate set by each municipality where the respective company
maintains its business establishment(s). Usually, this will result in a combined
tax rate for German companies of 30% to 33% (including the solidarity
surcharge), depending on the individual municipal rates.
Losses
generally can be accumulated for corporate income tax as well as for trade tax
purposes. To the extent losses cannot be offset against taxable income, the
remaining portion can be carried forward indefinitely. An optional carryback to
the previous year of up to EUR 511,500 is available for corporate income tax
purposes.
According
to a minimum taxation regime, the offset of 100% of profits for a particular
year against tax loss carryforward is only possible up to an amount of
EUR 1 million. Profits exceeding the EUR 1 million threshold can only
be offset up to 60% against the loss carryforward, so the remaining 40% will
remain taxable income (so-called minimum taxation) for both corporate income and
trade tax purposes.
Under the
German participation exemption, losses from the sale or exchange of shares in a
corporation or from the write-down of their value cannot be deducted from
taxable income.
According
to the German interest capping rules the amount of total interest expense
exceeding the amount of interest income may only be deducted up to 30% of the
taxable income before interest, taxes, depreciation and amortization (EBITDA,
for tax purposes). EBITDA amounts, which have not been used for interest
deductions, can be generally carried forward up to five years. For
entities that are part of a group of companies, the interest capping rules will
not apply if certain conditions of an equity test comparing the adjusted equity
ratio of the Group entity in relation to the equity ratio of the entire Group
are met. Interest expenses disallowed under the new rules may be carried forward
indefinitely, subject to certain limitations.
The loss
carryforward limitation rule applies if more than 25% of the loss entity’s
shares or voting rights are directly or indirectly transferred within a
five-year period to one purchaser or a related party or a group of purchasers
with common interest, with the consequence that a portion or even the entire
loss carryforward and interest expense carryforward (caused by the interest
capping rules) are forfeited both for corporate income and trade tax
purposes.
Up to 25%
of financing costs over EUR 100,000 (e.g., all interest on short and long-term
debts and a portion of rentals, lease payments and royalties) are considered
non-deductible expenses for trade tax purposes.
German
Withholding Tax on Dividends
The full
amount of a dividend distributed by a company is generally subject to German
withholding tax at the domestic rate of 25%, plus a solidarity surcharge of 5.5%
(effectively 1.375% of the dividend before taxes), resulting in an aggregate
rate of withholding of 26.375%.
If a
dividend is paid out of the so called German tax contribution
account within the meaning of Section 27 German Corporate Income Tax
Act (steuerliches Einlagekonto), no German withholding tax will be deducted from
the payment. Such dividend will generally not be subject to tax for
domestic shareholders. U.S. Holders will also receive such dividend without
deduction of German taxes. Therefore the dividend payment will not entitle
to any tax refund or tax credit.
Corporate
U.S. Holders will be entitled to a refund of two fifths of the German
withholding tax (including solidarity surcharge), irrespective of a potential
further reduction of withholding tax available under the relevant
Treaty.
For
information regarding the entitlement of a U.S. Holder to claim a refund of part
of the withholding tax, see “—U.S. Taxation and U.S.-German Double Taxation
Agreement of August 29, 1989, as amended by the Protocol of June 1,
2006—Imposition and Refund of German Withholding Tax and Taxation of Dividends
in the United States.”
Taxation
of Capital Gains
Under
German domestic law as currently in effect, capital gains derived by a
non-resident shareholder from the sale or other disposition of shares or ADSs
are subject to tax in Germany if such shareholder has held, directly or
indirectly, shares or ADSs representing 1% or more of the registered share
capital of a company at any time during the five-year period immediately
preceding the disposition (a “Qualified Participation”).
Even in
this case, non-resident corporate shareholders are generally exempt from German
tax on capital gains derived from the sale or other disposition of shares or
ADSs under the German participation exemption. However, 5% of the capital gains
derived by non-resident corporate shareholders are treated as non-deductible
business expenses and are subject to German corporate income tax and solidarity
surcharge, so effectively only 95% of the capital gains are tax
exempt.
As
described under “—U.S. Taxation and U.S.-German Double Taxation Agreement of
August 29, 1989, as amended by the Protocol of June 1, 2006—Taxation
of Capital Gains,” a U.S. Holder will not be liable for German tax on capital
gains under the Treaty.
A bank or
financial services institution that holds shares or ADSs in a German custody
account for a U.S. Holder is not required to withhold
German tax on the capital gain derived from the sale of shares or
ADSs held by U.S. Holders, even if such U.S. Holder holds a Qualified
Participation.
Inheritance
and Gift Tax
Under
German law, German gift or inheritance tax will be imposed on transfers of
shares or ADSs by a U.S. Holder at death or by way of gift, if:
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·
|
the
decedent or donor, or the heir, donee or other transferee, has his
residence or habitual abode (gewoehnlicher Aufenthalt) in Germany at the
time of the transfer;
|
|
·
|
the
shares or ADSs are part of the business property of a permanent
establishment in Germany;
|
|
·
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the
decedent or donor, or the heir, donee or other transferee, is a citizen of
Germany, is not resident in Germany, but has not been continuously outside
of Germany for a period of more than five years;
or
|
|
·
|
the
shares or ADSs subject to such transfer form part of a portfolio that
represents 10% or more of the registered share capital of a company and
has been held, directly or indirectly, by the decedent or donor,
respectively, actually or constructively together with related
parties.
|
The right
of the German government to impose inheritance or gift tax on a U.S. Holder may
be further limited by the estate tax treaty between the United States and
Germany of December 21, 2000.
Other
German Taxes
No German
transfer, stamp or other similar taxes apply to the purchase, sale or other
disposition of shares or ADSs by a U.S. Holder. Currently, net worth tax is not
levied in Germany.
German
Taxation of Bonus Shares
The
German tax authorities issued a release dated December 13, 2002, stating
that the receipt of bonus shares in January 2002, with respect to shares
purchased in our third public offering in 2000, would constitute other taxable
income within the meaning of Section 22 No. 3 of the Income Tax Act.
According to this view, U.S. Holders would not have been subject to German
income tax with respect to bonus shares received in connection with our third
public offering, and the German tax authorities would have treated the receipt
of bonus shares in connection with our third public offering differently from
the receipt of bonus shares in connection with our second public offering. As
described in more detail below, however, the German tax authorities have changed
their view regarding the bonus shares received in connection with our third
public offering.
According
to a circular of the Federal Ministry of Finance (Bundesministerium der
Finanzen) dated December 10, 1999, bonus shares received in 2000, with
respect to shares purchased in our second public offering in 1999, are taxable
as dividend income from capital to the shareholders, although no withholding tax
was to be retained.
The
Federal Finance Court (Bundesfinanzhof) decided on December 7, 2004 that
the receipt of the bonus shares constitutes taxable income from capital.
Accordingly, the Federal Finance Court has confirmed the view taken by the tax
authorities with regard to our second public offering whereby the bonus shares
were to be characterized as taxable income from capital.
In the
meantime, the German tax authorities have accepted the principles set forth in
the above-mentioned decision of the Federal Finance Court. Accordingly, the
local tax authorities are directed to treat also the receipt of the bonus shares
issued in connection with shares purchased in our third public offering as
taxable dividend income from capital.
U.S. Taxation and U.S.-German Double Taxation Agreement of
August 29, 1989, as amended by
the Protocol of June 1, 2006
Special
Tax Rules for U.S. Holders
This
section applies only if you hold your shares or ADSs as capital assets for tax
purposes. It does not address all material tax consequences of owning shares or
ADSs. This section does not address special classes of holders that are subject
to special rules, including:
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·
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financial
institutions;
|
|
·
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brokers
or dealers in securities or
currencies;
|
|
·
|
securities
traders that elect a mark-to-market method of accounting for securities
holdings;
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|
·
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investors
liable for the alternative minimum
tax;
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|
·
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investors
that actually or constructively own 10% or more of our voting
stock;
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|
·
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certain
short-term holders of the shares or
ADSs;
|
|
·
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partnerships,
or other entities classified as partnerships, for U.S. federal income tax
purposes;
|
|
·
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investors
that hedge their exposure to the shares or ADSs or that hold shares or
ADSs as part of a straddle or a hedging or conversion transaction;
or
|
|
·
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investors
that do not use the U.S. dollar as their functional
currency.
|
Imposition
and Refund of German Withholding Tax, if any, and Taxation of Dividends in the
United States
Under the
Treaty, a U.S. Holder will be entitled to claim a refund to the extent the
amount withheld, if any, exceeds the 15% dividend withholding rate provided
under the Treaty.
For
example, for a declared dividend of 100, a U.S. Holder initially would receive
73.625 (100 minus the 26.375% withholding tax). The U.S. Holder would then be
entitled to a partial refund from the German tax authorities in the amount of
11.375% of the gross dividend, which is equal to the difference between the
amount withheld at the German domestic dividend withholding rate (plus the
solidarity surcharge) and the amount computed under the applicable treaty rate
(26.375% aggregate German withholding tax minus 15% Treaty withholding tax
rate). As a result, the U.S. Holder effectively would receive a total of 85
(i.e., 85% of the declared dividend). The U.S. Holder would be deemed to have
received a dividend of 100, subject to German withholding tax of
15.
Germany
and the United States agreed on a Protocol amending the existing Treaty on
June 1, 2006. The 15% Treaty withholding rate on dividends remains
unaffected with regard to U.S. Holders. The gross amount of dividends that a
U.S. Holder receives (prior to the deduction of German withholding tax)
generally will be subject to U.S. federal income taxation as foreign-source
dividend income and will not be eligible for the dividends-received deduction
generally allowed to U.S. corporations. Subject to certain exceptions for
short-term or hedged positions, the U.S. dollar amount of dividends received by
a U.S. Holder who is an individual generally will be subject to U.S. taxation at
a maximum rate of 15%, in respect of dividends received before January 1,
2011, if the dividends are “qualified dividends.” Dividends that we pay will be
treated as qualified dividends if we were not, in the year prior to the year in
which the dividend was paid, and are not, in the year in which the dividend is
paid, a passive foreign investment company (“PFIC”). Based on our audited
financial statements and relevant market and shareholder data, we believe that
we were not treated as a PFIC for U.S. federal income tax purposes with respect
to our 2009 taxable year. In addition, based on our current expectations
regarding the value and nature of our assets, the sources and nature of our
income, and relevant market and shareholder data, we do not anticipate becoming
a PFIC for our 2010 taxable year.
German
withholding tax, if any, at the 15% rate provided under the Treaty will be
treated as a foreign income tax that, subject to generally applicable
limitations under U.S. tax law, is eligible for credit against a U.S. Holder’s
U.S. federal income tax liability or, at the holder’s election, may be deducted
in computing taxable income. You should consult your own tax advisor if you have
questions about whether applicable limitations may affect your ability to
utilize foreign tax credits.
Dividends
will be paid in euros and will be included in the income of a U.S. Holder in a
U.S. dollar amount calculated by reference to the exchange rate in effect on the
date of receipt by the holder or, in the case of ADSs, by the depository,
regardless of whether the payment is in fact converted into U.S. dollars. If
such a dividend is converted into U.S. dollars on the date of receipt, a U.S.
Holder generally should not be required to recognize foreign currency gain or
loss in respect of the dividend income. A U.S. Holder may be required to
recognize foreign currency gain or loss on the receipt of a refund in respect of
German withholding tax to the extent the U.S. dollar value of the refund differs
from the U.S. dollar equivalent of that amount on the date of receipt of the
underlying dividend.
Taxation
of Capital Gains
Under the
Treaty, a U.S. Holder will not be liable for German tax on capital gains
realized or accrued on the sale or other disposition of shares or ADSs, provided
the shares or ADSs subject to such transfer are not held as part of a permanent
establishment or a fixed base in Germany.
For U.S.
federal income tax purposes, gain or loss realized by a U.S. Holder on the sale
or disposition of shares or ADSs will be capital gain or loss, and will be
long-term capital gain or loss if the shares or ADSs were held for more than one
year. The net amount of long-term capital gain recognized by an individual U.S.
Holder before January 1, 2011, generally is subject to taxation at a
maximum rate of 15%. A U.S. Holder’s ability to offset capital losses against
income is subject to limitations. Deposits and withdrawals of shares in exchange
for ADSs generally will not result in the recognition of gain or loss for U.S.
federal income tax purposes.
German
Inheritance and Gift Tax
Under the
estate tax treaty between the United States and Germany, a transfer of shares or
ADSs by gift or upon death is generally not subject to German inheritance or
gift tax, if the donor or the transferor is domiciled in the United States.
However, this does not apply if the heir, donee or other beneficiary is
domiciled in Germany. In this case, the transferred shares or ADSs are subject
to German inheritance or gift tax. However, the amount of federal estate tax
paid in the United States with respect to the transferred shares or ADSs will be
credited against the German inheritance or gift tax liability pursuant to the
estate tax treaty.
Bonus
Shares
Certain
holders that acquired shares or ADSs at the time they were offered in our third
public offering in 2000 were entitled to receive bonus shares if they continued
to hold their shares or ADSs up to a specified date. The receipt of bonus shares
will be treated differently for U.S. and German tax purposes. From a U.S. tax
perspective, the receipt of bonus shares should be treated as a purchase price
adjustment. Accordingly, U.S. Holders would not include any amount in income
upon the receipt of bonus shares, but instead would reallocate their tax basis
between the prior shareholding and the bonus shares.
Following
a decision of the German Federal Finance Court dated December 7, 2004, the
German tax authorities treat the receipt of bonus shares with respect to both
our second and our third public offering as a taxable dividend income from
capital. For more information, see “—German Taxation—German Taxation of Bonus
Shares.” Although the delivery of bonus shares was not subject to German
withholding tax, a recipient that is a U.S. Holder would, in principle, still be
liable for German tax at the 15% rate applicable to dividend income under the
Treaty. A U.S. Holder must, therefore, file a tax return and report this
income to the German tax authorities with regard to our bonus shares issued in
respect of shares purchased both in our second and in our third public offering.
For purposes of the U.S. foreign tax credit limitation, it is possible that any
German taxes paid with respect to bonus shares may be allocated to general
limitation income (or, for taxable years beginning after December 31, 2006,
to general category income). In that event, a U.S. Holder that does not receive
sufficient foreign-source general limitation income from other sources may not
be able to derive effective foreign tax credit benefits in respect of those
German taxes. In the
case of a U.S. Holder’s sale or other disposition of the bonus shares or ADSs
representing such bonus shares, the rules described under “—Taxation of Capital
Gains” apply.
Refund
Procedures for U.S. Holders
The
administrative procedures, which were introduced on a trial basis and provided
for a simplified collective refund to certain U.S. Holders of ADSs that were
held through brokers participating in the Depository Trust Company (DTC), have
been terminated by the German tax authorities.
The DTC
had issued an information letter on April 22, 2008 that the German tax
authorities had notified the DTC that they will terminate the simplified
collective refund procedure. The termination applied with respect to refund
applications received from DTC after December 31, 2008.
Claims
for Treaty refunds by U.S. Holders of ADSs may be collectively submitted to the
German Federal Tax Office (Bundeszentralamt fuer Steuern) by the depository on
behalf of those holders in a special electronic refund procedure. Details of the
refund procedures for holders of ADSs can be obtained from the Federal Tax
Office at http://www.bzst.bund.de and the depository.
If a U.S.
Holder does not submit a claim for a Treaty refund pursuant to the collective
refund procedure described above, then it must submit a claim for refund on an
individual basis on a special German form, which must be filed with the German
Federal Tax Office at the following address: Bundeszentralamt fuer Steuern,
An der Kueppe 1, D-53225 Bonn, Germany. Copies of the required form may be
obtained from the German Federal Tax Office at that address or from the Embassy
of the Federal Republic of Germany, 4645 Reservoir Road, N.W., Washington, D.C.
20007-1998. Additionally, copies of the forms can be downloaded from the World
Wide Web site of the German Federal Tax Office at www.bzst.bund.de.
As part
of an individual refund claim, a U.S. Holder must submit to the German tax
authorities the original bank voucher (or certified copy thereof) issued by the
paying entity documenting the tax withheld, and an official certification on IRS
Form 6166 of its United States residency. IRS Form 6166 may be
obtained by filing a request for certification (generally on an IRS
Form 8802, which will not be processed unless a user fee is paid) with the
Internal Revenue Service, P.O. Box 42530, Philadelphia, PA 19101-2530.
(Additional information, including IRS Form 8802 and the instructions to
that form, can be obtained from the Internal Revenue Service at www.irs.gov).
You should consult your own tax advisor and the instructions to the IRS
Form 8802 for further details regarding how to obtain the IRS
Form 6166 certification.
The Act
for Combating Tax Evasion (Steuerhinterziehungsbekämpfungsgesetz) and the
Implementing Ordinance (Steuerhinterziehungsbekämpfungsverordnung) could lead to
further documentation obligations for corporate U.S. Holders claiming a Treaty
refund from the German Federal Tax Office for withholding tax on dividends
distributed or credited in 2010 onwards. According to these regulations,
corporate U.S. Holders may be required to (i) either disclose to the German
Federal Tax Office name and residence of the individual shareholders that hold
directly or indirectly more than 10% of its share capital and are resident in an
uncooperative state as defined in the Act for Combating Tax Evasion or (ii) to
prove that no such shareholders exist in order to receive the tax refund. The
same may apply to tax refund claims for two fifths of the German withholding tax
as described under “—German Taxation—German Withholding Tax on
Dividends”. However, no such documentation requirements currently
apply because the German Federal Ministry of Finance issued a circular (dated
January 5, 2010, reference number: - IV B 2 - S 1315/08/10001-09) according to
which no state is currently considered uncooperative.
All
claims for refund must be filed within four years of the end of the calendar
year in which the dividend was received. Refunds
under the Treaty are not available in respect of shares or ADSs held in
connection with a permanent establishment or fixed base in Germany.
Information
Reporting and Backup Withholding
Dividend
payments made to holders and proceeds paid from the sale, exchange, redemption
or disposal of shares or ADSs may be subject to information reporting to the
Internal Revenue Service. Such payments may be subject to backup withholding
taxes unless the holder (i) is a corporation or other exempt recipient or
(ii) provides a taxpayer identification number on a properly completed
Internal Revenue Service Form W-9 and certifies that no loss of exemption from
backup withholding has occurred. Holders that are not U.S. persons generally are
not subject to information reporting or backup withholding. However, such
holders may be required to provide a certification of non-U.S. status in
connection with payments received within the United States or through a
U.S.-related financial intermediary.
Backup
withholding is not an additional tax. Amounts withheld as backup withholding may
be credited against a holder’s U.S. federal income tax liability. A holder may
obtain a refund of any excess amounts withheld under the backup withholding
rules by filing the appropriate claim for refund with the Internal Revenue
Service and furnishing any required information.
We are
subject to the reporting requirements of the Exchange Act. In accordance with
these requirements, we file Annual Reports on Form 20-F and provide other
information through reports on Form 6-K filed with or submitted to the U.S.
Securities and Exchange Commission. These materials, including this Annual
Report and the exhibits thereto, may be inspected and copied at the SEC’s Public
Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may
obtain information on the operation of the SEC’s Public Reference Room by
calling the SEC in the United States at 1-800-SEC-0330. The SEC also maintains a
World Wide Web site at http://www.sec.gov that contains reports and information
regarding registrants that file electronically with the SEC.
ITEM 11. Quantitative and Qualitative Disclosures about
Market Risk
The
following discussion should be read in conjunction with “Summary of accounting
policies” in the notes to the Consolidated Financial Statements and
note (36) to the Consolidated Financial Statements, which provides
(i) a summary of the nominal amounts of and terms for derivative financial
instruments, (ii) a summarized comparison of carrying values and fair
values of derivative and non-derivative financial instruments, and
(iii) other information relating to those instruments.
We are
exposed to market risks primarily from changes in foreign exchange rates,
interest rates and share prices associated with assets, liabilities
or anticipated transactions that may affect our operating results and financial
condition. We seek to minimize these market risks through our regular operating
and financing activities and, following the evaluation of the exposures,
selectively enter into derivative or non-derivative hedging instruments. Our
policy is to enter into contracts for hedging instruments with major financial
institutions having at least a BBB+ credit rating or equivalent, thereby
reducing the risk of credit loss. We do not enter into derivative contracts for
trading purposes or other speculative purposes.
The
activities of our Central Treasury department are subject to policies approved
by the Management Board and are monitored by the Supervisory Board. The Central
Treasury’s policies address the use of derivative financial instruments,
including the approval of counterparties and the investment of excess liquidity.
These policies are intended to minimize financial risks and to provide financial
advantages to the entire Group, such as the central management of cash resources
and needs, cost reduction and the improvement of results from financial
transactions. Central Treasury regularly informs the Management Board of the
level and value of current market risk exposures. Certain transactions require
prior approval by the Management Board. We regard effective market risk
management as an important element of our treasury function. Simulations are
carried out using market and worst-case scenarios in order to evaluate the
effects of different market situations on our financial position. Our Central
Treasury, operating as a service center, provides financial services to
individual Deutsche Telekom Group entities corresponding to their requirements
and local circumstances. Central Treasury management activities can be complex,
and sometimes involve assumptions about the future or assessments of products,
strategies or counterparty creditworthiness that may prove to be inaccurate. In
such circumstances, unexpected losses or missed opportunities may
result.
The
following discussion of our market-sensitive financial instruments includes
forward-looking statements that involve risk and uncertainties.
We are
exposed to currency risks from our investing, financing and operating
activities. Since our corporate objectives are pursued through our commercial
operations, foreign currency exposures normally are hedged in cases where the
risks would affect our cash flows (transaction risk). Foreign currency risks
that do not affect our cash flows (risks resulting from the translation of the
assets and liabilities of our consolidated Group members outside the euro zone
into our reporting currency) generally remain unhedged. However, in specific
circumstances, we may hedge the foreign currency risk inherent in investments in
certain foreign entities and their operating results.
Foreign
currency transaction risks in our investing activities arise, for example, from
the acquisition and/or sale of investments in foreign entities. Our Central
Treasury hedges potential material exposures. If the exposure exceeds EUR
100 million, the Management Board determines the hedging strategy to be
followed based on a proposal by Central Treasury. At December 31, 2009, we
were not subject to material foreign currency transaction risk from investing
activities.
Central
Treasury hedges our foreign currency risks from financing activities to the
maximum extent possible. We use cross-currency interest rate swaps and foreign
currency forward contracts in order to effectively convert foreign currency
denominated financial liabilities into the Group companies’ functional
currencies (primarily euro and U.S. dollars), which are reflected in the
interest rate risk tabular presentation below. At December 31, 2009,
foreign currency denominated liabilities for which the foreign currency exposure
is hedged consisted primarily of bonds and medium-term notes that are
denominated in U.S. dollar, British pounds sterling, Japanese yen, Czech koruna
and Swiss francs. A variety of short-term foreign currency denominated
inter-company loans typically are hedged with foreign currency swaps by Central
Treasury. As a result of these hedging activities, we were not subject to
material foreign exchange risk from financing activities at December 31,
2009.
From
operating activities, individual Group entities conduct most of their
transactions in their respective functional currencies. Some Group companies,
however, are exposed to foreign currency transaction risk related to certain
anticipated foreign currency-denominated payments. These anticipated foreign
currency-denominated payments relate primarily to foreign currency-denominated
capital expenditures and expenses payable to international telecommunications
carriers for international calls made by our domestic customers and expenses for
mobile devices, network technology and roaming fees. We occasionally enter into
foreign currency forward contracts or if necessary into foreign currency options
to hedge these anticipated foreign currency-denominated payments for up to a
maximum of one year. Foreign exchange risks from operating activities were
reduced significantly as a result of the above mentioned hedging
activities.
Sensitivity
Analysis
A
sensitivity analysis was performed on all of our foreign exchange derivatives as
of December 31, 2009, which did not have offsetting positions on the
balance sheet. This sensitivity analysis was based on a modeling technique that
measures the hypothetical reduction in cash flow before tax from a 10% weakening
of all foreign currencies relative to the euro. On the basis of these foreign
exchange derivative contracts as of December 31, 2009, a 10% weakening of
all foreign currencies relative to the euro would approximate a EUR
11 million decrease in cash flows before tax.
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|
|
(millions
of €)
|
|
|
Nominal
amount of foreign exchange derivative contracts at spot
rate
|
|
|
83 |
|
|
Nominal
amount of foreign exchange derivative contracts at 10% weakened relative
to the euro
|
|
|
72 |
|
|
Cash
flow risk
|
|
|
(11 |
) |
|
|
|
|
|
|
We are
exposed to market risk arising from changing interest rates, primarily in the
euro zone and the United States. In order to reduce the impact of interest rate
fluctuations on our cash-flows in these regions, we separately manage the
interest rate risk for euro- and U.S. dollar-denominated financial liabilities
and liquid financial assets. Once per year, our Management Board specifies a
desired mix of fixed- and floating-rate financial liabilities and liquid
financial assets for the next three years. With consideration to our existing
and forecasted debt structure, Central Treasury enters into interest rate
derivative transactions to modify the interest payments on our debt in
accordance with the parameters defined by our Management Board.
As a
result of these derivative hedging activities, 72 % of our euro-denominated
financial liabilities and liquid financial assets and 73 % of our U.S.
dollar-denominated financial liabilities and liquid financial assets, had
interest rates that were effectively fixed on average in 2009.
Sensitivity
Analysis
As a
result of our derivative hedging activities, 43 % of our euro-denominated
financial liabilities and liquid financial assets and 24 % of the U.S.
dollar-denominated financial liabilities and liquid financial assets, had
interest rates that were effectively variable at December 31, 2009. These
portions of our financial liabilities and liquid financial assets are subject to
cash flow risk arising from changes in interest rates.
Based on
our outstanding euro- and U.S. dollar-denominated financial liabilities and
liquid financial assets subject to effective variable interest rates, a 100
basis point movement in the yield curve arising as an immediate and sustained
increase would approximate a EUR 158 million annual decrease in cash flows
before tax. Likewise, a 100 basis point movement in the yield curve arising as
an immediate and sustained decrease would approximate a EUR 158 million
annual increase in cash flows before tax.
|
|
|
EUR
|
|
|
USD
|
|
|
|
|
(Currency
in millions)
|
|
|
Financial
liabilities and liquid financial assets(1)
|
|
|
31,939 |
|
|
|
12,473 |
|
|
Variable
percentage
|
|
|
43 |
|
|
|
24 |
|
|
Variable
portion
|
|
|
13,734 |
|
|
|
2,994 |
|
|
Effect
of 100 basis point increase
|
|
|
(137 |
) |
|
|
(30 |
) |
|
FX-rate
to euro
|
|
|
1.00000 |
|
|
|
1.44106 |
|
|
in
millions of euro
|
|
|
(137 |
) |
|
|
(21 |
) |
|
|
|
|
|
|
|
|
|
|
|
(1)
|
Financial
liabilities less financial assets.
|
CHANGES IN MARKET RISK EXPOSURE IN 2009 COMPARED
TO 2008
Our
exposure to foreign currency exchange rate risk did not materially change in
2009.
Central
Treasury entered into new interest rate swap transactions or terminated existing
interest rate swaps during 2009 to adjust the mix of fixed and floating rate
debt in our functional currencies to the targets defined by the Management
Board. The impact of these adjustments resulted in an increase in the portion of
our euro and U.S. dollar financial liabilities and liquid financial assets at
fixed rates.
The
following table summarizes the average portion of financial liabilities and
liquid financial assets that were at fixed rates after
derivative adjustments for our main functional currencies as compared to our
total overall average financial liabilities and liquid financial assets
during 2009 and 2008:
|
|
|
Average
in %
|
|
|
|
|
2009
|
|
|
2008
|
|
|
Euro
|
|
|
72 |
|
|
|
64 |
|
|
U.S.
dollar
|
|
|
73 |
|
|
|
58 |
|
|
|
|
|
|
|
|
|
|
|
ITEM 12. Description of Securities Other than Equity
Securities
Our ADR
facility is maintained by Deutsche Bank Trust Company Americas, or DBTCA,
pursuant to an Amended and Restated Deposit Agreement dated as of December 5,
2005, among DBTCA, holders and beneficial owners of American Depositary Shares
evidenced by American Depositary Receipts issued under the agreement and
us. We use the term “holder” in this discussion to refer to the
person in whose name an American Depositary Receipt is registered.
In
accordance with the terms of the Deposit Agreement, DBTCA may charge holders of
our ADSs, either directly or indirectly, fees or charges up to the amounts
described below.
|
·
|
$5.00
for each 100 ADSs, or any portion thereof,
for:
|
|
·
|
each
issuance of ADSs, including upon the deposit of shares or to any person to
whom an ADS distribution is made pursuant to share dividends or other free
distributions of stock, bonus distributions, share splits or other
distributions (except where converted to cash);
and
|
|
·
|
each
surrender of ADSs for cancellation and withdrawal of deposited
securities;
|
|
·
|
subject
to certain conditions, $0.02 per ADS for each distribution of cash
proceeds, including a cash dividend or sale of rights and other
entitlements not made pursuant to an cancellation or
withdrawal;
|
|
·
|
$5.00
per 100 ADSs, or any portion thereof, issued upon the exercise of rights;
and
|
|
·
|
any
other charge payable by DBTCA, its agents (including its custodian), or
the agents of DBTCA’s agents in connection with the servicing of deposited
securities, which charge may at the discretion of DBTCA may be billed to
holders or deducted from cash dividends or other cash distributions
.
|
The fees
charged upon issuances of ADSs are imposed on the person to whom ADSs are
issued, and in the case of withdrawals and cancellations, on the person
surrendering the ADSs.
In
addition, holders or beneficial owners of our ADSs, persons depositing shares
for deposit and persons surrendering ADSs for cancellation and withdrawal of
deposited securities, may be required to pay DBTCA the following charges to the
extent attributable to, or associated with, deposits, surrenders or
withdrawals:
|
·
|
taxes,
including applicable interest and penalties, and other governmental
charges;
|
|
·
|
registration
fees for the registration of deposited securities on any applicable
register in connection with the deposit, or withdrawal of, deposited
securities, including those of a central depository for securities (where
applicable);
|
|
·
|
certain
cable, telex, facsimile and electronic transmission and delivery
expenses;
|
|
·
|
the
expenses and charges incurred by DBTCA in connection with the conversion
of foreign currency into U.S.
dollars;
|
|
·
|
fees
and expenses incurred by DBTCA in connection with compliance with exchange
control regulations and other regulatory requirements applicable to
shares, deposited securities, ADSs and
ADRs;
|
|
·
|
fees
and expenses incurred by DBTCA in connection with the registration or
delivery of deposited securities, including any fees of a central
depository for securities in the local market, where applicable;
and
|
|
·
|
any
additional fees, charges, costs or expenses that may be incurred by DBTCA
or the custodian from time to time.
|
In the
case of cash distributions, any fees charged generally will be deducted from the
cash being distributed. In the case of distributions other than cash, such as
stock dividends the distribution generally will be subject to apprpriate
adjustments for the deduction of the depository's fees and espeses.
If any
tax or other governmental charge becomes payable by or on behalf of DBTCA or its
custodian with respect to any ADS or underlying deposited security, such tax or
governmental charge is required to be paid to DBTCA by the relevant holder to
DBTCA. DBTCA may deduct from any distributions made on or in respect
of the relevant deposited securities and may sell for the account of the
relevant holder any or all of such deposited securities (after attempting by
reasonable means to notify the holder prior to such sale), and may apply such
distributions and sale proceeds in payment of such tax or governmental charges,
with the holder remaining fully liable for any deficiency. If DBTCA
undertakes efforts to assist a holder in obtaining a refund under certain tax
treaties, the holder is required to indemnify DBTCA and certain related parties
against any taxes, interest, penalties or additions to tax arising out of the
refund claims or other tax benefits obtained for the holders.
DBTCA may
retain, as an additional cost of currency conversion, for its account fractional
cents in excess of the per ADS stated distribution rate (which in any case will
not be less than two decimal places) used by DBTCA.
Payments
Made by DBTCA to Deutsche Telekom AG
In
consideration for its appointment as depositary, DBTCA agreed to pay
contributions toward the cost of the maintenance of our ADR program and of ADR
program-related investor relations activities. In 2009, the depositary paid us
USD 1.0 million in this regard. In addition, DBTCA waived the cost of
various ADR program-related support services that it provided to us in
2009. The depositary had valued these services at USD 310,000 per
annum when DBTCA was appointed in 2005. Under certain circumstances,
including termination of the appointment of DBTC prior to December 5, 2010, we
would be required to repay to DBTCA some or all of the cash contribution made to
us in the year of termination.
ITEM 13. Defaults, Dividend Arrearages and
Delinquencies
None.
ITEM 14. Material Modifications to the Rights of Security
Holders and Use of Proceeds
On
May 26, 2009, we registered in the Commercial Register (Handelsregister) of
the District Court (Amtsgericht) in Bonn, Germany, amendments to our Articles of
Incorporation (Satzung). The amended Articles of Incorporation reflect the
resolutions adopted by our shareholders at the Annual General Meeting
(Hauptversammlung) on April 30, 2009. The amended Articles of Incorporation are
incorporated by reference as Exhibit 1.1 to this Annual Report. For more
information on our Articles of Incorporation, please see Item 10 Additional
Information – Articles of Incorporation .
(a)
Disclosure Controls and Procedures
As of
December 31, 2009 (the “Evaluation Date”), our Chairman of the Management
Board and our Chief Financial Officer carried out an evaluation of the
effectiveness of our “disclosure controls and procedures” (as defined in
Rules 13(a)-15(e) and 15(d)-15(e) under the Exchange Act). Based on that
evaluation, these officers have concluded that as of the Evaluation Date, our
disclosure controls and procedures were effective and designed to provide
reasonable assurance that information required to be disclosed by us in the
reports that we file or submit under the Exchange Act is recorded, processed,
summarized and reported, within the time periods specified in the applicable
rules and forms, and that it is accumulated and communicated to our management,
including our Chairman of the Management Board and our Chief Financial Officer,
as appropriate to allow timely decisions regarding required
disclosure.
(b)
Management’s Annual Report on Internal Control Over Financial
Reporting
As
required by section 404 of the Sarbanes-Oxley Act of 2002, our Management Board
is responsible for establishing and maintaining adequate “internal control over
financial reporting” (as defined in Rule 13(a)-15(f) under the Exchange Act).
Our system of internal control over financial reporting is designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in conformity with
International Financial Reporting Standards (“IFRS”) as issued by the
International Accounting Standards Board (“IASB”).
Any
internal control system, no matter how well designed, has inherent limitations,
including the possibility of human error and the circumvention or overriding of
the controls and procedures, which may not prevent or detect misstatements.
Also, changes in conditions and business practices in subsequent periods may
subject our determination of effectiveness to the risk that certain controls may
become inadequate.
Our
Management Board, including the Chairman of the Management Board and the Chief
Financial Officer assessed the effectiveness of the Company’s internal control
over financial reporting as of December 31, 2009. The Management Board’s
assessment was based on the framework and criteria established in “Internal
Control—Integrated Framework” issued by the Committee of Sponsoring
Organizations of the Treadway Commission (COSO). Based on the assessment under
these criteria, our Management Board has concluded that, as of December 31,
2009, the Company’s internal control over financial reporting is
effective.
The
effectiveness of internal control over financial reporting, as of
December 31, 2009, has been audited by PricewaterhouseCoopers
Aktiengesellschaft Wirtschaftsprüfungsgesellschaft and Ernst & Young
GmbH Wirtschaftsprüfungsgesellschaft, both independent registered public
accounting firms, who also audit our consolidated financial statements included
in this Annual Report. Their audit report on internal control over financial
reporting appears below.
(c)
Report of Independent Registered Public Accounting Firms
To
the Management Board and Shareholders of Deutsche Telekom AG
We have
audited Deutsche Telekom AG’s internal control over financial reporting as of
December 31, 2009, based on criteria established in Internal Control-Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission (COSO). Deutsche Telekom AG’s management is responsible for
maintaining effective internal control over financial reporting, and for its
assessment of the effectiveness of internal control over financial reporting
included in the accompanying Management’s Annual Report on Internal Control Over
Financial Reporting. Our responsibility is to express an opinion on the
effectiveness of the Company’s internal control over financial reporting based
on our audit.
We
conducted our audit of internal control over financial reporting in accordance
with the standards of the Public Company Accounting Oversight Board (United
States). Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether effective internal control over financial
reporting was maintained in all material respects. An audit of internal control
over financial reporting includes obtaining an understanding of internal control
over financial reporting, assessing the risk that a material weakness exists,
testing and evaluating the design and operating effectiveness of internal
control based on the assessed risk, and performing such other procedures as we
consider necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion.
A
company’s internal control over financial reporting is a process designed to
provide reasonable assurance regarding the reliability of financial reporting
and the preparation of financial statements for external purposes in accordance
with the generally accepted accounting principles. A company’s internal control
over financial reporting includes those policies and procedures that (i) pertain
to the maintenance of records that, in reasonable detail, accurately and fairly
reflect the transactions and dispositions of the assets of the company; (ii)
provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted
accounting principles, and that receipts and expenditures of the company are
being made only in accordance with authorizations of management and directors of
the company; and (iii) provide reasonable assurance regarding prevention or
timely detection of unauthorized acquisition, use, or disposition of the
company’s assets that could have a material effect on the financial
statements.
Because
of its inherent limitations, internal control over financial reporting may not
prevent or detect misstatements. Also, projections of any evaluation of
effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.
In our
opinion, Deutsche Telekom AG maintained, in all material respects, effective
internal control over financial reporting as of December 31, 2009, based on
criteria established in Internal Control – Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission
(COSO).
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the statements of financial position as of
December 31, 2009, 2008 and 2007, and the related consolidated statements of
income, comprehensive income, changes in equity and cash flows for each of the
three years in the period ended December 31, 2009 of Deutsche Telekom AG and our
report dated February 25, 2010 expressed an unqualified opinion
thereon.
|
February 25,
2010
|
|
|
|
|
|
Ernst &
Young GmbH
|
|
|
Wirtschaftsprüfungsgesellschaft
|
|
|
Stuttgart
|
|
|
|
|
|
/s/ Prof. Dr. Wollmert
|
/s/ Forst
|
|
(Prof.
Dr. Wollmert)
|
(Forst)
|
|
Wirtschaftsprüfer
|
Wirtschaftsprüfer
|
|
|
|
|
PricewaterhouseCoopers
|
|
|
Aktiengesellschaft
|
|
|
Wirtschaftsprüfungsgesellschaft
|
|
|
Frankfurt
am Main
|
|
|
|
|
|
/s/ Prof. Dr. Kämpfer
|
/s/ Tandetzki
|
|
(Prof.
Dr. Kämpfer)
|
(Tandetzki)
|
|
Wirtschaftsprüfer
|
Wirtschaftsprüfer
|
(d)
Changes in Internal Control Over Financial Reporting
There
were no changes in our internal control over financial reporting during the
period covered by this Annual Report that have materially affected, or are
reasonably likely to materially affect, our internal control over financial
reporting.
ITEM 16A. Audit Committee Financial Expert
The
Supervisory Board has determined that Bernhard Walter is an “audit committee
financial expert,” as defined in Item 16A of Form 20-F. Mr. Walter is also
“independent,” as that term is defined in Rule 10A-3 under the Exchange
Act. Mr. Walter was a member of the Board of Managing Directors of Dresdner Bank
from 1987 until 2000. Mr. Walter was Spokesman for the Board of Managing
Directors of Dresdner Bank from January 1, 1998 until April 30, 2000. Mr. Walter
is also Chairman of Daimler AG’s Audit Committee. For more
information, see “Item 6. Directors, Senior Management and Employees—Supervisory
Board—Members of the Supervisory Board of Deutsche Telekom.”
In
addition to business conduct and fiduciary duties applicable by law to our
directors, officers and employees, we have adopted a code of ethics specifically
applicable to our board members, including the chief executive officer, the
chief financial officer and other senior financial officers including the chief
accounting officer and the chief controller. Our code of ethics is available
through our investor relations page on our World Wide Web site at
http://www.telekom.com.
ITEM 16C. Principal Accountant Fees and
Services
Our
“Audit and Non-Audit Services Pre-Approval Policy” (the “Pre-Approval Policy”),
as implemented by our Audit Committee, requires that all services to be
performed by our external auditors be pre-approved by the Audit Committee. Such
pre-approval may be in the form of a general pre-approval or a pre-approval on a
case-by-case basis. This Pre-Approval Policy is intended to comply with the
Sarbanes-Oxley Act of 2002 and applicable rules and regulations of the SEC and
the NYSE.
The Audit
Committee is required to pre-approve services that are not specified in the
Pre-Approval Policy. Requests or applications to provide services that require
specific pre-approval by the Audit Committee will be submitted to the Audit
Committee by the Chief Accounting Officer. The request is required to be signed
by the auditor providing such services and the Chief Financial Officer of the
Group company requesting the services. Any such request must include a joint
statement as to whether, in the view of the auditors and the Chief Financial
Officer of the Group company concerned, the request or application is consistent
with the Pre-Approval Policy and the SEC’s rules on auditor
independence.
Each year
our Audit Committee defines fee caps for audit, audit related, tax and all other
services. These fee caps cannot be exceeded without the prior approval of the
Audit Committee. All
services performed by our external auditors in the last three financial years
were authorized pursuant to our Pre-Approval Policy, and the Audit Committee had
been regularly informed about the services provided and the fees
paid.
No
services which are classified by the SEC as “prohibited services” were
authorized in the last three financial years.
Our
external auditors, PwC and E&Y, billed the following services related to
2009 and 2008:
|
PwC
|
|
2009
|
|
|
2008
|
|
|
|
|
(millions
of €)
|
|
|
Audit
fees
|
|
|
17.3 |
|
|
|
18.3 |
|
|
Audit-related
fees
|
|
|
5.2 |
|
|
|
5.1 |
|
|
Tax
fees
|
|
|
0.9 |
|
|
|
0.4 |
|
|
All
other fees
|
|
|
12.4 |
|
|
|
6.1 |
|
|
Total
|
|
|
35.8 |
|
|
|
29.9 |
|
|
|
|
|
|
|
|
|
|
|
|
E&Y
|
|
2009
|
|
|
2008
|
|
|
|
|
(millions
of €)
|
|
|
Audit
fees
|
|
|
17.4 |
|
|
|
14.0 |
|
|
Audit-related
fees
|
|
|
3.9 |
|
|
|
9.7 |
|
|
Tax
fees
|
|
|
1.2 |
|
|
|
1.2 |
|
|
All
other fees
|
|
|
1.1 |
|
|
|
0.1 |
|
|
Total
|
|
|
23.6 |
|
|
|
25.0 |
|
|
|
|
|
|
|
|
|
|
|
Audit
Fees
The
following services were billed under the category “audit fees”: auditing of
financial statements, management’s assessment of the effectiveness of internal
control over financial reporting, review of quarterly reports, auditing of
impairment tests and services performed in relation to legal obligations and
submissions required by regulatory provisions, including the formulation of
audit opinions and reports, domestic and international legal audits and support
in the preparation and auditing of the documents to be filed. Audit services
also included the auditing of information systems and processes, and tests which
serve to promote understanding and reliability of these systems and internal
corporate controls, as well as advice on issues of billing, accounting and
reporting.
Audit-Related
Fees
Audit-related
fees mainly consisted of services that are normally performed by the external
auditor in connection with the auditing of our annual financial statements,
management’s assessment of the effectiveness of internal controls over financial
reporting. Audit-related services also included due diligence tests relating to
possible acquisitions and sales of companies, advice on issues of billing,
accounting and reporting (which were not classified as audit services), support
with the interpretation and implementation of new accounting and reporting
standards, auditing procedures that are not carried out in connection with the
audit of our annual financial statements and concern our information systems,
and support with the implementation of corporate control requirements for
reporting.
Tax
Fees
Tax fees
consisted of services relating to issues of domestic and international taxation
(adherence to tax laws, tax planning and tax consulting). Furthermore, services
were authorized for the review of tax returns, assistance with tax audits and
appeals, as well as assistance relating to tax law and the review of compliance
with tax laws applicable to international employees.
All
Other Fees
All other
fees mainly consisted of risk management advisory services, business plan
analysis, project steering tasks within the framework of intra-Group
restructuring measures, review of third-party evaluations, training courses and
seminars, and assistance related to procedures required by the Federal Network
Agency and other regulatory bodies. None of these services were related to the
audits of our financial statements.
ITEM 16D. Exemptions from the Listing Standards for Audit
Committees
Our audit
committee includes one or more members who are exempt from the audit committee
member independence requirements of Rule 10A-3 of the Exchange Act pursuant
to the exemptions provided by Rule 10A-3(b)(1)(iv) of the Exchange
Act. Specifically, Herman Josef Becker, Lothar Holzwarth and Waltraud
Litzenberger are employees of Deutsche Telekom AG. Mr. Becker is a member
of the management of Deutsche Telekom Direct Sales and Consulting, as well as
Chairman of the Group Executive Staff Representation Committee and Executive
Staff Representation Committee of Deutsche Telekom AG. Mr. Holzwarth is Chairman
of the Central Works Council Deutsche Telekom Geschäftskunden.
Mrs. Litzenberger is Chairwoman of the Group Works Council and the European
Works Council at Deutsche Telekom AG. All members named above are exempt
from the requirements of Rule 10A-3(b)(1)(ii) of the Exchange Act by
virtue of Rule 10A-3(b)(1)(iv)(C) of the Exchange Act as they are not
executive officers and were named to the Supervisory Board pursuant to the
Co-Determination Act. We do not believe that our reliance on these exemptions
from the independence requirements of Rule 10A-3 of the Exchange Act will
materially adversely affect the ability of the Audit Committee to act
independently and to satisfy the other requirements of Rule 10A-3 of the
Exchange Act.
ITEM 16E. Purchases of Equity Securities by the Issuer and
Affiliated Purchasers
None.
ITEM 16F. Changes in Registrant’s Certifying
Accountant
Not
applicable.
ITEM 16G. Significant Differences in Corporate Governance
Practices
Our
corporate governance practices are generally derived from the provisions of the
Stock Corporation Act, the Co-Determination Act and the German Corporate
Governance Code. German corporate governance standards differ from those
corporate governance listing standards applicable to U.S. domestic companies
that have been adopted by the NYSE. The following is a brief, general summary of
the significant differences between German corporate governance standards, as
they relate to Deutsche Telekom AG, and the NYSE listing standards relating to
U.S. domestic corporate governance practices.
Our
company has three basic governance bodies—a management board, a supervisory
board and its shareholders’ meeting. The Stock Corporation Act requires a clear
separation of management and supervisory functions and therefore prohibits
simultaneous membership on both boards. Our two-tiered board structure contrasts
with the unitary board of directors envisaged by the relevant laws of all U.S.
states and the NYSE listing standards. For more information on our Management
Board and Supervisory Board, see “Item 6. Directors, Senior Management and
Employees.”
Members
of our Management and Supervisory Boards must exercise the standard of care of a
prudent and diligent business person while carrying out their duties. In
complying with this standard of care, members must not only take into account
the interests of shareholders, as would typically be the case with a U.S. board
of directors, but also the interests of other constituents, such as our
employees, and, to some extent, the public.
Our
Management Board is responsible for managing our company and representing it in
its dealings with third parties. The members of our Management Board, including
its Chairman, are regarded as peers and share a collective responsibility for
all management decisions.
Our
Supervisory Board oversees and monitors our Management Board and appoints and
removes its members. However, our Articles of Incorporation and the rules of
procedure of our Supervisory and Management Boards specify matters of
fundamental importance that require the approval of our Supervisory Board.
Matters requiring such approval include decisions or actions that would
fundamentally change our assets, financial position or results of operations.
Additionally, since the Audit Committee is a committee of our Supervisory Board,
its power and authority are likewise limited by German law. This limited ability
to be involved in day-to-day management affairs is a fundamental difference
between our company and U.S. domestic companies.
In the
United States, the interests of the owners of a company are predominantly
represented by the Board of Directors, whereas our Supervisory Board must be
concerned with the interests of our shareholders as well as those of our
employees. Our Supervisory Board is made up of ten shareholder representatives
and ten employee representatives, the latter having been elected by our
employees. The Chairman of our Supervisory Board is one of the shareholder
representatives. In case of a tie vote, the Chairman may cast the tie-breaking
vote.
German
law also includes several rules applicable to members of our Supervisory Board,
which are designed to ensure a certain degree of independence of the board’s
members. Members of our Supervisory Board are required to act in the best
interests of Deutsche Telekom AG. They must not follow directions or
instructions from third parties. Any service, consulting or similar agreement
between us and any of the members of our Supervisory Board must be approved by
the Supervisory Board. Deutsche Telekom AG, as a German stock corporation and
foreign private issuer, is not required to make the affirmative independence
determination set forth in Section 303A of the NYSE Listed Company Manual
(as an NYSE-listed U.S. company would be required to do).
The
German Corporate Governance Code sets out additional corporate governance rules
applicable to us. While these rules are not legally binding, companies failing
to comply with the German Corporate Governance Code’s recommendations must
disclose publicly that their practices differ from those recommended by the
German Corporate Governance Code. The German Corporate Governance Code describes
and summarizes the basic mandatory statutory corporate governance principles
found in the Stock Corporation Act and other provisions of German law. In
addition, it contains supplemental recommendations and suggestions for standards
of responsible corporate governance, which are intended to reflect generally
accepted best practices. Because we are a stock corporation with shares listed
on a German stock exchange, we are required by Section 161 of the Stock
Corporation Act to issue an annual compliance report stating which of the German
Corporate Governance Code’s recommendations, if any, we do not apply. However,
we may choose not to adopt the German Corporate Governance Code’s suggestions
without making any related disclosure. For more information on our most recently
issued declaration of conformity, see Item 10. Additional Information –
Corporate Governance.
Some of
the German Corporate Governance Code’s recommendations are directed at ensuring
the independence of the members of the Supervisory Board. Specifically, the
German Corporate Governance Code recommends that the Supervisory Board should
take into account potential conflicts of interest when nominating candidates for
election to the Supervisory Board. Similarly, if a material conflict of interest
arises during the term of a member of the Supervisory Board, the German
Corporate Governance Code recommends that the term of that member be terminated.
The German Corporate Governance Code further recommends that, at any given time,
not more than two former members of the Management Board should serve on the
Supervisory Board. Another of the German Corporate Governance Code’s
recommendations is that, with respect to nominations for the election of members
of the Supervisory Board, requisite care be taken, such that the Supervisory
Board is at all times composed of members who have the required knowledge,
abilities and expertise to complete their tasks properly. The German Corporate
Governance Code also includes the suggestion that Supervisory Board members meet
without any representatives of the Management Board attending, whenever
“necessary.”
With one
exception, German corporate law does not mandate the creation of specific
Supervisory Board committees. German corporations with more than 2,000 employees
are only required to establish a mediation committee to assist the Supervisory
Board in connection with any disputes among the members of the Supervisory Board
that arise in connection with the appointment or dismissal of members of the
Management Board. Pursuant to a recommendation of the German Corporate
Governance Code, our Supervisory Board established the Audit Committee, which
handles the formal engagement of our independent auditors once they have been
approved at the shareholders’ meeting. The Audit Committee also addresses issues
of accounting, risk management, compliance and auditor independence. Our
Supervisory Board has also established several other committees to facilitate
its work. Although not legally required, our Supervisory Board maintains a
General Committee, a Finance Committee and a Personnel Committee. For more
information on these committees, see “Item 6. Directors, Senior Management and
Employees—Supervisory Board—Members of the Supervisory Board of Deutsche
Telekom.”
In
accordance with our NYSE listing, the Audit Committee is required to comply with
the provisions of Section 301 of the Sarbanes-Oxley Act and Rule 10A-3
of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”),
both of which are also applicable to NYSE-listed U.S. companies. Because we are
a foreign private issuer, however, our Audit Committee is not subject to the
requirements applied to U.S. companies under Section 303A.07 of the NYSE
Listed Company Manual. Those requirements include an affirmative determination
that all members of the Audit Committee are “independent,” using more stringent
criteria than those applicable to foreign private issuers, the adoption of a
written charter specifying, among other things, the audit committee’s purpose
and including an annual performance evaluation, and the review of an auditor’s
report describing internal quality-control issues and procedures and all
relationships between the auditor and us. However, our Audit Committee does have
a charter. For more information on our Supervisory Board and Management Board
committees, see “Item 6. Directors, Senior Management and Employees—Supervisory
Board—Members of the Supervisory Board of Deutsche Telekom.”
In
addition to the foregoing, pursuant to Section 303A.06 of the NYSE’s Listed
Company Manual, all NYSE-listed U.S. domestic companies must:
|
·
|
establish
an audit committee that is responsible for the appointment (in our case,
following shareholder approval at the shareholders’ meeting),
compensation, retention and oversight of the work of the company’s
registered public accounting firms, each such registered public accounting
firm reporting directly to the audit
committee;
|
|
·
|
establish
procedures for the receipt, retention and treatment of complaints
regarding accounting, internal accounting controls or auditing matters,
including procedures for the confidential, anonymous submission by
employees of concerns regarding questionable accounting or auditing
matters;
|
|
·
|
provide
the audit committee with the authority to engage independent counsel and
other advisors, as it determines necessary to carry out its duties;
and
|
|
·
|
provide
appropriate funding for the Audit Committee and its
functions.
|
Although
we are not required to do so, all NYSE-listed U.S. domestic companies must
also:
|
·
|
regularly
schedule non-management director
sessions;
|
|
·
|
establish
a nominating/corporate governance committee composed entirely of
independent directors, with a written charter that addresses certain
specified responsibilities;
|
|
·
|
establish
a compensation committee composed entirely of independent directors, with
a written charter that addresses certain specified
responsibilities;
|
|
·
|
establish
an audit committee in compliance with Rule 10A-3 of the Exchange Act
as described above;
|
|
·
|
adopt
and disclose corporate governance guidelines that address certain
specified items.
|
|
·
|
adopt
and disclose a code of business conduct and ethics for directors, officers
and employees, and promptly disclose any waivers of the code for directors
or executive officers that should address certain specified items;
and
|
|
·
|
certify
to the NYSE each year that the CEO is not aware of any violation by the
company of NYSE corporate governance listing
standards.
|
The
NYSE’s Listed Company Manual requires U.S. companies to, among other things,
seek shareholder approval for the implementation of certain equity compensation
plans and issuances of common stock. Under the Stock Corporation Act and other
applicable German laws, shareholder approval is required for all amendments to
our Articles of Incorporation, for certain corporate measures (including
inter-company agreements and material restructurings), for our issuance of new
shares and of convertible bonds, or bonds with warrants attached, for
authorization to purchase our own shares and for other essential issues, such as
transfers of important assets, including our shareholdings in subsidiaries.
However, we might not be required to seek shareholder approval for issuances of
shares in some circumstances in which a U.S. company would be required to do so
under the NYSE rules applicable to U.S. domestic companies (e.g., an acquisition
of another company in exchange for shares representing more than 20% of our
shareholders’ voting power, using previously authorized capital available for
the acquisition).
Not
applicable.
See pages
F-1 through F-96.
Documents
filed as exhibits to this Annual Report.
|
|
|
|
1.1
|
Memorandum
and Articles of Incorporation (Satzung) of Deutsche Telekom AG, as amended
(English translation) (incorporated by reference to Deutsche Telekom’s
current report on Form 6-K filed with the SEC on June 17, 2009 that
indicates on its cover page that it was incorporated by reference into
Deutsche Telekom AG’s existing registration statements)
|
|
2.1
|
Indenture
dated as of July 6, 2000, relating to debt securities of Deutsche
Telekom International Finance B.V. (incorporated by reference to
Exhibit 4.1 of Deutsche Telekom’s registration statement on
Form F-3 (Reg. No. 333-118932) filed with the SEC on
September 13, 2004)
|
|
2.2
|
Indenture
dated as of July 6, 2000, relating to debt securities of Deutsche
Telekom (incorporated by reference to Exhibit 4.2 of Deutsche
Telekom’s registration statement on Form F-3
(Reg. No. 333-118932) filed with the SEC on September 13,
2004)
|
|
2.3
|
First
Supplemental Indenture and Resignation and Appointment of Paying Agent and
Security Registrar dated as of November 9, 2007 (incorporated by reference
to Exhibit 2.3 of Deutsche Telekom’s Annual Report on Form 20-F filed
with the SEC on February 28, 2008)
|
|
2.4
|
Except
as noted in Exhibits 2.1, 2.2 and 2.3 above, the total amount of
long-term debt securities of Deutsche Telekom AG authorized under any
instrument does not exceed 10% of the total assets of the Group on a
consolidated basis. Deutsche Telekom AG hereby agrees to furnish to the
SEC, upon its request, a copy of any instrument defining the rights of
holders of long-term debt of Deutsche Telekom AG or of its subsidiaries
for which consolidated or unconsolidated financial statements are required
to be filed.
|
|
8.1
|
Subsidiaries
as of December 31, 2009
|
|
11.1
|
Deutsche
Telekom AG’s Code of Ethics, as amended (incorporated by reference to
Exhibit 11.1 of Deutsche Telekom’s Annual Report on Form 20-F filed with
the SEC on March 14, 2006)
|
|
12.1
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
12.2
|
Certification
pursuant to Section 302 of the Sarbanes-Oxley Act
|
|
13.1
|
Certification
pursuant to Section 906 of the Sarbanes-Oxley Act
|
|
15.1
|
Consent
of Independent Registered Public Accounting Firms
|
|
|
|
SIGNATURES
The
registrant hereby certifies that it meets all of the requirements for filing on
Form 20-F and that it has duly caused and authorized the undersigned to
sign this Annual Report on its behalf.
|
Date:
February 25, 2010
|
DEUTSCHE TELEKOM
AG
|
|
|
|
By:
|
/s/ RENÉ OBERMANN
|
|
|
René
Obermann
Chairman
of the Management Board
|
|
|
|
By:
|
/s/ TIMOTHEUS HÖTTGES
|
|
|
Timotheus
Höttges
Member of the Management Board Finance
|
Deutsche
Telekom AG
Index
to Consolidated Financial Statements
|
|
|
Page
|
|
|
and
for the three years ended December 31, 2009
|
|
|
F-2 |
|
|
Consolidated
Statement of Financial Position as of December 31, 2009, 2008 and
2007
|
|
|
F-3 |
|
|
Consolidated
Income Statement for the three years ended December 31,
2009
|
|
|
F-4 |
|
|
Consolidated
Statement of Comprehensive Income for the three years ended December 31,
2009
|
|
|
F-5 |
|
|
Consolidated
Statement of Changes in Equity as of December 31, 2009, 2008 and
2007
|
|
|
F-6 |
|
|
Consolidated
Statement of Cash Flows for the three years ended December 31,
2009
|
|
|
F-8 |
|
|
Notes
to the Consolidated Financial Statements
|
|
|
F-9 |
|
|
|
|
|
|
|
To the
Board of Management and Shareholders of Deutsche Telekom AG:
We have
audited the accompanying consolidated statements of financial position of
Deutsche Telekom AG (the “Company”) as of December 31, 2009, 2008 and 2007, and
the related consolidated statements of income, comprehensive income, changes in
equity and cash flows for each of the three years in the period ended December
31, 2009. These consolidated financial statements are the responsibility of the
Company's management. Our responsibility is to express an opinion on these
consolidated financial statements based on our audits.
We
conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free of material misstatement. An audit of
consolidated financial statements includes examining, on a test basis, evidence
supporting the amounts and disclosures in the consolidated financial statements,
assessing the accounting principles used and significant estimates made by
management, and evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our
opinion, the consolidated financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Deutsche
Telekom AG at December 31, 2009, 2008 and 2007 and the consolidated results of
its operations and its cash flows for each of the three years in the period
ended December 31, 2009, in conformity with International Financial Reporting
Standards as issued by the International Accounting Standards Board
(IASB).
As
discussed in the Summary of Accounting Policies note to the consolidated
financial statements, the Company applied the amendments of IAS 1 "Presentation
of Financial Statements" for the first time in 2009 and, as required for the
accounting change, has restated prior periods for comparison
purposes.
We have
also audited, in accordance with the standards of the Public Company Accounting
Oversight Board (United States), the effectiveness of Deutsche Telekom AG`s
internal control over financial reporting as of December 31, 2009, based on
criteria established in Internal Control-Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (COSO) and our
report dated February 25, 2010 expressed an unqualified opinion
thereon.
February
25, 2010
|
Ernst
& Young GmbH
Wirtschaftsprüfungsgesellschaft
Stuttgart
/s/Prof. Dr. Wollmert
|
|
/s/
Forst
|
|
(Prof.
Dr. Wollmert)
Wirtschaftsprüfer
|
|
(Forst)
Wirtschaftsprüfer
|
|
|
|
|
|
PricewaterhouseCoopers
Aktiengesellschaft
Wirtschaftsprüfungsgesellschaft
Frankfurt
am Main
/s/ Prof. Dr. Kämpfer
|
|
/s/ Tandetzki
|
|
(Prof.
Dr. Kämpfer)
Wirtschaftsprüfer
|
|
(Tandetzki)
Wirtschaftsprüfer
|
|
(millions
of €)
|
|
Note
|
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 20081
|
|
|
Dec.
31, 20071
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
23,012 |
|
|
|
15,431 |
|
|
|
15,845 |
|
|
Cash
and cash equivalents
|
|
|
1 |
|
|
|
5,022 |
|
|
|
3,026 |
|
|
|
2,200 |
|
|
Trade
and other receivables
|
|
|
2 |
|
|
|
6,757 |
|
|
|
7,393 |
|
|
|
7,696 |
|
|
Current
recoverable income taxes
|
|
|
24 |
|
|
|
144 |
|
|
|
273 |
|
|
|
222 |
|
|
Other
financial assets
|
|
|
8 |
|
|
|
2,001 |
|
|
|
1,692 |
|
|
|
1,919 |
|
|
Inventories
|
|
|
3 |
|
|
|
1,174 |
|
|
|
1,294 |
|
|
|
1,463 |
|
|
Non-current
assets and disposal groups held for sale
|
|
|
4 |
|
|
|
6,527 |
|
|
|
434 |
|
|
|
1,103 |
|
|
Other
assets
|
|
|
|
|
|
|
1,387 |
|
|
|
1,319 |
|
|
|
1,242 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
104,762 |
|
|
|
107,709 |
|
|
|
104,828 |
|
|
Intangible
assets
|
|
|
5 |
|
|
|
51,705 |
|
|
|
53,927 |
|
|
|
54,404 |
|
|
Property,
plant and equipment
|
|
|
6 |
|
|
|
45,468 |
|
|
|
41,559 |
|
|
|
42,531 |
|
|
Investments
accounted for using the equity method
|
|
|
7 |
|
|
|
147 |
|
|
|
3,557 |
|
|
|
118 |
|
|
Other
financial assets
|
|
|
8 |
|
|
|
1,739 |
|
|
|
1,863 |
|
|
|
699 |
|
|
Deferred
tax assets
|
|
|
24 |
|
|
|
5,162 |
|
|
|
6,234 |
|
|
|
6,610 |
|
|
Other
assets
|
|
|
|
|
|
|
541 |
|
|
|
569 |
|
|
|
466 |
|
|
Total
assets
|
|
|
|
|
|
|
127,774 |
|
|
|
123,140 |
|
|
|
120,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
and shareholders’ equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
24,794 |
|
|
|
24,242 |
|
|
|
22,504 |
|
|
Financial
liabilities
|
|
|
9 |
|
|
|
9,391 |
|
|
|
9,584 |
|
|
|
8,364 |
|
|
Trade
and other payables
|
|
|
10 |
|
|
|
6,304 |
|
|
|
7,073 |
|
|
|
6,823 |
|
|
Income
tax liabilities
|
|
|
24 |
|
|
|
511 |
|
|
|
585 |
|
|
|
437 |
|
|
Other
provisions
|
|
|
12 |
|
|
|
3,369 |
|
|
|
3,437 |
|
|
|
3,365 |
|
|
Liabilities
directly associated with non-current assets and disposal groups held for
sale
|
|
|
4 |
|
|
|
1,423 |
|
|
|
95 |
|
|
|
182 |
|
|
Other
liabilities
|
|
|
13 |
|
|
|
3,796 |
|
|
|
3,468 |
|
|
|
3,333 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
liabilities
|
|
|
|
|
|
|
61,043 |
|
|
|
55,786 |
|
|
|
52,924 |
|
|
Financial
liabilities
|
|
|
9 |
|
|
|
41,800 |
|
|
|
37,010 |
|
|
|
34,542 |
|
|
Provisions
for pensions and other employee benefits
|
|
|
11 |
|
|
|
6,179 |
|
|
|
5,157 |
|
|
|
5,354 |
|
|
Other
provisions
|
|
|
12 |
|
|
|
2,161 |
|
|
|
3,304 |
|
|
|
3,665 |
|
|
Deferred
tax liabilities
|
|
|
24 |
|
|
|
7,153 |
|
|
|
7,108 |
|
|
|
6,675 |
|
|
Other
liabilities
|
|
|
13 |
|
|
|
3,750 |
|
|
|
3,207 |
|
|
|
2,688 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
85,837 |
|
|
|
80,028 |
|
|
|
75,428 |
|
|
Shareholders'
equity
|
|
|
14 |
|
|
|
41,937 |
|
|
|
43,112 |
|
|
|
45,245 |
|
|
Issued
capital
|
|
|
|
|
|
|
11,165 |
|
|
|
11,165 |
|
|
|
11,165 |
|
|
Capital
reserves
|
|
|
|
|
|
|
51,530 |
|
|
|
51,526 |
|
|
|
51,524 |
|
|
Retained
earnings including carryforwards
|
|
|
|
|
|
|
(20,951 |
) |
|
|
(18,761 |
) |
|
|
(16,218 |
) |
|
Total
other comprehensive income
|
|
|
|
|
|
|
(3,576 |
) |
|
|
(5,411 |
) |
|
|
(4,907 |
) |
|
Total
other comprehensive income directly associated with non-current assets and
disposal groups held for sale
|
|
|
|
|
|
|
(2,162 |
) |
|
|
- |
|
|
|
- |
|
|
Net
profit
|
|
|
|
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
Treasury
shares
|
|
|
|
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
Issued
capital and reserves attributable to owners of the parent
|
|
|
|
|
|
|
36,354 |
|
|
|
39,997 |
|
|
|
42,130 |
|
|
Non-controlling
interests
|
|
|
|
|
|
|
5,583 |
|
|
|
3,115 |
|
|
|
3,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities and shareholders’ equity
|
|
|
|
|
|
|
127,774 |
|
|
|
123,140 |
|
|
|
120,673 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Figures
for the prior-year reporting dates adjusted. Changes in the presentation
of derivatives. For explanations, please refer to "Summary of accounting
policies/Change in accounting
policies."
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
(millions
of €)
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net
revenue
|
|
|
15 |
|
|
|
64,602 |
|
|
|
61,666 |
|
|
|
62,516 |
|
|
Cost
of sales
|
|
|
16 |
|
|
|
(36,259 |
) |
|
|
(34,592 |
) |
|
|
(35,337 |
) |
|
Gross
profit
|
|
|
|
|
|
|
28,343 |
|
|
|
27,074 |
|
|
|
27,179 |
|
|
Selling
expenses
|
|
|
17 |
|
|
|
(15,863 |
) |
|
|
(15,952 |
) |
|
|
(16,644 |
) |
|
General
and administrative expenses
|
|
|
18 |
|
|
|
(4,653 |
) |
|
|
(4,821 |
) |
|
|
(5,133 |
) |
|
Other
operating income
|
|
|
19 |
|
|
|
1,504 |
|
|
|
1,971 |
|
|
|
1,645 |
|
|
Other
operating expenses
|
|
|
20 |
|
|
|
(3,319 |
) |
|
|
(1,232 |
) |
|
|
(1,761 |
) |
|
Profit
from operations
|
|
|
|
|
|
|
6,012 |
|
|
|
7,040 |
|
|
|
5,286 |
|
|
Finance
costs
|
|
|
21 |
|
|
|
(2,555 |
) |
|
|
(2,487 |
) |
|
|
(2,514 |
) |
|
Interest
income
|
|
|
|
|
|
|
341 |
|
|
|
408 |
|
|
|
261 |
|
|
Interest
expense
|
|
|
|
|
|
|
(2,896 |
) |
|
|
(2,895 |
) |
|
|
(2,775 |
) |
|
Share
of profit (loss) of associates and joint ventures accounted for using the
equity method
|
|
|
22 |
|
|
|
24 |
|
|
|
(388 |
) |
|
|
55 |
|
|
Other
financial income (expense)
|
|
|
23 |
|
|
|
(826 |
) |
|
|
(713 |
) |
|
|
(374 |
) |
|
Profit
(loss) from financial activities
|
|
|
|
|
|
|
(3,357 |
) |
|
|
(3,588 |
) |
|
|
(2,833 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
before income taxes
|
|
|
|
|
|
|
2,655 |
|
|
|
3,452 |
|
|
|
2,453 |
|
|
Income
taxes
|
|
|
24 |
|
|
|
(1,782 |
) |
|
|
(1,428 |
) |
|
|
(1,373 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
|
|
|
|
|
|
|
873 |
|
|
|
2,024 |
|
|
|
1,080 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
(loss) attributable to
|
|
|
|
|
|
|
873 |
|
|
|
2,024 |
|
|
|
1,080 |
|
|
Owners
of the parent (net profit (loss))
|
|
|
|
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
Non-controlling
interests
|
|
|
25 |
|
|
|
520 |
|
|
|
541 |
|
|
|
509 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share/ADS
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
|
|
|
|
|
|
|
0.08 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
Diluted
|
|
|
|
|
|
|
0.08 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Profit
|
|
|
873 |
|
|
|
2,024 |
|
|
|
1,080 |
|
|
Actuarial
gains and losses on defined benefit pension plans
|
|
|
(461 |
) |
|
|
227 |
|
|
|
923 |
|
|
Revaluation
due to business combinations
|
|
|
(38 |
) |
|
|
0 |
|
|
|
18 |
|
|
Exchange
differences on translating foreign operations
|
|
|
(211 |
) |
|
|
(352 |
) |
|
|
(2,510 |
) |
|
Available-for-sale
financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of other comprehensive income in income statement
|
|
|
0 |
|
|
|
0 |
|
|
|
(1 |
) |
|
Change
in other comprehensive income (not recognized in income
statement)
|
|
|
(4 |
) |
|
|
1 |
|
|
|
(1 |
) |
|
Fair
value measurement of hedging instruments
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Recognition
of other comprehensive income in income statement
|
|
|
8 |
|
|
|
(101 |
) |
|
|
3 |
|
|
Change
in other comprehensive income (not recognized in income
statement)
|
|
|
(56 |
) |
|
|
60 |
|
|
|
(118 |
) |
|
Other
income and expense recognized directly in equity
|
|
|
11 |
|
|
|
(8 |
) |
|
|
0 |
|
|
Income
taxes relating to components of other comprehensive income
|
|
|
138 |
|
|
|
(53 |
) |
|
|
(228 |
) |
|
Other
comprehensive income
|
|
|
(613 |
) |
|
|
(226 |
) |
|
|
(1,914 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
260 |
|
|
|
1,798 |
|
|
|
(834 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income attributable to
|
|
|
260 |
|
|
|
1,798 |
|
|
|
(834 |
) |
|
Owners
of the parent
|
|
|
(261 |
) |
|
|
1,251 |
|
|
|
(1,346 |
) |
|
Non-controlling
interests
|
|
|
521 |
|
|
|
547 |
|
|
|
512 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
accompanying notes are an integral part of the consolidated financial
statements.
| |
|
|
Issued
capital and reserves attributable to
owners of the parent
|
|
| |
|
|
Equity
contributed
|
|
|
Consolidated
shareholders’ equity generated
|
|
|
Total
other comprehensive income
|
|
|
|
|
Number
of shares
|
|
|
Issued
capital
|
|
|
Capital
reserves
|
|
|
Retained
earnings incl. carryforwards
|
|
|
Net
profit (loss)
|
|
|
Translation
of foreign operations
|
|
|
Revaluation
surplus
|
|
|
Available-for-sale
financial assets
|
|
|
|
|
(thousands)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
Balance
at Jan. 1, 2007
|
|
|
4,361,119 |
|
|
|
11,164 |
|
|
|
51,498 |
|
|
|
(16,977 |
) |
|
|
3,173 |
|
|
|
(3,476 |
) |
|
|
436 |
|
|
|
4 |
|
|
Changes
in the composition of
the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unappropriated
profit (loss) carried forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,173 |
|
|
|
(3,173 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,124 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the exercise
of
stock options
|
|
|
179 |
|
|
|
1 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
559 |
|
|
|
571 |
|
|
|
(2,523 |
) |
|
|
28 |
|
|
|
(2 |
) |
|
Transfer
to retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
156 |
|
|
|
|
|
|
|
|
|
|
|
(156 |
) |
|
|
|
|
|
Balance
at Dec. 31, 2007
|
|
|
4,361,298 |
|
|
|
11,165 |
|
|
|
51,524 |
|
|
|
(16,218 |
) |
|
|
571 |
|
|
|
(5,999 |
) |
|
|
308 |
|
|
|
2 |
|
|
Balance
at Jan. 1, 2008
|
|
|
4,361,298 |
|
|
|
11,165 |
|
|
|
51,524 |
|
|
|
(16,218 |
) |
|
|
571 |
|
|
|
(5,999 |
) |
|
|
308 |
|
|
|
2 |
|
|
Changes
in the composition of
the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unappropriated
profit (loss) carried forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
571 |
|
|
|
(571 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,386 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the exercise
of
stock options
|
|
|
22 |
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
166 |
|
|
|
1,483 |
|
|
|
(357 |
) |
|
|
|
|
|
|
1 |
|
|
Transfer
to retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
106 |
|
|
|
|
|
|
|
|
|
|
|
(106 |
) |
|
|
|
|
|
Balance
at Dec. 31, 2008
|
|
|
4,361,320 |
|
|
|
11,165 |
|
|
|
51,526 |
|
|
|
(18,761 |
) |
|
|
1,483 |
|
|
|
(6,356 |
) |
|
|
202 |
|
|
|
3 |
|
|
Balance
at Jan. 1, 2009
|
|
|
4,361,320 |
|
|
|
11,165 |
|
|
|
51,526 |
|
|
|
(18,761 |
) |
|
|
1,483 |
|
|
|
(6,356 |
) |
|
|
202 |
|
|
|
3 |
|
|
Changes
in the composition of
the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unappropriated
profit (loss) carried forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,483 |
|
|
|
(1,483 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,386 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from the exercise
of
stock options
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(333 |
) |
|
|
353 |
|
|
|
(221 |
) |
|
|
(38 |
) |
|
|
(6 |
) |
|
Transfer
to retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
46 |
|
|
|
|
|
|
|
|
|
|
|
(46 |
) |
|
|
|
|
|
Balance
at Dec. 31, 2009
|
|
|
4,361,320 |
|
|
|
11,165 |
|
|
|
51,530 |
|
|
|
(20,951 |
) |
|
|
353 |
|
|
|
(6,577 |
) |
|
|
118 |
|
|
|
(3 |
) |
The
accompanying notes are an integral part of the consolidated financial
statements.
|
|
|
Issued
capital and reserves attributable to
owners of the parent
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
other comprehensive income
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flow hedges
|
|
|
Other
comprehensive income
|
|
|
Taxes
|
|
|
Treasury
shares
|
|
|
Total
|
|
|
Non-controlling
interests
|
|
|
Total shareholders’
equity
|
|
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
(millions
of €)
|
|
|
Balance
at Jan. 1, 2007
|
|
|
1,241 |
|
|
|
0 |
|
|
|
(480 |
) |
|
|
(5 |
) |
|
|
46,578 |
|
|
|
3,100 |
|
|
|
49,678 |
|
|
Changes
in the composition
of
the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5 |
) |
|
|
|
|
|
|
(5 |
) |
|
Unappropriated
profit (loss) carried forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,124 |
) |
|
|
(497 |
) |
|
|
(3,621 |
) |
|
Proceeds
from the exercise
of
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
27 |
|
|
|
|
|
|
|
27 |
|
|
Total
comprehensive income
|
|
|
(115 |
) |
|
|
|
|
|
|
136 |
|
|
|
|
|
|
|
(1,346 |
) |
|
|
512 |
|
|
|
(834 |
) |
|
Transfer
to retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Balance
at Dec. 31, 2007
|
|
|
1,126 |
|
|
|
0 |
|
|
|
(344 |
) |
|
|
(5 |
) |
|
|
42,130 |
|
|
|
3,115 |
|
|
|
45,245 |
|
|
Balance
at Jan. 1, 2008
|
|
|
1,126 |
|
|
|
0 |
|
|
|
(344 |
) |
|
|
(5 |
) |
|
|
42,130 |
|
|
|
3,115 |
|
|
|
45,245 |
|
|
Changes
in the composition
of
the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
(2 |
) |
|
|
(2 |
) |
|
Unappropriated
profit (loss) carried forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,386 |
) |
|
|
(545 |
) |
|
|
(3,931 |
) |
|
Proceeds
from the exercise
of
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
2 |
|
|
Total
comprehensive income
|
|
|
(41 |
) |
|
|
(11 |
) |
|
|
10 |
|
|
|
|
|
|
|
1,251 |
|
|
|
547 |
|
|
|
1,798 |
|
|
Transfer
to retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Balance
at Dec. 31, 2008
|
|
|
1,085 |
|
|
|
(11 |
) |
|
|
(334 |
) |
|
|
(5 |
) |
|
|
39,997 |
|
|
|
3,115 |
|
|
|
43,112 |
|
|
Balance
at Jan. 1, 2009
|
|
|
1,085 |
|
|
|
(11 |
) |
|
|
(334 |
) |
|
|
(5 |
) |
|
|
39,997 |
|
|
|
3,115 |
|
|
|
43,112 |
|
|
Changes
in the composition
of
the Group
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
2,783 |
|
|
|
2,783 |
|
|
Unappropriated
profit (loss) carried forward
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Dividends
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,386 |
) |
|
|
(840 |
) |
|
|
(4,226 |
) |
|
Proceeds
from the exercise
of
stock options
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4 |
|
|
|
4 |
|
|
|
8 |
|
|
Total
comprehensive income
|
|
|
(48 |
) |
|
|
11 |
|
|
|
21 |
|
|
|
|
|
|
|
(261 |
) |
|
|
521 |
|
|
|
260 |
|
|
Transfer
to retained earnings
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
|
|
|
|
|
0 |
|
|
Balance
at Dec. 31, 2009
|
|
|
1,037 |
|
|
|
0 |
|
|
|
(313 |
) |
|
|
(5 |
) |
|
|
36,354 |
|
|
|
5,583 |
|
|
|
41,937 |
|
The
accompanying notes are an integral part of the consolidated financial
statements.
|
(millions
of €)
|
|
Note
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Profit
|
|
|
30 |
|
|
|
873 |
|
|
|
2,024 |
|
|
|
1,080 |
|
|
Depreciation,
amortization and impairment losses
|
|
|
|
|
|
|
13,894 |
|
|
|
10,975 |
|
|
|
11,611 |
|
|
Income
tax expense (benefit)
|
|
|
|
|
|
|
1,782 |
|
|
|
1,428 |
|
|
|
1,373 |
|
|
Interest
income and interest expenses
|
|
|
|
|
|
|
2,555 |
|
|
|
2,487 |
|
|
|
2,514 |
|
|
Other
financial (income) expense
|
|
|
|
|
|
|
826 |
|
|
|
713 |
|
|
|
374 |
|
|
Share
of (profit) loss of associates and joint ventures accounted for
using the equity method
|
|
|
|
|
|
|
(24 |
) |
|
|
388 |
|
|
|
(55 |
) |
|
(Profit)
loss on the disposal of fully consolidated
subsidiaries
|
|
|
|
|
|
|
(26 |
) |
|
|
(455 |
) |
|
|
(379 |
) |
|
Other
non-cash transactions
|
|
|
|
|
|
|
(230 |
) |
|
|
(147 |
) |
|
|
124 |
|
|
(Gain)
loss from the disposal of intangible assets and property, plant and
equipment
|
|
|
|
|
|
|
51 |
|
|
|
70 |
|
|
|
(42 |
) |
|
Change
in assets carried as working capital
|
|
|
|
|
|
|
1,936 |
|
|
|
286 |
|
|
|
(1,072 |
) |
|
Change
in provisions
|
|
|
|
|
|
|
(891 |
) |
|
|
493 |
|
|
|
1,825 |
|
|
Change
in other liabilities carried as working capital
|
|
|
|
|
|
|
(1,818 |
) |
|
|
(130 |
) |
|
|
(1,391 |
) |
|
Income
taxes received (paid)
|
|
|
|
|
|
|
(928 |
) |
|
|
(520 |
) |
|
|
171 |
|
|
Dividends
received
|
|
|
|
|
|
|
29 |
|
|
|
13 |
|
|
|
36 |
|
|
Net
payments from entering into or canceling interest rate swaps1
|
|
|
|
|
|
|
242 |
|
|
|
- |
|
|
|
- |
|
|
Cash
generated from operations
|
|
|
|
|
|
|
18,271 |
|
|
|
17,625 |
|
|
|
16,169 |
|
|
Interest
paid
|
|
|
|
|
|
|
(3,456 |
) |
|
|
(3,431 |
) |
|
|
(4,005 |
) |
|
Interest
received
|
|
|
|
|
|
|
980 |
|
|
|
1,174 |
|
|
|
1,550 |
|
|
Net
cash from operating activities
|
|
|
|
|
|
|
15,795 |
|
|
|
15,368 |
|
|
|
13,714 |
|
|
Cash
outflows for investments in
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
|
|
|
|
(1,598 |
) |
|
|
(1,799 |
) |
|
|
(1,346 |
) |
|
Property,
plant and equipment
|
|
|
|
|
|
|
(7,604 |
) |
|
|
(6,908 |
) |
|
|
(6,669 |
) |
|
Non-current
financial assets
|
|
|
|
|
|
|
(176 |
) |
|
|
(3,261 |
) |
|
|
(264 |
) |
|
Investments
in fully consolidated subsidiaries and business units
|
|
|
|
|
|
|
(1,007 |
) |
|
|
(1,030 |
) |
|
|
(1,547 |
) |
|
Proceeds
from disposal of
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
|
|
|
|
7 |
|
|
|
34 |
|
|
|
39 |
|
|
Property,
plant and equipment
|
|
|
|
|
|
|
369 |
|
|
|
338 |
|
|
|
722 |
|
|
Non-current
financial assets
|
|
|
|
|
|
|
99 |
|
|
|
102 |
|
|
|
133 |
|
|
Investments
in fully consolidated subsidiaries and business units
|
|
|
|
|
|
|
116 |
|
|
|
778 |
|
|
|
888 |
|
|
Net
change in short-term investments and marketable securities and
receivables
|
|
|
|
|
|
|
(320 |
) |
|
|
611 |
|
|
|
(60 |
) |
|
Net
change in cash and cash equivalents due to the first-time full
consolidation of OTE
|
|
|
|
|
|
|
1,558 |
|
|
|
- |
|
|
|
- |
|
|
Other
|
|
|
|
|
|
|
(93 |
) |
|
|
(249 |
) |
|
|
50 |
|
|
Net
cash used in investing activities
|
|
|
|
|
|
|
(8,649 |
) |
|
|
(11,384 |
) |
|
|
(8,054 |
) |
|
Proceeds
from issue of current financial liabilities
|
|
|
|
|
|
|
3,318 |
|
|
|
39,281 |
|
|
|
32,514 |
|
|
Repayment
of current financial liabilities
|
|
|
|
|
|
|
(9,314 |
) |
|
|
(44,657 |
) |
|
|
(35,259 |
) |
|
Proceeds
from issue of non-current financial liabilities
|
|
|
|
|
|
|
5,379 |
|
|
|
6,477 |
|
|
|
1,586 |
|
|
Repayment
of non-current financial liabilities
|
|
|
|
|
|
|
(93 |
) |
|
|
(96 |
) |
|
|
(1,020 |
) |
|
Dividend
payments
|
|
|
|
|
|
|
(4,287 |
) |
|
|
(3,963 |
) |
|
|
(3,762 |
) |
|
Proceeds
from the exercise of stock options
|
|
|
|
|
|
|
2 |
|
|
|
3 |
|
|
|
24 |
|
|
Repayment
of lease liabilities
|
|
|
|
|
|
|
(128 |
) |
|
|
(142 |
) |
|
|
(208 |
) |
|
Net
cash used in financing activities
|
|
|
|
|
|
|
(5,123 |
) |
|
|
(3,097 |
) |
|
|
(6,125 |
) |
|
Effect
of exchange rate changes on cash and cash equivalents
|
|
|
|
|
|
|
58 |
|
|
|
(61 |
) |
|
|
(100 |
) |
|
Changes
in cash and cash equivalents associated with non-current assets and
disposal groups held for sale
|
|
|
|
|
|
|
(85 |
) |
|
|
- |
|
|
|
- |
|
|
Net
increase (decrease) in cash and cash equivalents
|
|
|
|
|
|
|
1,996 |
|
|
|
826 |
|
|
|
(565 |
) |
|
Cash
and cash equivalents, at the beginning of the year
|
|
|
|
|
|
|
3,026 |
|
|
|
2,200 |
|
|
|
2,765 |
|
|
Cash
and cash equivalents, at the end of the year
|
|
|
|
|
|
|
5,022 |
|
|
|
3,026 |
|
|
|
2,200 |
|
|
|
Adjusted. For explanations,
please refer to "Summary of accounting policies/Change in accounting
policies."
|
The
accompanying notes are an integral part of the consolidated financial
statements.
Summary
of accounting policies.
General
information.
The
Deutsche Telekom Group (hereinafter referred to as “Deutsche Telekom” or the
“Group”) is one of the world's leading service providers in the
telecommunications and information technology sector. With its five operating
segments, Germany, United States, Europe, Southern and Eastern Europe and
Systems Solutions, as well as Group Headquarters & Shared Services, Deutsche
Telekom covers the full range of state-of-the-art telecommunications and
information technology services.
The
Company was entered as Deutsche Telekom AG in the commercial register of the
Bonn District Court (Amtsgericht - HRB 6794) on January
2, 1995. The
Company has its registered office in Bonn, Germany. Its address is Deutsche
Telekom AG, Friedrich-Ebert-Allee 140, 53113 Bonn. In
addition to Frankfurt/Main, other German stock exchanges, and Tokyo, Deutsche
Telekom shares are also traded on the New York Stock Exchange (NYSE) in the form
of American Depositary Shares (ADSs).
This Annual
Report on Form 20-F, filed with the SEC due to Deutsche Telekom’s listing on the
NYSE, are available upon request from Deutsche Telekom AG, Bonn, Investor
Relations, and on the Internet at www.telekom.com.
The
consolidated financial statements of Deutsche Telekom for the 2009 financial
year were released for publication by the Board of Management on February 8,
2010.
Basis
of preparation.
The
consolidated financial statements of Deutsche Telekom have been prepared in
accordance with the International Financial Reporting Standards (IFRS) as issued
by the International Accounting Standards Board (IASB).
The
financial year corresponds to the calendar year. Due to a change in accounting
policies, the consolidated statement of financial position includes comparative
amounts for two reporting dates. The consolidated income statement, the
consolidated statement of comprehensive income, the consolidated statement of
changes in equity, and the consolidated statement of cash flows include two
comparative years.
Presentation
in the statement of financial position differentiates between current and
non-current assets and liabilities, some of which are broken down further by
their respective maturities in the notes to the financial statements. The
consolidated income statement is presented using the cost-of-sales method. Under
this format, net revenue is compared against the expenses incurred to generate
these revenues, classified into cost of sales, selling, and general and
administrative functions. The consolidated financial statements are prepared in
euros.
The
financial statements of Deutsche Telekom AG and its subsidiaries included in the
consolidated financial statements were prepared using uniform group accounting
policies.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Initial
application of standards, interpretations and amendments to standards and
interpretations in the financial year.
In the
financial year, Deutsche Telekom for the first time applied the following IASB
pronouncements and/or amendments to such pronouncements that have a material
impact on the presentation of Deutsche Telekom’s results of operations,
financial position or cash flows:
|
·
|
IAS
1 "Presentation of Financial
Statements,"
|
|
·
|
Amendments
resulting from the Annual Improvements Project, May
2008,
|
|
·
|
IAS
23 "Borrowing Costs," and
|
|
·
|
IFRS
7 "Financial Instruments:
Disclosures."
|
For
further details of the effects of the initial application, please refer to the
section "Change in accounting policies."
None of
the following IASB pronouncements or amendments to such pronouncements that are
applicable in the 2009 financial year for the first time had any impact or a
material impact on the presentation of Deutsche Telekom's results of operations,
financial position or cash flows.
|
Pronouncement
|
Date
of issue by the IASB
|
Title
|
|
IFRIC
13
|
June
28, 2007
|
Customer
Loyalty Programmes
|
|
IFRS
2
|
January
17, 2008
|
Share-based
Payment
|
|
IAS
32
|
February
14, 2008
|
Financial
Instruments: Presentation
|
|
IFRS
1/IAS 27
|
May
22, 2008
|
First-time
Adoption of International Financial Reporting Standards/
Consolidated
and Separate Financial Statements
|
|
IFRIC
15
|
July
3, 2008
|
Agreements
for the Construction of Real Estate
|
|
IFRIC
16
|
July
3, 2008
|
Hedges
of a Net Investment in a Foreign Operation
|
|
IFRIC
18
|
January
29, 2009
|
Transfer
of Assets from Customers
|
|
IFRIC
9/IAS 39
|
March
12, 2009
|
Reassessment
of Embedded Derivatives/Financial Instruments: Recognition and
Measurement
|
Standards,
interpretations and amendments issued, but not yet adopted.
In
January 2008, the IASB issued the revised standards IFRS 3 "Business
Combinations" and IAS 27
"Consolidated and Separate Financial Statements." The standards are the
result of the second phase of the project undertaken jointly with the Financial
Accounting Standards Board (FASB) to reform the accounting for business
combinations.
The main
changes that the revised IFRS 3 will make to the existing requirements are
described below:
|
·
|
The
revised IFRS 3 gives the option of measuring non-controlling interests
either at fair value or at the proportionate share of the net identifiable
assets. This option can be exercised for each business combination
individually.
|
|
·
|
In
a business combination achieved in stages, the acquirer shall remeasure
its previously held equity interest in the acquiree at the date the
acquirer obtains control. Goodwill shall then be determined as the
difference between the remeasured carrying amount plus consideration
transferred for the acquisition of the new shares, minus net assets
acquired.
|
|
·
|
Contingent
consideration shall be measured at fair value at the acquisition date and
classified either as equity, or as asset or liability at the acquisition
date. Agreed contingent consideration shall be recognized subsequently in
accordance with the classification determined at the acquisition
date.
|
|
·
|
Acquisition-related
costs incurred in connection with business combinations shall be
recognized as expenses.
|
|
·
|
For
changes in contingent consideration classified as a liability at the
acquisition date, goodwill cannot be remeasured
subsequently.
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
·
|
According
to the revised IFRS 3, effects from the settlement of relationships
existing prior to the business combination shall not be part of the
exchange for the acquiree.
|
|
·
|
In
contrast to the previous version of IFRS 3, the revised standard governs
the recognition and measurement of rights that were granted to another
entity prior to the business combination and which are now reacquired as
part of the business combination (reacquired
rights).
|
The main
changes that the revised IAS 27 will make to the existing requirements are
described below:
|
·
|
Changes
in a parent's ownership interest in a subsidiary, that do not result in
the loss of control shall only be accounted for within
equity.
|
|
·
|
If
a parent loses control of a subsidiary, it shall derecognize the
consolidated assets and liabilities. The new requirement is that any
investment retained in the former subsidiary shall be recognized at fair
value at the date when control is lost; any differences resulting from
this shall be recognized in profit or
loss.
|
|
·
|
When
losses attributed to the non-controlling interests exceed the
non-controlling interests in the subsidiary's equity, these losses shall
be allocated to the non-controlling interests even if this results in a
deficit balance.
|
The
revised IFRS 3 shall be applied prospectively to business combinations for which
the acquisition date is on or after the beginning of the first financial year
beginning on or after July 1, 2009. Earlier application is permitted, however,
at the earliest at the beginning of a financial year beginning on or after June
30, 2007. The provisions of IAS 27 shall be effective for financial years
beginning on or after July 1, 2009. Earlier application is permitted. However,
the earlier application of one of these two standards requires that the other
standard is also applied at the same earlier time. Deutsche Telekom will apply
the amendments to IFRS 3 and IAS 27 for business combinations and transactions
with subsidiaries after January 1, 2010 for the first time.
In July
2008, the IASB issued an amendment to IAS 39 "Financial Instruments:
Recognition and Measurement." The amendment on eligible hedged items
specifies that an entity may designate an option as a hedge of changes in the
cash flows or fair value of a hedged item above or below a specified price or
other variable. The amendment to IAS 39 is effective for financial years
beginning on or after July 1, 2009. The provisions are to be applied
retrospectively. The amendment to the standard is not expected to have a
material impact on the presentation of Deutsche Telekom’s results of operations,
financial position or cash flows.
In
November 2008, the IASB issued the revised IFRS 1 "First-time Adoption of
International Financial Reporting Standards." The revised standard is
effective for financial years beginning on or after July 1, 2009. In addition,
IFRS 1 was amended in July 2009 to add two additional exemptions for first-time
adopters. These exemptions are effective for financial years beginning on or
after January 1, 2010. In January 2010, IFRS 1 was extended once again by some
minor supplements, which are mandatory from July 1, 2010. None of the amendments
to IFRS 1 are relevant for Deutsche Telekom’s financial reporting.
In
November 2008, the IFRIC issued IFRIC 17 "Distribution of Non-Cash
Assets to Owners”. The interpretation provides guidance on the
recognition and measurement of liabilities arising from dividends paid in the
form of assets other than cash (e.g., property, plant and equipment) and
clarifies how any difference between the carrying amount of the assets
distributed and the fair value of the dividend paid should be accounted for.
IFRIC 17 is effective for financial years beginning on or after July 1, 2009.
The adoption of IFRIC 17 is not expected to have a material impact on the
presentation of Deutsche Telekom’s results of operations, financial position or
cash flows.
In April
2009, the IASB issued "Improvements to IFRSs" – a
collection of necessary, but non-urgent, amendments to existing IFRSs. This is
the second pronouncement published as part of the Annual Improvements Project
and contains amendments to twelve existing standards and interpretations. Unless
otherwise specified in the respective standard, the amendments are effective for
financial years beginning on or after January 1, 2010. The amendments are not
expected to have a material impact on the presentation of Deutsche Telekom’s
results of operations, financial position or cash flows.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
In June
2009, the IASB issued amendments to IFRS 2 "Share-based Payment."
These amendments clarify the accounting for group-settled share-based payment
transactions. In these arrangements, the subsidiary receives goods or services
from employees or suppliers, but its parent or another entity in the group must
pay those suppliers. An entity that receives goods or services in a share-based
payment arrangement must account for those goods or services no matter which
entity in the group settles the transaction, and no matter whether the
transaction is settled in shares or cash. The IASB additionally clarified that
in IFRS 2 a “group” has the same meaning as in IAS 27 "Consolidated and Separate
Financial Statements." The amendments to IFRS 2 also incorporate guidance
previously included in IFRIC 8 "Scope of IFRS 2" and IFRIC 11 "IFRS 2 – Group
and Treasury Share Transactions." As a result, the IASB has withdrawn IFRIC 8
and IFRIC 11. The amendments to IFRS 2 are effective retrospectively for
financial years beginning on or after January 1, 2010. The amendments are not
expected to have a material impact on the presentation of Deutsche Telekom’s
results of operations, financial position or cash flows.
In
October 2009, the IASB issued an amendment to IAS 32 "Financial Instruments:
Presentation." This amendment clarifies the classification of rights
issues as equity or liabilities when the rights are denominated in a currency
other than the issuer’s functional currency. Previously, such rights issues had
been accounted for as derivative liabilities. The amendment requires that if
such rights are issued pro rata to an entity's shareholders for a fixed amount
of currency, they are to be classified as equity regardless of the currency in
which the exercise price is denominated. The amendment is effective for
financial years beginning on or after February 1, 2010. The amendment is not
expected to have a material impact on the presentation of Deutsche Telekom’s
results of operations, financial position or cash flows.
In
November 2009, the IASB issued amendments to IAS 24 "Related Party
Disclosures." Previously, entities that are controlled or significantly
influenced by a government had been required to disclose information about all
transactions with entities that are controlled or significantly influenced by
the same state. The revised standard still requires disclosures that are
important to users of financial statements. However, in the future, information
that is costly to produce or that is of little value for users of financial
statements will be exempt from this requirement. Only information on
transactions that are individually or collectively significant is still to be
disclosed. In addition, the definition of a related party was simplified and a
number of inconsistencies were eliminated. The revised standard is effective
retrospectively for financial years beginning on or after January 1, 2011.
The amendments are not expected to have a material impact on the presentation of
Deutsche Telekom’s results of operations, financial position or cash
flows.
In
November 2009, the IASB issued IFRS 9 "Financial
Instruments." The standard is the result of the first of three phases of
the project to replace IAS 39 "Financial Instruments: Recognition and
Measurement" with IFRS 9. IFRS 9 governs the classification and measurement of
financial assets. The other phases of the project, in which the classification
and measurement of financial liabilities, the impairment of financial
instruments, and hedge accounting will be revised, as well as a further project
on the derecognition of financial instruments, have not yet been finalized. The
IASB is aiming to replace IAS 39 in its entirety by the end of 2010. IFRS 9
requires financial assets to be assigned to one of the following two measurement
categories: "at amortized cost" or "at fair value." IFRS 9 also grants a fair
value option which allows financial assets that would normally be assigned to
the "at amortized cost" category to be designated as “at fair value” if the fair
value designation would eliminate or significantly reduce measurement or
recognition inconsistency. It is mandatory to assign equity instruments to the
"at fair value" category. If, however, the equity instrument is not held for
trading, the standard allows an irrevocable option to be made at initial
recognition to designate it as “at fair value" through other comprehensive
income. Dividend income resulting from the equity instrument is recognized in
profit or loss. IFRS 9 is effective for financial years beginning on or after
January 1, 2013. The provisions are to be applied retrospectively. Deutsche
Telekom is currently analyzing the resulting effects on the presentation of
results of operations, financial position or cash flows.
In
November 2009, the IASB issued an amendment to its requirements on accounting
for pension plans. The amendment is to IFRIC 14 "Prepayments of a Minimum
Funding Requirement," which is an interpretation of IAS 19 "Employee
Benefits." The amendment applies in limited circumstances when an entity is
subject to minimum funding requirements and makes an early payment of
contributions to cover these requirements. The amendment permits such an entity
to treat the benefit of such an early payment as an asset. The amendment has an
effective date for mandatory adoption of January 1, 2011. Retrospective adoption
is required. Deutsche Telekom is currently analyzing the resulting effects on
the presentation of results of operations, financial position or cash
flows.
In
November 2009, the IASB issued the interpretation IFRIC 19 "Extinguishing Financial
Liabilities with Equity Instruments." The interpretation provides
guidance on how to interpret IFRS when an entity renegotiates the terms of a
financial liability with its creditor and the creditor agrees to accept equity
instruments to settle the financial liabilities fully or partially. IFRIC 19
clarifies that the entity’s equity instruments issued to a creditor are part of
the consideration paid to extinguish the financial liability fully or partially.
In addition, these equity instruments are measured at their fair value. If their
fair value cannot be reliably measured, the equity instruments shall be measured
to reflect the fair value of the financial liability extinguished. Any
difference between the carrying amount of the financial liability and the
initial measurement amount of the equity instruments issued is included in the
entity’s profit or loss for the period. The interpretation is effective for
financial years beginning on or after July 1, 2010. The adoption of IFRIC 19 is
not expected to have a material impact on the presentation of Deutsche Telekom’s
results of operations, financial position or cash flows.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Change
in accounting policies.
Deutsche
Telekom changed the structure of its operating segments in the 2009 financial
year. In addition, the following changes in accounting policies primarily
resulted from the adoption of pronouncements or amendments to pronouncements
that were applicable for the first time.
Changes
to the structure of the operating segments.
|
·
|
Since
July 1, 2009, Deutsche Telekom's organizational structure has reflected
the realigned management structure approved by the Supervisory Board on
April 29, 2009. The new structure increases regional market responsibility
in the combined fixed-network and mobile communications business. The
realignment also resulted in a change to the structure of the operating
segments from July 1, 2009. Since July 1, 2009, Deutsche Telekom has
reported on the five operating segments Germany, United States, Europe,
Southern and Eastern Europe, and Systems Solutions, as well as on Group
Headquarters & Shared Services.
|
|
·
|
To
implement its "Focus, fix and grow" strategy, Deutsche Telekom transferred
around 160,000 business customers from T-Systems to the former
Broadband/Fixed Network operating segment (since July 1, 2009:
Germany operating segment) under the umbrella of T-Home and
Sales & Service with effect from January 1, 2009. At the
same time, the Business Customers operating segment was renamed Systems
Solutions.
|
Changes
in accounting policies.
In
September 2007, the IASB issued an amendment to IAS 1 "Presentation of Financial
Statements." The amendments to IAS 1 are effective for financial
years beginning on or after January 1, 2009. In accordance with the
requirements of IAS 1, Deutsche Telekom has retrospectively adjusted the
presentation of its results of operations, financial position and cash flows as
follows:
|
·
|
All
changes in shareholders' equity resulting from transactions with owners
are presented separately from those changes in shareholders' equity not
resulting from transactions with owners (non-owner
changes).
|
|
·
|
Income
and expenses are presented separately from transactions with owners in two
components of the financial statements (consolidated income statement and
consolidated statement of comprehensive
income).
|
|
·
|
The
components of “Other comprehensive income“ are presented in the
consolidated statement of comprehensive
income.
|
|
·
|
“Total
other comprehensive income“ is presented in the consolidated statement of
changes in equity.
|
IAS 1
also requires the relevant amount of income tax per component of “Other
comprehensive income” to be stated and the amounts reclassified as “Other
comprehensive income” to be presented.
Deutsche
Telekom adopted the amendments to IAS 1 in the 2009 financial year and changed
the presentation of its financial statements accordingly.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
As a
result of the first Annual
Improvements Project, the IASB issued a collective standard with
amendments to various IFRSs in May 2008. It relates to a large number of smaller
amendments to existing standards whose implementation was regarded as necessary,
but non-urgent. In the collective standard, the IASB clarified that derivative
financial instruments classified as held for trading are not always required to
be presented in the statement of financial position as current assets or
liabilities. Since January 1, 2009, Deutsche Telekom has therefore reported its
held-for-trading derivative financial instruments as either current or
non-current depending on the maturity of the particular contract. The figures
for the comparative reporting dates have been adjusted accordingly.
The
retrospective amendment of the disclosure of derivative financial instruments
classified as held for trading had the following effects on the presentation of
the consolidated statements of financial position as of December 31, 2008
and 2007:
|
(millions
of €)
|
|
Dec.
31, 2008
|
|
|
Dec.
31, 2007
|
|
|
|
|
Before
amendment
|
|
|
Amendment
|
|
|
After
amendment
|
|
|
Before
amendment
|
|
|
Amendment
|
|
|
After
amendment
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
financial assets
|
|
|
2,169 |
|
|
|
(477 |
) |
|
|
1,692 |
|
|
|
2,019 |
|
|
|
(100 |
) |
|
|
1,919 |
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
financial assets
|
|
|
1,386 |
|
|
|
477 |
|
|
|
1,863 |
|
|
|
599 |
|
|
|
100 |
|
|
|
699 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities
|
|
|
10,208 |
|
|
|
(624 |
) |
|
|
9,584 |
|
|
|
9,075 |
|
|
|
(711 |
) |
|
|
8,364 |
|
|
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities
|
|
|
36,386 |
|
|
|
624 |
|
|
|
37,010 |
|
|
|
33,831 |
|
|
|
711 |
|
|
|
34,542 |
|
The
amendment does not affect any other items in the statement of financial
position. Prior-year figures included in all disclosures relating to items
presented here were adjusted accordingly.
The other
amendments to IFRSs resulting from the collective standard did not have a
material impact on the presentation of Deutsche Telekom’s results of operations,
financial position or cash flows.
Deutsche
Telekom adjusted the presentation of its statement of cash
flows in 2009. Net payments from entering into or canceling interest rate
swaps are disclosed as cash generated from operations under "Net cash from
operating activities" and no longer under “Net cash used in/from investing
activities.” Deutsche Telekom believes that this change better reflects the
economic nature of the transaction.
In March
2007, the IASB issued an amendment to IAS 23 "Borrowing Costs." The
amendment to the standard mainly relates to the elimination of the option of
recognizing borrowing costs directly attributable to the acquisition,
construction or production of a qualifying asset as an expense. In accordance
with Deutsche Telekom's accounting principles, qualifying assets are
construction projects or other assets for which a period of at least twelve
months is necessary in order to get them ready for their intended use or sale.
Borrowing costs relating to assets measured at fair value and to inventories
that are manufactured or produced in large quantities on a repetitive basis must
not be capitalized, even if they take a substantial period of time to get ready
for use or sale. For further details, please refer to Note 21.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
On
March 5, 2009, the IASB issued amendments to IFRS 7 "Financial Instruments:
Disclosures." The amendments are entitled "Improving Disclosures about
Financial Instruments – Amendments to IFRS 7" and also contain minor changes to
IFRS 4 "Insurance Contracts." The amendments to IFRS 7 relate to disclosures
about fair value measurements and disclosures about liquidity risk. The
disclosures about fair value measurements specify that a table must be provided
for each class of financial instruments on the basis of a three-level fair value
hierarchy. The scope of the disclosure requirements is also expanded. A
distinction is made between three measurement categories:
|
·
|
Level 1: At the top
level of the fair value hierarchy, fair values are determined based on
quoted prices because the best objective evidence of the fair value of a
financial asset or financial liability is quoted prices in an active
market.
|
|
·
|
Level 2: If the market
for a financial instrument is not active, an entity can establish fair
value by using a valuation technique. Valuation techniques include using
recent arm's length market transactions between knowledgeable, willing
parties, reference to the current fair value of another instrument that is
substantially the same, discounted cash flow analysis and option pricing
models. Fair value is estimated on the basis of the results of a valuation
technique that makes maximum use of market inputs, and relies as little as
possible on entity-specific inputs.
|
|
·
|
Level 3: The valuation
techniques used at this level are not based on observable market
data.
|
Disclosures
about liquidity risk are also clarified and expanded. For example, the maturity
analysis must be divided into disclosures about derivative and non-derivative
financial liabilities. The amendments shall be applied for financial years
beginning on or after January 1, 2009. For further details, please refer to Note
21.
Accounting
policies.
Intangible assets (excluding
goodwill) with finite useful lives, including UMTS licenses, are measured
at cost and amortized on a straight-line basis over their useful lives. Such
assets are impaired if their recoverable amount, which is measured at the higher
of fair value less costs to sell and value in use, is lower than the carrying
amount. Indefinite-lived intangible assets (mobile communications licenses
granted by the Federal Communications Commission in the United States (FCC
licenses)) are carried at cost. While FCC licenses are issued for a fixed time,
renewals of FCC licenses have occurred routinely and at nominal costs. Moreover,
Deutsche Telekom has determined that there are currently no legal, regulatory,
contractual, competitive, economic or other factors that limit the useful lives
of the FCC licenses, and therefore treats the FCC licenses as an
indefinite-lived intangible asset. They are not amortized, but tested for
impairment annually or whenever there are indications of impairment and, if
necessary, written down to the recoverable amount. Impairment losses are
reversed if the reasons for recognizing the original impairment loss no longer
apply and the asset is recognized at a value that would have been applied if no
impairment losses had been recognized in prior periods.
The
useful lives and the amortization method of the assets are reviewed at least at
each financial year-end and, if expectations differ from previous estimates, the
changes are accounted for as changes in accounting estimates in accordance with
IAS 8.
Amortization
of mobile communications licenses begins as soon as the related network is ready
for use. The useful lives of mobile communications licenses are determined based
on several factors, including the term of the licenses granted by the respective
regulatory body in each country, the availability and expected cost of renewing
the licenses, as well as the development of future technologies. The remaining
useful lives of the Company’s mobile communications licenses are as
follows:
|
|
Years
|
|
Mobile
communications licenses:
|
|
|
FCC
licenses
|
Indefinite
|
|
UMTS
licenses
|
5
to 15
|
|
GSM
licenses
|
1
to 15
|
|
|
|
Development expenditures are
capitalized if they meet the criteria for recognition as assets and are
amortized over their useful lives. Research expenditures are not
capitalized and are expensed as incurred.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Goodwill is not amortized, but
is tested for impairment based on the recoverable amount of the cash-generating
unit to which the goodwill is allocated (impairment-only approach). For the
purpose of impairment testing, goodwill acquired in a business combination is
allocated to each of the cash-generating units that are expected to benefit from
the synergies of the combination. The impairment test must be performed
annually, as well as whenever there are indications that the carrying amount of
the cash-generating unit is impaired. If the carrying amount of the
cash-generating unit to which goodwill is allocated exceeds its recoverable
amount, goodwill allocated to this cash-generating unit must be reduced in the
amount of the difference. Impairment losses for goodwill may not be reversed. If
the impairment loss recognized for the cash-generating unit exceeds the carrying
amount of the allocated goodwill, the additional amount of the impairment loss
is recognized through the pro-rata reduction of the carrying amounts of the
assets allocated to the cash-generating unit. Deutsche Telekom determines the
recoverable amount of a cash-generating unit based on its fair value less costs
to sell, unless a higher value in use can be determined. The fair value less
costs to sell is generally determined based on discounted cash flow
calculations. These discounted cash flow calculations use projections that are
based on financial budgets approved by management covering a ten-year period and
are also used for internal purposes. The planning horizon reflects the
assumptions for short- to mid-term market developments. Cash flows beyond the
ten-year period are extrapolated using appropriate growth rates. Key assumptions
on which management has based its determination of fair value less costs to sell
include the development of revenue, customer acquisition and retention costs,
churn rates, capital expenditure, market share, growth rates and discount rates.
Cash flow calculations are supported by external sources of
information.
Property, plant and equipment
is carried at cost less straight-line depreciation, and impairment losses, if
applicable. The depreciation period is based on the expected useful life. Items
of property, plant and equipment are depreciated pro rata in the year of
acquisition. The residual values, useful lives and the depreciation method of
the assets are reviewed at least at each financial year-end and, if expectations
differ from previous estimates, the changes are accounted for as changes in
accounting estimates in accordance with IAS 8. In addition to directly
attributable costs, the costs of internally developed assets include
proportionate indirect material and labor costs, as well as administrative
expenses relating to production or the provision of services. In addition to the
purchase price and costs directly attributable to bringing the asset to the
location and condition necessary for it to be capable of operating in the manner
intended by management, costs also include the estimated costs for dismantling
and removing the asset, and restoring the site on which it is located. If an
item of property, plant and equipment consists of several components with
different estimated useful lives, the individual significant components are
depreciated over their individual useful lives. Maintenance and repair costs are
expensed as incurred. Investment grants received reduce the cost of the assets
for which the grants were made.
On
disposal of an item of property, plant and equipment or when no future economic
benefits are expected from its use or disposal, the carrying amount of the item
is derecognized. The gain or loss arising from the disposal of an item of
property, plant and equipment is the difference between the net disposal
proceeds, if any, and the carrying amount of the item and is recognized as other
operating income or other operating expenses when the item is derecognized. The
useful lives of material asset categories are presented in the following
table:
|
|
Years
|
|
Buildings
|
25
to 50
|
|
Telephone
facilities and terminal equipment
|
3
to 10
|
|
Data
communications equipment, telephone network and ISDN switching equipment,
transmission equipment, radio transmission equipment and technical
equipment for broadband distribution networks
|
2
to 12
|
|
Broadband
distribution networks, outside plant networks and cable conduit
lines
|
8
to 35
|
|
Other
equipment, operating and office equipment
|
2
to 23
|
|
|
|
Leasehold
improvements are depreciated over the shorter of their useful lives or lease
terms.
Impairment of intangible assets and
items of property, plant and equipment is identified by comparing the
carrying amount with the recoverable amount. If no future cash flows generated
independently of other assets can be allocated to the individual assets,
recoverability is tested on the basis of the cash-generating unit to which the
assets can be allocated. At each reporting date, Deutsche Telekom assesses
whether there is any indication that an asset may be impaired. If any such
indication exists, the recoverable amount of the asset or cash-generating unit
must be determined. In addition, annual impairment tests are carried out for
intangible assets with indefinite useful lives (FCC licenses). The recoverable
amount of a cash-generating unit is the higher of the cash-generating unit’s
fair value less costs to sell and its value in use. Impairment losses are
reversed if the reasons for recognizing the original impairment loss no longer
apply and the asset is recognized at a value that would have been applied if no
impairment losses had been recognized in prior periods.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
recoverable amount of the cash-generating units is generally determined using
discounted cash flow calculations. Cash flows are projected over the estimated
useful life of the asset or cash-generating unit. The discount rate used
reflects the risk specific to the asset or cash-generating unit. The cash flows
used reflect management assumptions and are supported by external sources of
information.
Beneficial
ownership of leased
assets is attributed to the contracting party in the lease to which the
substantial risks and rewards incidental to ownership of the asset are
transferred. If substantially all risks and rewards are attributable to the
lessor (operating lease), the leased asset is recognized in the statement of
financial position by the lessor. Measurement of the leased asset is then based
on the accounting policies applicable to that asset. The lease payments are
recognized in profit or loss. The lessee in an operating lease recognizes the
lease payments made during the term of the lease in profit or loss.
If
substantially all risks and rewards incidental to ownership of the leased asset
are attributable to the lessee (finance lease), the lessee must recognize the
leased asset in the statement of financial position. At the commencement of the
lease term, the leased asset is measured at the lower of fair value or present
value of the future minimum lease payments and is depreciated over the shorter
of the estimated useful life or the lease term. Depreciation is recognized as
expense. The lessee recognizes a lease liability equal to the carrying amount of
the leased asset at the commencement of the lease term. In subsequent periods,
the lease liability is reduced using the effective interest method and the
carrying amount is adjusted accordingly. The lessor in a finance lease
recognizes a receivable in the amount of the net investment in the lease. Lease
income is classified into repayments of the lease receivable and finance income.
The lease receivable is reduced using the effective interest method and the
carrying amount is adjusted accordingly.
If a sale
and leaseback transaction results in a finance lease, any excess of sales
proceeds over the carrying amount is deferred and amortized over the lease
term.
Investment property consists
of all property held to earn rentals or for capital appreciation and not used in
production or for administrative purposes. Investment property is measured at
cost less any accumulated depreciation and impairment losses.
Non-current assets and disposal
groups held for sale are classified as held for sale if their carrying
amount will be recovered principally through a sale transaction rather than
through continuing use. These assets are measured at the lower of the carrying
amount and fair value less costs to sell and are classified as non-current
assets and disposal groups held for sale. Such assets are no longer depreciated.
As a rule, impairment of such assets is only recognized if fair value less costs
to sell is lower than the carrying amount. If fair value less costs to sell
subsequently increases, the impairment loss previously recognized must be
reversed. The reversal of impairment losses is limited to the impairment losses
previously recognized for the assets concerned. If the requirements for the
classification of assets as held for sale are no longer met, the assets may no
longer be shown as held for sale. The assets are to be measured at the lower of
the carrying amount that would have applied if the asset had not been classified
as held for sale, and the recoverable amount at the date at which the
requirements for the classification as held for sale are no longer
met.
Inventories are carried at the
lower of net realizable value or cost. Cost comprises all costs of purchase,
costs of conversion and other costs incurred in bringing the inventories to
their present location and condition. Cost is measured using the weighted
average cost method. Net realizable value is the estimated selling price in the
ordinary course of business less the estimated costs of completion and the
estimated costs necessary to make the sale. Deutsche Telekom sells handsets
separately and in connection with service contracts. As part of the strategy to
acquire new customers, it sometimes sells handsets, in connection with a service
contract, at below its acquisition cost. As the handset subsidy is part of the
Company’s strategy for acquiring new customers, the loss on the sale of handsets
is recognized at the time of the sale and, as a rule, shown under cost of
sales.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pension
obligations and other employee benefits.
The Group
arranges defined benefit pension plans in different countries on the basis of
the pensionable compensation of its employees and their length of service. Some
of these pension plans are financed through external pension funds.
Provisions
for pensions are measured using the projected unit credit method for defined
benefit plans, taking into account not only the pension obligations and vested
pension rights known at the reporting date, but also expected future salary and
benefit increases. The interest rate used to determine the present value of the
obligations was set on the basis of the yield on high-quality corporate bonds in
the respective currency area. In countries without a deep market for such bonds,
estimates based on the yield on government bonds were used instead. Actuarial
gains and losses arising from adjustments and changes in actuarial assumptions
are recognized in the period in which they occur outside profit or loss within
equity (retained earnings). The return on plan assets is classified in interest
income. Service costs are classified as operating expenses. Past service costs
are recognized immediately to the extent that the benefits are vested;
otherwise, they are recognized on a straight-line basis over the average
remaining vesting period.
The
majority of the Group’s defined benefit plans are pension plans in Germany.
Other significant pension plans are offered in Switzerland, Greece, and a number
of other European Union countries.
In
addition to the Group's pension obligations for non-civil servants in Germany
based on direct and indirect pension commitments, there are further obligations
under Article 131 of the Basic Law (Grundgesetz – GG). Since 1996, the
pension commitments in Germany have been based on direct pension commitments in
the form of credits to capital accounts held by employees. Within the scope of
the realignment of the company pension plan in 1997, existing commitments were
transferred to these capital accounts in accordance with an agreement for the
protection of vested benefits. The benefit obligations due to retirees and
employees approaching retirement remained unchanged.
Individual
Group entities grant defined
contribution plans to their employees. Under defined contribution plans,
the employer does not assume any other obligations above and beyond the payment
of contributions to an external fund. The amount of the future pension payments
will exclusively depend on the contribution made by the employer (and their
employees, if applicable) to the external fund, including income from the
investment of such contributions. The amounts payable are expensed when the
obligation to pay the amounts is established, and classified as
expenses.
Civil-servant retirement arrangements
at Deutsche Telekom. In accordance with the provisions of the German
Posts and Telecommunications Reorganization Act (Postneuordnungsgesetz), the
Federal Pension Service for Post and Telecommunications (Bundes-Pensions-Service
für Post und Telekommunikation e.V. - BPS-PT) for current and former employees
with civil servant status makes pension and allowance payments to retired
employees and their surviving dependents who are entitled to pension payments as
a result of civil-servant status. The level of Deutsche Telekom’s payment
obligations to its special pension fund is defined under § 16 of the German
Act on the Legal Provisions for the Former Deutsche Bundespost Staff
(Postpersonalrechtsgesetz – PostPersRG). Since 2000, Deutsche Telekom AG has
been legally obliged to make an annual contribution to the special pension fund
amounting to 33 percent of the pensionable gross emoluments of active civil
servants and the notional pensionable gross emoluments of civil servants on
leave of absence.
Part-time working arrangements
for employees approaching retirement are largely based on the block model of the
partial retirement arrangement (Altersteilzeit). Two types of obligations, both
measured at their present value in accordance with actuarial principles, arise
and are accounted for separately. The first type of obligation relates to the
cumulative outstanding settlement amount, which is recorded on a pro-rata basis
during the active/working phase. The cumulative outstanding settlement amount is
based on the difference between the employee's remuneration before entering
partial retirement (including the employer's social security contributions) and
the remuneration for the part-time service (including the employer's social
security contributions, but excluding top-up payments). The second type of
obligation relates to the employer's obligation to make top-up payments plus an
additional contribution to the statutory pension scheme and is recognized in
full when the obligation arises.
Provisions
for voluntary redundancy and severance payments and in connection with early
retirement arrangements for civil servants are recognized when Deutsche Telekom
is demonstrably committed to granting those benefits. This is the case when
Deutsche Telekom has a detailed formal plan for the termination of the
employment relationship and is without realistic possibility of withdrawal. The
termination benefits are measured based on the number of employees expected to
be affected by the measures. Where termination benefits fall due more than
twelve months after the reporting date, the expected amount to be paid is
discounted to the reporting date.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Other provisions are
recognized where Deutsche Telekom has legal or constructive obligations to third
parties on the basis of past transactions or events that will probably require
an outflow of resources to settle, and this outflow can be reliably measured.
These provisions are carried at their expected settlement amount, taking into
account all identifiable risks, and may not be offset against reimbursements.
The settlement amount is calculated on the basis of a best estimate. Provisions
are discounted when the effect of the time value of money is material. Changes
in estimates of the amount and timing of payments or changes in the discount
rate applied in measuring provisions for decommissioning, restoration, and
similar obligations are recognized in accordance with the change in the carrying
amount of the related asset. Where the decrease in the amount of a provision
exceeds the carrying amount of the related asset, the excess is recognized
immediately in profit or loss. Provisions are recognized for external legal fees
related to litigation risks.
Contingencies (contingent liabilities
and assets) are potential liabilities or assets arising from past events
whose existence will be confirmed by the occurrence or non-occurrence of one or
more uncertain future events not entirely within the control of Deutsche
Telekom. Contingent liabilities can also be present obligations that arise from
past events for which an outflow of resources embodying economic benefits is not
probable or for which the amount of the obligation cannot be measured reliably.
Contingent liabilities are only recognized at their fair value if they were
assumed in the course of a business combination. Contingent liabilities not
assumed in the course of a business combination are not recognized. Contingent
assets are not recognized. However, when the realization of income is virtually
certain, then the related asset is no longer a contingent asset, but it is
recognized as an asset. Information on contingent liabilities is disclosed in
the notes to the consolidated financial statements, unless the possibility of an
outflow of resources embodying economic benefits is remote. The same applies to
contingent assets where an inflow of economic benefits is probable.
A financial instrument is any
contract that gives rise to a financial asset of one entity and a financial
liability or equity instrument of another entity. Financial assets include, in
particular, cash and cash equivalents, trade receivables and other originated
loans and receivables, held-to-maturity investments, and derivative and
non-derivative financial assets held for trading. Financial liabilities
generally substantiate claims for repayment in cash or another financial asset.
In particular, this includes bonds and other securitized liabilities, trade
payables, liabilities to banks, finance lease payables, liabilities to non-banks
from promissory notes, and derivative financial liabilities. Financial
instruments are recognized as soon as Deutsche Telekom becomes a party to the
contractual regulations of the financial instrument. However, in the case of
regular way purchase or sale (purchase or sale of a financial asset under a
contract whose terms require delivery of the asset within the timeframe
established generally by regulation or convention in the marketplace concerned),
the settlement date is relevant for the initial recognition and derecognition.
This is the day on which the asset is delivered to or by Deutsche Telekom. In
general, financial assets and financial liabilities are offset and the net
amount presented in the statement of financial position when, and only when, the
entity currently has a right to set off the recognized amounts and intends to
settle on a net basis. To the extent that contracts to buy or sell non-financial
assets fall within the scope of IAS 39, they are accounted for in accordance
with this standard.
Financial assets are measured
at fair value on initial recognition. For all financial assets not subsequently
remeasured at fair value through profit or loss, the transaction costs directly
attributable to the acquisition are taken into account. The fair values
recognized in the statement of financial position are generally based on the
market prices of the financial assets. If these are not available, they must be
calculated using standard valuation models on the basis of current market
parameters. For this calculation, the cash flows already fixed or determined by
way of forward rates using the current yield curve are discounted at the
measurement date using the discount factors calculated from the yield curve
applicable at the reporting date. Middle rates are used.
Cash and cash equivalents,
which include cash accounts and short-term cash deposits at banks, have
maturities of up to three months when initially recognized and are measured at
amortized cost.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Trade and other current
receivables are measured at the amount the item is initially recognized
less any impairment losses using the effective interest method, if applicable.
Impairments, which take the form of allowances, make adequate provision for the
expected credit risk; concrete cases of default lead to the derecognition of the
respective receivables. For allowances, financial assets that may need to be
written down are grouped together on the basis of similar credit risk
characteristics, tested collectively for impairment and written down, if
necessary. When the expected future cash flows of the portfolio are being
calculated as required for this, previous cases of default are taken into
consideration in addition to the cash flows envisaged in the contract. The cash
flows are discounted on the basis of the weighted average of the original
effective interest rates of the financial assets contained in the relevant
portfolio.
Impairment
losses on trade accounts receivable are recognized in some cases using allowance
accounts. The decision to account for credit risks using an allowance account or
by directly reducing the receivable will depend on the reliability of the risk
assessment. As there is a variety of operating segments and regional
circumstances, this decision is the responsibility of the respective portfolio
managers.
Other non-current receivables
are measured at amortized cost using the effective interest method.
Financial assets held for
trading are measured at fair value. These mainly include derivatives that
are not part of an effective hedging relationship as set out in IAS 39 and
therefore shall be classified as held for trading. Any gains or losses arising
from subsequent measurement are recognized in the income statement.
Certain
types of investment are intended and expected to be held to maturity with
reasonable economic certainty. These financial assets are measured at amortized
cost using the effective interest method.
Other
non-derivative financial assets are classified as available for sale and
generally measured at fair value. The gains and losses arising from fair value
measurement are recognized directly in equity, unless the impairment is
permanent or significant, or the changes in the fair value of debt instruments
resulting from currency fluctuations are recognized in profit or loss. The
cumulative gains and losses arising from fair value measurement are only
recognized in profit or loss on disposal of the related financial assets. If the
fair value of unquoted equity instruments cannot be measured with sufficient
reliability, these instruments are measured at cost (less any impairment losses,
if applicable).
Deutsche
Telekom has not yet made use of the option of designating financial assets upon
initial recognition as financial assets at fair value
through profit or loss.
The
carrying amounts of the financial assets that are not measured at fair value
through profit or loss are tested at each reporting date to determine whether
there is objective, material evidence of impairment (e.g., a debtor is
facing serious financial difficulties, it is highly probable that insolvency
proceedings will be initiated against the debtor, an active market for the
financial asset disappears, there is a substantial change in the technological,
economic or legal environment and the market environment of the issuer, or there
is a continuous decline in the fair value of the financial asset to a level
below amortized cost). Any impairment losses caused by the fair value being
lower than the carrying amount are recognized in profit or loss. Where
impairments of the fair values of available-for-sale financial assets were
recognized directly in equity in the past, these must now be reclassified from
equity in the amount of the impairment determined and reclassified to the income
statement. If, in a subsequent period, the fair value of the financial asset
increases and this increase can be related objectively to events occurring after
the impairment was recognized, the impairment loss is reversed in the
appropriate amount. In the case of debt instruments, these reversed impairment
losses are recognized in profit or loss. Impairment losses on unquoted equity
instruments that are classified as available for sale and carried at cost may
not be reversed. Both the fair value of held-to-maturity securities to be
determined by testing for impairment and the fair value of the loans and
receivables measured at amortized cost, which are required for impairment
testing, correspond to the present value of the estimated future cash flows,
discounted using the original effective interest rate. The fair value of
unquoted equity instruments measured at cost is calculated as the present value
of the expected future cash flows, discounted using the current interest rate
that corresponds to the investment's special risk position.
Financial liabilities are
measured at fair value on initial recognition. For all financial liabilities not
subsequently measured at fair value through profit or loss, the transaction
costs directly attributable to the acquisition are also recognized.
Trade payables and other
non-derivative financial liabilities are generally measured at amortized
cost using the effective interest method.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The Group
has not yet made use of the option to designate financial liabilities upon
initial recognition as
financial liabilities at fair value through profit or loss.
Derivatives that are not part of
an effective hedging relationship as set out in IAS 39 must be classified
as held for trading and measured at fair value through profit or loss. If the
fair values are negative, the derivatives are recognized as financial
liabilities.
Deutsche
Telekom uses derivatives
to hedge the interest rate and currency risks resulting from its operating,
financing, and investing activities.
The
Company does not hold or issue derivatives for speculative trading
purposes.
Derivatives
are carried at their fair value upon initial recognition. The fair values are
also relevant for subsequent measurement. The fair value of traded derivatives
is equal to their market value, which can be positive or negative. If there is
no market value available, the fair value is determined using standard financial
valuation models.
The fair
value of derivatives is the value that Deutsche Telekom would receive or have to
pay if the financial instrument were discontinued at the reporting date. This is
calculated on the basis of the contracting parties' relevant exchange rates and
interest rates at the reporting date. Calculations are made using middle rates.
In the case of interest-bearing derivatives, a distinction is made between the
"clean price" and the "dirty price." In contrast to the clean price, the dirty
price also includes the interest accrued. The fair values carried correspond to
the full fair value or the dirty price.
Recording
the changes in the fair values - in either the income statement or directly in
equity - depends on whether or not the derivative is part of an effective
hedging relationship as set out in IAS 39. If hedge accounting pursuant to
IAS 39 is not employed, the changes in the fair values of the derivatives must
be recognized in profit or loss. If, on the other hand, an effective hedging
relationship as set out in IAS 39 exists, the hedge will be recognized as
such.
Deutsche
Telekom applies hedge
accounting to hedge items in the statement of financial position and
future cash flows, thus reducing income statement volatility. A distinction is
made between fair value hedges, cash flow hedges, and hedges of a net investment
in a foreign operation depending on the nature of the hedged item.
Fair value hedges are used to
hedge the fair values of assets recognized in the statement of financial
position, liabilities recognized in the statement of financial position, or firm
commitments not yet recognized in the statement of financial position. Any
change in the fair value of the derivative designated as the hedging instrument
is recognized in profit or loss; the carrying amount of the hedged item is
adjusted by the profit or loss to the extent of the hedged risk (basis
adjustment). The adjustments to the carrying amount are not amortized until the
hedging relationship has been discontinued.
Cash flow hedges are used to
hedge against fluctuations in future cash flows from assets and liabilities
recognized in the statement of financial position, from firm commitments (in the
case of currency risks), or from highly probable forecast transactions. To hedge
the currency risk of an unrecognized firm commitment, Deutsche Telekom makes use
of the option to recognize this as a cash flow hedge rather than a fair value
hedge. If a cash flow hedge is employed, the effective portion of the change in
the fair value of the hedging instrument is recognized in equity (hedging
reserve) until the gain or loss on the hedged item is realized; the ineffective
portion of the hedging instrument is recognized in profit or loss. If a hedge of
a forecast transaction subsequently results in the recognition of a financial or
non-financial asset or liability, the associated cumulative gains and losses
that were recognized directly in equity are reclassified into profit or loss in
the same periods during which the financial asset acquired or the financial
liability assumed affects profit or loss for the period. In doing so, Deutsche
Telekom has decided not to make use of the basis adjustment option for hedging
forecast transactions when non-financial items in the statement of financial
position arise.
If hedges of a net investment
in a foreign operation are employed, all
gains or losses on the effective portion of the hedging instrument, together
with any gains or losses on the foreign-currency translation of the hedged
investment, are taken directly to equity. Any gains or losses on the ineffective
portion are recognized immediately in profit or loss. The cumulative
remeasurement gains and losses on the hedging instrument that had previously
been recognized directly in equity and the gains and losses on the currency
translation of the hedged item are recognized in profit or loss only on disposal
of the investment.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
IAS 39
sets out strict requirements on the use of hedge accounting. These are fulfilled
at Deutsche Telekom by documenting, at the inception of a hedge, both the
relationship between the financial instrument used as the hedging instrument and
the hedged item, as well as the aim and strategy of the hedge. This involves
concretely assigning the hedging instruments to the corresponding assets or
liabilities or (firmly agreed/expected) future transactions and also estimating
the degree of effectiveness of the hedging instruments employed. The
effectiveness of existing hedge accounting is monitored on an ongoing basis;
ineffective hedges are discontinued immediately.
Deutsche
Telekom also employs hedges that do not satisfy the strict hedge accounting
criteria of IAS 39 but which make an effective contribution to hedging the
financial risk in accordance with the principles of risk management.
Furthermore, Deutsche Telekom does not use hedge accounting in accordance with
IAS 39 to hedge the foreign-currency exposure of recognized monetary assets
and liabilities, because the gains and losses on the hedged item from currency
translation that are recognized in profit or loss in accordance with IAS 21
are shown in the income statement together with the gains and losses on the
derivatives used as hedging instruments.
Stock options (equity-settled
share-based payment transactions) are measured at fair value on the grant date.
The fair value of the obligation is recognized as personnel costs over the
vesting period. Non-market vesting conditions are included in assumptions about
the number of options that are expected to become exercisable. Obligations
arising from cash-settled share-based payment transactions are recognized as a
liability and measured at fair value at the reporting date. The expenses are
recognized over the vesting period. For both cash-settled and equity-settled
share-based payment transactions, the fair value is determined using
internationally accepted valuation techniques, such as the Black-Scholes model
or the Monte Carlo model.
Revenues include all revenues
from the ordinary business activities of Deutsche Telekom. Revenues are recorded
net of value-added tax and other taxes collected from customers that are
remitted to governmental authorities. They are recognized in the accounting
period in which they are earned in accordance with the realization principle.
Customer activation fees are deferred and amortized over the estimated average
period of customer retention, unless they are part of a multiple-element
arrangement, in which case they are a component of the arrangement consideration
to be paid by the customer. Activation costs and costs of acquiring customers
are deferred, up to the amount of deferred customer activation fees, and
recognized over the average customer retention period.
For multiple-element arrangements,
revenue recognition for each of the units of accounting (elements) identified
must be determined separately. Revenue is recognized on the basis of the fair
value of the individual elements. Arrangements involving the delivery of bundled
products or services shall be separated into individual elements, each with its
own separate revenue contribution. Total arrangement consideration relating to
the bundled contract is allocated among the different elements based on their
relative fair values (i.e., a ratio of the fair value of each element to the
aggregated fair value of the bundled deliverables is generated). The relative
fair value of an individual element and thus the revenue recognized for this
unit of accounting, however, is limited by that proportion of the total
arrangement consideration to be provided by the customer, the payment of which
does not depend on the delivery of additional elements. If the fair value of the
delivered elements cannot be determined reliably but the fair value of the
undelivered elements can be determined reliably, the total arrangement
consideration provided by the customer is allocated by determining the fair
value of the delivered elements as the difference between the total arrangement
consideration and the fair value of the undelivered elements.
Payments
to customers, including payments to dealers and agents (discounts, provisions)
are generally recognized as a decrease in revenue. If the consideration provides
a benefit in its own right and can be reliably measured, the payments are
recognized as expenses.
Revenue
from systems integration contracts requiring the delivery of customized products
is recognized by reference to the stage of completion, as determined by the
ratio of project costs incurred to date to estimated total contract costs, with
estimates regularly revised during the life of the contract. A group of
contracts, whether with a single customer or with several customers, is treated
as a single contract when the group of contracts is negotiated as a single
package, the contracts are closely interrelated and the contracts are performed
concurrently or in a continuous sequence. When a contract covers a number of
assets, the construction of each asset is treated separately when separate
proposals have been submitted for each asset, each asset has been negotiated
separately and can be accepted or rejected by the customer separately, and the
costs and revenues of each asset can be identified. Receivables from these
contracts are classified in the item "trade and other receivables" in the
statement of financial position. Receivables from these contracts are calculated
as the balance of the costs incurred and the profits recognized, less any
discounts and recognized losses on the contract; if the balance for a contract
is negative, this amount is reported in liabilities. If the total actual and
estimated expenses exceed revenues for a particular contract, the loss is
immediately recognized.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Revenue recognition at
Deutsche Telekom is as follows:
Mobile
communications business in the operating segments Germany, United States,
Europe, and Southern and Eastern Europe.
Revenue
generated by the mobile communications business of the operating segments
Germany, United States, Europe, and Southern and Eastern Europe includes
revenues from the provision of mobile services, customer activation fees, and
sales of mobile handsets and accessories. Mobile services revenues include
monthly service charges, charges for special features, call charges, and roaming
charges billed to T-Mobile customers, as well as other mobile operators. Mobile
services revenue is recognized based upon minutes of use or other agreed calling
plans less credits and adjustments for discounts. The revenue and related
expenses associated with the sale of mobile phones, wireless data devices, and
accessories are recognized when the products are delivered and accepted by the
customer.
Fixed-network
business in the operating segments Germany and Southern and Eastern
Europe.
The
fixed-network business in the operating segments Germany and Southern and
Eastern Europe provides narrow and broadband access to the fixed network as well
as the Internet. Revenue generated from these types of access for the use of
voice and data communications is recognized upon rendering of the service. The
services rendered relate either to use by customers (e.g., call minutes),
availability over time (e.g., monthly service charges) or other agreed calling
plans. Telecommunications equipment is also sold, leased, and serviced. Revenue
and expenses associated with the sale of telecommunications equipment and
accessories are recognized when the products are delivered, provided there are
no unfulfilled company obligations that affect the customer’s final acceptance
of the arrangement. Revenue from rentals and operating leases is recognized
monthly as the entitlement to the fees accrues. Revenues from customer
activation fees are deferred over the average customer retention period.
Revenues also result from charges for advertising and e-commerce. Advertising
revenues are recognized in the period that the advertisements are exhibited.
Transaction revenues are recognized upon notification from the customer that
qualifying transactions have occurred and collection of the resulting receivable
is reasonably assured.
Systems
Solutions operating segment.
In the
Systems Solutions operating segment, revenue is recognized when persuasive
evidence of a sales arrangement exists, products are delivered or services are
rendered, the sales price or fee is fixed or determinable and collectability is
reasonably assured.
Revenue
from Computing & Desktop Services is recognized as the services are provided
using a proportional performance model. Revenue is recognized ratably over the
contractual service period for fixed-price contracts and on an output or
consumption basis for all other service contracts. Revenue from service
contracts billed on the basis of time and material used is recognized at the
contractual hourly rates as labor hours are delivered and direct expenses are
incurred.
Revenue
from hardware sales or sales-type leases is recognized when the product is
shipped to the customer, provided there are no unfulfilled company obligations
that affect the customer’s final acceptance of the arrangement. Any costs of
these obligations are recognized when the corresponding revenue is
recognized.
Revenue
from rentals and leases is recognized on a straight-line basis over the rental
period.
Revenue
from systems integration contracts requiring the delivery of customized products
is recognized by reference to the stage of completion, as determined by the
ratio of project costs incurred to date to estimated total contract costs, with
estimates regularly revised during the life of the contract. For contracts
including milestones, revenues are recognized only when the services for a given
milestone are provided and accepted by the customer, and the billable amounts
are not contingent upon providing remaining services.
Telecommunication
services include network services and hosting & ASP services. Contracts for
network services, which consist of the installation and operation of
communication networks for customers, have an average duration of approximately
three years. Customer activation fees and related costs are deferred and
amortized over the estimated average period of customer retention. Revenues for
voice and data services are recognized under such contracts when used by the
customer. When an arrangement contains a lease, the lease is accounted for
separately in accordance with IFRIC 4 and IAS 17. Revenues from hosting &
ASP services are recognized as the services are provided.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Income taxes include current
income taxes as well as deferred taxes. Tax liabilities/tax receivables mainly
comprise liabilities/receivables relating to domestic and foreign income taxes.
They include liabilities/receivables for the current period as well as for prior
periods. The liabilities/receivables are measured based on the applicable tax
law in the countries Deutsche Telekom operates in and include all facts the
Company is aware of.
Deferred
tax assets and liabilities are recognized for temporary differences between the
carrying amounts in the consolidated statement of financial position and the tax
base, as well as for tax loss carryforwards. Deferred tax assets are recognized
to the extent that it is probable that future taxable profit will be available
against which the temporary differences can be utilized. Deferred tax is
provided on temporary differences arising on the investments in subsidiaries and
associates, except where the timing of the reversal of the temporary difference
is controlled by the Group and it is probable that the temporary difference will
not reverse in the foreseeable future. Deferred tax is not recognized if it
arises from the initial recognition of an asset or liability in a transaction
other than a business combination that at the time of the transaction affects
neither accounting profit or loss (before income taxes) under IFRS nor taxable
profit or loss. Currently enacted tax laws and tax laws that have been
substantively enacted as of the reporting date are used as the basis for
measuring deferred taxes.
Judgments
and estimates.
The
presentation of the results of operations, financial position or cash flows in
the consolidated financial statements is dependent upon and sensitive to the
accounting policies, assumptions and estimates. The actual amounts may differ
from those estimates. The following critical accounting estimates and related
assumptions and uncertainties inherent in accounting policies applied are
essential to understand the underlying financial reporting risks and the effects
that these accounting estimates, assumptions and uncertainties may have on the
consolidated financial statements.
Measurement
of property, plant and
equipment, and intangible assets involves the use of estimates for
determining the fair value at the acquisition date, provided they were acquired
in a business combination. Furthermore, the expected useful lives of these
assets must be estimated. The determination of the fair values of assets and
liabilities, as well as of the useful lives of the assets is based on
management’s judgment.
The determination of impairments of
property, plant and equipment, and intangible assets involves the use of
estimates that include, but are not limited to, the cause, timing and amount of
the impairment. Impairment is based on a large number of factors, such as
changes in current competitive conditions, expectations of growth in the
telecommunications industry, increased cost of capital, changes in the future
availability of financing, technological obsolescence, discontinuance of
services, current replacement costs, prices paid in comparable transactions and
other changes in circumstances that indicate an impairment exists. The
recoverable amount and the fair values are typically determined using the
discounted cash flow method which incorporates reasonable market participant
assumptions. The identification of impairment indicators, as well as the
estimation of future cash flows and the determination of fair values for assets
(or groups of assets) require management to make significant judgments
concerning the identification and validation of impairment indicators, expected
cash flows, applicable discount rates, useful lives and residual values.
Specifically, the estimation of cash flows underlying the fair values from the
mobile business considers the continued investment in network infrastructure
required to generate future revenue growth through the offering of new data
products and services, for which only limited historical information on customer
demand is available. If the demand for these products and services does not
materialize as expected, this would result in less revenue, less cash flow and
potential impairment to write down these investments to their fair values, which
could adversely affect future operating results.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The determination of the recoverable
amount of a cash-generating unit involves the use of estimates by
management. Methods used to determine the fair value less costs to sell include
discounted cash flow-based methods and methods that use quoted stock market
prices as a basis. Key assumptions on which management has based its
determination of fair value less costs to sell include revenue, customer
acquisition and retention costs, churn rates, capital expenditure and market
share. These estimates, including the methodologies used, can have a material
impact on the fair value and ultimately the amount of any goodwill
impairment.
Other financial assets include
equity investments in foreign telecommunications service providers on which the
Group does not have a significant influence and that are principally engaged in
the mobile, fixed-network, Internet and data communications business, some of
which are publicly traded and have highly volatile share prices. As a rule, an
investment impairment loss is recorded when an investment’s carrying amount
exceeds the present value of its estimated future cash flows. The calculation of
the present value of estimated future cash flows and the determination of
whether an impairment is permanent involve judgment and rely heavily on an
assessment by management regarding the future development prospects of the
investee. In measuring impairments, quoted market prices are used, if available,
or other valuation parameters, based on information available from the investee.
To determine whether an impairment is permanent, the Company considers the
ability and intent to hold the investment for a reasonable period of time
sufficient for a forecasted recovery of fair value up to (or beyond) the
carrying amount, including an assessment of factors such as the length of time
and magnitude of the excess of carrying value over market value, the forecasted
results of the investee, the regional geographic economic environment and state
of the industry. Future adverse changes in market conditions, particularly a
downturn in the telecommunications industry, or poor operating results of
investees, could result in losses or an inability to recover the carrying amount
of the investments that may not be reflected in an investment’s current carrying
amount. This could result in impairment losses, which could adversely affect
future operating results.
Management
maintains an allowance for
doubtful accounts to account for estimated losses resulting from the
inability of customers to make required payments. When evaluating the adequacy
of an allowance for doubtful accounts, management bases its estimates on the
aging of accounts receivable balances and historical write-off experience,
customer credit worthiness and changes in customer payment terms. If the
financial condition of customers were to deteriorate, actual write-offs might be
higher than expected.
Income taxes must be estimated
for each of the jurisdictions in which the Group operates, involving a specific
calculation of the expected actual income tax exposure for each tax object and
an assessment of temporary differences resulting from the different treatment of
certain items for IFRS consolidated financial and tax reporting purposes. Any
temporary differences will generally result in the recognition of deferred tax
assets and liabilities in the consolidated financial statements. Management
judgment is required for the calculation of actual and deferred taxes. Deferred
tax assets are recognized to the extent that their utilization is probable. The
utilization of deferred tax assets will depend on whether it is possible to
generate sufficient taxable income in the respective tax type and jurisdiction,
taking into account any legal restrictions on the length of the loss
carryforward period. Various factors are used to assess the probability of the
future utilization of deferred tax assets, including past operating results,
operational plans, loss carryforward periods, and tax planning strategies. If
actual results differ from these estimates or if these estimates must be
adjusted in future periods, results of operations, the financial position, and
cash flows may be negatively affected. In the event that the assessment of
future utilization of deferred tax assets changes, the recognized deferred tax
assets must be reduced in profit or loss or directly in equity, or the impaired
deferred tax assets must be recognized in profit or loss or directly in equity,
depending on how the deferred tax assets were originally
recognized.
Pension obligations for benefits to
non-civil servants are generally satisfied by defined benefit plans.
Pension benefit costs for non-civil servants are determined in accordance with
actuarial valuations, which rely on assumptions including discount rates, life
expectancies and, if applicable, expected return on plan assets. The assumptions
concerning the expected return on plan assets are determined on a uniform basis,
considering long-term historical returns, asset allocation and future estimates
of long-term investment returns. In the event that changes in assumptions are
required with respect to discount rates and expected returns on invested assets,
the future amounts of the pension benefit costs may be affected
materially.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Deutsche
Telekom is obligated, under the German Federal Posts and Telecommunications
Agency Reorganization Act (Gesetz zur Reorganisation der Bundesanstalt für Post
und Telekommunikation Deutsche Bundespost), to pay for its share of any
operating cost shortfalls between the income of the Civil Service Health Insurance
Fund (Postbeamtenkrankenkasse) and benefits paid. The Civil Service
Health Insurance Fund provides services mainly in cases of illness, birth, or
death for its members, who are civil servants employed by or retired from
Deutsche Telekom AG, Deutsche Post AG and Deutsche Postbank AG, and their
relatives. When Postreform II came into effect, participation in the Civil
Service Health Insurance Fund was closed to new members. The insurance premiums
collected by the Civil Service Health Insurance Fund may not exceed the
insurance premiums imposed by alternative private health insurance enterprises
for comparable insurance benefits, and, therefore, do not reflect the changing
age distribution of the participants in the fund. Deutsche Telekom recognizes
provisions in the amount of the actuarially determined present value of Deutsche
Telekom's share in the fund's future deficit, using a discount rate and making
assumptions about life expectancies and projections for contributions and future
increases in general health care costs in Germany. Since the calculation of
these provisions involves long-term projections over periods of more than 50
years, the present value of the liability may be highly sensitive even to small
variations in the underlying assumptions.
Deutsche
Telekom exercises considerable judgment in measuring and recognizing provisions and the exposure to
contingent liabilities
related to pending litigation or other outstanding claims subject to
negotiated settlement, mediation, arbitration or government regulation, as well
as other contingent liabilities. Judgment is necessary in assessing the
likelihood that a pending claim will succeed, or a liability will arise, and to
quantify the possible range of the final settlement. Provisions are recorded for
liabilities when losses are expected from executory contracts, a loss is
considered probable and can be reasonably estimated. Because of the inherent
uncertainties in this evaluation process, actual losses may be different from
the originally estimated provision. In addition, significant estimates are
involved in the determination of provisions related to taxes, environmental
liabilities and litigation risks. These estimates are subject to change as new
information becomes available, primarily with the support of internal
specialists, if available, or with the support of outside consultants, such as
actuaries or legal counsel. Revisions to the estimates of these losses from
executory contracts may significantly affect future operating
results.
Revenue
recognition.
Customer
activation fees.
The
operating segments Germany, United States, Europe, and Southern and Eastern
Europe receive installation and activation fees from new customers. These fees
(and related directly attributable costs) are deferred and amortized over the
expected duration of the customer relationship. The estimation of the expected
average duration of the relationship is based on historical customer turnover.
If management’s estimates are revised, material differences may result in the
amount and timing of revenue for any period.
Service
contracts.
The
Systems Solutions operating segment conducts a portion of its business under
long-term contracts with customers. Under these contracts, revenue is recognized
as performance progresses. Contract progress is estimated. Depending on the
methodology used to determine contract progress, these estimates may include
total contract costs, remaining costs to completion, total contract revenues,
contract risks and other judgments. All estimates involved in such long-term
contracts are subject to regular reviews and adjusted as necessary.
Multiple-element
arrangements.
The fair
values of individual units of accounting of bundled products or services are
complex to determine, because some of the elements are price-sensitive and,
thus, volatile in a competitive marketplace. Revisions to the estimates of these
relative fair values may significantly affect the allocation of total
arrangement consideration among the different units of accounting, affecting
future operating results.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Consolidated
group.
All
subsidiaries, joint ventures and associates are included in the consolidated
financial statements. Subsidiaries are companies that are directly or indirectly
controlled by Deutsche Telekom and are fully consolidated. The existence and
effect of potential voting rights that are currently exercisable or convertible,
including potential voting rights held by another entity, are considered when
assessing whether an entity is controlled. Joint ventures are companies jointly
controlled by Deutsche Telekom and other companies. Associates are companies on
which Deutsche Telekom has a significant influence, and that are neither
subsidiaries nor joint ventures. As with joint ventures, associates are
accounted for using the equity method.
The
composition of the Deutsche Telekom Group changed as follows in the 2009
financial year:
|
|
|
Domestic
|
|
|
International
|
|
|
Total
|
|
|
Consolidated
subsidiaries
|
|
|
|
|
|
|
|
|
|
|
January
1, 2009
|
|
|
65 |
|
|
|
164 |
|
|
|
229 |
|
|
Additions
from the acquisition of the OTE group
|
|
|
0 |
|
|
|
30 |
|
|
|
30 |
|
|
Other
additions
|
|
|
3 |
|
|
|
12 |
|
|
|
15 |
|
|
Disposals
(including mergers)
|
|
|
(6 |
) |
|
|
(24 |
) |
|
|
(30 |
) |
|
December
31, 2009
|
|
|
62 |
|
|
|
182 |
|
|
|
244 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Associates
accounted for using the equity method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2009
|
|
|
5 |
|
|
|
9 |
|
|
|
14 |
|
|
Additions
|
|
|
1 |
|
|
|
0 |
|
|
|
1 |
|
|
Disposals
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(3 |
) |
|
December
31, 2009
|
|
|
5 |
|
|
|
7 |
|
|
|
12 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Joint
ventures accounted for using the equity method
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2009
|
|
|
2 |
|
|
|
3 |
|
|
|
5 |
|
|
Additions
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Disposals
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
December
31, 2009
|
|
|
2 |
|
|
|
3 |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
January
1, 2009
|
|
|
72 |
|
|
|
176 |
|
|
|
248 |
|
|
Additions
|
|
|
4 |
|
|
|
42 |
|
|
|
46 |
|
|
Disposals
(including mergers)
|
|
|
(7 |
) |
|
|
(26 |
) |
|
|
(33 |
) |
|
December
31, 2009
|
|
|
69 |
|
|
|
192 |
|
|
|
261 |
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Business
combinations.
The
significant business combinations in the 2009 financial year are described
below.
OTE.
On May
16, 2008, Deutsche Telekom acquired just under 20 percent of the shares in
Hellenic Telecommunications Organization S.A., Athens, Greece (OTE) from Marfin
Investment Group at a price of EUR 2.6 billion. On May 14, 2008,
Deutsche Telekom also entered into a shareholders' agreement with the Hellenic
Republic providing for an increase in this holding to 25 percent plus one
vote - each share is entitled to one vote - and granting Deutsche Telekom the
possibility of controlling OTE’s financial and operating policies, as defined by
IAS 27, following the completion of all necessary steps of the
transaction.
To this
end, Deutsche Telekom and the Hellenic Republic entered into a share purchase
agreement on May 14, 2008 for the acquisition of an additional 3 percent of
the shares at a price of EUR 0.4 billion. Under the share purchase
agreement, Deutsche Telekom has additionally granted the Hellenic Republic two
put options for an additional 5 percent (put option I) and 10 percent
(put option II) of the shares. Deutsche Telekom assumed present ownership of the
shares of put option I when the share purchase agreement became effective,
meaning the agreed purchase price of EUR 0.7 billion was recognized as
acquisition costs. The Hellenic Republic exercised put option I on July 31,
2009. Put option II can be exercised at market price plus a premium initially of
20 percent for a period of twelve months from November 10, 2009, after
which it can be exercised at market price plus a premium of 15 percent
until December 31, 2011. The consummation of the shareholders' agreement and the
share purchase agreement was also contingent upon the acquisition of an
additional 2 percent of the shares in OTE by Deutsche Telekom from the
market, which was executed on July 17, 2008 at a total value of
EUR 0.1 billion.
The share
purchase agreement became legally valid following full approval given by the
responsible national and international supervisory authorities by the beginning
of November 2008. Consequently, Deutsche Telekom acquired an additional 3
percent of OTE's shares from the Hellenic Republic on November 5, 2008, thus
affecting the legal validity of the shareholders' agreement. As a result of the
aforementioned transactions, Deutsche Telekom holds a stake in OTE of 30 percent
plus one share. The changes to OTE's Articles of Incorporation necessary for
full implementation of the shareholders' agreement were approved at the
extraordinary shareholders' meeting of OTE on February 6, 2009.
Consequently, Deutsche Telekom has taken control of 50 percent plus two
voting shares and therefore the company's financial and operating
policies.
Upon
implementation of the shareholders’ agreement on February 6, 2009, OTE is no
longer included using the equity method, but fully consolidated for the first
time. As part of the first-time full consolidation of OTE, put option II was
recognized as contingent consideration, thus resulting in the recording of a
liability and corresponding cost of the acquisition of EUR 0.6 billion. As
a result, the interest attributable to Deutsche Telekom amounts to
40 percent plus one vote. The total cost of the acquisition including costs
directly attributable to the transaction amounts to EUR 4.4 billion, of
which EUR 3.7 billion had an effect on cash flows until December 31, 2009.
The following table shows the purchase price as of the date of
acquisition:
|
|
|
Interest (%)
|
|
|
(billions
of €)
|
|
|
Purchase
price for acquired shares
|
|
|
25 |
|
|
|
3.1 |
|
|
Shares
acquired from Marfin Investment Group
|
|
|
20 |
|
|
|
2.6 |
|
|
Shares
acquired from the market
|
|
|
2 |
|
|
|
0.1 |
|
|
Shares
acquired from the Hellenic Republic
|
|
|
3 |
|
|
|
0.4 |
|
|
Put
option I (exercised on July 31, 2009)
|
|
|
5 |
|
|
|
0.7 |
|
|
Put
option II
|
|
|
10 |
|
|
|
0.7 |
|
|
Dividend
received from pre-acquisition profits
|
|
|
|
|
|
|
(0.1 |
) |
|
Purchase
price
|
|
|
40 |
|
|
|
4.4 |
|
The total
liability for put option II comprises the covered shares measured at market
price as well as a market price premium. The carrying amounts of the liabilities
for put option II are adjusted in each period in the event of changes in market
price, as well as in the event that it is not exercised. As of the reporting
date, liabilities for put option II adjusted for changes in market prices
amounted to EUR 0.6 billion; accordingly, goodwill decreased by
EUR 0.1 billion compared with the date of acquisition to EUR 2.4
billion.
The
business combination with OTE resulted in goodwill of EUR 2.5 billion
at the acquisition date. This goodwill arises from synergies expected from the
two companies, in particular in procurement as well as due to the integrated
market position. The fair
values of OTE’s acquired assets, liabilities and contingent liabilities
recognized at the acquisition date and their carrying amounts immediately prior
to the business combination are presented in the table below. The measurement of
the acquired property, plant and equipment was completed in the fourth quarter
of 2009 as part of the final purchase price allocation.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
(millions of
€)
|
|
Fair
value at the acquisition date
|
|
|
Carrying
amounts immediately
prior
to the business combination
|
|
|
Cash
and cash equivalents
|
|
|
1,558 |
|
|
|
1,558 |
|
|
Non-current
assets and disposal groups held for sale
|
|
|
195 |
|
|
|
158 |
|
|
Other
assets
|
|
|
1,716 |
|
|
|
1,716 |
|
|
Current
assets
|
|
|
3,469 |
|
|
|
3,432 |
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
5,348 |
|
|
|
4,734 |
|
|
Of
which: goodwill
|
|
|
2,500 |
|
|
|
3,835 |
|
|
Property,
plant and equipment
|
|
|
6,965 |
|
|
|
5,581 |
|
|
Other
assets
|
|
|
823 |
|
|
|
782 |
|
|
Non-current
assets
|
|
|
13,136 |
|
|
|
11,097 |
|
|
Assets
|
|
|
16,605 |
|
|
|
14,529 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities
|
|
|
637 |
|
|
|
637 |
|
|
Trade
and other payables
|
|
|
901 |
|
|
|
901 |
|
|
Liabilities
directly associated with non-current assets and disposal groups held for
sale
|
|
|
21 |
|
|
|
21 |
|
|
Other
liabilities
|
|
|
1,430 |
|
|
|
1,430 |
|
|
Current
liabilities
|
|
|
2,989 |
|
|
|
2,989 |
|
|
|
|
|
|
|
|
|
|
|
|
Financial
liabilities
|
|
|
5,133 |
|
|
|
5,411 |
|
|
Other
liabilities
|
|
|
1,713 |
|
|
|
1,018 |
|
|
Non-current
liabilities
|
|
|
6,846 |
|
|
|
6,429 |
|
|
Liabilities
|
|
|
9,835 |
|
|
|
9,418 |
|
Following
the developments in the economy overall during the fourth quarter of 2008 and
the associated increase in the volatility of the discount rates, Deutsche
Telekom tested the OTE investment for impairment at the end of 2008. This test
resulted in Deutsche Telekom recognizing an impairment loss of EUR 0.5
billion on the carrying amount of OTE. The impairment loss was disclosed as a
decrease in the goodwill when OTE was fully consolidated for the first time. A
further impairment loss of EUR 0.4 billion was recognized on goodwill in
the fourth quarter of 2009. For further details, please refer to Note
5.
The
supervisory authorities approved the acquisition of the stake in OTE subject to
the requirement to sell Cosmofon, OTE’s Macedonian subsidiary. Cosmofon was sold
as of May 12, 2009 and is therefore no longer included in the consolidated
statement of financial position as of the reporting date.
OTE was
fully included in Deutsche Telekom’s consolidated financial statements for the
first time as of February 6, 2009. Net revenue increased by
EUR 5,426 million in the reporting period as a result of the
acquisition of OTE. Had the business combination already occurred on January 1,
2009, Deutsche Telekom's net revenue would have been EUR 499 million
higher. Deutsche Telekom's profit for the current period includes a loss at OTE
of EUR 378 million. Had the business combination already occurred on
January 1, 2009, the profit would have been EUR 24 million
higher.
Other.
Deutsche
Telekom's other acquisitions in 2009 do not have a material impact on the
presentation of the results of operations and financial position. The other
additions to the goodwill of the Group totaled EUR 65 million (in
particular Telemobil S.A. (Zapp) and Metrolico).
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Pro
forma information - unaudited.
The pro
forma information shown in the following table presents Deutsche Telekom’s
financial data, including its principal consolidated subsidiaries acquired in
the financial years 2007 through 2009, as if they had been included in the
consolidated financial statements from the beginning of each financial year in
which they were acquired.
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Net
revenue
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
64,602 |
|
|
|
61,666 |
|
|
|
62,516 |
|
|
Pro
forma
|
|
|
65,101 |
|
|
|
61,750 |
|
|
|
63,060 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
profit
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
Pro
forma
|
|
|
377 |
|
|
|
1,477 |
|
|
|
557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings
per share/ADS (€)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Reported
|
|
|
0.08 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
Pro
forma
|
|
|
0.09 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Principal
subsidiaries.
The
Group's principal subsidiaries are presented in the following
table:
|
|
|
Deutsche
Telekom share
|
|
|
Net
revenue
|
|
|
Employees
|
|
|
|
|
(%)
|
|
|
(millions
of €)
|
|
|
(average)
|
|
|
Name
and registered office
|
|
Dec.
31, 2009
|
|
|
2009
|
|
|
2009
|
|
|
T-Mobile
USA, Inc., Bellevue, Washington, United States1,2
|
|
|
100.00 |
|
|
|
15,471 |
|
|
|
38,231 |
|
|
T-Systems
International GmbH, Frankfurt/Main
|
|
|
100.00 |
|
|
|
4,312 |
|
|
|
15,060 |
|
|
T-Mobile
Deutschland GmbH, Bonn
|
|
|
100.00 |
|
|
|
7,813 |
|
|
|
5,531 |
|
|
Hellenic
Telecommunications Organization S.A. (OTE), Athens, Greece1
|
|
|
30.00 |
|
|
|
5,000 |
|
|
|
30,339 |
|
|
T-Mobile
Holdings Ltd., Hatfield, United Kingdom1,2
|
|
|
100.00 |
|
|
|
3,390 |
|
|
|
5,660 |
|
|
Magyar
Telekom Nyrt., Budapest, Hungary1,2
|
|
|
59.30 |
|
|
|
2,124 |
|
|
|
9,749 |
|
|
T-Mobile
Netherlands Holding B.V., The Hague, Netherlands1,2
|
|
|
100.00 |
|
|
|
1,807 |
|
|
|
2,285 |
|
|
PTC,
Polska Telefonia Cyfrowa Sp.z o.o., Warsaw, Poland2
|
|
|
97.00 |
|
|
|
1,756 |
|
|
|
5,462 |
|
|
T-Mobile
Czech Republic a.s., Prague, Czech Republic2
|
|
|
60.77 |
|
|
|
1,191 |
|
|
|
2,721 |
|
|
HT-Hrvatske
telekomunikacije d.d., Zagreb, Croatia1
|
|
|
51.00 |
|
|
|
1,161 |
|
|
|
6,222 |
|
|
T-Mobile
Austria Holding GmbH, Vienna, Austria1,2
|
|
|
100.00 |
|
|
|
1,038 |
|
|
|
1,488 |
|
|
Slovak
Telekom a.s., Bratislava, Slovakia1
|
|
|
51.00 |
|
|
|
974 |
|
|
|
5,107 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Consolidated
subgroup financial statements
|
|
2
|
Indirect
shareholding of Deutsche Telekom AG
|
In
accordance with § 313 HGB, the full list of investment holdings, which is
included in the notes to the consolidated financial statements, is published in
the electronic Federal Gazette (elektronischer Bundesanzeiger) together with the
consolidated financial statements. The list is available upon request from
Deutsche Telekom AG, Bonn, Investor Relations. Furthermore, the list of
investment holdings includes a full list of all subsidiaries that exercise
simplification options in accordance with § 264 (3) HGB or disclosure
simplification options in accordance with § 264 b HGB.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Consolidation
methods.
Under
IFRS, all business combinations must be accounted for using the purchase method.
The acquirer allocates the cost of a business combination by recognizing the
acquiree's identifiable assets, liabilities and contingent liabilities that
satisfy the recognition criteria at their fair value at the acquisition date.
Non-current assets that are classified as held for sale are recognized at fair
value less costs to sell. Any excess of the cost of the business combination
over the acquirer’s interest in the net fair value of the identifiable assets,
liabilities and contingent liabilities taken over, regardless of the level of
the investment held, is recognized as goodwill. Any excess of the acquirer's
interest in the net fair value of the identifiable assets, liabilities and
contingent liabilities over the cost of a business combination is recognized in
profit or loss.
When
acquiring additional equity interests in companies that are already consolidated
subsidiaries, the difference between the purchase price consideration and the
proportionate acquired equity is recognized as goodwill.
Income
and expenses of a subsidiary remain included in the consolidated financial
statements from the acquisition date. Income and expenses of a subsidiary are
included in the consolidated financial statements until the date on which the
parent ceases to control the subsidiary. The difference between the proceeds
from the disposal of the subsidiary and its carrying amount, including the
cumulative amount of any exchange differences that are recognized in equity and
relate to the subsidiary, is recognized in the consolidated income statement as
the gain or loss on the disposal of the subsidiary. Intercompany income and
expenses, receivables and liabilities, and profits or losses are
eliminated.
Investments
in joint ventures and associates accounted for using the equity method are
carried at the acquirer’s interest in the identifiable assets (including any
attributable goodwill), liabilities and contingent liabilities which are
remeasured to fair value upon acquisition. Goodwill from application of the
equity method is not amortized. Unrealized gains and losses from transactions
with these companies are eliminated in proportion to the acquirer's interest.
The carrying amount of the investment accounted for using the equity method is
tested for impairment whenever there are indications of impairment. If the
carrying amount of the investment exceeds its recoverable amount, an impairment
loss must be recognized in the amount of the difference. The recoverable amount
is measured at the higher of fair value less costs to sell and value in
use.
Currency
translation.
Foreign-currency
transactions are translated into the functional currency at the exchange rate at
the date of transaction. At the reporting date, monetary items are translated at
the closing rate, and non-monetary items are translated at the exchange rate at
the date of transaction. Exchange rate differences are recognized in profit or
loss.
The
assets and liabilities of Group entities whose functional currency is not the
euro are translated into euros from the local currency using the middle rates at
the reporting date. The middle rates are the average of the bid and ask rates at
closing on the respective dates. The income statements and corresponding profit
or loss of foreign-currency denominated Group entities are translated at average
exchange rates for the period. Exchange rate differences are recognized as a
separate component of equity.
The
exchange rates of certain significant currencies changed as
follows:
|
|
|
Annual
average rate
|
|
|
Rate
at the reporting date
|
|
|
(€)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
100
Czech korunas (CZK)
|
|
|
3.78123 |
|
|
|
4.00894 |
|
|
|
3.60154 |
|
|
|
3.77646 |
|
|
|
3.75561 |
|
|
1
Pound sterling (GBP)
|
|
|
1.12218 |
|
|
|
1.25601 |
|
|
|
1.46142 |
|
|
|
1.12387 |
|
|
|
1.04555 |
|
|
100
Croatian kuna (HRK)
|
|
|
13.62190 |
|
|
|
13.84420 |
|
|
|
13.62830 |
|
|
|
13.70710 |
|
|
|
13.57610 |
|
|
1,000
Hungarian forints (HUF)
|
|
|
3.56631 |
|
|
|
3.97687 |
|
|
|
3.97762 |
|
|
|
3.69609 |
|
|
|
3.77407 |
|
|
100
Macedonian denars (MKD)
|
|
|
1.62428 |
|
|
|
1.62523 |
|
|
|
1.62699 |
|
|
|
1.63024 |
|
|
|
1.64255 |
|
|
100
Polish zlotys (PLN)
|
|
|
23.09760 |
|
|
|
28.47930 |
|
|
|
26.42900 |
|
|
|
24.35900 |
|
|
|
23.94770 |
|
|
1
U.S. dollar (USD)
|
|
|
0.71692 |
|
|
|
0.67976 |
|
|
|
0.72974 |
|
|
|
0.69393 |
|
|
|
0.71617 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES
TO THE CONSOLIDATED STATEMENT OF FINANCIALS POSITION
1
Cash and cash equivalents.
The
assets reported under this category have an original maturity of less than three
months and mainly comprise fixed-term bank deposits. They also include small
amounts of cash-in-hand and checks. Deutsche Telekom obtained cash collateral of
EUR 578 million on the basis of collateral contracts as surety for
potential credit risks arising from derivative transactions.
In the
reporting period, cash and cash equivalents increased by
EUR 2.0 billion to EUR 5.0 billion. This increase was partly
attributable to the addition of cash and cash equivalents totaling EUR 1.6
billion as a result of the first-time full consolidation of OTE. In addition,
net cash from operating activities of EUR 15.8 billion contributed to this
increase, which was partially offset by cash outflows for intangible assets and
property, plant and equipment of EUR 9.2 billion, dividend payments of
EUR 4.3 billion, cash outflows of EUR 1.0 billion for the acquisition
of shares in fully consolidated entities and financing repayments of
EUR 0.8 billion net.
For
further details, please refer to the consolidated statement of cash
flows.
As of
December 31, 2009, the Group reported cash and cash equivalents of EUR 0.6
billion held by subsidiaries in Croatia, the F.Y.R.O.Macedonia and Montenegro.
These countries are subject to foreign exchange controls or other legal
restrictions. As a result, the cash balances are not fully available for use by
the parent or other Group companies.
2
Trade and other receivables.
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Trade
receivables
|
|
|
6,643 |
|
|
|
7,224 |
|
|
Receivables
from construction contracts
|
|
|
114 |
|
|
|
169 |
|
|
|
|
|
6,757 |
|
|
|
7,393 |
|
|
|
|
|
|
|
|
|
|
|
Of the
total amount of trade receivables and receivables from construction contracts,
EUR 6,715 million (December 31, 2008: EUR 7,391 million) is due within
one year.
|
Trade
receivables
|
Carrying
amounts
|
Of
which: neither impaired nor past due on the reporting date
|
Of
which: not impaired on the reporting date and past due
in
the following periods
|
|
(millions
of €)
|
Less
than 30 days
|
Between
30 and 60 days
|
Between
61 and
90
days
|
Between
91 and 180 days
|
Between
181 and 360 days
|
More
than 360 days
|
|
as
of Dec. 31, 2009
|
6,643
|
3,245
|
814
|
115
|
77
|
179
|
205
|
38
|
|
|
|
|
|
|
|
|
|
|
|
as
of Dec. 31, 2008
|
7,224
|
4,029
|
730
|
135
|
40
|
73
|
37
|
117
|
|
|
|
|
|
|
|
|
|
|
With
respect to the trade receivables that are neither impaired nor past due, there
are no indications as of the reporting date that the debtors will not meet their
payment obligations.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table shows the development of allowances on trade
receivables:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
Allowances
as of January 1
|
|
|
1,023 |
|
|
|
1,071 |
|
|
Currency
translation adjustments
|
|
|
(11 |
) |
|
|
(7 |
) |
|
Additions
(allowances recognized as expense)
|
|
|
676 |
|
|
|
547 |
|
|
Use
|
|
|
(447 |
) |
|
|
(437 |
) |
|
Reversal
|
|
|
(63 |
) |
|
|
(151 |
) |
|
Allowances
as of December 31
|
|
|
1,178 |
|
|
|
1,023 |
|
|
|
|
|
|
|
|
|
|
|
The
following table presents expenses for the full write-off of trade receivables as
well as income from recoveries on trade receivables written off:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Expenses
for full write-off of receivables
|
|
|
327 |
|
|
|
424 |
|
|
|
378 |
|
|
Income
from recoveries on receivables written off
|
|
|
39 |
|
|
|
55 |
|
|
|
52 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
income and expenses relating to allowances and write-offs of trade receivables
are reported under selling expenses.
3
Inventories.
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Raw
materials and supplies
|
|
|
193 |
|
|
|
118 |
|
|
Work
in process
|
|
|
48 |
|
|
|
27 |
|
|
Finished
goods and merchandise
|
|
|
929 |
|
|
|
1,147 |
|
|
Advance
payments
|
|
|
4 |
|
|
|
2 |
|
|
|
|
|
1,174 |
|
|
|
1,294 |
|
|
|
|
|
|
|
|
|
|
|
Of the
inventories reported as of December 31, 2009, write-downs of
EUR 33 million (2008: EUR 53 million; 2007:
EUR 55 million) on the net realizable value were recognized in profit
or loss.
The
carrying amount of inventories recognized as expense amounted to EUR 6,311
million (2008: EUR 6,188 million; 2007: EUR 5,713
million).
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
4
Non-current assets and disposal groups held for sale.
As of
December 31, 2009, current assets recognized in the consolidated statement of
financial position included EUR 6.5 billion in non-current assets and
disposal groups held for sale as well as directly associated liabilities of
EUR 1.4 billion. The following table sets out the major classes of assets
and liabilities classified as held for sale:
|
|
|
T-Mobile
UK
|
|
|
Real
estate
portfolio
|
|
|
Other
|
|
|
Dec.
31, 2009
|
|
|
(millions
of €)
|
|
Europe
operating segment
|
|
|
Group
Headquarters & Shared Services
|
|
|
|
|
|
|
|
|
Current
assets
|
|
|
547 |
|
|
|
- |
|
|
|
- |
|
|
|
547 |
|
|
Trade
and other receivables
|
|
|
314 |
|
|
|
- |
|
|
|
- |
|
|
|
314 |
|
|
Other
current assets
|
|
|
233 |
|
|
|
- |
|
|
|
- |
|
|
|
233 |
|
|
Non-current
assets
|
|
|
5,870 |
|
|
|
55 |
|
|
|
55 |
|
|
|
5,980 |
|
|
Intangible
assets
|
|
|
3,821 |
|
|
|
- |
|
|
|
26 |
|
|
|
3,847 |
|
|
Property,
plant and equipment
|
|
|
1,608 |
|
|
|
55 |
|
|
|
29 |
|
|
|
1,692 |
|
|
Other
non-current assets
|
|
|
441 |
|
|
|
- |
|
|
|
- |
|
|
|
441 |
|
|
Non-current
assets and disposal groups held for sale
|
|
|
6,417 |
|
|
|
55 |
|
|
|
55 |
|
|
|
6,527 |
|
|
Current
liabilities
|
|
|
761 |
|
|
|
- |
|
|
|
- |
|
|
|
761 |
|
|
Trade
and other payables
|
|
|
503 |
|
|
|
- |
|
|
|
- |
|
|
|
503 |
|
|
Other
current liabilities
|
|
|
258 |
|
|
|
- |
|
|
|
- |
|
|
|
258 |
|
|
Non-current
liabilities
|
|
|
662 |
|
|
|
- |
|
|
|
- |
|
|
|
662 |
|
|
Liabilities
directly associated with non-current assets and disposal groups held for
sale
|
|
|
1,423 |
|
|
|
- |
|
|
|
- |
|
|
|
1,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
assets and liabilities shown here that are classified as held for sale, and the
assets and liabilities associated with disposal groups, are not included in the
further explanations in the notes to the consolidated financial statements or
presented as reconciliation.
T-Mobile
UK.
On
November 5, 2009, Deutsche Telekom AG and France Télécom S.A. signed an
agreement on the combination of T-Mobile UK and Orange UK in a joint venture in
which the two companies will hold 50 percent each. After completion of the
transaction, Deutsche Telekom AG will account for its share in the joint venture
using the equity method. The entire transaction is subject to approval by the
relevant competition authorities. In addition to the assets and liabilities
shown in the table above, EUR -2.2 billion (translation of foreign
operations) of the total other comprehensive income reported as of December 31,
2009 is attributable to T-Mobile UK. In addition, T-Mobile UK received funds
totaling EUR 1.3 billion from Deutsche Telekom as of the reporting date.
This amount is not included in the liabilities shown above, since funding was
provided from within the Group. Obligations from operating leases totaling
EUR 1.1 billion that existed at T-Mobile UK at the reporting date were not
included in future obligations from operating leases (Note 33). In addition,
T-Mobile UK had commitments for the acquisition of property, plant and equipment
in the amount of EUR 0.3 billion.
Real
estate portfolio.
Real
estate was shown as held for sale in the consolidated statement of financial
position at the reporting date as a result of measures to make the use of floor
space more efficient, especially in technical facilities (December 31,
2008: EUR 0.4 billion). This primarily relates to real estate owned by
Deutsche Telekom AG. Impairment losses of EUR 0.2 billion were expensed in
2009 in connection with the reclassification of real estate. Given the current
difficult market environment for real estate, Deutsche Telekom does not
anticipate disposal of certain land and buildings intended for sale in the near
future. According to the relevant accounting regulations (IFRS 5), this real
estate at Group Headquarters & Shared Services was no longer permitted to be
recognized in the consolidated statement of financial position as held for sale
and had to be reclassified as non-current assets and measured at the lower of
amortized cost and recoverable amount. The resulting measurement differences of
EUR 0.1 billion have been recognized under “Other operating income“ in the
income statement.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
5
Intangible assets.
|
(millions
of €)
|
Internally
generated intangible assets
|
Acquired
intangible assets
|
Goodwill
|
Advance
payments
|
Total
|
|
Total
|
Acquired
concessions, industrial and similar rights
and
assets
|
UMTS
licenses
|
GSM
licenses
|
FCC
licenses
(T-Mobile
USA)
|
Other
acquired intangible assets
|
|
Cost
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec. 31, 2007
|
2,083
|
42,379
|
1,042
|
15,161
|
1,287
|
16,357
|
8,532
|
30,274
|
269
|
75,005
|
|
Currency
translation
|
(23)
|
(736)
|
18
|
(1,301)
|
(28)
|
907
|
(332)
|
(1,421)
|
(8)
|
(2,188)
|
|
Changes
in the composition of the Group
|
0
|
436
|
2
|
0
|
0
|
276
|
158
|
(1)
|
0
|
435
|
|
Additions
|
414
|
692
|
15
|
10
|
0
|
159
|
508
|
884
|
750
|
2,740
|
|
Disposals
|
361
|
538
|
(12)
|
0
|
18
|
0
|
532
|
2
|
(2)
|
899
|
|
Change
from non-current assets and disposal groups held for sale
|
2
|
44
|
0
|
0
|
0
|
(33)
|
77
|
54
|
0
|
100
|
|
Reclassifications
|
105
|
663
|
91
|
0
|
39
|
0
|
533
|
0
|
(141)
|
627
|
|
At
Dec. 31, 2008
|
2,220
|
42,940
|
1,180
|
13,870
|
1,280
|
17,666
|
8,944
|
29,788
|
872
|
75,820
|
|
Currency
translation
|
(12)
|
(98)
|
3
|
410
|
2
|
(547)
|
34
|
246
|
2
|
138
|
|
Changes
in the composition of the Group
|
0
|
2,953
|
425
|
327
|
198
|
0
|
2,003
|
0
|
0
|
2,953
|
|
Additions
|
232
|
713
|
26
|
0
|
11
|
31
|
645
|
2,470
|
676
|
4,091
|
|
Disposals
|
278
|
1,352
|
88
|
0
|
0
|
0
|
1,264
|
18
|
11
|
1,659
|
|
Change
from non-current assets and disposal groups held for sale
|
(219)
|
(5,413)
|
0
|
(4,593)
|
0
|
(35)
|
(785)
|
(5,933)
|
0
|
(11,565)
|
|
Reclassifications
|
572
|
462
|
(16)
|
8
|
0
|
0
|
470
|
0
|
(430)
|
604
|
|
At
Dec. 31, 2009
|
2,515
|
40,205
|
1,530
|
10,022
|
1,491
|
17,115
|
10,047
|
26,553
|
1,109
|
70,382
|
NOTES TO THE
CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
(millions
of €)
|
Internally
generated intangible assets
|
Acquired
intangible assets
|
Goodwill
|
Advance
payments
|
Total
|
|
Total
|
Acquired
concessions, industrial and similar rights
and
assets
|
UMTS
licenses
|
GSM
licenses
|
FCC
licenses
(T-Mobile
USA)
|
Other
acquired intangible assets
|
|
Accumulated
amortization
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec. 31, 2007
|
1,223
|
9,744
|
437
|
3,305
|
573
|
0
|
5,429
|
9,634
|
0
|
20,601
|
|
Currency
translation
|
(6)
|
(548)
|
(11)
|
(308)
|
(11)
|
0
|
(218)
|
(761)
|
0
|
(1,315)
|
|
Changes
in the composition of the Group
|
0
|
(18)
|
0
|
0
|
0
|
0
|
(18)
|
0
|
0
|
(18)
|
|
Additions
(amortization)
|
459
|
2,598
|
134
|
868
|
124
|
0
|
1,472
|
0
|
0
|
3,057
|
|
Additions
(impairment)
|
14
|
37
|
0
|
0
|
0
|
21
|
16
|
289
|
0
|
340
|
|
Disposals
|
370
|
508
|
(19)
|
0
|
18
|
0
|
509
|
0
|
0
|
878
|
|
Change
from non-current assets and disposal groups held for sale
|
0
|
(21)
|
0
|
0
|
0
|
(21)
|
0
|
0
|
0
|
(21)
|
|
Reclassifications
|
(10)
|
137
|
67
|
0
|
1
|
0
|
69
|
0
|
0
|
127
|
|
At
Dec. 31, 2008
|
1,310
|
11,421
|
646
|
3,865
|
669
|
0
|
6,241
|
9,162
|
0
|
21,893
|
|
Currency
translation
|
(8)
|
163
|
2
|
109
|
2
|
0
|
50
|
250
|
1
|
406
|
|
Changes
in the composition of the Group
|
0
|
(33)
|
0
|
0
|
0
|
0
|
(33)
|
0
|
0
|
(33)
|
|
Additions
(amortization)
|
561
|
2,742
|
175
|
767
|
138
|
0
|
1,662
|
0
|
0
|
3,303
|
|
Additions
(impairment)
|
0
|
7
|
7
|
0
|
0
|
0
|
0
|
2,345
|
0
|
2,352
|
|
Disposals
|
278
|
1,344
|
81
|
0
|
0
|
0
|
1,263
|
0
|
0
|
1,622
|
|
Change
from non-current assets and disposal groups held for sale
|
(132)
|
(1,969)
|
0
|
(1,356)
|
0
|
0
|
(613)
|
(5,538)
|
0
|
(7,639)
|
|
Reclassifications
|
2
|
15
|
(14)
|
0
|
0
|
0
|
29
|
0
|
0
|
17
|
|
At
Dec. 31, 2009
|
1,455
|
11,002
|
735
|
3,385
|
809
|
0
|
6,073
|
6,219
|
1
|
18,677
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
carrying amounts
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec. 31, 2008
|
910
|
31,519
|
534
|
10,005
|
611
|
17,666
|
2,703
|
20,626
|
872
|
53,927
|
|
At
Dec. 31, 2009
|
1,060
|
29,203
|
795
|
6,637
|
682
|
17,115
|
3,974
|
20,334
|
1,108
|
51,705
|
The net
carrying amount of the UMTS licenses of EUR 6,637 million mainly
relates to T-Mobile Deutschland. Deutsche
Telekom had commitments for the acquisition of intangible assets in the amount
of EUR 0.3 billion as of the reporting date. These are largely related to
network expansion at T-Mobile USA and T-Mobile Deutschland.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The carrying amounts of goodwill
are mainly allocated to the following operating segments and
cash-generating units:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Germany
– Fixed network
|
|
|
3,587 |
|
|
|
3,527 |
|
|
United
States
|
|
|
4,471 |
|
|
|
4,604 |
|
|
Europe
|
|
|
4,801 |
|
|
|
6,887 |
|
|
Of
which: T-Mobile UK
|
|
n.a.
|
|
|
|
2,073 |
|
|
Of
which: PTC
|
|
|
1,607 |
|
|
|
1,580 |
|
|
Of
which: T-Mobile Netherlands
|
|
|
1,317 |
|
|
|
1,317 |
|
|
Of
which: T-Mobile Austria group
|
|
|
1,202 |
|
|
|
1,249 |
|
|
Of
which: T-Mobile Czech Republic
|
|
|
631 |
|
|
|
625 |
|
|
Of
which: Other
|
|
|
44 |
|
|
|
43 |
|
|
Southern
and Eastern Europe
|
|
|
4,481 |
|
|
|
2,565 |
|
|
Of
which: Greece – Mobile communications
|
|
|
964 |
|
|
|
- |
|
|
Of
which: Hungary – Mobile communications
|
|
|
958 |
|
|
|
978 |
|
|
Of
which: Greece – Fixed network
|
|
|
476 |
|
|
|
- |
|
|
Of
which: Hungary – Fixed network
|
|
|
373 |
|
|
|
430 |
|
|
Of
which: Bulgaria – Mobile communications
|
|
|
293 |
|
|
|
- |
|
|
Of
which: Croatia – Fixed network
|
|
|
297 |
|
|
|
291 |
|
|
Of
which: Romania – Mobile communications
|
|
|
251 |
|
|
|
- |
|
|
Of
which: Slovakia – Fixed network
|
|
|
225 |
|
|
|
266 |
|
|
Of
which: Croatia – Mobile communications
|
|
|
196 |
|
|
|
194 |
|
|
Of
which: Slovakia – Mobile communications
|
|
|
168 |
|
|
|
168 |
|
|
Of
which: Other
|
|
|
280 |
|
|
|
238 |
|
|
Systems
Solutions
|
|
|
2,994 |
|
|
|
3,043 |
|
|
|
|
|
20,334 |
|
|
|
20,626 |
|
In the
2009 financial year, the main changes in the carrying amounts of goodwill at
cash-generating units were as follows:
Europe. The goodwill of
T-Mobile UK in the Europe operating segment decreased as a result of an
impairment loss of EUR 1.8 billion that had to be recognized in the first
quarter of 2009. Events or circumstances that resulted in this impairment loss
to be recognized at the cash-generating unit T-Mobile UK in the first quarter of
2009 primarily include the major economic slowdown and more intense competition
in the United Kingdom. Lower roaming revenues and new regulation of roaming and
termination charges had a negative impact on revenue at the time of the
impairment. Increased termination charges for the use of third-party mobile
communications networks and high customer acquisition and retention expenses
raised the cost base. Since T-Mobile UK was classified as held for sale as of
September 30, 2009, the remaining goodwill is no longer shown under
intangible assets, but as non-current assets and disposal groups held for sale
(Note 4). The goodwill of the cash-generating unit T-Mobile Austria group also
declined as a result of an impairment loss that had to be recognized at the end
of the year.
Southern and Eastern Europe.
The first-time full consolidation of the OTE group in the consolidated
financial statements generated goodwill of EUR 2.5 billion. This was
allocated primarily to the following cash-generating units: Greece – Fixed
network, Greece – Mobile communications, Bulgaria – Mobile communications, and
Romania – Mobile communications. In addition to exchange rate effects, the
carrying amounts of the goodwill assets in the Southern and Eastern Europe
operating segment have changed as a result of impairment losses that had to be
recognized at the end of the year.
All other
goodwill assets changed primarily as a result of exchange rate
effects.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Disclosures
on impairment tests
Deutsche
Telekom performed its annual goodwill impairment tests at December 31, 2009. The
following table gives an overview of the periods for which the Group has
provided cash flow projections, the growth rates used as the basis for the cash
flow projections, and the discount rates applied to the cash flow projections,
broken down by operating segment:
|
|
|
Periods
used
(years)
|
|
|
Growth
rates
(%)
|
|
|
Discount
rates
(%)
|
|
|
Germany
|
|
|
10 |
|
|
|
1.0 |
|
|
|
6.51 |
|
|
United
States
|
|
|
10 |
|
|
|
2.5 |
|
|
|
7.97 |
|
|
Europe
|
|
|
10 |
|
|
|
2.0 |
|
|
|
7.23
– 8.26 |
|
|
Southern
and Eastern Europe
|
|
|
10 |
|
|
|
1.3
– 2.3 |
|
|
|
7.75
– 11.24 |
|
|
Systems
Solutions
|
|
|
10 |
|
|
|
1.5 |
|
|
|
7.71 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
measurements of the cash-generating units are founded on projections that are
based on financial plans that have been approved by management and are also used
for internal purposes. The planning horizon reflects the assumptions for short-
to mid-term market developments. Cash flows beyond the planning horizon are
extrapolated using appropriate growth rates. The key assumptions on which
management has based its determination of fair value less costs to sell include
the following assumptions that were primarily derived from internal sources and
in particular reflect past experience: development of revenue, customer
acquisition and retention costs, churn rates, capital expenditure, market share,
and growth rates. Discount rates were determined on the basis of external
figures derived from the market. Any significant future changes in the
aforementioned assumptions would have an impact on the fair values of the
cash-generating units. With regard to cash-generating units in countries of the
Southern and Eastern Europe operating segment, these potential changes of
assumptions might have a stronger and possibly negative effect as a result of
future trends in the difficult macroeconomic situation, ongoing intense
competition and mobile communications taxes recently imposed or increased in
some of these countries.
On the
basis of information available at the reporting date and expectations with
respect to the market and competitive environment, the year-end impairment tests
indicated a need for impairment at the following cash-generating
units.
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
Assigned
to segment
|
|
Greece
– Mobile communications
|
|
|
203 |
|
Southern
and Eastern Europe
|
|
Greece
– Fixed network
|
|
|
130 |
|
Southern
and Eastern Europe
|
|
Romania
– Mobile communications
|
|
|
66 |
|
Southern
and Eastern Europe
|
|
T-Mobile
Austria group
|
|
|
47 |
|
Europe
|
|
Slovakia
– Fixed network
|
|
|
37 |
|
Southern
and Eastern Europe
|
|
Other
|
|
|
45 |
|
Southern
and Eastern Europe
|
|
|
|
|
528 |
|
|
|
|
|
|
|
|
|
The
impairment losses were largely due to the country-specific risk in connection
with the current financial and national crisis in Greece. Other impairment
losses were primarily recognized as a result of the negative developments in
connection with the financial market crisis.
If the
impairment tests of goodwill assets at the cash-generating units where
impairment losses totaling EUR 0.5 billion were recognized at year-end, had
been conducted using discount rates that were 0.5 percentage points higher, the
impairment losses to be recognized would have increased by EUR 0.5 billion.
If, by contrast, the discount rates had been 0.5 percentage points lower, the
resulting impairment losses would have been EUR 0.4 billion lower. If
the growth rates used as a basis in the impairment tests had been 0.5 percentage
points lower, the impairment losses would have been EUR 0.3 billion higher.
In turn, impairment losses would have been EUR 0.3 billion lower if the
growth rates had been 0.5 percentage points higher.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
6
Property, plant and equipment.
|
(millions
of €)
|
|
Land
and equivalent rights, and buildings including buildings on land owned by
third parties
|
|
|
Technical
equipment and machinery
|
|
|
Other
equipment, operating and office equipment
|
|
|
Advance
payments and construction in progress
|
|
|
Total
|
|
|
Costs
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec. 31, 2007
|
|
|
15,831 |
|
|
|
91,681 |
|
|
|
6,794 |
|
|
|
2,867 |
|
|
|
117,173 |
|
|
Currency
translation
|
|
|
15 |
|
|
|
(533 |
) |
|
|
(65 |
) |
|
|
(24 |
) |
|
|
(607 |
) |
|
Changes
in the composition of the Group
|
|
|
12 |
|
|
|
122 |
|
|
|
(51 |
) |
|
|
18 |
|
|
|
101 |
|
|
Additions
|
|
|
112 |
|
|
|
2,171 |
|
|
|
566 |
|
|
|
4,528 |
|
|
|
7,377 |
|
|
Disposals
|
|
|
88 |
|
|
|
2,052 |
|
|
|
876 |
|
|
|
63 |
|
|
|
3,079 |
|
|
Change
from non-current assets and disposal groups held for sale
|
|
|
62 |
|
|
|
16 |
|
|
|
0 |
|
|
|
(1 |
) |
|
|
77 |
|
|
Reclassifications
|
|
|
234 |
|
|
|
2,939 |
|
|
|
333 |
|
|
|
(4,133 |
) |
|
|
(627 |
) |
|
At
Dec. 31,
2008
|
|
|
16,178 |
|
|
|
94,344 |
|
|
|
6,701 |
|
|
|
3,192 |
|
|
|
120,415 |
|
|
Currency
translation
|
|
|
(41 |
) |
|
|
(40 |
) |
|
|
(6 |
) |
|
|
(21 |
) |
|
|
(108 |
) |
|
Changes
in the composition of the Group
|
|
|
1,779 |
|
|
|
4,492 |
|
|
|
87 |
|
|
|
695 |
|
|
|
7,053 |
|
|
Additions
|
|
|
140 |
|
|
|
2,522 |
|
|
|
436 |
|
|
|
4,278 |
|
|
|
7,376 |
|
|
Disposals
|
|
|
55 |
|
|
|
3,397 |
|
|
|
438 |
|
|
|
47 |
|
|
|
3,937 |
|
|
Change
from non-current assets and disposal groups held for sale
|
|
|
437 |
|
|
|
(3,588 |
) |
|
|
(211 |
) |
|
|
(326 |
) |
|
|
(3,688 |
) |
|
Reclassifications
|
|
|
454 |
|
|
|
3,382 |
|
|
|
537 |
|
|
|
(4,977 |
) |
|
|
(604 |
) |
|
At
Dec. 31, 2009
|
|
|
18,892 |
|
|
|
97,715 |
|
|
|
7,106 |
|
|
|
2,794 |
|
|
|
126,507 |
|
|
Accumulated
depreciation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec.31, 2007
|
|
|
6,502 |
|
|
|
63,561 |
|
|
|
4,571 |
|
|
|
8 |
|
|
|
74,642 |
|
|
Currency
translation
|
|
|
17 |
|
|
|
(424 |
) |
|
|
(30 |
) |
|
|
0 |
|
|
|
(437 |
) |
|
Changes
in the composition of the Group
|
|
|
23 |
|
|
|
(5 |
) |
|
|
(54 |
) |
|
|
0 |
|
|
|
(36 |
) |
|
Additions
(depreciation)
|
|
|
678 |
|
|
|
6,031 |
|
|
|
729 |
|
|
|
0 |
|
|
|
7,438 |
|
|
Additions
(impairment)
|
|
|
110 |
|
|
|
5 |
|
|
|
8 |
|
|
|
4 |
|
|
|
127 |
|
|
Disposals
|
|
|
51 |
|
|
|
1,888 |
|
|
|
737 |
|
|
|
3 |
|
|
|
2,679 |
|
|
Change
from non-current assets and disposal groups held for sale
|
|
|
64 |
|
|
|
(1 |
) |
|
|
0 |
|
|
|
(2 |
) |
|
|
61 |
|
|
Reclassifications
|
|
|
(16 |
) |
|
|
(118 |
) |
|
|
10 |
|
|
|
(2 |
) |
|
|
(126 |
) |
|
Reversal
of impairment losses
|
|
|
(134 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(134 |
) |
|
At
Dec. 31, 2008
|
|
|
7,193 |
|
|
|
67,161 |
|
|
|
4,497 |
|
|
|
5 |
|
|
|
78,856 |
|
|
Currency
translation
|
|
|
(18 |
) |
|
|
30 |
|
|
|
(9 |
) |
|
|
0 |
|
|
|
3 |
|
|
Changes
in the composition of the Group
|
|
|
2 |
|
|
|
6 |
|
|
|
0 |
|
|
|
0 |
|
|
|
8 |
|
|
Additions
(depreciation)
|
|
|
762 |
|
|
|
6,498 |
|
|
|
760 |
|
|
|
0 |
|
|
|
8,020 |
|
|
Additions
(impairment)
|
|
|
179 |
|
|
|
10 |
|
|
|
3 |
|
|
|
11 |
|
|
|
203 |
|
|
Disposals
|
|
|
46 |
|
|
|
3,240 |
|
|
|
341 |
|
|
|
0 |
|
|
|
3,627 |
|
|
Change
from non-current assets and disposal groups held for sale
|
|
|
251 |
|
|
|
(2,427 |
) |
|
|
(100 |
) |
|
|
0 |
|
|
|
(2,276 |
) |
|
Reclassifications
|
|
|
(3 |
) |
|
|
(14 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
(17 |
) |
|
Reversal
of impairment losses
|
|
|
(131 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(131 |
) |
|
At
Dec. 31, 2009
|
|
|
8,189 |
|
|
|
68,024 |
|
|
|
4,810 |
|
|
|
16 |
|
|
|
81,039 |
|
|
Net
carrying amounts
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
Dec. 31,
2008
|
|
|
8,985 |
|
|
|
27,183 |
|
|
|
2,204 |
|
|
|
3,187 |
|
|
|
41,559 |
|
|
At
Dec. 31, 2009
|
|
|
10,703 |
|
|
|
29,691 |
|
|
|
2,296 |
|
|
|
2,778 |
|
|
|
45,468 |
|
Restoration
obligations of EUR 0.2 billion were recognized as of December 31, 2009
(December 31, 2008: EUR 0.2 billion). Deutsche Telekom had commitments
for the acquisition of property, plant and equipment in the amount of
EUR 0.9 billion as of the reporting date.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
7
Investments accounted for using the equity method.
Significant
investments in entities accounted for using the equity method are as
follows:
|
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
|
|
Deutsche
Telekom share
|
|
|
Net
carrying amounts
|
|
|
Deutsche
Telekom share
|
|
|
Net
carrying amounts
|
|
|
|
|
(%)
|
|
|
(millions
of €)
|
|
|
(%)
|
|
|
(millions
of €)
|
|
|
Hellenic
Telecommunications Organization S.A. (OTE)1
|
|
|
- |
|
|
|
- |
|
|
|
30.00 |
|
|
|
3,407 |
|
|
HT
Mostar2,3
|
|
|
39.10 |
|
|
|
51 |
|
|
|
39.10 |
|
|
|
49 |
|
|
Toll
Collect2
|
|
|
45.00 |
|
|
|
46 |
|
|
|
45.00 |
|
|
|
39 |
|
|
Iowa
Wireless Services LCC
|
|
|
36.42 |
|
|
|
18 |
|
|
|
39.74 |
|
|
|
14 |
|
|
CTDI
GmbH (formerly: CTDI Nethouse Services GmbH)
|
|
|
49.00 |
|
|
|
14 |
|
|
|
49.00 |
|
|
|
12 |
|
|
DETECON
AL SAUDIA CO. Ltd.
|
|
|
46.50 |
|
|
|
8 |
|
|
|
46.50 |
|
|
|
7 |
|
|
Other
|
|
|
|
|
|
|
10 |
|
|
|
|
|
|
|
29 |
|
|
|
|
|
|
|
|
|
147 |
|
|
|
|
|
|
|
3,557 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Fair
value (share value) as of December 31, 2008: EUR 1,750
million.
|
|
3
|
Indirect
shareholding via HT-Hrvatske telekomunikacije d.d., Croatia (Deutsche
Telekom AG’s share: 51.00 %)
|
Aggregated
key financial figures for the associates accounted for using the equity method
are shown in the following overview. The data is not based on the portions
attributable to the Deutsche Telekom Group, but represents the shareholdings on
a 100-percent basis.
|
(billions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 20081
|
|
|
Total
assets
|
|
|
0.2 |
|
|
|
11.8 |
|
|
Total
liabilities
|
|
|
0.1 |
|
|
|
9.4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
20081 |
|
|
Net
revenue
|
|
|
0.2 |
|
|
|
6.8 |
|
|
Profit
(loss)
|
|
|
0.0 |
|
|
|
0.6 |
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Figures
for the prior year adjusted. In Deutsche Telekom’s consolidated financial
statements as of December 31, 2008, OTE’s prior-year figures were not
included in this presentation, since OTE as a listed company had not yet
published its financial statements as of December 31, 2008 when Deutsche
Telekom's consolidated financial statements were
prepared.
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following table is a summary presentation of aggregated key financial figures –
pro-rated according to the relevant percentage of shares held – for the joint
ventures of Deutsche Telekom accounted for using the equity method:
|
(billions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Total
assets
|
|
|
0.5 |
|
|
|
0.5 |
|
|
Current
|
|
|
0.3 |
|
|
|
0.3 |
|
|
Non-current
|
|
|
0.2 |
|
|
|
0.2 |
|
|
|
|
|
|
|
|
|
|
|
|
Total
liabilities
|
|
|
0.4 |
|
|
|
0.4 |
|
|
Current
|
|
|
0.3 |
|
|
|
0.4 |
|
|
Non-current
|
|
|
0.1 |
|
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
2008 |
|
|
Net
revenue
|
|
|
0.2 |
|
|
|
0.2 |
|
|
Profit
(loss)
|
|
|
0.0 |
|
|
|
0.0 |
|
|
|
|
|
|
|
|
|
|
|
8
Other financial assets.
|
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
(millions
of €)
|
|
Total
|
|
|
Of
which: current
|
|
|
Total
|
|
|
Of
which: current
|
|
|
Originated
loans and receivables
|
|
2,003
|
|
|
|
1,509 |
|
|
|
1,267 |
|
|
|
1,034 |
|
|
Available-for-sale
financial assets
|
|
|
609 |
|
|
|
74 |
|
|
|
406 |
|
|
|
17 |
|
|
Derivative
financial assets1
|
|
|
1,048 |
|
|
|
348 |
|
|
|
1,601 |
|
|
|
374 |
|
|
Miscellaneous assets
|
|
|
80 |
|
|
|
70 |
|
|
|
281 |
|
|
|
267 |
|
|
|
|
|
3,740 |
|
|
|
2,001 |
|
|
|
3,555 |
|
|
|
1,692 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Figures
for the prior-year reporting dates adjusted. Changes in the presentation
of derivatives. For explanations, please refer to "Summary of accounting
policies/Change in accounting
policies."
|
|
Originated loans and
receivables |
Carrying
amounts
|
Of
which: neither impaired nor past due on the reporting date
|
Of
which: not impaired on the reporting date and past due
in
the following periods
|
|
(millions
of €)
|
Less
than 30 days
|
Between
30 and 60 days
|
Between
61 and 90 days
|
Between
91 and 180 days
|
Between
181 and 360 days
|
More
than 360 days
|
|
as
of Dec. 31, 2009
|
|
|
|
|
|
|
|
|
|
Due
within one year
|
1,509
|
1,413
|
26
|
8
|
3
|
19
|
18
|
1
|
|
Due
after more than
one
year
|
494
|
482
|
9
|
|
|
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
as
of Dec. 31, 2008
|
|
|
|
|
|
|
|
|
|
Due
within one year
|
1,034
|
1,007
|
13
|
3
|
|
|
1
|
|
|
Due
after more than
one
year
|
233
|
232
|
|
|
|
|
|
1
|
|
|
|
|
|
|
|
|
|
|
With
respect to the originated loans and receivables that are neither impaired nor
past due, there are no indications as of the reporting date that the debtors
will not meet their payment obligations.
Receivables
of EUR 337 million (December 31, 2008: EUR 28 million) were
used in connection with collateral agreements as surety for potential credit
risks arising from derivative transactions. In addition, an amount of
EUR 309 million had been paid into a trust account as of the reporting date
– in particular relating to the purchase of Strato AG - and is currently not
freely available for Deutsche Telekom.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The available-for-sale financial
assets include unquoted equity instruments whose fair values could not be
reliably measured, and which were therefore recognized at cost in the amount of
EUR 411 million as of December 31, 2009 (December 31, 2008:
EUR 288 million). In the
2009 financial year, EUR 8 million (2008: EUR 12 million) in
impairment losses on available-for-sale financial assets were recognized in
profit or loss because the impairment was permanent or significant.
9
Financial liabilities.
|
|
|
Dec.
31, 2009
|
|
|
(millions
of €)
|
|
Total
|
|
|
Due
within 1 year
|
|
|
Due
> 1 year
≤
5 years
|
|
|
Due
> 5 years
|
|
|
Bonds
and other securitized liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Non-convertible bonds
|
|
|
25,055 |
|
|
|
4,121 |
|
|
|
9,686 |
|
|
|
11,248 |
|
|
- Commercial
paper, medium-term notes, and
similar
liabilities
|
|
|
13,453 |
|
|
|
285 |
|
|
|
8,318 |
|
|
|
4,850 |
|
|
Liabilities
to banks
|
|
|
4,718 |
|
|
|
974 |
|
|
|
2,764 |
|
|
|
980 |
|
|
|
|
|
43,226 |
|
|
|
5,380 |
|
|
|
20,768 |
|
|
|
17,078 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
1,909 |
|
|
|
131 |
|
|
|
446 |
|
|
|
1,332 |
|
|
Liabilities
to non-banks from promissory notes
|
|
|
1,057 |
|
|
|
0 |
|
|
|
177 |
|
|
|
880 |
|
|
Other
interest-bearing liabilities
|
|
|
447 |
|
|
|
97 |
|
|
|
229 |
|
|
|
121 |
|
|
Other
non-interest-bearing liabilities
|
|
|
3,573 |
|
|
|
3,486 |
|
|
|
85 |
|
|
|
2 |
|
|
Derivative
financial liabilities
|
|
|
979 |
|
|
|
297 |
|
|
|
463 |
|
|
|
219 |
|
|
|
|
|
7,965 |
|
|
|
4,011 |
|
|
|
1,400 |
|
|
|
2,554 |
|
|
Financial
liabilities
|
|
|
51,191 |
|
|
|
9,391 |
|
|
|
22,168 |
|
|
|
19,632 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dec.
31, 2008
|
|
|
(millions
of €)
|
|
Total
|
|
|
Due
within 1 year
|
|
|
Due
> 1 year
≤
5 years
|
|
|
Due
> 5 years
|
|
|
Bonds
and other securitized liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
Non-convertible bonds
|
|
|
23,272 |
|
|
|
717 |
|
|
|
13,452 |
|
|
|
9,103 |
|
|
-
Commercial paper, medium-term notes, and
similar liabilities
|
|
|
11,030 |
|
|
|
4,375 |
|
|
|
2,893 |
|
|
|
3,762 |
|
|
Liabilities
to banks
|
|
|
4,222 |
|
|
|
319 |
|
|
|
1,752 |
|
|
|
2,151 |
|
|
|
|
|
38,524 |
|
|
|
5,411 |
|
|
|
18,097 |
|
|
|
15,016 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Lease
liabilities
|
|
|
2,009 |
|
|
|
129 |
|
|
|
436 |
|
|
|
1,444 |
|
|
Liabilities
to non-banks from promissory notes
|
|
|
887 |
|
|
|
- |
|
|
|
50 |
|
|
|
837 |
|
|
Other
interest-bearing liabilities
|
|
|
541 |
|
|
|
196 |
|
|
|
211 |
|
|
|
134 |
|
|
Other
non-interest-bearing liabilities
|
|
|
3,545 |
|
|
|
3,450 |
|
|
|
94 |
|
|
|
1 |
|
|
Derivative
financial liabilities1
|
|
|
1,088 |
|
|
|
398 |
|
|
|
562 |
|
|
|
128 |
|
|
|
|
|
8,070 |
|
|
|
4,173 |
|
|
|
1,353 |
|
|
|
2,544 |
|
|
Financial
liabilities
|
|
|
46,594 |
|
|
|
9,584 |
|
|
|
19,450 |
|
|
|
17,560 |
|
|
|
1 Figures
for the prior-year reporting dates adjusted. Changes in the presentation
of derivatives. For explanations, please refer to "Summary of accounting
policies/Change in accounting
policies."
|
Bonds and
other securitized liabilities are mainly issued by Deutsche Telekom
International Finance B.V., a wholly-owned subsidiary of Deutsche Telekom AG.
Deutsche Telekom AG provides a full and irrevocable guarantee for all
liabilities issued by Deutsche Telekom International Finance B.V. At
December 31, 2009, Deutsche Telekom had standardized bilateral credit agreements
with 24 banks for a total of EUR 14.4 billion. None of the credit lines had
been utilized by December 31, 2009. Pursuant to the credit agreements, the terms
and conditions depend on Deutsche Telekom’s rating. The bilateral credit
agreements have an original maturity of 36 months and can, after each period of
12 months, be extended by a further 12 months to renew the maturity of 36
months. In 2008 and in early 2009, the financial market crisis impacted the
extension of bilateral credit lines. Especially institutions that were split up
or taken over by other banks or did not have sufficient equity did not extend
their lines. Deutsche Telekom agreed to cancel one credit line with each
of four merged banks in 2009. As a result, the number of credit facilities
available to Deutsche Telekom decreased from 28 to 24 in the course of the
year, with 19 of them having been extended at the point in time of the previous
extension request. In the event that these 19 credit lines are not extended,
they will continue to be available to Deutsche Telekom for another two years
from the date of non-extension.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The
following tables show Deutsche Telekom’s contractually agreed (undiscounted)
interest payments and repayments of the non-derivative financial liabilities and
the derivatives with positive and negative fair values:
|
|
|
|
|
|
Cash
flows in 2010
|
|
|
Cash
flows in 2011
|
|
|
(millions
of €)
|
|
Carrying
amounts
December
31, 2009
|
|
|
Fixed
interest rate
|
|
|
Variable
interest rate
|
|
|
Repayment
|
|
|
Fixed
interest rate
|
|
|
Variable
interest rate
|
|
|
Repayment
|
|
|
Non-derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds,
other securitized liabilities, liabilities to banks and liabilities to
non-banks from promissory notes and similar liabilities
|
|
|
(44,283 |
) |
|
|
(2,327 |
) |
|
|
(59 |
) |
|
|
(5,629 |
) |
|
|
(2,038 |
) |
|
|
(58 |
) |
|
|
(6,886 |
) |
|
Finance
lease liabilities
|
|
|
(1,423 |
) |
|
|
(113 |
) |
|
|
|
|
|
|
(121 |
) |
|
|
(106 |
) |
|
|
|
|
|
|
(96 |
) |
|
Other
interest-bearing liabilities
|
|
|
(933 |
) |
|
|
(34 |
) |
|
|
|
|
|
|
(213 |
) |
|
|
(35 |
) |
|
|
|
|
|
|
(75 |
) |
|
Other
non-interest-bearing liabilities
|
|
|
(3,573 |
) |
|
|
|
|
|
|
|
|
|
|
(3,486 |
) |
|
|
|
|
|
|
|
|
|
|
(85 |
) |
|
Derivative
financial liabilities and assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Currency derivatives without a hedging relationship
|
|
|
(46 |
) |
|
|
|
|
|
|
|
|
|
|
(45 |
) |
|
|
|
|
|
|
|
|
|
|
(2 |
) |
|
–
Currency derivatives in connection with cash flow hedges
|
|
|
(17 |
) |
|
|
|
|
|
|
|
|
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Interest rate derivatives without a hedging relationship
|
|
|
(635 |
) |
|
|
(40 |
) |
|
|
(36 |
) |
|
|
(129 |
) |
|
|
18 |
|
|
|
(33 |
) |
|
|
(32 |
) |
| –
Interest rate derivatives in connection with fair value
hedges |
|
|
(52 |
) |
|
|
115 |
|
|
|
(28 |
) |
|
|
|
|
|
|
115 |
|
|
|
(28 |
) |
|
|
|
|
|
–
Interest rate derivatives in connection with cash flow
hedges
|
|
|
(174 |
) |
|
|
(46 |
) |
|
|
14 |
|
|
|
|
|
|
|
(70 |
) |
|
|
27 |
|
|
|
|
|
|
Derivative
financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Currency derivatives without a hedging relationship
|
|
|
91 |
|
|
|
|
|
|
|
|
|
|
|
102 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
–
Currency derivatives in connection with cash flow hedges
|
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
11 |
|
|
|
|
|
|
|
|
|
|
|
1 |
|
|
–
Interest rate derivatives without a hedging relationship
|
|
|
562 |
|
|
|
135 |
|
|
|
(56 |
) |
|
|
11 |
|
|
|
(7 |
) |
|
|
(12 |
) |
|
|
31 |
|
|
–
Interest rate derivatives in connection with fair value
hedges
|
|
|
225 |
|
|
|
155 |
|
|
|
(43 |
) |
|
|
|
|
|
|
162 |
|
|
|
(33 |
) |
|
|
|
|
|
–
Interest rate derivatives in connection with cash flow
hedges
|
|
|
155 |
|
|
|
(26 |
) |
|
|
|
|
|
|
129 |
|
|
|
(24 |
) |
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
|
|
Cash
flows in 2012-2014
|
|
|
Cash
flows in 2015-2019
|
|
|
Cash
flows in 2020 and thereafter
|
|
|
(millions
of €)
|
|
Fixed
interest rate
|
|
|
Variable
interest rate
|
|
|
Repayment
|
|
|
Fixed
interest rate
|
|
|
Variable
interest rate
|
|
|
Repayment
|
|
|
Fixed
interest rate
|
|
|
Variable
interest rate
|
|
|
Repayment
|
|
|
Non-derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Bonds,
other securitized liabilities, liabilities to banks and liabilities to
non-banks from promissory notes and similar liabilities
|
|
|
(4,392 |
) |
|
|
(77 |
) |
|
|
(14,037 |
) |
|
|
(3,594 |
) |
|
|
(2 |
) |
|
|
(12,920 |
) |
|
|
(4,030 |
) |
|
|
|
|
|
|
(6,022 |
) |
|
Finance
lease liabilities
|
|
|
(244 |
) |
|
|
|
|
|
|
(293 |
) |
|
|
(275 |
) |
|
|
|
|
|
|
(496 |
) |
|
|
(227 |
) |
|
|
|
|
|
|
(417 |
) |
|
Other
interest-bearing liabilities
|
|
|
(112 |
) |
|
|
|
|
|
|
(103 |
) |
|
|
(161 |
) |
|
|
|
|
|
|
(508 |
) |
|
|
(64 |
) |
|
|
|
|
|
|
(34 |
) |
|
Other
non-interest-bearing liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Derivative
financial liabilities and assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Derivative
financial liabilities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Currency derivatives without a hedging relationship
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Currency derivatives in connection with cash
flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Interest rate derivatives without a hedging relationship
|
|
|
38 |
|
|
|
(68 |
) |
|
|
(234 |
) |
|
|
33 |
|
|
|
(61 |
) |
|
|
(64 |
) |
|
|
107 |
|
|
|
(144 |
) |
|
|
(58 |
) |
| –
Interest rate derivatives in connection with fair value
hedges |
|
|
346 |
|
|
|
(84 |
) |
|
|
|
|
|
|
34 |
|
|
|
(7 |
) |
|
|
|
|
|
|
62 |
|
|
|
(12 |
) |
|
|
|
|
|
–
Interest rate derivatives in connection with
cash flow hedges
|
|
|
(334 |
) |
|
|
54 |
|
|
|
|
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
17 |
|
|
Derivative
financial assets:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Currency derivatives without a hedging relationship
|
|
|
|
|
|
|
|
|
|
|
2 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| –
Currency derivatives in connection with cash flow hedges |
|
|
|
|
|
|
|
|
|
|
1 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Interest rate derivatives without a hedging relationship
|
|
|
(8 |
) |
|
|
(9 |
) |
|
|
293 |
|
|
|
|
|
|
|
(3 |
) |
|
|
178 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Interest rate derivatives in connection with
fair value hedges
|
|
|
299 |
|
|
|
(49 |
) |
|
|
|
|
|
|
218 |
|
|
|
(21 |
) |
|
|
|
|
|
|
381 |
|
|
|
(41 |
) |
|
|
|
|
|
–
Interest rate derivatives in connection with
cash flow hedges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
Carrying
amounts
Dec.
31, 2008
|
Cash
flows in
|
|
(millions
of €)
|
2009
|
2010
|
2011-2013
|
2014-2018
|
2019
and thereafter
|
|
Non-derivative
financial liabilities:
|
|
|
|
|
|
|
|
Bonds,
other securitized liabilities, liabilities to banks and liabilities to
non-banks from promissory notes and similar liabilities
|
(39,411)
|
(7,866)
|
(7,096)
|
(16,998)
|
(12,831)
|
(10,866)
|
|
Finance
lease liabilities
|
(1,514)
|
(250)
|
(204)
|
(548)
|
(830)
|
(762)
|
|
Other
interest-bearing liabilities
|
(1,036)
|
(305)
|
(134)
|
(207)
|
(716)
|
(130)
|
|
Other
non-interest-bearing liabilities
|
(3,545)
|
(3,523)
|
(12)
|
(9)
|
(1)
|
(1)
|
|
Derivative
financial liabilities
and
assets:
|
|
|
|
|
|
|
|
Derivative
financial liabilities:
|
|
|
|
|
|
|
|
Currency
derivatives without
a
hedging relationship
|
(277)
|
(271)
|
|
(2)
|
|
|
|
Currency
derivatives in connection with cash flow hedges
|
(47)
|
(42)
|
(2)
|
|
|
|
|
Interest
rate derivatives without
a
hedging relationship
|
(662)
|
(131)
|
(211)
|
(437)
|
(158)
|
(291)
|
|
Interest
rate derivatives in connection with cash flow hedges
|
(67)
|
(9)
|
9
|
(52)
|
(19)
|
|
|
Derivative
financial assets:
|
|
|
|
|
|
|
|
Currency
derivatives without
a
hedging relationship
|
261
|
262
|
1
|
|
|
|
|
Currency
derivatives in connection with cash flow hedges
|
34
|
31
|
|
|
|
|
|
Interest
rate derivatives without
a
hedging relationship
|
553
|
106
|
85
|
248
|
268
|
|
|
Interest
rate derivatives in connection with fair value hedges
|
660
|
90
|
74
|
143
|
125
|
184
|
|
Interest
rate derivatives in connection with cash flow hedges
|
90
|
(26)
|
112
|
|
|
|
|
|
|
|
|
|
|
|
All
instruments held at December 31, 2009 and for which payments were already
contractually agreed are included. Planning data for future, new liabilities
were not included. Amounts in foreign currency were each translated at the
closing rate at the reporting date. The variable interest payments arising from
the financial instruments were calculated using the last interest rates fixed
before December 31, 2009. Financial liabilities that can be repaid at any time
are always assigned to the earliest possible time period. In accordance with § 2
(4) of the German Act on the Transformation of the Deutsche Bundespost
Enterprises into the Legal Structure of Stock Corporation (Stock Corporation
Transformation Act - Postumwandlungsgesetz), the Federal Republic is guarantor
of all Deutsche Telekom AG’s liabilities which were already outstanding as at
January 1, 1995. At December 31, 2009, this figure was a nominal EUR 1.9
billion (December 31, 2008: EUR 2.1 billion).
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
10
Trade and other payables.
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Trade
payables
|
|
|
6,294 |
|
|
|
7,055 |
|
|
Liabilities
from construction contracts
|
|
|
10 |
|
|
|
18 |
|
|
|
|
|
6,304 |
|
|
|
7,073 |
|
|
|
|
|
|
|
|
|
|
|
Of the
total of trade and other payables, EUR 6,300 million (December 31, 2008:
EUR 7,064 million) is due within one
year.
11
Provisions for pensions and other employee benefits.
The
following disclosures on pension obligations as of the reporting date do not
include T-Mobile UK’s pension obligations of EUR 147 million as of December
31, 2009 (defined benefit obligations of EUR 454 million minus plan assets
of EUR 307 million), since this entity has been classified as held for
sale. These obligations have been eliminated in the following tables in the line
“Reclassification in accordance with IFRS 5.”
Defined
benefit plans.
The
following table shows the composition of pension obligations:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Pension
obligations
|
|
|
|
|
|
|
|
Unfunded
|
|
|
5,804 |
|
|
|
4,826 |
|
|
Funded
|
|
|
358 |
|
|
|
315 |
|
|
Obligations
in accordance with Article 131 GG
|
|
|
3 |
|
|
|
3 |
|
|
Net
defined benefit liability (+)/defined benefit asset (-)
|
|
|
6,165 |
|
|
|
5,144 |
|
|
|
|
|
|
|
|
|
|
|
Calculation
of net defined benefit liability (+) / defined benefit asset (-):
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Present
value of funded obligations
|
|
|
979 |
|
|
|
1,270 |
|
|
Plan
assets at fair value
|
|
|
(618 |
) |
|
|
(952 |
) |
|
Defined
benefit obligations in excess of plan assets
|
|
|
361 |
|
|
|
318 |
|
|
|
|
|
|
|
|
|
|
|
|
Present
value of unfunded obligations
|
|
|
5,854 |
|
|
|
4,831 |
|
|
Unrecognized
past service cost
|
|
|
(50 |
) |
|
|
(8 |
) |
|
Defined
benefit liability (+)/ defined benefit asset (-) according to
IAS 19.54
|
|
|
6,165 |
|
|
|
5,141 |
|
|
Additional
provision recognized due to a minimum funding requirement
|
|
|
0 |
|
|
|
3 |
|
|
Net
defined benefit liability (+)/ defined benefit asset (-)
|
|
|
6,165 |
|
|
|
5,144 |
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Pension
provisions break down into defined benefit liability and defined benefit asset
as follows:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Defined
benefit asset
|
|
|
(14 |
) |
|
|
(13 |
) |
|
Defined
benefit liability
|
|
|
6,179 |
|
|
|
5,157 |
|
|
Net
defined benefit liability (+)/defined benefit asset (-)
|
|
|
6,165 |
|
|
|
5,144 |
|
|
|
|
|
|
|
|
|
|
|
The
defined benefit asset is recognized under other non-current assets in the
consolidated statement of financial position.
The
calculations were based on the following assumptions at the respective reporting
dates:
Assumptions
for the measurement of defined benefit obligations as of
December 31:
|
(%)
|
|
2009
|
2008
|
|
Discount
rate
|
Germany
|
5.25
|
5.80
|
|
Switzerland
(T-Systems)
|
3.15
|
3.00
|
|
Greece
(OTE S.A.)
|
4.56/3.89
|
n.a.
|
|
United
Kingdom
|
5.70
|
5.80
|
|
Projected
salary increase
|
Germany
(pay-scale employees)
|
3.25
|
3.50
|
|
Germany
(non-pay-scale employees)
|
3.50
|
4.25
|
|
Switzerland
(T-Systems)
|
1.50
|
1.50
|
|
Greece
(OTE S.A.)
|
4.50/5.50
|
n.a.
|
|
United
Kingdom
|
4.60
|
4.20
|
|
Projected
pension increase
|
Germany
(general)
|
1.50
|
2.00
|
|
Germany
(according to articles of association)
|
1.00
|
1.00
|
|
Switzerland
(T-Systems)
|
0.30
|
0.30
|
|
Greece
(OTE S.A.)
|
n.a.
|
n.a.
|
|
United
Kingdom
|
3.40
|
3.20
|
|
|
|
|
|
Pension
obligations at German entities of the Group are measured using the biometrical
assumptions of the 2005G tables published by Prof. Klaus Heubeck. Local
actuarial tables are used in the other countries.
Assumptions
for determining the pension expense for years ending
December 31:
|
%
|
|
2009
|
2008
|
2007
|
|
Discount
rate
|
Germany
|
5.80
|
5.50
|
4.45
|
|
Switzerland
(T-Systems)
|
3.00
|
3.25
|
3.25
|
|
Greece
(OTE S.A.)
|
5.50/5.00
|
n.a.
|
n.a.
|
|
United
Kingdom
|
5.80
|
5.40
|
4.80
|
|
Projected
salary increase
|
Germany
(pay-scale employees)
|
3.50
|
2.50
|
2.50
|
|
Germany
(non-pay-scale employees)
|
4.25
|
3.25
|
3.25
|
|
Switzerland
(T-Systems)
|
1.50
|
1.50
|
1.50
|
|
Greece
(OTE S.A.)
|
6.50/4.50
|
n.a.
|
n.a.
|
|
United
Kingdom
|
4.20
|
4.20
|
4.00
|
|
Return
on plan assets
|
Germany
|
3.50
|
4.30
|
4.00
|
|
Switzerland
(T-Systems)
|
4.50
|
4.50
|
4.50
|
|
United
Kingdom
|
6.90
|
7.00
|
6.47
|
|
Projected
pension increase
|
Germany
(general)
|
2.00
|
1.70
|
1.50
|
|
Germany
(accordung to articles of association)
|
1.00
|
1.00
|
1.00
|
|
Switzerland
(T-Systems)
|
0.30
|
0.60
|
0.60
|
|
Greece
(OTE S.A.)
|
n.a.
|
n.a.
|
n.a.
|
|
United
Kingdom
|
3.20
|
3.20
|
3.00
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Development
of defined benefit obligations in the reporting year:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
Present
value of the defined benefit obligations as of January 1
|
|
|
6,101 |
|
|
|
6,327 |
|
|
Reclassification
in accordance with IFRS 5
|
|
|
(454 |
) |
|
|
- |
|
|
Changes
attributable to business combinations/transfers of operation/
acquisitions
and disposals
|
|
|
609 |
|
|
|
(132 |
) |
|
Current
service cost
|
|
|
204 |
|
|
|
204 |
|
|
Interest
cost
|
|
|
371 |
|
|
|
331 |
|
|
Contributions
by plan participants
|
|
|
3 |
|
|
|
4 |
|
|
Actuarial
losses (gains)
|
|
|
373 |
|
|
|
(232 |
) |
|
Total
benefits actually paid
|
|
|
(393 |
) |
|
|
(301 |
) |
|
Plan
amendments
|
|
|
(12 |
) |
|
|
4 |
|
|
Exchange
rate fluctuations for foreign-currency plans
|
|
|
31 |
|
|
|
(104 |
) |
|
Present
value of the defined benefit obligations as of
December 31
|
|
|
6,833 |
|
|
|
6,101 |
|
|
|
|
|
|
|
|
|
|
|
Taking
the plan assets into consideration, the pension obligations were accounted for
in full.
Development
of plan assets at fair value in the respective reporting year:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
Plan
assets at fair value as of January 1
|
|
|
952 |
|
|
|
986 |
|
|
Reclassification
in accordance with IFRS 5
|
|
|
(307 |
) |
|
|
- |
|
|
Changes
attributable to business combinations/transfers of operation/
acquisitions
and disposals
|
|
|
0 |
|
|
|
3 |
|
|
Expected
return on plan assets
|
|
|
50 |
|
|
|
52 |
|
|
Actuarial
(losses) gains
|
|
|
(91 |
) |
|
|
(2 |
) |
|
Contributions
by employer
|
|
|
45 |
|
|
|
54 |
|
|
Contributions
by plan participants
|
|
|
3 |
|
|
|
4 |
|
|
Benefits
actually paid through pension funds
|
|
|
(61 |
) |
|
|
(57 |
) |
|
Exchange
rate fluctuations for foreign-currency plans
|
|
|
27 |
|
|
|
(88 |
) |
|
Plan
assets at fair value as of December 31
|
|
|
618 |
|
|
|
952 |
|
|
|
|
|
|
|
|
|
|
|
Breakdown
of plan assets at fair value by investment category:
|
(%)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Equity
securities
|
|
|
19 |
|
|
|
24 |
|
|
Debt
securities
|
|
|
64 |
|
|
|
40 |
|
|
Real
estate
|
|
|
6 |
|
|
|
7 |
|
|
Other
|
|
|
11 |
|
|
|
29 |
1 |
|
|
|
|
|
|
|
|
|
|
|
|
1 Of
which T-Mobile UK holds a 70-% share which breaks down as follows:
interest rate swaps (56 %), money market securities (33 %) and cash and
cash equivalents (11 %).
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The
investment structure is defined, managed and regularly reviewed using
asset/liability studies. The resulting target allocations for the plan assets of
the respective pension plans therefore reflect the duration of the obligations,
the defined benefit obligation, the minimum requirements for the policy reserve,
and other factors.
At
December 31, 2009, the plan assets include shares issued by Deutsche Telekom
amounting to EUR 1.0 million (December 31, 2008: shares totaling
EUR 1.7 million). No other own financial instruments were included in the
years shown.
Determination
of the expected return on essential plan assets:
These
expectations are based on consensus forecasts for each asset class as well as on
bank estimates. The forecasts are based on historical figures, economic data,
interest rate forecasts, and anticipated stock market developments.
The
pension expense for each period is composed of the following items and is
reported in the indicated accounts of the income statement:
|
(millions
of €)
|
Presentation
in the income statement
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current
service cost
|
Functional
costs1
|
|
|
204 |
|
|
|
204 |
|
|
|
217 |
|
|
Interest
cost
|
Other
financial income (expense)
|
|
|
371 |
|
|
|
331 |
|
|
|
307 |
|
|
Expected
return on plan assets
|
Other
financial income (expense)
|
|
|
(50 |
) |
|
|
(52 |
) |
|
|
(50 |
) |
|
Past
service cost
|
Functional
costs1
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Pension
expense before curtailments/
settlements
|
|
|
|
525 |
|
|
|
483 |
|
|
|
474 |
|
|
Curtailments
|
Functional
costs1
|
|
|
0 |
|
|
|
0 |
|
|
|
1 |
|
|
Settlements
|
Functional
costs1
|
|
|
0 |
|
|
|
0 |
|
|
|
32 |
|
|
Pension
expense
|
|
|
|
525 |
|
|
|
483 |
|
|
|
507 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Actual
return on plan assets
|
|
|
|
(41 |
) |
|
|
50 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1 Including
other operating expenses
|
The
consolidated statement of comprehensive income includes the following
amounts:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Cumulative
losses (gains) recognized directly in equity as of January
1
|
|
|
118 |
|
|
|
342 |
|
|
|
1,265 |
|
|
Change
due to business combinations/disposals
|
|
|
10 |
|
|
|
3 |
|
|
|
0 |
|
|
Actuarial
(gains) losses as shown in the consolidated statement
of
comprehensive income
|
|
|
461 |
|
|
|
(227 |
) |
|
|
(923 |
) |
|
Of
which: recognition directly in equity of actuarial (gains)
losses
in
the reporting period
|
|
|
464 |
|
|
|
(230 |
) |
|
|
(923 |
) |
|
Of
which: change in the additional provision recognized due
to
a minimum funding requirement
|
|
|
(3 |
) |
|
|
3 |
|
|
|
0 |
|
|
Cumulative
losses (gains) recognized directly in equity as of December
31
|
|
|
589 |
|
|
|
118 |
|
|
|
342 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
EUR 62
million of the EUR 589 million in cumulative income and expenses recognized
directly in equity as of the reporting date relate to T-Mobile UK, which is
classified as held for sale.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Expected
employer contributions for the subsequent year are estimated as
follows:
|
(millions
of €)
|
|
2010
|
|
|
Expected
contributions by employer
|
|
|
15 |
|
|
|
|
|
|
|
Amounts
for the current year and four preceding years of defined benefit obligations,
plan assets, defined benefit obligations in excess of plan assets, and
experience-based adjustments:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Dec.
31, 2007
|
|
|
Dec.
31, 2006
|
|
|
Dec.
31, 2005
|
|
|
Defined
benefit obligations
|
|
|
6,833 |
|
|
|
6,101 |
|
|
|
6,327 |
|
|
|
7,134 |
|
|
|
7,016 |
|
|
Plan
assets at fair value
|
|
|
(618 |
) |
|
|
(952 |
) |
|
|
(986 |
) |
|
|
(966 |
) |
|
|
(901 |
) |
|
Defined
benefit obligations in excess of plan assets (funded
status)
|
|
|
6,215 |
|
|
|
5,149 |
|
|
|
5,341 |
|
|
|
6,168 |
|
|
|
6,115 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustment
in %
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Experience-based
increase (decrease) of pension obligations
|
|
|
(0.7 |
) |
|
|
(0.1 |
) |
|
|
(0.8 |
) |
|
Experience-based
increase (decrease) of plan assets
|
|
|
(9.9 |
) |
|
|
(0.2 |
) |
|
|
(2.5 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Defined
contribution plans.
Current
contributions for defined contributions plans, which are reported as an expense
in the consolidated income statement of the respective year, amounted to
EUR 73 million in 2009 (2008: EUR 160 million; 2007: EUR 103
million).
Civil-servant
retirement arrangements at Deutsche Telekom.
An
expense of EUR 684 million was recognized in the 2009 financial year
(2008: EUR 762 million; 2007: EUR 772 million) for the
annual contribution to the BPS-PT special pension fund amounting to
33 percent of the pensionable gross emoluments of active civil servants and
the notional pensionable gross emoluments of civil servants on leave of absence.
The present value to the total obligation arising from payment obligations to
this special pension fund was EUR 6.6 billion as of the reporting date
(December 31, 2008: EUR 6.9 billion).
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
12
Other provisions.
|
(millions
of €)
|
|
Provisions
for restructuring expenses
|
|
|
Other
provisions for personnel costs
|
|
|
Provisions
for restoration obligations
|
|
|
Provisions
for litigation risks
|
|
|
Provisions
for sales and procurement support
|
|
|
Miscellaneous
other provisions
|
|
|
Total
|
|
|
At
Dec. 31, 2007
|
|
|
2,808 |
|
|
|
1,802 |
|
|
|
664 |
|
|
|
351 |
|
|
|
452 |
|
|
|
953 |
|
|
|
7,030 |
|
|
Of
which: current
|
|
|
800 |
|
|
|
1,367 |
|
|
|
10 |
|
|
|
165 |
|
|
|
437 |
|
|
|
586 |
|
|
|
3,365 |
|
|
Changes
in the composition of the Group
|
|
|
(25 |
) |
|
|
(34 |
) |
|
|
3 |
|
|
|
1 |
|
|
|
2 |
|
|
|
23 |
|
|
|
(30 |
) |
|
Currency
translation adjustments
|
|
|
(25 |
) |
|
|
1 |
|
|
|
(24 |
) |
|
|
(1 |
) |
|
|
0 |
|
|
|
(18 |
) |
|
|
(67 |
) |
|
Addition
|
|
|
893 |
|
|
|
1,531 |
|
|
|
113 |
|
|
|
202 |
|
|
|
553 |
|
|
|
639 |
|
|
|
3,931 |
|
|
Use
|
|
|
(1,366 |
) |
|
|
(1,348 |
) |
|
|
(49 |
) |
|
|
(63 |
) |
|
|
(491 |
) |
|
|
(318 |
) |
|
|
(3,635 |
) |
|
Reversal
|
|
|
(171 |
) |
|
|
(90 |
) |
|
|
(26 |
) |
|
|
(22 |
) |
|
|
(31 |
) |
|
|
(240 |
) |
|
|
(580 |
) |
|
Interest
effect
|
|
|
112 |
|
|
|
23 |
|
|
|
19 |
|
|
|
0 |
|
|
|
0 |
|
|
|
3 |
|
|
|
157 |
|
|
Other
changes
|
|
|
25 |
|
|
|
(10 |
) |
|
|
0 |
|
|
|
4 |
|
|
|
2 |
|
|
|
(86 |
) |
|
|
(65 |
) |
|
At
Dec. 31, 2008
|
|
|
2,251 |
|
|
|
1,875 |
|
|
|
700 |
|
|
|
472 |
|
|
|
487 |
|
|
|
956 |
|
|
|
6,741 |
|
|
Of
which: current
|
|
|
695 |
|
|
|
1,466 |
|
|
|
26 |
|
|
|
170 |
|
|
|
474 |
|
|
|
606 |
|
|
|
3,437 |
|
|
Changes
in the composition of the Group
|
|
|
1 |
|
|
|
83 |
|
|
|
7 |
|
|
|
48 |
|
|
|
0 |
|
|
|
12 |
|
|
|
151 |
|
|
Currency
translation adjustments
|
|
|
7 |
|
|
|
4 |
|
|
|
6 |
|
|
|
1 |
|
|
|
(1 |
) |
|
|
3 |
|
|
|
20 |
|
|
Addition
|
|
|
460 |
|
|
|
1,382 |
|
|
|
156 |
|
|
|
105 |
|
|
|
456 |
|
|
|
397 |
|
|
|
2,956 |
|
|
Use
|
|
|
(1,341 |
) |
|
|
(1,477 |
) |
|
|
(38 |
) |
|
|
(68 |
) |
|
|
(481 |
) |
|
|
(288 |
) |
|
|
(3,693 |
) |
|
Reversal
|
|
|
(116 |
) |
|
|
(296 |
) |
|
|
(24 |
) |
|
|
(104 |
) |
|
|
(23 |
) |
|
|
(194 |
) |
|
|
(757 |
) |
|
Interest
effect
|
|
|
131 |
|
|
|
17 |
|
|
|
67 |
|
|
|
0 |
|
|
|
0 |
|
|
|
17 |
|
|
|
232 |
|
|
Other
changes
|
|
|
(54 |
) |
|
|
13 |
|
|
|
(76 |
) |
|
|
(4 |
) |
|
|
(31 |
) |
|
|
32 |
|
|
|
(120 |
) |
|
At
Dec. 31, 2009
|
|
|
1,339 |
|
|
|
1,601 |
|
|
|
798 |
|
|
|
450 |
|
|
|
407 |
|
|
|
935 |
|
|
|
5,530 |
|
|
Of
which: current
|
|
|
536 |
|
|
|
1,349 |
|
|
|
39 |
|
|
|
424 |
|
|
|
407 |
|
|
|
614 |
|
|
|
3,369 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
provisions for restructuring expenses mainly include provisions for staff
restructuring. The provisions for restructuring expenses developed as follows in
the financial year:
|
(millions
of €)
|
|
Jan.
1,.2009
|
|
|
Addition
|
|
|
Use
|
|
|
Reversal
|
|
|
Other
changes
|
|
|
Dec.
31, 2009
|
|
|
Early
retirement
|
|
|
1,179 |
|
|
|
170 |
|
|
|
(742 |
) |
|
|
(58 |
) |
|
|
73 |
|
|
|
622 |
|
|
Severance
and voluntary redundancy models
|
|
|
690 |
|
|
|
141 |
|
|
|
(350 |
) |
|
|
(29 |
) |
|
|
(86 |
) |
|
|
366 |
|
|
Partial
retirement
|
|
|
340 |
|
|
|
111 |
|
|
|
(218 |
) |
|
|
(24 |
) |
|
|
83 |
|
|
|
292 |
|
|
Other
|
|
|
42 |
|
|
|
38 |
|
|
|
(31 |
) |
|
|
(5 |
) |
|
|
15 |
|
|
|
59 |
|
|
|
|
|
2,251 |
|
|
|
460 |
|
|
|
(1,341 |
) |
|
|
(116 |
) |
|
|
85 |
|
|
|
1,339 |
|
|
Of
which: current
|
|
|
695 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
536 |
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Some of
the staff restructuring measures are covered by law and will apply beyond 2009.
The deadline for civil servants to apply for early retirement, for example, was
originally the end of 2010. For civil servants employed at Deutsche Telekom, the
law provides the opportunity under certain conditions to retire early from the
age of 55. When the reform of civil-service law came into effect, the provisions
for early retirement for civil servants were extended until December 31, 2012.
Exercise of the early retirement option in 2011 and 2012, however, will be
subject to a resolution by the Board of Management.
Other
provisions for personnel costs include a variety of individual issues such as
provisions for deferred compensation and allowances, as well as for anniversary
gifts. The expenses are allocated to functional costs or to other operating
expenses based on actual cost generation.
Provisions
for restoration obligations include the estimated costs for dismantling and
removing an asset, and restoring the site on which it is located. The estimated
costs are included in the costs of the relevant asset.
The
provisions for litigation risks primarily include possible settlements
attributable to pending lawsuits.
Provisions
for sales and procurement support include dealer commissions, subsidies for
advertising expenses and reimbursements.
Miscellaneous
other provisions include provisions related to the disposal of businesses and
site closures, provisions for environmental damage and risks, warranty
provisions as well as a variety of other items for which the individually
recognized amounts are not material.
13
Other liabilities.
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Deferred
revenue
|
|
2,095
|
|
|
1,910
|
|
|
Liabilities
from other taxes
|
|
|
1,178 |
|
|
|
1,181 |
|
|
Other
deferred revenue
|
|
|
527 |
|
|
|
702 |
|
|
Miscellaneous
other liabilities
|
|
|
3,746 |
|
|
|
2,882 |
|
|
|
|
|
7,546 |
|
|
|
6,675 |
|
|
|
|
|
|
|
|
|
|
|
Miscellaneous
other liabilities increased in the reporting year due to higher liabilities in
connection with the early retirement arrangements for civil
servants.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
14
Shareholders’ equity.
Issued
capital.
As of
December 31, 2009, the share
capital of Deutsche Telekom totaled EUR 11,164,979,182.08, the same
as on the reporting date of the prior year. The share capital is divided into
4,361,319,993 no par value registered shares.
|
|
|
2009
|
|
|
|
|
(thousands)
|
|
|
(%)
|
|
|
Federal
Republic of Germany
|
|
|
646,575 |
|
|
|
14.8 |
|
|
KfW
Bankengruppe
|
|
|
735,662 |
|
|
|
16.9 |
|
|
Free
float
|
|
|
2,979,083 |
|
|
|
68.3 |
|
|
Of
which: Blackstone Group
|
|
|
191,700 |
|
|
|
4.4 |
|
|
Of
which: BlackRock
|
|
|
145,762 |
|
|
|
3.3 |
|
|
|
|
|
4,361,320 |
|
|
|
100.0 |
|
|
|
|
|
|
|
|
|
|
|
Each
share entitles the holder to one vote. The voting rights are nevertheless
restricted in relation to the treasury shares (around 2 million as of December
31, 2009) and the trust shares (around 19 million as of December 31, 2009). The
trust shares are connected with the acquisitions of VoiceStream and Powertel
(now T-Mobile USA) in 2001. As part of these acquisitions, Deutsche Telekom AG
issued new shares from authorized capital to trustees for the benefit of holders
of warrants, options, and conversion rights, among others. As regards the shares
issued to trusts, the trustees in question waived voting rights and subscription
rights and, in general, dividend rights for the duration of the trusts’
existence. The shares issued to the trusts can be sold on the stock exchange on
the instruction of Deutsche Telekom AG if the beneficiaries do not exercise
their options or conversion rights or if these expire. The proceeds from the
sale accrue to Deutsche Telekom AG. As of December 31, 2009, the number of
T-Shares reserved for the stock options still outstanding was
5,403,455.
Authorized
capital and contingent capital.
Authorized
capital and contingent capital comprised the following components as of December
31, 2009:
|
|
|
Amount
(€)
|
|
|
No
par value shares
|
|
Purpose
|
|
2009
Authorized capital I1
|
|
|
2,176,000,000.00 |
|
|
|
850,000,000 |
|
Increase
in share capital (until April 29, 2014)
|
|
2009
Authorized capital II1
|
|
|
38,400,000.00 |
|
|
|
15,000,000 |
|
Employee
shares (until April 29, 2014)
|
|
Contingent
capital II
|
|
|
31,813,089.28 |
|
|
|
12,426,988 |
|
Meeting
preemptive rights to shares from stock options under the 2001 Stock Option
Plan
|
|
Contingent
capital IV
|
|
|
600,000,000.00 |
|
|
|
234,375,000 |
|
Servicing
guaranteed convertible bonds or bonds with warrants issued on or before
April 25, 2010
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
The
Supervisory Board's approval is
required.
|
Capital
reserves.
The
capital reserves of the Group primarily encompass the capital reserves of
Deutsche Telekom AG. Differences to the capital reserves of Deutsche Telekom AG
result from the recognition at fair value of the Deutsche Telekom AG shares
newly issued in the course of the acquisition of T-Mobile USA Inc., Bellevue
(United States)/Powertel Inc., Bellevue (United States) instead of at their par
value, which is permissible in the consolidated financial statements, and from
the related treatment of the issuing costs, which are deducted from capital
reserves.
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (Continued)
Treasury
shares.
The total
of 1,881,508 treasury shares remained unchanged year-on-year. These are carried
at cost of EUR 5 million and correspond to 0.04 percent of the Company's
share capital. All treasury shares are held by Deutsche Telekom AG.
The
shareholders’ meeting on April 30, 2009 authorized the Board of Management to
purchase up to 436,131,999 no par value shares in Deutsche Telekom AG by October
29, 2010, with the amount of share capital accounted for by these shares
totaling up to EUR 1,116,497,917.44, provided the shares to be purchased on
the basis of this authorization in conjunction with other shares of Deutsche
Telekom AG which it has already purchased and still possesses or are to be
assigned to it under § 71d and § 71e AktG do not at any time account
for more than 10 percent of Deutsche Telekom’s share capital. This
authorization may be exercised in full or in part. The purchase can be carried
out in partial tranches spread over various purchase dates within the
authorization period until the maximum purchase volume is reached. Dependent
Group companies of Deutsche Telekom AG within the meaning of § 17 AktG or
third parties acting for the account of Deutsche Telekom AG or for the account
of dependent Group companies of Deutsche Telekom AG within the meaning of
§ 17 AktG are also entitled to purchase the shares. The purchase takes
place without prejudice to the principle of equal treatment through the stock
exchange or a public purchase offer addressed to all shareholders. By resolution
of the shareholders’ meeting of April 30, 2009, the Board of Management is
authorized to redeem Deutsche Telekom AG's shares purchased on the basis of
the aforementioned authorization, without such redemption or its implementation
requiring a further resolution of the shareholders’ meeting.
Non-controlling
interests.
The
significant increase in non-controlling interests compared with the prior year
was attributable to offsetting effects. The increase in non-controlling
interests as a result of the first-time full consolidation of OTE and the
attributable total comprehensive income was partially offset by the payment of
dividends.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTES TO THE CONSOLIDATED INCOME
STATEMENT
15
Net revenue.
Net
revenue breaks down into the following revenue categories:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Revenue
from the rendering of services
|
|
|
61,017 |
|
|
|
58,449 |
|
|
|
59,125 |
|
|
Revenue
from the sale of goods and merchandise
|
|
|
3,442 |
|
|
|
3,036 |
|
|
|
3,174 |
|
|
Revenue
from the use of entity assets by others
|
|
|
143 |
|
|
|
181 |
|
|
|
217 |
|
|
|
|
|
64,602 |
|
|
|
61,666 |
|
|
|
62,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
first-time full consolidation of the OTE was the primary driver behind the rise
in net revenue in the 2009 financial year, contributing EUR 5.4 billion.
Adjusted for the effects of changes in the composition of the Group totaling
EUR 5.5 billion and negative exchange rate effects (EUR 0.4 billion),
net revenue was below prior-year level.
While the
Group's revenue in the United States and Southern and Eastern Europe operating
segments increased, revenue in the Germany, Europe and Systems Solutions
operating segments declined.
16
Cost of sales.
The
EUR 1.7 billion increase in cost of sales year-on-year was mainly
attributable to the first-time full consolidation of OTE, which contributed
EUR 3.2 billion to the Group’s cost of sales in the financial year.
Furthermore, exchange rate effects totaling EUR 0.4 billion as well as, to
a smaller extent, higher sales of higher-value products and the roll-out of the
2G and 3G networks increased costs in the United States operating
segment.
Sales-related
declines in costs in the Europe and Systems Solutions operating segments
impacted the Group by a total of EUR 1.5 billion. Positive exchange rate
effects totaling EUR 0.4 billion, in particular in the Europe operating
segment and in the Southern and Eastern Europe operating segment arising from
the translation of pounds sterling, Polish zlotys, Czech korunas and Hungarian
forints to euros also reduced cost of sales.
17
Selling expenses.
The
Group’s selling expenses remained on a par with the prior-year level despite the
increasing effects of the first-time full consolidation of OTE in 2009. These
effects were offset in particular by cost cuts in the Germany operating segment,
primarily in operational sales and receivables management. In addition, selling
expenses decreased in the Europe operating segment, after elimination of
exchange rate effects.
18
General and administrative expenses.
The
Group’s general and administrative expenses were reduced by EUR 0.2
billion. The effect from the first-time full consolidation of OTE of
EUR 0.5 billion was more than offset by savings measures.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
19
Other operating income.
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income
from reimbursements
|
|
|
344 |
|
|
|
272 |
|
|
|
226 |
|
|
Income
from the reversal of impairment losses on noncurrent
financial
assets in accordance with IFRS 5
|
|
|
131 |
|
|
|
134 |
|
|
|
32 |
|
|
Income
from disposal of non-current assets
|
|
|
104 |
|
|
|
100 |
|
|
|
300 |
|
|
Income
from insurance compensation
|
|
|
49 |
|
|
|
50 |
|
|
|
58 |
|
|
Income
from divestitures
|
|
|
20 |
|
|
|
505 |
|
|
|
388 |
|
|
Miscellaneous
other operating income
|
|
|
856 |
|
|
|
910 |
|
|
|
641 |
|
|
|
|
|
1,504 |
|
|
|
1,971 |
|
|
|
1,645 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
operating income decreased by EUR 0.5 billion year-on-year. The decline was
mainly attributable to lower income from divestitures. In the prior year, the
Group generated income of EUR 0.4 billion from the disposal of
Media&Broadcast.
20
Other operating expenses.
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Goodwill
impairment losses
|
|
|
2,345 |
|
|
|
289 |
|
|
|
327 |
|
|
Loss
on disposal of non-current assets
|
|
|
154 |
|
|
|
170 |
|
|
|
257 |
|
|
Miscellaneous
other operating expenses
|
|
|
820 |
|
|
|
773 |
|
|
|
1,177 |
|
|
|
|
|
3,319 |
|
|
|
1,232 |
|
|
|
1,761 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Other
operating expenses increased by EUR 2.1 billion year-on-year. This was
mainly attributable to impairment losses on goodwill amounting to EUR 2.3
billion that had to be recognized in the financial year. For further details,
please refer to Note 5.
21
Finance costs.
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Interest
income
|
|
|
341 |
|
|
|
408 |
|
|
|
261 |
|
|
Interest
expense
|
|
|
(2,896 |
) |
|
|
(2,895 |
) |
|
|
(2,775 |
) |
|
|
|
|
(2,555 |
) |
|
|
(2,487 |
) |
|
|
(2,514 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Of
which: from financial instruments relating to categories
in
accordance with IAS 39:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and receivables
|
|
|
132 |
|
|
|
162 |
|
|
|
152 |
|
|
Held-to-maturity
investments
|
|
|
3 |
|
|
|
23 |
|
|
|
9 |
|
|
Available-for-sale
financial assets
|
|
|
42 |
|
|
|
32 |
|
|
|
31 |
|
|
Financial
liabilities measured at amortized cost1
|
|
|
(2,637 |
) |
|
|
(2,668 |
) |
|
|
(2,612 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Interest
expense calculated according to the effective interest method and adjusted
for accrued interest from derivatives that were used as hedging
instruments against interest rate-based changes in the fair values of
financial liabilities measured at amortized cost in the reporting period
for hedge accounting in accordance with IAS 39 (2009: interest income of
EUR 107 million; 2008: interest income of EUR 68 million,
interest expense of EUR 11 million; 2007: interest expense of
EUR 42 million).
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Finance
costs were subject to two offsetting effects. On the one hand, interest expense
increased in the 2009 financial year due to the first-time full consolidation of
OTE in the consolidated financial statements. On the other, the downgrade of
Deutsche Telekom’s rating in the prior year and the resulting adjustments to
carrying amounts for a number of bonds with rating-linked coupons had a one-time
impact on interest expense in the prior year.
Since
January 1, 2009 Deutsche Telekom has capitalized borrowing costs as part of the
cost of qualifying assets. EUR 27 million were recognized as part of
acquisition costs in the financial year. The amount was calculated on the basis
of an average capitalization rate of 5.9 percent applied across the Group.
The figures for prior-year periods have not been adjusted.
Accrued
interest payments from derivatives (interest rate swaps) that were designated as
hedging instruments in a fair value hedge in accordance with IAS 39 are netted
per swap contract and recognized as interest income or interest expense
depending on the net amount. Finance costs are assigned to the categories on the
basis of the hedged item; only financial liabilities were hedged in the
reporting period.
22
Share of profit/loss of associates and joint ventures accounted for using the
equity method.
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Share
of profit (loss) of joint ventures
|
|
|
9 |
|
|
|
31 |
|
|
|
25 |
|
|
Share
of profit (loss) of associates
|
|
|
15 |
|
|
|
(419 |
) |
|
|
30 |
|
|
|
|
|
24 |
|
|
|
(388 |
) |
|
|
55 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The share
of profit or loss of associates and joint ventures accounted for using the
equity method improved by EUR 0.4 billion in the financial year. This was
mainly due to the impairment loss of EUR 0.5 billion that had to be
recognized in the prior year on the carrying amount of the shares in OTE. OTE
has been fully consolidated since the beginning of February 2009. For
further details, please refer to the “Business combinations”
section.
23
Other financial income/expense.
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Income
from investments
|
|
|
22 |
|
|
|
44 |
|
|
|
25 |
|
|
Gain
(loss) from financial instruments
|
|
|
(171 |
) |
|
|
(254 |
) |
|
|
(3 |
) |
|
Interest
component from measurement of provisions and liabilities
|
|
|
(677 |
) |
|
|
(503 |
) |
|
|
(396 |
) |
|
|
|
|
(826 |
) |
|
|
(713 |
) |
|
|
(374 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
All
income components including interest income and expense from financial
instruments classified as held for trading in accordance with IAS 39 are
reported under other financial income/expense.
The
EUR 0.1 billion increase in other financial expense compared with the prior
year is mainly attributable to higher interest rate expenses on provisions and
liabilities.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
24
Income taxes.
Income
taxes in the consolidated income statement.
Income
taxes are broken down into current taxes paid or payable in the individual
countries and into deferred taxes.
The
following table provides a breakdown of income taxes in Germany and
internationally:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current
taxes
|
|
|
873 |
|
|
|
644 |
|
|
|
212 |
|
|
Germany
|
|
|
163 |
|
|
|
88 |
|
|
|
(259 |
) |
|
International
|
|
|
710 |
|
|
|
556 |
|
|
|
471 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
taxes
|
|
|
909 |
|
|
|
784 |
|
|
|
1,161 |
|
|
Germany
|
|
|
353 |
|
|
|
515 |
|
|
|
1,121 |
|
|
International
|
|
|
556 |
|
|
|
269 |
|
|
|
40 |
|
|
|
|
|
1,782 |
|
|
|
1,428 |
|
|
|
1,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche
Telekom’s combined income tax rate for 2009 amounted to 30.5 percent, comprising
corporate income tax at a rate of 15 percent, the solidarity surcharge of 5.5
percent on corporate income tax, and trade income tax at an average multiplier
of 419 percent. The combined income tax rate amounted to 30.5 percent for 2008
and to 39 percent for 2007.
Reconciliation
of the effective tax rate:
Income
taxes of EUR 1,782 million in the reporting year (2008: EUR 1,428
million; 2007: EUR 1,373 million) are derived as follows from the expected
income tax expense that would have arisen had the statutory income tax rate of
the parent company (combined income tax rate) been applied to profit before
income taxes:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Profit
before income taxes
|
|
|
2,655 |
|
|
|
3,452 |
|
|
|
2,453 |
|
|
Expected
income tax expense (income tax rate applicable
to
Deutsche Telekom AG: 2009:
30.5 %; 2008: 30.5 %; 2007: 39 %)
|
|
|
810 |
|
|
|
1,053 |
|
|
|
957 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjustments
to expected tax expense
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effect
of changes in statutory tax rates
|
|
|
26 |
|
|
|
3 |
|
|
|
734 |
|
|
Tax
effects from prior years
|
|
|
(26 |
) |
|
|
29 |
|
|
|
65 |
|
|
Tax
effects from other income taxes
|
|
|
161 |
|
|
|
115 |
|
|
|
42 |
|
|
Non-taxable
income
|
|
|
(106 |
) |
|
|
(86 |
) |
|
|
(217 |
) |
|
Tax
effects from equity investments
|
|
|
(9 |
) |
|
|
124 |
|
|
|
(23 |
) |
|
Non-deductible
expenses
|
|
|
136 |
|
|
|
110 |
|
|
|
63 |
|
|
Permanent
differences
|
|
|
64 |
|
|
|
(47 |
) |
|
|
28 |
|
|
Goodwill
impairment losses
|
|
|
702 |
|
|
|
71 |
|
|
|
130 |
|
|
Tax
effects from loss carryforwards
|
|
|
51 |
|
|
|
(34 |
) |
|
|
(306 |
) |
|
Tax
effects from additions to and reductions of local tax
|
|
|
71 |
|
|
|
86 |
|
|
|
92 |
|
|
Adjustment
of taxes to different foreign tax rates
|
|
|
(102 |
) |
|
|
3 |
|
|
|
(182 |
) |
|
Other
tax effects
|
|
|
4 |
|
|
|
1 |
|
|
|
(10 |
) |
|
Income
tax expense (benefit) according to the
consolidated
income statement
|
|
|
1,782 |
|
|
|
1,428 |
|
|
|
1,373 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Effective
income tax rate (%)
|
|
|
67 |
|
|
|
41 |
|
|
|
56 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Current
income taxes in the consolidated income statement.
The
following table provides a breakdown of current income taxes:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Current
income taxes
|
|
|
873 |
|
|
|
644 |
|
|
|
212 |
|
|
Of
which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Current
tax expense
|
|
|
744 |
|
|
|
596 |
|
|
|
579 |
|
|
Prior-period
tax expense (income)
|
|
|
129 |
|
|
|
48 |
|
|
|
(367 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Deferred
taxes in the consolidated income statement.
The
following table shows the development of deferred taxes:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Deferred
tax expense (income)
|
|
|
909 |
|
|
|
784 |
|
|
|
1,161 |
|
|
Of
which:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
On
temporary differences
|
|
|
692 |
|
|
|
409 |
|
|
|
324 |
|
|
On
loss carryforwards
|
|
|
232 |
|
|
|
419 |
|
|
|
852 |
|
|
From
tax credits
|
|
|
(15 |
) |
|
|
(44 |
) |
|
|
(15 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Despite
the significantly lower profit/loss before income taxes, income tax expense did
not decrease year-on-year; rather, it increased significantly. This was mainly
attributable to higher impairment losses recognized on goodwill, in particular
at T-Mobile UK. Since these impairment losses are not to be considered for tax
purposes, income tax expense increased relative to profit before income
taxes.
Income
taxes in the consolidated statement of financial position.
Current
income taxes in the consolidated statement of financial position:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Recoverable
taxes
|
|
|
144 |
|
|
|
273 |
|
|
Tax
liabilities
|
|
|
(511 |
) |
|
|
(585 |
) |
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred
taxes in the consolidated statement of financial position:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Deferred
tax assets
|
|
|
5,162 |
|
|
|
6,234 |
|
|
Deferred
tax liabilities
|
|
|
(7,153 |
) |
|
|
(7,108 |
) |
|
|
|
|
(1,991 |
) |
|
|
(874 |
) |
|
Of
which: recognized in equity:
|
|
|
|
|
|
|
|
|
|
Actuarial
gains and losses
|
|
|
151 |
|
|
|
35 |
|
|
Revaluation
due to business combinations
|
|
|
3 |
|
|
|
0 |
|
|
Cash
flow hedges
|
|
|
(319 |
) |
|
|
(338 |
) |
|
Financial
assets available for sale
|
|
|
3 |
|
|
|
3 |
|
|
|
|
|
(162 |
) |
|
|
(300 |
) |
|
|
|
|
|
|
|
|
|
|
Development
of deferred taxes:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Deferred
taxes recognized in statement of financial position
|
|
|
(1,991 |
) |
|
|
(874 |
) |
|
Difference
to prior year
|
|
|
(1,117 |
) |
|
|
(809 |
) |
|
Of
which:
|
|
|
|
|
|
|
|
|
|
Recognized
in income statement
|
|
|
(909 |
) |
|
|
(784 |
) |
|
Recognized
in equity
|
|
|
138 |
|
|
|
(53 |
) |
|
Acquisitions/disposals
|
|
|
(482 |
) |
|
|
215 |
|
|
Currency
translation adjustments
|
|
|
136 |
|
|
|
(187 |
) |
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deferred
taxes relate to the following key items in the statement of financial position,
loss carryforwards, and tax credits:
|
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
(millions
of €)
|
|
Deferred
tax
assets
|
|
|
Deferred
tax liabilities
|
|
|
Deferred
tax
assets
|
|
|
Deferred
tax
liabilities
|
|
|
Current
assets
|
|
|
788 |
|
|
|
(368 |
) |
|
|
659 |
|
|
|
(1,145 |
) |
|
Trade
and other receivables
|
|
|
339 |
|
|
|
(52 |
) |
|
|
262 |
|
|
|
(57 |
) |
|
Other
financial assets
|
|
|
317 |
|
|
|
(251 |
) |
|
|
276 |
|
|
|
(1,036 |
) |
|
Inventories
|
|
|
13 |
|
|
|
(17 |
) |
|
|
13 |
|
|
|
(5 |
) |
|
Other
assets
|
|
|
119 |
|
|
|
(48 |
) |
|
|
108 |
|
|
|
(47 |
) |
|
Non-current
assets
|
|
|
1,279 |
|
|
|
(9,739 |
) |
|
|
2,391 |
|
|
|
(9,748 |
) |
|
Intangible
assets
|
|
|
493 |
|
|
|
(6,802 |
) |
|
|
888 |
|
|
|
(6,755 |
) |
|
Property,
plant and equipment
|
|
|
459 |
|
|
|
(2,588 |
) |
|
|
507 |
|
|
|
(2,135 |
) |
|
Investments
accounted for using the equity method
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(3 |
) |
|
Other
financial assets
|
|
|
327 |
|
|
|
(349 |
) |
|
|
996 |
|
|
|
(855 |
) |
|
Current
liabilities
|
|
|
641 |
|
|
|
(405 |
) |
|
|
1,713 |
|
|
|
(748 |
) |
|
Financial
liabilities
|
|
|
267 |
|
|
|
(229 |
) |
|
|
117 |
|
|
|
(212 |
) |
|
Trade
and other payables
|
|
|
29 |
|
|
|
(58 |
) |
|
|
1,175 |
|
|
|
(394 |
) |
|
Other
provisions
|
|
|
176 |
|
|
|
(46 |
) |
|
|
305 |
|
|
|
(40 |
) |
|
Other
liabilities
|
|
|
169 |
|
|
|
(72 |
) |
|
|
116 |
|
|
|
(102 |
) |
|
Non-current
liabilities
|
|
|
3,209 |
|
|
|
(998 |
) |
|
|
2,572 |
|
|
|
(605 |
) |
|
Financial
liabilities
|
|
|
1,572 |
|
|
|
(734 |
) |
|
|
864 |
|
|
|
(300 |
) |
|
Provisions
for pensions and other employee benefits
|
|
|
542 |
|
|
|
(162 |
) |
|
|
393 |
|
|
|
(217 |
) |
|
Other
provisions
|
|
|
393 |
|
|
|
(75 |
) |
|
|
664 |
|
|
|
(44 |
) |
|
Other
liabilities
|
|
|
702 |
|
|
|
(27 |
) |
|
|
651 |
|
|
|
(44 |
) |
|
Tax
credits
|
|
|
196 |
|
|
|
- |
|
|
|
188 |
|
|
|
- |
|
|
Loss
carryforwards
|
|
|
4,458 |
|
|
|
- |
|
|
|
5,062 |
|
|
|
- |
|
|
Total
|
|
|
10,571 |
|
|
|
(11,510 |
) |
|
|
12,585 |
|
|
|
(12,246 |
) |
|
Of
which: non-current
|
|
|
8,865 |
|
|
|
(10,737 |
) |
|
|
11,327 |
|
|
|
(9,982 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Allowance
|
|
|
(1,052 |
) |
|
|
|
|
|
|
(1,213 |
) |
|
|
|
|
|
Netting
|
|
|
(4,357 |
) |
|
|
4,357 |
|
|
|
(5,138 |
) |
|
|
5,138 |
|
|
Recognition
|
|
|
5,162 |
|
|
|
(7,153 |
) |
|
|
6,234 |
|
|
|
(7,108 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
allowances relate primarily to loss carryforwards. This table does
not include deferred taxes (deferred tax assets: EUR 0.3 billion;
deferred tax liabilities: EUR 0.3 billion) attributable to T-Mobile UK,
which was classified as held for sale as of the reporting date.
The
loss carryforwards are shown in the following table:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Loss
carryforwards for corporate income tax purposes
|
|
|
13,516 |
|
|
|
15,293 |
|
|
|
|
|
|
|
|
|
|
|
|
Expiry
within
|
|
|
|
|
|
|
|
|
|
1
year
|
|
|
38 |
|
|
|
4 |
|
|
2
years
|
|
|
1,403 |
|
|
|
2 |
|
|
3
years
|
|
|
165 |
|
|
|
1,390 |
|
|
4
years
|
|
|
128 |
|
|
|
87 |
|
|
5
years
|
|
|
157 |
|
|
|
28 |
|
|
After
5 years
|
|
|
5,051 |
|
|
|
6,291 |
|
|
Unlimited
carryforward period
|
|
|
6,574 |
|
|
|
7,491 |
|
|
|
|
|
|
|
|
|
|
|
The loss
carryforwards of T-Mobile UK, which was classified as held for sale as of the
reporting date, totaling EUR 1,666 million are not included in the
table.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Loss
carryforwards and temporary differences for which no deferred taxes were
recorded amount to:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Loss
carryforwards for corporate income tax purposes
|
|
|
3,295 |
|
|
|
3,952 |
|
|
|
|
|
|
|
|
|
|
|
|
Expiry
within
|
|
|
|
|
|
|
|
|
|
1
year
|
|
|
18 |
|
|
|
4 |
|
|
2
years
|
|
|
1,127 |
|
|
|
2 |
|
|
3
years
|
|
|
46 |
|
|
|
1,146 |
|
|
4
years
|
|
|
43 |
|
|
|
34 |
|
|
5
years
|
|
|
81 |
|
|
|
22 |
|
|
After
5 years
|
|
|
202 |
|
|
|
117 |
|
|
Unlimited
carryforward period
|
|
|
1,778 |
|
|
|
2,627 |
|
|
Temporary
differences in corporate income tax
|
|
|
477 |
|
|
|
289 |
|
|
|
|
|
|
|
|
|
|
|
The loss
carryforwards of T-Mobile UK, which was classified as held for sale as of the
reporting date, totaling EUR 774 million are not included in the
table.
In
addition, no deferred taxes are recognized on trade tax loss carryforwards of
EUR 124 million (December 31, 2008: EUR 220 million) and on temporary
differences for trade tax purposes in the amount of EUR 40 million
(December 31, 2008: EUR 75 million). Apart from corporate income tax loss
carryforwards, no deferred taxes amounting to EUR 118 million (December 31,
2008: EUR 106 million) were recognized for other foreign income tax loss
carryforwards.
No
deferred tax assets were recognized on the aforementioned tax loss carryforwards
and temporary differences as it is not probable that taxable profit will be
available in the foreseeable future against which these tax loss carryforwards
can be utilized.
A
positive tax effect in the amount of EUR 12 million (2008: EUR 12
million; 2007: EUR 14 million) was recorded, attributable to the
utilization of loss carryforwards on which deferred tax assets had not yet been
recognized.
As the
Group expects to generate future taxable profits, deferred tax assets in the
amount of EUR 2,624 million were recognized on loss carryforwards and
temporary differences for 2009 (December 31, 2008: EUR 2,878 million),
although the respective entities generated tax losses in the current and the
prior year. Furthermore, the impairment test of deferred tax assets also takes
potential structural improvements into consideration.
Having
streamlined T-Mobile UK’s corporate structure in 2006, Deutsche Telekom believes
that a capital loss has become available for tax purposes. However, as it is
unlikely that the resulting loss carryforward of EUR 8,122 million, which can
only be offset against certain types of profit, can be utilized, it is not
included in the aforementioned loss carryforwards.
No
deferred tax liabilities were recognized on temporary differences in connection
with equity interests in subsidiaries amounting to EUR 1,590 million
(December 31, 2008: EUR 1,485 million) as it is unlikely that these
differences will be reversed in the foreseeable future.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Disclosure
of tax effects relating to each component of "Other comprehensive
income."
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
(millions
of €)
|
|
Before
tax amount
|
|
|
Tax
(expense) benefit
|
|
|
Net
of tax amount
|
|
|
Before
tax amount
|
|
|
Tax
(expense) benefit
|
|
|
Net
of tax amount
|
|
|
Before
tax amount
|
|
|
Tax
(expense) benefit
|
|
|
Net
of tax amount
|
|
|
Actuarial
gains and losses on defined benefit pension plans
|
|
|
(461 |
) |
|
|
116 |
|
|
|
(345 |
) |
|
|
227 |
|
|
|
(64 |
) |
|
|
163 |
|
|
|
923 |
|
|
|
(364 |
) |
|
|
559 |
|
|
Revaluation
due to business combinations
|
|
|
(38 |
) |
|
|
3 |
|
|
|
(35 |
) |
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
18 |
|
|
|
0 |
|
|
|
18 |
|
|
Exchange
differences on translating foreign operations
|
|
|
(211 |
) |
|
|
0 |
|
|
|
(211 |
) |
|
|
(352 |
) |
|
|
0 |
|
|
|
(352 |
) |
|
|
(2,510 |
) |
|
|
0 |
|
|
|
(2,510 |
) |
|
Available-for-sale
financial assets
|
|
|
(4 |
) |
|
|
0 |
|
|
|
(4 |
) |
|
|
1 |
|
|
|
0 |
|
|
|
1 |
|
|
|
(2 |
) |
|
|
0 |
|
|
|
(2 |
) |
|
Of
which: recognized in income statement
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
|
(1 |
) |
|
|
0 |
|
|
|
(1 |
) |
|
Fair
value measurement of hedging instruments
|
|
|
(48 |
) |
|
|
19 |
|
|
|
(29 |
) |
|
|
(41 |
) |
|
|
8 |
|
|
|
(33 |
) |
|
|
(115 |
) |
|
|
137 |
|
|
|
22 |
|
|
Of
which: recognized in income statement
|
|
|
8 |
|
|
|
(1 |
) |
|
|
7 |
|
|
|
(101 |
) |
|
|
5 |
|
|
|
(96 |
) |
|
|
3 |
|
|
|
(1 |
) |
|
|
2 |
|
|
Other
income and expense recognized directly in equity
|
|
|
11 |
|
|
|
0 |
|
|
|
11 |
|
|
|
(8 |
) |
|
|
3 |
|
|
|
(5 |
) |
|
|
0 |
|
|
|
(1 |
) |
|
|
(1 |
) |
|
Other
comprehensive income
|
|
|
(751 |
) |
|
|
138 |
|
|
|
(613 |
) |
|
|
(173 |
) |
|
|
(53 |
) |
|
|
(226 |
) |
|
|
(1,686 |
) |
|
|
(228 |
) |
|
|
(1,914 |
) |
|
Profit
|
|
|
|
|
|
|
|
|
|
|
873 |
|
|
|
|
|
|
|
|
|
|
|
2,024 |
|
|
|
|
|
|
|
|
|
|
|
1,080 |
|
|
Total
comprehensive income
|
|
|
|
|
|
|
|
|
|
|
260 |
|
|
|
|
|
|
|
|
|
|
|
1,798 |
|
|
|
|
|
|
|
|
|
|
|
(834 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
25
Profit attributable to non-controlling interests.
Profit
attributable to non-controlling interests of EUR 520 million (2008:
EUR 541 million; 2007: EUR 509 million) comprises gains of
EUR 527 million (2008: EUR 859 million; 2007: EUR 549
million) and losses of EUR 7 million (2008: EUR 318 million; 2007:
EUR 40 million). Profit
attributable to non-controlling interests in 2009 primarily relates to T-Mobile
Czech Republic, Magyar Telekom, T-Mobile Hrvatska, HT-Hrvatske telekomunikacije
and Slovak Telekom.
26
Earnings per share.
Basic and
diluted earnings per share are calculated in accordance with IAS 33 as
follows:
|
Basic
earnings per share
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Profit
attributable to the owners of the parent (net profit) ((millions of
€))
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
Adjustment
|
|
|
- |
|
|
|
- |
|
|
|
- |
|
|
Adjusted
net profit (basic) (millions of €)
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number
of ordinary shares issued (millions)
|
|
|
4,361 |
|
|
|
4,361 |
|
|
|
4,361 |
|
|
Treasury
shares (millions)
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
Shares
reserved for outstanding options (T-Mobile USA/Powertel)
(millions)
|
|
|
(19 |
) |
|
|
(19 |
) |
|
|
(20 |
) |
|
Adjusted
weighted average number of ordinary shares outstanding (basic)
(millions)
|
|
|
4,340 |
|
|
|
4,340 |
|
|
|
4,339 |
|
|
Basic
earnings per share/ADS (€)
|
|
|
0.08 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
calculation of basic earnings per share is based on the time-weighted total
number of all ordinary shares outstanding. The number of ordinary shares issued
already includes all shares newly issued in the reporting period in line with
their time weighting. Furthermore, the weighted average number of ordinary
shares outstanding is determined by deducting the treasury shares held by
Deutsche Telekom AG as well as the shares that, as part of the issue of new
shares in the course of the acquisition of T-Mobile USA/Powertel, are held in a
trust deposit account for later issue and later trading as registered shares
and/or American depositary shares (ADSs), each multiplied by the corresponding
time weighting factor.
|
Diluted
earnings per share
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Adjusted
profit attributable to the owners of the parent (net profit) (millions
of €)
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
Dilutive
effects on profit (loss) from stock options (after taxes) (millions of
€)
|
|
|
0 |
|
|
|
0 |
|
|
|
0 |
|
|
Net
profit (diluted) (millions of €)
|
|
|
353 |
|
|
|
1,483 |
|
|
|
571 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Adjusted
weighted average number of ordinary shares outstanding (basic)
(millions)
|
|
|
4,340 |
|
|
|
4,340 |
|
|
|
4,339 |
|
|
Dilutive
potential ordinary shares from stock options and warrants (millions)
|
|
|
0 |
|
|
|
0 |
|
|
|
1 |
|
|
Weighted
average number of ordinary shares outstanding (diluted)
(millions)
|
|
|
4,340 |
|
|
|
4,340 |
|
|
|
4,340 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted
earnings per share/ADS (€)
|
|
|
0.08 |
|
|
|
0.34 |
|
|
|
0.13 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
calculation of diluted earnings per share generally corresponds to the method
for calculating basic earnings per share. However, the calculation must be
adjusted for all dilutive effects arising from potential ordinary shares. Equity
instruments may dilute basic earnings per share in the future and – to the
extent that a potential dilution already occurred in the respective reporting
period – have been included in the calculation of diluted earnings per share.
For further details on the equity instruments currently applicable, please refer
to Notes 14 and Note 34.
27
Dividend per share.
For the
2009 financial year, the Board of Management proposes a dividend of
EUR 0.78 for each no par value share carrying dividend rights. On the basis
of this proposed appropriation, total dividends in the amount of
EUR 3,386 million (2008: EUR 3,386 million) will be appropriated
to the no par value shares carrying dividend rights at February 8, 2010.
The final
amount of the total dividend payment depends on the number of no par value
shares carrying dividend rights as of the date of the resolution on the
appropriation of net income as adopted on the day of the shareholders’
meeting.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
28
Average number of employees and personnel costs.
|
Average
number of employees
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Group
(total)
|
|
|
257,601 |
|
|
|
234,887 |
|
|
|
243,736 |
|
|
Domestic
|
|
|
130,477 |
|
|
|
141,123 |
|
|
|
154,101 |
|
|
International
|
|
|
127,124 |
|
|
|
93,764 |
|
|
|
89,635 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-civil
servants
|
|
|
226,460 |
|
|
|
201,036 |
|
|
|
205,471 |
|
|
Civil
servants (domestic)
|
|
|
31,141 |
|
|
|
33,851 |
|
|
|
38,265 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trainees
and student interns
|
|
|
9,805 |
|
|
|
10,424 |
|
|
|
10,708 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2009 |
|
|
|
2008 |
|
|
|
2007 |
|
|
Personnel
costs (millions of €)
|
|
|
14,333 |
|
|
|
14,078 |
|
|
|
15,387 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
number of employees in the Group increased year-on-year by 22,714. This increase
was largely a result of the first-time inclusion of the OTE staff in early
February 2009. The headcount also grew in the Systems Solutions and United
States operating segments. In the Systems Solutions operating segment, the
higher staff level was due to the expansion of international business. In the
United States operating segment, the rise in headcount resulted from further
retail distribution growth. These effects were only partially offset by staff
reductions in Germany.
The
change in personnel costs, which are included in functional costs, is
attributable to the headcount trends described.
29
Depreciation, amortization and impairment losses.
The
following table provides a breakdown of depreciation, amortization and
impairment losses included in the functional costs:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Amortization
and impairment of intangible assets
|
|
|
5,657 |
|
|
|
3,397 |
|
|
|
3,490 |
|
|
Of
which: goodwill impairment losses
|
|
|
2,345 |
|
|
|
289 |
|
|
|
327 |
|
|
Of
which: amortization of mobile communications licenses
|
|
|
905 |
|
|
|
1,013 |
|
|
|
1,017 |
|
|
Depreciation
and impairment of property, plant and equipment
|
|
|
8,237 |
|
|
|
7,578 |
|
|
|
8,121 |
|
|
|
|
|
13,894 |
|
|
|
10,975 |
|
|
|
11,611 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The
following table provides a breakdown of impairment losses:
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Intangible
assets
|
|
|
2,354 |
|
|
|
340 |
|
|
|
378 |
|
|
Of
which: goodwill
|
|
|
2,345 |
|
|
|
289 |
|
|
|
327 |
|
|
Of
which: U.S. mobile communications licenses
|
|
|
- |
|
|
|
21 |
|
|
|
9 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Property,
plant and equipment
|
|
|
217 |
|
|
|
140 |
|
|
|
300 |
|
|
Land
and buildings
|
|
|
193 |
|
|
|
123 |
|
|
|
238 |
|
|
Technical
equipment and machinery
|
|
|
10 |
|
|
|
5 |
|
|
|
54 |
|
|
Other
equipment, operating and office equipment
|
|
|
3 |
|
|
|
8 |
|
|
|
4 |
|
|
Advance
payments and construction in progress
|
|
|
11 |
|
|
|
4 |
|
|
|
4 |
|
|
|
|
|
2,571 |
|
|
|
480 |
|
|
|
678 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Amortization
and impairment of intangible assets mainly relate to mobile communications
licenses, software, customer bases and brand names as well as goodwill. The
increase in the 2009 financial year is mainly due to the full consolidation of
OTE for the first time in early February 2009 as well as higher impairment
losses recognized on goodwill. The Group recognized an impairment loss of
EUR 1.8 billion on the goodwill of the cash-generating unit T-Mobile UK in
the first quarter of 2009. T-Mobile UK has been classified as held for sale
since September 8, 2009. The Group also recognized impairment losses of
EUR 0.5 billion as of December 31, 2009 as a result of the annual
impairment test. For further details on impairment losses, please refer to Note
5. For further details on the disclosure of T-Mobile UK, please refer to Note
4.
Depreciation
of property, plant and equipment increased by EUR 0.7 billion in the
reporting year, mainly as a result of the full consolidation of OTE for the
first time. This increase was partially offset by lower depreciation of
technical equipment and machinery as well as lower impairment of land and
buildings.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
OTHER
DISCLOSURES
30
Notes to the consolidated statement of cash flows.
Net
cash from operating activities.
Net cash
from operating activities amounted to EUR 15.8 billion in the 2009
financial year, an increase of EUR 0.4 billion over the prior year. While cash
generated from operations improved by EUR 0.6 billion, net interest
paid increased by EUR 0.2 billion. The increase in cash generated from
operations is the result of several factors, some of which offset each other.
The Group's profit from operations decreased by EUR 1.0 billion while
depreciation, amortization and impairment losses increased by EUR 2.9 billion
year-on-year. Additionally, the effects of the disposal of fully consolidated
companies increased by EUR 0.4 billion. The change in assets carried
as working capital increased by EUR 1.7 billion, mainly as a result of
inflows of EUR 0.8 billion from the sale of receivables (factoring) and as
a result of the decrease of EUR 0.5 billion in trade receivables (excluding
receivables from construction contracts) which is due to improved receivables
management. By contrast, the changes in provisions and other liabilities carried
as working capital decreased by EUR 3.1 billion year-on-year, mainly due to
lower additions to provisions for restructuring measures in combination with
higher cash outflows for restructuring measures, increased utilization of
provisions for personnel costs and provisions for litigation risks, as well as a
reduction in trade payables. In addition, income tax payments increased by
EUR 0.4 billion year-on-year, in particular as a result of the first-time
full consolidation of OTE from February 2009. The increase in net interest paid
is also largely attributable to this effect.
Net
cash used in investing activities.
Net cash
used in investing activities totaled EUR 8.6 billion as compared with
EUR 11.4 billion in the previous year. This development was mainly due to
the addition of OTE’s cash and cash equivalents amounting to EUR 1.6
billion as part of the first-time full consolidation of OTE, whereas the prior
year saw outflows for the acquisition of shares in OTE amounting to EUR 3.1
billion. Cash outflows for intangible assets and property, plant and equipment
increased by EUR 0.5 billion in 2009. In addition, cash outflows were
impacted by EUR 0.3 billion for the deposit of cash collateral in 2009 for
the acquisition of Strato AG, whereas in 2008 net cash used in investing
activities was positively impacted by EUR 0.6 billion cash inflows from
short-term investments.
The net
cash outflows for investments in fully consolidated companies and business units
increased by EUR 0.6 billion. Whereas cash outflows amounting to
EUR 1.0 billion for the acquisition of SunCom and cash inflows of
EUR 0.8 billion from the sale of Media&Broadcast were recorded in
the 2008 financial year, the 2009 financial year saw cash outflows of
EUR 1.0 billion in particular for the acquisition of additional shares in
OTE in connection with put option I, and the acquisition of Zapp, and cash
inflows of EUR 0.1 billion from the sale of Cosmofon.
Net
cash used in financing activities.
Net cash
used in financing activities amounted to EUR 5.1 billion in the reporting
period, compared with EUR 3.1 billion in the prior year.
This
change was mostly attributable to EUR 1.1 billion lower year-on-year
proceeds from the issue of non-current financial liabilities and EUR 0.6
billion higher net repayments of current financial liabilities. In addition,
dividend payments increased by EUR 0.3 billion compared with 2008, in
particular as a result of the first-time full consolidation of OTE in February
2009 and higher dividend payments at Slovak Telekom. The considerable decrease
in issuance and repayment of current financial liabilities year-on-year is
primarily attributable to the issuance of commercial paper in 2009 to finance
short-term liquidity needs. This is contrasted by the drawdown of several
short-term credit lines in the prior year.
The issue
of financial liabilities in the 2009 financial year consisted in particular of
the issue of a Eurobond for EUR 2.0 billion, medium-term notes for
EUR 2.0 billion, U.S. dollar bonds for EUR 1.1 billion, and promissory
notes for EUR 0.2 billion. Medium-term notes for an amount of
EUR 3.7 billion, a U.S. dollar bond for an amount of EUR 0.7 billion,
commercial paper for a net amount of EUR 0.6 billion, a medium-term note of
OTE for an amount of EUR 0.6 billion and promissory notes and other loans
for EUR 0.4 billion were repaid during the same period.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
31
Segment reporting.
Since
July 1, 2009, Deutsche Telekom's organizational structure has reflected the
realigned management structure approved by the Supervisory Board on April 29,
2009. The new structure increases regional market responsibility in the combined
fixed-network and mobile communications business. The realignment also resulted
in a change to the structure of the operating segments from July 1, 2009. Since
July 1, 2009, Deutsche Telekom has reported on the five operating segments
Germany, United States, Europe, Southern and Eastern Europe, and Systems
Solutions as well as on Group Headquarters & Shared Services.
The
business activities in four of these five operating segments are assigned by
regions and in the fifth by customers and products.
The Germany operating segment
comprises all fixed-network and mobile activities in Germany. In addition, the
operating segment provides wholesale telecommunications services for the Group's
other operating segments. The United States operating
segment combines all mobile activities in the U.S. market. The Europe operating segment
covers all activities of the mobile communications companies in the United
Kingdom, Poland, the Netherlands, the Czech Republic and Austria, as well as the
International Carrier Sales and Services unit, which provides wholesale
telecommunications services for the Group’s other operating segments. The Southern and Eastern Europe
operating segment comprises all fixed-network and mobile communications
operations of the national companies in Hungary, Croatia, Slovakia, Greece,
Romania, Bulgaria, Albania, the F.Y.R.O. Macedonia, and Montenegro.
Fixed-network
business includes all voice and data communications activities based on
fixed-network and broadband technology. This includes the sale of terminal
equipment and other hardware, as well as the sale of services to
resellers.
The
mobile communications business offers mobile voice and data services to
consumers and business customers. Mobile terminals and other hardware are sold
in connection with the services offered. In addition, T-Mobile services are sold
to resellers and to companies that buy network services and market them
independently to third parties (MVNOs).
The Systems Solutions operating segment
bundles business with ICT products and solutions for large multinational
corporations under the T-Systems brand. The operating segment offers its
customers information and communication technology (ICT) from a single source.
It develops and operates infrastructure and industry solutions for multinational
corporations and public institutions. The products and services offered range
from standard products and IP-based high-performance networks through to
complete ICT solutions.
Group Headquarters & Shared
Services comprises Service Headquarters and those subsidiaries of
Deutsche Telekom AG that are not allocated to the operating
segments.
The
around 160,000 business customers of the Systems Solutions operating segment
(called the Business Customers operating segment until December 31, 2008), which
were transferred to the former Broadband/Fixed Network operating segment as of
January 1, 2009, are now included in the Germany operating
segment.
All of
the information presented here has been incorporated into the following tables,
and prior-year and comparative figures have been adjusted accordingly. The
reconciliation summarizes the elimination of intersegment
transactions.
The
measurement principles for Deutsche Telekom’s segment reporting structure are
based on the IFRSs adopted in the consolidated financial statements. Deutsche
Telekom evaluates the segments’ performance based on revenue and profit or loss
from operations (EBIT), among other factors. Revenue generated and goods and
services exchanged between segments are calculated on the basis of market
prices. Segment assets and liabilities include all assets and liabilities that
are accounted for on the basis of the financial statements prepared by the
operating segments and included in the consolidated financial statements.
Segment investments include additions to intangible assets and property, plant
and equipment. Where entities accounted for using the equity method are directly
allocable to a segment, their share of profit or loss after income taxes and
their carrying amount is reported in this segment’s accounts. The following
tables show the performance indicators used by Deutsche Telekom to evaluate the
segments’ performance as well as additional segment-related
indicators:
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
|
(millions
of €)
|
Year
|
|
Net
revenue
|
|
|
Intersegment
revenue
|
|
|
Total
revenue
|
|
|
Profit
(loss) from operations (EBIT)
|
|
|
Interest
income
|
|
|
Interest
expense
|
|
|
Share
of profit (loss) of associates and joint ventures accounted for using the
equity method
|
|
|
Income
taxes
|
|
|
Germany
|
2009
|
|
|
23,813 |
|
|
|
1,610 |
|
|
|
25,423 |
|
|
|
5,062 |
|
|
|
172 |
|
|
|
(107 |
) |
|
|
2 |
|
|
|
(13 |
) |
|
|
2008
|
|
|
24,754 |
|
|
|
1,646 |
|
|
|
26,400 |
|
|
|
4,624 |
|
|
|
654 |
|
|
|
(425 |
) |
|
|
(1 |
) |
|
|
16 |
|
|
|
2007
|
|
|
26,134 |
|
|
|
1,982 |
|
|
|
28,116 |
|
|
|
4,691 |
|
|
|
524 |
|
|
|
(420 |
) |
|
|
7 |
|
|
|
(9 |
) |
|
United
States
|
2009
|
|
|
15,457 |
|
|
|
14 |
|
|
|
15,471 |
|
|
|
2,233 |
|
|
|
16 |
|
|
|
(543 |
) |
|
|
6 |
|
|
|
(643 |
) |
|
|
2008
|
|
|
14,942 |
|
|
|
15 |
|
|
|
14,957 |
|
|
|
2,299 |
|
|
|
81 |
|
|
|
(577 |
) |
|
|
6 |
|
|
|
(694 |
) |
|
|
2007
|
|
|
14,050 |
|
|
|
25 |
|
|
|
14,075 |
|
|
|
2,017 |
|
|
|
99 |
|
|
|
(457 |
) |
|
|
6 |
|
|
|
(518 |
) |
|
Europe
|
2009
|
|
|
9,486 |
|
|
|
548 |
|
|
|
10,034 |
|
|
|
(905 |
) |
|
|
92 |
|
|
|
(187 |
) |
|
|
0 |
|
|
|
(160 |
) |
|
|
2008
|
|
|
10,798 |
|
|
|
556 |
|
|
|
11,354 |
|
|
|
496 |
|
|
|
190 |
|
|
|
(269 |
) |
|
|
0 |
|
|
|
(58 |
) |
|
|
2007
|
|
|
10,675 |
|
|
|
559 |
|
|
|
11,234 |
|
|
|
86 |
|
|
|
150 |
|
|
|
(264 |
) |
|
|
0 |
|
|
|
202 |
|
|
Southern
and Eastern Europe
|
2009
|
|
|
9,510 |
|
|
|
175 |
|
|
|
9,685 |
|
|
|
1,037 |
|
|
|
126 |
|
|
|
(479 |
) |
|
|
7 |
|
|
|
(420 |
) |
|
|
2008
|
|
|
4,497 |
|
|
|
148 |
|
|
|
4,645 |
|
|
|
915 |
|
|
|
99 |
|
|
|
(151 |
) |
|
|
7 |
|
|
|
(223 |
) |
|
|
2007
|
|
|
4,458 |
|
|
|
142 |
|
|
|
4,600 |
|
|
|
1,010 |
|
|
|
80 |
|
|
|
(139 |
) |
|
|
38 |
|
|
|
(214 |
) |
|
Systems
Solutions
|
2009
|
|
|
6,083 |
|
|
|
2,715 |
|
|
|
8,798 |
|
|
|
(11 |
) |
|
|
39 |
|
|
|
(46 |
) |
|
|
10 |
|
|
|
(12 |
) |
|
|
2008
|
|
|
6,368 |
|
|
|
2,975 |
|
|
|
9,343 |
|
|
|
81 |
|
|
|
82 |
|
|
|
(59 |
) |
|
|
41 |
|
|
|
(10 |
) |
|
|
2007
|
|
|
6,911 |
|
|
|
3,660 |
|
|
|
10,571 |
|
|
|
(229 |
) |
|
|
72 |
|
|
|
(97 |
) |
|
|
1 |
|
|
|
(43 |
) |
|
Group
Headquarters & Shared Services
|
2009
|
|
|
253 |
|
|
|
2,157 |
|
|
|
2,410 |
|
|
|
(1,249 |
) |
|
|
1,156 |
|
|
|
(2,768 |
) |
|
|
0 |
|
|
|
(570 |
) |
|
|
2008
|
|
|
307 |
|
|
|
2,474 |
|
|
|
2,781 |
|
|
|
(1,266 |
) |
|
|
1,559 |
|
|
|
(3,627 |
) |
|
|
(441 |
) |
|
|
(476 |
) |
|
|
2007
|
|
|
288 |
|
|
|
2,855 |
|
|
|
3,143 |
|
|
|
(2,243 |
) |
|
|
1,206 |
|
|
|
(3,272 |
) |
|
|
2 |
|
|
|
(720 |
) |
|
Total
|
2009
|
|
|
64,602 |
|
|
|
7,219 |
|
|
|
71,821 |
|
|
|
6,167 |
|
|
|
1,601 |
|
|
|
(4,130 |
) |
|
|
25 |
|
|
|
(1,818 |
) |
|
|
2008
|
|
|
61,666 |
|
|
|
7,814 |
|
|
|
69,480 |
|
|
|
7,149 |
|
|
|
2,665 |
|
|
|
(5,108 |
) |
|
|
(388 |
) |
|
|
(1,445 |
) |
|
|
2007
|
|
|
62,516 |
|
|
|
9,223 |
|
|
|
71,739 |
|
|
|
5,332 |
|
|
|
2,131 |
|
|
|
(4,649 |
) |
|
|
54 |
|
|
|
(1,302 |
) |
|
Reconciliation
|
2009
|
|
|
- |
|
|
|
(7,219 |
) |
|
|
(7,219 |
) |
|
|
(155 |
) |
|
|
(1,260 |
) |
|
|
1,234 |
|
|
|
(1 |
) |
|
|
36 |
|
|
|
2008
|
|
|
- |
|
|
|
(7,814 |
) |
|
|
(7,814 |
) |
|
|
(109 |
) |
|
|
(2,257 |
) |
|
|
2,213 |
|
|
|
0 |
|
|
|
17 |
|
|
|
2007
|
|
|
- |
|
|
|
(9,223 |
) |
|
|
(9,223 |
) |
|
|
(46 |
) |
|
|
(1,870 |
) |
|
|
1,874 |
|
|
|
1 |
|
|
|
(71 |
) |
|
Group
|
2009
|
|
|
64,602 |
|
|
|
- |
|
|
|
64,602 |
|
|
|
6,012 |
|
|
|
341 |
|
|
|
(2,896 |
) |
|
|
24 |
|
|
|
(1,782 |
) |
|
|
2008
|
|
|
61,666 |
|
|
|
- |
|
|
|
61,666 |
|
|
|
7,040 |
|
|
|
408 |
|
|
|
(2,895 |
) |
|
|
(388 |
) |
|
|
(1,428 |
) |
|
|
2007
|
|
|
62,516 |
|
|
|
- |
|
|
|
62,516 |
|
|
|
5,286 |
|
|
|
261 |
|
|
|
(2,775 |
) |
|
|
55 |
|
|
|
(1,373 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
(millions
of €)
|
Year
|
|
Segment
assets
|
|
|
Segment
liabilities
|
|
|
Segment
investments
|
|
|
Investments
accounted for using the equity method
|
|
|
Depreciation
and amortization
|
|
|
Impairment
losses
|
|
|
Employees
(average)
|
|
|
Germany
|
2009
|
|
|
52,002 |
|
|
|
16,244 |
|
|
|
3,221 |
|
|
|
23 |
|
|
|
(4,189 |
) |
|
|
(7 |
) |
|
|
84,584 |
|
|
|
2008
|
|
|
49,797 |
|
|
|
14,693 |
|
|
|
3,412 |
|
|
|
18 |
|
|
|
(4,164 |
) |
|
|
(16 |
) |
|
|
89,961 |
|
|
|
2007
|
|
|
49,289 |
|
|
|
15,286 |
|
|
|
3,386 |
|
|
|
19 |
|
|
|
(4,292 |
) |
|
|
(49 |
) |
|
|
94,460 |
|
|
United
States
|
2009
|
|
|
36,087 |
|
|
|
19,326 |
|
|
|
2,494 |
|
|
|
18 |
|
|
|
(2,025 |
) |
|
|
(3 |
) |
|
|
38,231 |
|
|
|
2008
|
|
|
37,213 |
|
|
|
20,998 |
|
|
|
3,615 |
|
|
|
14 |
|
|
|
(1,863 |
) |
|
|
(21 |
) |
|
|
36,076 |
|
|
|
2007
|
|
|
33,602 |
|
|
|
13,998 |
|
|
|
2,203 |
|
|
|
10 |
|
|
|
(1,883 |
) |
|
|
(9 |
) |
|
|
31,655 |
|
|
Europe
|
2009
|
|
|
21,668 |
|
|
|
10,372 |
|
|
|
804 |
|
|
|
0 |
|
|
|
(1,561 |
) |
|
|
(1,850 |
) |
|
|
18,105 |
|
|
|
2008
|
|
|
23,297 |
|
|
|
7,539 |
|
|
|
1,095 |
|
|
|
3 |
|
|
|
(2,229 |
) |
|
|
(128 |
) |
|
|
17,945 |
|
|
|
2007
|
|
|
27,379 |
|
|
|
9,234 |
|
|
|
1,485 |
|
|
|
0 |
|
|
|
(2,364 |
) |
|
|
(336 |
) |
|
|
17,189 |
|
|
Southern
and Eastern Europe
|
2009
|
|
|
25,120 |
|
|
|
11,724 |
|
|
|
4,009 |
|
|
|
52 |
|
|
|
(2,211 |
) |
|
|
(536 |
) |
|
|
51,172 |
|
|
|
2008
|
|
|
11,054 |
|
|
|
3,130 |
|
|
|
844 |
|
|
|
65 |
|
|
|
(861 |
) |
|
|
(173 |
) |
|
|
21,229 |
|
|
|
2007
|
|
|
10,726 |
|
|
|
3,112 |
|
|
|
732 |
|
|
|
67 |
|
|
|
(913 |
) |
|
|
(24 |
) |
|
|
23,442 |
|
|
Systems
Solutions
|
2009
|
|
|
8,872 |
|
|
|
5,932 |
|
|
|
837 |
|
|
|
54 |
|
|
|
(718 |
) |
|
|
(3 |
) |
|
|
45,328 |
|
|
|
2008
|
|
|
9,280 |
|
|
|
6,342 |
|
|
|
846 |
|
|
|
46 |
|
|
|
(765 |
) |
|
|
(16 |
) |
|
|
46,095 |
|
|
|
2007
|
|
|
10,841 |
|
|
|
6,973 |
|
|
|
934 |
|
|
|
18 |
|
|
|
(863 |
) |
|
|
(25 |
) |
|
|
49,433 |
|
|
Group
Headquarters & Shared Services
|
2009
|
|
|
120,162 |
|
|
|
78,379 |
|
|
|
747 |
|
|
|
0 |
|
|
|
(660 |
) |
|
|
(173 |
) |
|
|
20,181 |
|
|
|
2008
|
|
|
116,948 |
|
|
|
75,764 |
|
|
|
545 |
|
|
|
3,411 |
|
|
|
(646 |
) |
|
|
(127 |
) |
|
|
23,581 |
|
|
|
2007
|
|
|
109,902 |
|
|
|
71,915 |
|
|
|
442 |
|
|
|
4 |
|
|
|
(666 |
) |
|
|
(258 |
) |
|
|
27,557 |
|
|
Total
|
2009
|
|
|
263,911 |
|
|
|
141,977 |
|
|
|
12,112 |
|
|
|
147 |
|
|
|
(11,364 |
) |
|
|
(2,572 |
) |
|
|
257,601 |
|
|
|
2008
|
|
|
247,589 |
|
|
|
128,466 |
|
|
|
10,357 |
|
|
|
3,557 |
|
|
|
(10,528 |
) |
|
|
(481 |
) |
|
|
234,887 |
|
|
|
2007
|
|
|
241,739 |
|
|
|
120,518 |
|
|
|
9,182 |
|
|
|
118 |
|
|
|
(10,981 |
) |
|
|
(701 |
) |
|
|
243,736 |
|
|
Reconciliation
|
2009
|
|
|
(136,137 |
) |
|
|
(56,140 |
) |
|
|
(645 |
) |
|
|
- |
|
|
|
41 |
|
|
|
1 |
|
|
|
- |
|
|
|
2008
|
|
|
(124,449 |
) |
|
|
(48,438 |
) |
|
|
(240 |
) |
|
|
- |
|
|
|
33 |
|
|
|
1 |
|
|
|
- |
|
|
|
2007
|
|
|
(121,066 |
) |
|
|
(45,090 |
) |
|
|
(105 |
) |
|
|
- |
|
|
|
48 |
|
|
|
23 |
|
|
|
- |
|
|
Group
|
2009
|
|
|
127,774 |
|
|
|
85,837 |
|
|
|
11,467 |
|
|
|
147 |
|
|
|
(11,323 |
) |
|
|
(2,571 |
) |
|
|
257,601 |
|
|
|
2008
|
|
|
123,140 |
|
|
|
80,028 |
|
|
|
10,117 |
|
|
|
3,557 |
|
|
|
(10,495 |
) |
|
|
(480 |
) |
|
|
234,887 |
|
|
|
2007
|
|
|
120,673 |
|
|
|
75,428 |
|
|
|
9,077 |
|
|
|
118 |
|
|
|
(10,933 |
) |
|
|
(678 |
) |
|
|
243,736 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
(millions
of €)
|
Year
|
|
Net
cash from operating activities
|
|
|
Net
cash (used in) from investing activities
|
|
|
Of
which:
Cash
capex1
|
|
|
Net
cash (used in) from financing activities
|
|
|
Germany
|
2009
|
|
|
9,777 |
|
|
|
(2,801 |
) |
|
|
(3,158 |
) |
|
|
(3,689 |
) |
|
|
2008
|
|
|
9,941 |
|
|
|
(2,791 |
) |
|
|
(3,038 |
) |
|
|
(7,224 |
) |
|
|
2007
|
|
|
8,587 |
|
|
|
483 |
|
|
|
(3,014 |
) |
|
|
(2,238 |
) |
|
United
States
|
2009
|
|
|
3,929 |
|
|
|
(3,014 |
) |
|
|
(2,666 |
) |
|
|
(1,004 |
) |
|
|
2008
|
|
|
3,740 |
|
|
|
(2,892 |
) |
|
|
(2,540 |
) |
|
|
(852 |
) |
|
|
2007
|
|
|
3,622 |
|
|
|
(2,713 |
) |
|
|
(1,958 |
) |
|
|
(831 |
) |
|
Europe
|
2009
|
|
|
2,175 |
|
|
|
(1,413 |
) |
|
|
(879 |
) |
|
|
(3,839 |
) |
|
|
2008
|
|
|
2,605 |
|
|
|
(1,525 |
) |
|
|
(1,152 |
) |
|
|
(1,436 |
) |
|
|
2007
|
|
|
2,474 |
|
|
|
(2,774 |
) |
|
|
(1,148 |
) |
|
|
435 |
|
|
Southern
and Eastern Europe
|
2009
|
|
|
2,859 |
|
|
|
(97 |
) |
|
|
(1,610 |
) |
|
|
(2,232 |
) |
|
|
2008
|
|
|
1,691 |
|
|
|
(523 |
) |
|
|
(865 |
) |
|
|
(464 |
) |
|
|
2007
|
|
|
1,655 |
|
|
|
(452 |
) |
|
|
(732 |
) |
|
|
(710 |
) |
|
Systems
Solutions
|
2009
|
|
|
325 |
|
|
|
(643 |
) |
|
|
(681 |
) |
|
|
88 |
|
|
|
2008
|
|
|
766 |
|
|
|
9 |
|
|
|
(823 |
) |
|
|
(838 |
) |
|
|
2007
|
|
|
688 |
|
|
|
(839 |
) |
|
|
(903 |
) |
|
|
932 |
|
|
Group
Headquarters & Shared Services
|
2009
|
|
|
6,801 |
|
|
|
(2,995 |
) |
|
|
(449 |
) |
|
|
(2,147 |
) |
|
|
2008
|
|
|
3,366 |
|
|
|
(1,021 |
) |
|
|
(426 |
) |
|
|
(1,028 |
) |
|
|
2007
|
|
|
1,120 |
|
|
|
(4,871 |
) |
|
|
(340 |
) |
|
|
(6,902 |
) |
|
Total
|
2009
|
|
|
25,866 |
|
|
|
(10,963 |
) |
|
|
(9,443 |
) |
|
|
(12,823 |
) |
|
|
2008
|
|
|
22,109 |
|
|
|
(8,743 |
) |
|
|
(8,844 |
) |
|
|
(11,842 |
) |
|
|
2007
|
|
|
18,146 |
|
|
|
(11,166 |
) |
|
|
(8,095 |
) |
|
|
(9,314 |
) |
|
Reconciliation
|
2009
|
|
|
(10,071 |
) |
|
|
2,314 |
|
|
|
241 |
|
|
|
7,700 |
|
|
|
2008
|
|
|
(6,741 |
) |
|
|
(2,641 |
) |
|
|
137 |
|
|
|
8,745 |
|
|
|
2007
|
|
|
(4,432 |
) |
|
|
3,112 |
|
|
|
80 |
|
|
|
3,189 |
|
|
Group
|
2009
|
|
|
15,795 |
|
|
|
(8,649 |
) |
|
|
(9,202 |
) |
|
|
(5,123 |
) |
|
|
2008
|
|
|
15,368 |
|
|
|
(11,384 |
) |
|
|
(8,707 |
) |
|
|
(3,097 |
) |
|
|
2007
|
|
|
13,714 |
|
|
|
(8,054 |
) |
|
|
(8,015 |
) |
|
|
(6,125 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
Cash
outflows for investments in intangible assets (excluding goodwill) and
property, plant and equipment, as shown in the statement of cash
flows.
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Information
on geographic areas.
The
Group’s non-current assets and net revenue are shown by region. These are the
regions in which Deutsche Telekom is active: Germany, Europe (excluding
Germany), North America and Other countries. The Europe (excluding Germany)
region covers the entire European Union (excluding Germany) and the other
countries in Europe. The North America region comprises the United States and
Canada. "Other countries" includes all countries that are not Germany or in
Europe (excluding Germany) or North America. Non-current assets are allocated to
the regions according to the location of the assets in question. Non-current
assets encompass intangible assets; property, plant and equipment; investments
accounted for using the equity method as well as other non-current assets. Net
revenue is allocated according to the location of the respective customers’
operations.
|
|
|
Non-current
assets
|
|
|
Net
revenue
|
|
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Dec.
31, 2007
|
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Germany
|
|
|
40,499 |
|
|
|
44,385 |
|
|
|
44,817 |
|
|
|
28,033 |
|
|
|
28,885 |
|
|
|
30,694 |
|
|
International
|
|
|
57,362 |
|
|
|
55,227 |
|
|
|
52,702 |
|
|
|
36,569 |
|
|
|
32,781 |
|
|
|
31,822 |
|
|
Of
which:
Europe (excluding
Germany)
|
|
|
26,575 |
|
|
|
23,854 |
|
|
|
25,238 |
|
|
|
20,573 |
|
|
|
17,324 |
|
|
|
17,264 |
|
|
North America
|
|
|
30,717 |
|
|
|
31,298 |
|
|
|
27,407 |
|
|
|
15,527 |
|
|
|
14,931 |
|
|
|
14,159 |
|
|
Other countries
|
|
|
70 |
|
|
|
75 |
|
|
|
57 |
|
|
|
469 |
|
|
|
526 |
|
|
|
399 |
|
|
Group
|
|
|
97,861 |
|
|
|
99,612 |
|
|
|
97,519 |
|
|
|
64,602 |
|
|
|
61,666 |
|
|
|
62,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Information
on products and services.
Revenue
generated with external customers for groups of comparable products and services
developed as follows:
|
|
|
Net
revenue
|
|
|
(millions
of €)
|
|
2009
|
|
|
2008
|
|
|
2007
|
|
|
Telecommunications
|
|
|
58,266 |
|
|
|
54,991 |
|
|
|
55,317 |
|
|
Systems
solutions
|
|
|
6,083 |
|
|
|
6,368 |
|
|
|
6,911 |
|
|
Other
|
|
|
253 |
|
|
|
307 |
|
|
|
288 |
|
| Group |
|
|
64,602 |
|
|
|
61,666 |
|
|
|
62,516 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
32
Contingencies.
As of the
reporting date, the Group was exposed to contingent liabilities amounting to
EUR 724 million (December 31, 2008: EUR 591 million) that, on the
basis of the information and estimates available, do not fulfill the
requirements for recognition as liabilities in the statement of financial
position. Deutsche Telekom is involved in a number of court and arbitration
proceedings in connection with its regular business activities. Litigation
provisions include the costs of legal counsel services and any probable losses.
Deutsche Telekom does not believe that any additional costs arising from legal
counsel services or the results of proceedings will have a material adverse
effect on the results of operations and financial position of the
Group.
In
addition to individual cases that do not have any significant impact on their
own, the aforementioned total contingent liabilities include the
following:
Year-end
bonus for civil servants.
In
November 2004, the Federal Republic of Germany passed the Act to amend the Act
on the Legal Provisions for the Former Deutsche Bundespost Staff
(Postpersonalrechtsgesetz - PostPersRG), which abolished the obligation on
Deutsche Telekom and other private companies to pay active civil servants an
annual year-end bonus under the German Federal Act on Bonus Payments
(Bundessonderzahlungsgesetz). This Act was reviewed at several court instances.
In December 2008, the Federal Administrative Court ruled to refer the question
as to whether § 10 PostPersRG is constitutional to the Federal Constitutional
Court for a judicial review pursuant to Article 100 of the Basic Law. It is
uncertain when the Federal Constitutional Court will announce its ruling. If the
court rules that the abolition of the bonus payment was unconstitutional,
Deutsche Telekom AG's supplementary payment risk would total EUR 0.2
billion for the period 2004 through June 2009.
T-Online
appraisal rights proceedings.
After the
merger of T-Online International AG into Deutsche Telekom AG became effective on
June 6, 2006, Deutsche Telekom AG was served around 250 applications for a court
review of the fairness of the exchange ratio stipulated in the merger agreement
dated March 8, 2005. Under the German Reorganization and Transformation Act
(Umwandlungsgesetz), former shareholders of T-Online can request the
Frankfurt/Main Regional Court to review the fairness of the exchange ratio in
the course of appraisal rights proceedings (Spruchverfahren). The court ruled on
March 13, 2009 that the exchange ratio for the T-Online shares was not fair
and deemed a supplementary payment of EUR 1.15 per share fair. This
decision is not yet final and legally binding. Deutsche Telekom filed an appeal
(sofortige Beschwerde) against the ruling immediately and within the stipulated
period. Because the complaints do not stipulate a precise numerical claim, but
rather target a supplementary cash payment in the amount deemed appropriate by
the court, it is not possible at present to estimate whether Deutsche Telekom
will be ordered to make a supplementary payment and if so, in what amount.
Deutsche Telekom believes the plaintiffs’ claims are unfounded. However, should
the current ruling of the Regional Court of Frankfurt/Main become legally
binding and Deutsche Telekom be ordered to make a supplementary payment of
EUR 1.15 per share to the former shareholders of T-Online, this could
result in a payment of approximately EUR 0.2 billion. The amount of
EUR 1.15 per share is a possible, but not the most probable outcome in the
event that the Higher Regional Court determines that there is to be a
supplementary cash payment. It is also possible that in this event the Higher
Regional Court will call in an expert consultant to conduct a partial or full
revaluation. The expert consultant’s (partial) revaluation may result in no
supplementary cash payment at all, but may also result in a higher payment than
EUR 1.15 per share.
Likewise,
on the basis of the information and estimates available, the issues listed below
do not fulfill the requirements for recognition as liabilities in the statement
of financial position. As, however, the Group is unable to estimate the amount
of the contingent liabilities in each case due to the uncertainties described
below, they have not been included in the aforementioned total contingent
liabilities.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Toll
Collect.
In order
to fulfill their obligations as set out in the agreement (operating agreement)
with the Federal Republic of Germany, Deutsche Telekom AG, Daimler Financial
Services AG and Compagnie Financière et Industrielle des Autoroutes S.A.
(Cofiroute) have concluded a consortium agreement on the development and setup
of an electronic system for collecting toll charges for the use of German
autobahns by commercial vehicles with a permissible total weight of more than 12
tons, and on the operation of this system via a joint venture company. Deutsche
Telekom AG and Daimler Financial Services AG each hold a 45-percent stake in
both the consortium (Toll Collect GbR) and the joint venture company (Toll
Collect GmbH) (together Toll Collect), while Cofiroute holds the remaining
10-percent stake in each.
Under the
operating agreement, the toll collection system had to be operational no later
than August 31, 2003. Following a delay in launching the system, which
resulted in revenue losses at Toll Collect and the payment of contractual
penalties, the toll collection system was launched on January 1, 2005 using
on-board units that allowed for slightly less than full technical performance in
accordance with the original specifications (phase 1). On January 1, 2006,
the fully functioning toll collection system was installed and put into
operation as required in the operating agreement (phase 2). On December 20,
2005, Toll Collect GmbH received the preliminary operating permit in accordance
with the operating agreement. Toll Collect GmbH anticipates receiving the final
operating permit and has been operating the toll collection system in the
interim period using the preliminary operating permit.
On
August 2, 2005, the Federal Republic of Germany initiated arbitration
proceedings against Deutsche Telekom AG, Daimler Financial Services AG and Toll
Collect GbR. The Federal Republic claims to have lost toll revenues of
approximately EUR 3.5 billion plus interest (5 percent per year above
the applicable base interest rate since the arbitration proceedings were
initiated), alleging – among other things – that it was deceived as to the
likelihood of operations commencing on September 1, 2003. In May 2008, the
Federal Republic of Germany slightly reduced its claim to around EUR 3.3
billion plus interest (5 percent per year above the applicable base
interest rate since the arbitration proceedings were initiated). The asserted
claims for contractual penalties total approximately EUR 1.7 billion plus
interest (5 percent per year above the applicable base interest rate since
the arbitration proceedings were initiated). The contractual penalties are based
on alleged violations of the operator agreement (lack of consent to
subcontracting, delayed provision of on-board units and monitoring equipment).
Deutsche Telekom AG believes the claims of the Federal Republic to be unfounded
and is contesting them. The statement of defense was submitted to the
arbitration court on June 30, 2006. The plaintiff's reply was submitted to
the arbitration court on February 14, 2007. The defendant's rejoinder was
submitted to the arbitration court on October 1, 2007. Further declarations
were received from the Federal Republic of Germany on January 7 and
February 6, 2008. The initial hearing took place in June 2008 during which
the arbitration court discussed legal issues with the parties. No arbitrational
ruling was made on the claims asserted. Under orders from the arbitration court,
each party submitted documents to the other party at the end of September 2008,
as well as a written statement at the end of November 2008 addressing the legal
issues discussed during the hearing and in the documents submitted. On
May 15, 2009, the parties presented written responses to the relevant
statement from the other party. The arbitration court also scheduled another
hearing for October 19 to 22, 2009. In this connection, the arbitration court
ordered the submission of further documents and papers as well as witness
examinations and appointed three experts to evaluate by September 30, 2009
the plausibility of the expert opinions that had been presented by the parties.
In July and August 2009, the defendants became aware of information that gave
rise to concerns of bias regarding the arbitrator appointed by the Federal
Republic, following which the defendants filed a request with the arbitration
court to reject the arbitrator on the grounds of bias. On September 4,
2009, the arbitration court ruled to cancel the hearing date and the submission
of expert opinions on plausibility. On September 30, 2009, the arbitration
court rejected the defendant's request. Following this decision, the defendants
filed a rejection request with the Berlin Administrative Court on
November 6, 2009.
Toll
Collect GmbH filed for arbitration against the Federal Republic of Germany on
May 25, 2007 requesting, among other things, the granting of a final
operating permit and the payment of outstanding claims. Following an increase in
the claim by Toll Collect GmbH on May 15, 2009, the asserted claims for payment
total EUR 0.7 billion plus interest. The Federal Republic of Germany filed
a counterclaim against Toll Collect GmbH with rebutter dated September 30, 2009
for EUR 0.2 billion plus interest, claiming, among other things,
excessive compensation had been paid and contractual penalties that were
allegedly due. Just as the defendants in the arbitrational proceedings initiated
by the Federal Republic, Toll Collect GmbH has also applied to reject the
arbitrator appointed by the Federal Republic on the grounds of bias. Following
the aforementioned ruling of the arbitration court, Toll Collect GmbH also filed
a rejection request with the Berlin Administrative Court on November 6,
2009.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Each
consortium member has submitted guarantees for Toll Collect GmbH's obligations
to the Federal Republic of Germany in connection with the completion and
operation of the toll system. In addition, Deutsche Telekom AG has given a
guarantee for bank loans to Toll Collect GmbH. These guarantees, which are
subject to certain terms and conditions, are described below:
|
·
|
Bank loans guarantee.
Deutsche Telekom AG guarantees to third parties bank loans of up to
a maximum amount of EUR 115 million granted to Toll Collect GmbH.
These guarantees for bank loans will expire on May 31,
2012.
|
|
·
|
Equity maintenance
undertaking. The consortium partners have the obligation, on a
joint and several basis, to provide Toll Collect GmbH with additional
equity in order to ensure a minimum equity ratio of 15 percent (in
the single-entity financial statements prepared in accordance with German
GAAP) (equity maintenance undertaking). This obligation ends when the
operating agreement expires on August 31, 2015, or earlier if the
operating agreement is terminated
early.
|
In June
2006, the Federal Republic of Germany began to partially offset its monthly
advance payments for operating fees to Toll Collect GmbH of EUR 8 million
against the contractual penalty claims that are already subject of the
aforementioned arbitration proceedings. As a result, it may become necessary for
the consortium members to provide Toll Collect GmbH with further
liquidity.
Cofiroute's
risks and obligations are limited to EUR 70 million. Deutsche Telekom AG
and Daimler Financial Services AG have the obligation, on a joint and several
basis, to indemnify Cofiroute against further claims.
Deutsche
Telekom believes the claims of the Federal Republic of Germany are unfounded.
Furthermore, the amount of a possible settlement attributable to the equity
maintenance undertaking or the arbitration proceedings described, which may be
material, cannot be estimated because of the aforementioned
uncertainties.
ULL
rate approvals.
In
November 2008, the Cologne Administrative Court revoked the rates approval for
the unbundled local loop line (ULL) from 1999 with regard to the monthly
charges. Both Deutsche Telekom and the Federal Network Agency filed complaints
against non-allowance of appeal. In a ruling dated October 5, 2009, the Federal
Administrative Court rejected these complaints because the points raised relate
to the old legal framework. The rulings of Cologne Administrative Court revoking
the approvals thus became legally effective and the rate approval proceedings
from 1999 were revived, i.e., the Federal Network Agency must decide again on
ULL monthly charges for the period from February 1999 to March 2001. Under its
rulings dated August 27, 2009, the Cologne Administrative Court revoked the
2001 ULL rate approval, which relates to monthly charges for the period April
2001 through March 2003 and one-time charges for the period April 2001 through
March 2002. In its rulings dated November 19, 2009, the Cologne
Administrative Court then revoked the 2002 rate approval, which relates to
one-time charges for the period April 2002 through June 2003. These rulings are
not legally effective because both Deutsche Telekom and the Federal Network
Agency have filed complaints against non-allowance of appeal. If the rulings
become legally effective, the Federal Network Agency would have to decide again
on the rates for the period April 2001 to March 2003 or June 2003. All other
rulings of the Federal Network Agency on ULL rates since 1999 have been
challenged and, apart from the 1999 ULL one-time charges, are therefore not
final.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
33
Disclosures on leases.
Deutsche
Telekom as lessee.
Finance
leases.
When a
lease transfers substantially all risks and rewards to Deutsche Telekom as
lessee, Deutsche Telekom initially recognizes the leased assets in the statement
of financial position at the lower of fair value or present value of the future
minimum lease payments. Most of the leased assets carried in the statement of
financial position as part of a finance lease relate to long-term rental and
lease agreements for office buildings with a typical lease term of up to 25
years. The agreements include extension and purchase options. The following
table shows the net carrying amounts of leased assets capitalized in connection
with a finance lease as of the reporting date:
|
|
|
Dec.
31, 2009
|
|
|
Of
which:
|
|
|
Dec.
31, 2008
|
|
|
Of
which:
|
|
|
(millions
of €)
|
|
|
|
|
sale
and leaseback transactions
|
|
|
|
|
|
sale
and leaseback transactions
|
|
|
Land
and buildings
|
|
|
1,035 |
|
|
|
591 |
|
|
|
1,116 |
|
|
|
649 |
|
|
Technical
equipment and machinery
|
|
|
35 |
|
|
|
9 |
|
|
|
57 |
|
|
|
- |
|
|
Other
|
|
|
21 |
|
|
|
0 |
|
|
|
24 |
|
|
|
1 |
|
|
Net
carrying amounts of leased assets capitalized
|
|
|
1,091 |
|
|
|
600 |
|
|
|
1,197 |
|
|
|
650 |
|
At the
commencement of the lease term, Deutsche Telekom recognizes a lease liability
equal to the carrying amount of the leased asset. In subsequent periods, the
liability decreases by the amount of lease payments made to the lessors using
the effective interest method. The interest component of the lease payments is
recognized in the income statement.
The
following table provides a breakdown of these amounts:
|
|
|
Dec.
31, 2009
|
|
|
(millions
of €)
|
|
Minimum
lease payments
|
|
|
Interest
component
|
|
|
Present
values
|
|
|
Maturity
|
|
Total
|
|
|
Of
which: sale and leaseback
|
|
|
Total
|
|
|
Of
which: sale and leaseback
|
|
|
Total
|
|
|
Of
which: sale and leaseback
|
|
|
Within
1 year
|
|
|
231 |
|
|
|
114 |
|
|
|
110 |
|
|
|
66 |
|
|
|
121 |
|
|
|
48 |
|
|
In
1 to 3 years
|
|
|
387 |
|
|
|
211 |
|
|
|
202 |
|
|
|
120 |
|
|
|
185 |
|
|
|
91 |
|
|
In
3 to 5 years
|
|
|
358 |
|
|
|
213 |
|
|
|
154 |
|
|
|
104 |
|
|
|
204 |
|
|
|
109 |
|
|
After
5 years
|
|
|
1,415 |
|
|
|
860 |
|
|
|
502 |
|
|
|
334 |
|
|
|
913 |
|
|
|
526 |
|
|
|
|
|
2,391 |
|
|
|
1,398 |
|
|
|
968 |
|
|
|
624 |
|
|
|
1,423 |
|
|
|
774 |
|
| |
|
|
|
|
|
|
Dec.
31, 2008
|
|
|
(millions
of €)
|
|
Minimum
lease payments
|
|
|
Interest
component
|
|
|
Present
values
|
|
|
Maturity
|
|
Total
|
|
|
Of
which: sale and leaseback
|
|
|
Total
|
|
|
Of
which: sale and leaseback
|
|
|
Total
|
|
|
Of
which: sale and leaseback
|
|
|
Within
1 year
|
|
|
236 |
|
|
|
116 |
|
|
|
116 |
|
|
|
68 |
|
|
|
120 |
|
|
|
48 |
|
|
In
1 to 3 years
|
|
|
404 |
|
|
|
210 |
|
|
|
215 |
|
|
|
128 |
|
|
|
189 |
|
|
|
82 |
|
|
In
3 to 5 years
|
|
|
367 |
|
|
|
212 |
|
|
|
170 |
|
|
|
113 |
|
|
|
197 |
|
|
|
99 |
|
|
After
5 years
|
|
|
1,586 |
|
|
|
967 |
|
|
|
578 |
|
|
|
384 |
|
|
|
1,008 |
|
|
|
583 |
|
|
|
|
|
2,593 |
|
|
|
1,505 |
|
|
|
1,079 |
|
|
|
693 |
|
|
|
1,514 |
|
|
|
812 |
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Operating
leases.
Beneficial
ownership of a lease is attributed to the lessor if this is the party to which
all the substantial risks and rewards incidental to ownership of the asset are
transferred. The lessor recognizes the leased asset in their statement of
financial position. Deutsche Telekom recognizes the lease payments made during
the term of the operating lease in profit or loss. Deutsche Telekom’s
obligations arising from non-cancelable operating leases are mainly related to
long-term rental or lease agreements for network infrastructure, radio towers
and real estate. Some leases include extension options and provide for stepped
rents. The obligations from operating leases as of December 31, 2009 do not
include the obligations of T-Mobile UK, classified as held for sale at the
reporting date. The operating lease expenses recognized in profit or loss
amounted to EUR 2.1 billion as of the end of 2009 (2008: EUR 2.0
billion; 2007: EUR 1.8 billion). The following table provides a breakdown
of future obligations arising from operating leases:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Maturity
|
|
|
|
|
|
|
|
Within
1 year
|
|
|
2,553 |
|
|
|
2,414 |
|
|
In
1 to 3 years
|
|
|
4,195 |
|
|
|
3,864 |
|
|
In
3 to 5 years
|
|
|
3,325 |
|
|
|
2,988 |
|
|
After
5 years
|
|
|
14,475 |
|
|
|
13,407 |
|
|
|
|
|
24,548 |
|
|
|
22,673 |
|
Deutsche
Telekom as lessor.
Finance
leases.
Deutsche
Telekom acts as lessor in connection with finance leases. Essentially, these
relate to the leasing of routers which Deutsche Telekom provides to its
customers for data and telephone network solutions. Deutsche Telekom recognizes
a receivable in the amount of the net investment in the lease. The lease
payments made by the lessees are split into an interest component and a
principal component using the effective interest method. The lease receivable is
reduced by the principal received. The interest component of the payments is
recognized as finance income in the income statement. The amount of the net
investment in a finance lease is determined as shown in the following
table:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Minimum
lease payments
|
|
|
307 |
|
|
|
334 |
|
|
Unguaranteed
residual value
|
|
|
- |
|
|
|
- |
|
|
Gross
investment
|
|
|
307 |
|
|
|
334 |
|
|
Unearned
finance income
|
|
|
(43 |
) |
|
|
(51 |
) |
|
Net
investment (present value of the minimum lease payments)
|
|
|
264 |
|
|
|
283 |
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The gross
investment amount and the present value of payable minimum lease payments are
shown in the following table:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Maturity
|
|
Gross
investment
|
|
|
Present
value of minimum lease payments
|
|
|
Gross
investment
|
|
|
Present
value of minimum lease payments
|
|
|
Within
1 year
|
|
|
98 |
|
|
|
83 |
|
|
|
128 |
|
|
|
108 |
|
|
In
1 to 3 years
|
|
|
131 |
|
|
|
112 |
|
|
|
122 |
|
|
|
102 |
|
|
In
3 to 5 years
|
|
|
57 |
|
|
|
49 |
|
|
|
52 |
|
|
|
43 |
|
|
After
5 years
|
|
|
21 |
|
|
|
20 |
|
|
|
32 |
|
|
|
30 |
|
|
|
|
|
307 |
|
|
|
264 |
|
|
|
334 |
|
|
|
283 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating
leases.
Deutsche
Telekom acts as a lessor in connection with operating leases and continues to
recognize the leased assets in its statement of financial position. The lease
payments received are recognized in profit or loss. The leases mainly relate to
the rental of building space and radio towers and have an average term of ten
years. The future minimum lease payments arising from non-cancelable operating
leases are shown in the following table:
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Maturity
|
|
|
|
|
|
|
|
Within
1 year
|
|
|
338 |
|
|
|
330 |
|
|
In
1 to 3 years
|
|
|
406 |
|
|
|
354 |
|
|
In
3 to 5 years
|
|
|
318 |
|
|
|
281 |
|
|
After
5 years
|
|
|
624 |
|
|
|
614 |
|
|
|
|
|
1,686 |
|
|
|
1,579 |
|
Agreements
that are not leases in substance.
In 2002,
T-Mobile Deutschland GmbH concluded so-called lease-in / lease-out agreements
(QTE lease agreements) for substantial parts of its GSM mobile communications
network (amounting to USD 0.8 billion). The contracting parties were
initially four and, after the contract with one of them was terminated by mutual
agreement in 2009, three U.S. trusts backed by U.S. investors. Under the terms
of the principal lease agreements, T-Mobile Deutschland GmbH is obliged to grant
the respective U.S. trust unhindered use of the leased objects for a period of
30 years. After expiry of the principal lease agreements, the U.S. trusts have
the right to acquire the network components for a purchase price of
USD 1.00 each. In return, T-Mobile Deutschland GmbH has leased the network
components back for 16 years by means of sub-lease agreements. After around 13
years, T-Mobile Deutschland GmbH has the option of acquiring the rights of the
respective U.S. trust arising from the principal lease agreements (call option).
Upon exercise of this call option, all the rights of the U.S. trust in question
to the leased objects arising are transferred to T-Mobile Deutschland GmbH. In
this case, T-Mobile Deutschland GmbH would be the only party to the principal
lease agreement, meaning that this agreement would be extinguished as a result
of the fusion of rights and obligations under the agreement.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
34
Stock-based compensation plans.
Stock
option plans.
The
following table provides an overview of all existing stock option plans (SOPs)
of Deutsche Telekom AG, T-Online International AG (prior to merger), T-Mobile
USA and the OTE group:
|
Entity
|
Plan
|
Year
of issuance
|
Stock
options
granted
(thousands)
|
Vesting
period
(years)
|
Contractual
term
(years)
|
Weighted
exercise price
|
Share
price
at grant
date
(€)
|
Max.
price for SARs
(€)
|
Comments
|
Classification/accounting
treatment
|
|
Deutsche
Telekom AG
|
2001
SOP
|
2001
|
8,221
|
2 -
3
|
10
|
€
30.00
|
19.10
|
|
|
Equity-settled
|
|
|
2002
|
3,928
|
2 -
3
|
10
|
€
12.36
|
10.30
|
|
|
Equity-settled
|
|
SARs
|
2001
|
165
|
2 -
3
|
10
|
€
30.00
|
19.10
|
50.00
|
|
Cash-settled
|
|
|
2002
|
3
|
2 -
3
|
10
|
€
12.36
|
10.30
|
20.60
|
|
Cash-settled
|
|
T-Online
International AG
|
2001
SOP
|
2001
|
2,369
|
2 -
3
|
10
|
€
10.35
|
8.28
|
|
|
Cash-settled
|
|
|
2002
|
2,067
|
2 -
6
|
10
|
€
10.26
|
8.21
|
|
|
Cash-settled
|
|
T-Mobile
USA
|
Acquired
SOPs
|
2001
|
24,278
|
up
to 4
|
max.
10
|
USD 15.36
|
|
|
|
Equity-settled
|
|
|
2002
|
5,964
|
up
to 4
|
max.
10
|
USD 13.35
|
|
|
|
Equity-settled
|
|
|
2003
|
1,715
|
up
to 4
|
max.
10
|
USD 12.86
|
|
|
|
Equity-settled
|
|
Powertel
|
2001
|
5,323
|
up
to 4
|
max.
10
|
USD 20.04
|
|
|
|
Equity-settled
|
|
T-Mobile
USA/
Powertel
|
2004
|
230
|
up
to 4
|
max.
10
|
USD 19.64
|
|
|
Plans
merged
|
Equity-settled
|
|
OTE
group
|
Cosmote
group
|
2005-2007
|
3,440
|
up
to 3
|
6
|
€
14.90
|
15.48
|
|
Modified
in 2008 and 2009
|
Equity-settled
|
|
OTE
(original)
2008
|
2008
|
3,142
|
up
to 3
|
max.
6
|
€
15.70
|
21.38
|
|
Modified
in 2008 and 2009
|
Equity-settled
|
|
OTE
group 2008
|
2009
|
3,226
|
up
to 3
|
max.
6
|
€
16.20
|
10.40
|
|
Modified
in 2009
|
Equity-settled
|
|
|
|
|
|
|
|
|
|
|
|
|
Supplemental
information on the stock option plans.
Deutsche
Telekom AG.
In May
2001, the shareholders’ meeting approved the introduction of the 2001 Stock
Option Plan, resulting in the granting of stock options in August 2001 and July
2002. Furthermore, in 2001 and 2002, Deutsche Telekom also granted stock
appreciation rights (SARs) to employees in countries where it was not legally
possible to issue stock options.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The table
below shows the changes in outstanding options issued by Deutsche Telekom
AG:
|
Deutsche
Telekom AG
|
|
2001
SOP
|
|
|
SARs
|
|
|
|
|
Stock
options
(thousands)
|
|
|
Weighted
average
exercise
price
(€)
|
|
|
SARs
(thousands)
|
|
|
Weighted
average
exercise
price
(€)
|
|
|
Stock
options outstanding/exercisable
at
January 1, 2009
|
|
|
9,006 |
|
|
|
24.38 |
|
|
|
138 |
|
|
|
29.93 |
|
|
Granted
|
|
|
0 |
|
|
|
- |
|
|
|
0 |
|
|
|
- |
|
|
Exercised
|
|
|
0 |
|
|
|
- |
|
|
|
0 |
|
|
|
- |
|
|
Forfeited
|
|
|
949 |
|
|
|
26.43 |
|
|
|
4 |
|
|
|
30.00 |
|
|
Stock
options outstanding/exercisable
at
December 31, 2009
|
|
|
8,057 |
|
|
|
24.14 |
|
|
|
134 |
|
|
|
29.93 |
|
|
Supplemental
information for 2009
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Remaining
contractual life of options outstanding
at
end of period (years, weighted)
|
|
|
1.9 |
|
|
|
|
|
|
|
1.6 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
characteristics of the options outstanding/exercisable as of the reporting date
(December 31, 2009) are as follows:
|
Deutsche
Telekom AG
|
|
|
Options
outstanding/exercisable as of Dec. 31, 2009
|
|
|
Range
of exercise prices
(€)
|
|
|
Number
(thousands)
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Weighted
average
exercise
price
(€)
|
|
| |
10 |
|
|
|
- |
|
|
|
20 |
|
|
|
2,675 |
|
|
|
2.5 |
|
|
|
12.36 |
|
| |
21 |
|
|
|
- |
|
|
|
40 |
|
|
|
5,382 |
|
|
|
1.6 |
|
|
|
30.00 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
8,057 |
|
|
|
1.9 |
|
|
|
24.14 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
Deutsche
Telekom AG (formerly T-Online International AG (prior to merger)).
In May
2001, the shareholders’ meeting approved the introduction of the 2001 Stock
Option Plan, resulting in the granting of stock options in August 2001 and July
2002.
The
merger of T-Online International AG into Deutsche Telekom AG became effective
upon entry in the commercial register on June 6, 2006. Under the
merger agreement, as of this date Deutsche Telekom AG granted rights equivalent
to the stock options awarded by T-Online International AG. When exercising
a stock option, the holders of such rights receive 0.52 shares in Deutsche
Telekom AG. The Board of Management of Deutsche Telekom AG has made use of
the possibility of a future cash compensation provided for under the merger
agreement and the option terms and conditions.
The table
below shows the changes in outstanding options issued by the former T-Online
International AG:
| |
|
2001
SOP
|
|
|
T-Online
International AG
(prior
to merger)
|
|
Stock
options
(thousands)
|
|
|
Weighted
average
exercise
price
(€)
|
|
|
Stock
options outstanding/exercisable
at
January 1, 2009
|
|
|
2,840 |
|
|
|
10.30 |
|
|
Granted
|
|
|
0 |
|
|
|
- |
|
|
Exercised
|
|
|
0 |
|
|
|
- |
|
|
Forfeited
|
|
|
494 |
|
|
|
10.31 |
|
|
Stock
options outstanding/exercisable
at
December 31, 2009
|
|
|
2,346 |
|
|
|
10.30 |
|
|
|
|
|
|
|
|
|
|
|
The
characteristics of the options outstanding/exercisable as of the reporting date
are as follows:
|
T-Online
International AG
(prior
to merger)
|
|
|
Options
outstanding/exercisable as of Dec. 31, 2009
|
|
|
Range
of exercise prices
(€)
|
|
|
Number
(thousands)
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Weighted
average
exercise
price
(€)
|
|
| |
10 |
|
|
|
- |
|
|
|
20 |
|
|
|
2,346 |
|
|
|
2.1 |
|
|
|
10.30 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
T-Mobile
USA.
Prior to
the acquisition on May 31, 2001 of T-Mobile USA (formerly VoiceStream and
Powertel), the companies had granted stock options to their employees under the
1999 Management Incentive Stock Option Plan (MISOP). These plans were combined
as of January 1, 2004 into a single T-Mobile plan. The exchange ratio for
VoiceStream shares was 3.7647 per share and for Powertel shares 2.6353 per
share. The plan has now expired and no more options can be issued.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The table
below shows the changes in outstanding options issued by T-Mobile
USA:
|
T-Mobile
USA
|
|
Stock
options
(thousands)
|
|
|
Weighted
average
exercise
price
(€)
|
|
|
Stock
options outstanding/exercisable
at
January 1, 2009
|
|
|
6,060 |
|
|
|
23.00 |
|
|
Granted
|
|
|
0 |
|
|
|
- |
|
|
Exercised
|
|
|
247 |
|
|
|
8.88 |
|
|
Forfeited
|
|
|
410 |
|
|
|
23.07 |
|
|
Expired
|
|
|
0 |
|
|
|
- |
|
|
Stock
options outstanding/exercisable
at
December 31, 2009
|
|
|
5,403 |
|
|
|
23.64 |
|
|
|
|
|
|
|
|
|
|
|
The
characteristics of the options outstanding/exercisable as of the reporting date
are as follows:
|
T-Mobile
USA
|
|
|
Options
outstanding/exercisable as of Dec. 31, 2009
|
|
|
Range
of exercise prices
(USD)
|
|
|
Number
(thousands)
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Weighted
average
exercise
price
(€)
|
|
| |
3.81 |
|
|
|
- |
|
|
|
15.19 |
|
|
|
1,202 |
|
|
|
2.3 |
|
|
|
13.06 |
|
| |
15.20 |
|
|
|
- |
|
|
|
30.39 |
|
|
|
3,617 |
|
|
|
0.8 |
|
|
|
25.87 |
|
| |
30.40 |
|
|
|
|
|
|
|
34.19 |
|
|
|
524 |
|
|
|
0.4 |
|
|
|
31.00 |
|
| |
34.20 |
|
|
|
- |
|
|
|
38.00 |
|
|
|
60 |
|
|
|
0.1 |
|
|
|
37.04 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
5,403 |
|
|
|
1.1 |
|
|
|
23.64 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
group.
In July
2008, the OTE shareholders' meeting passed a resolution to introduce a modified
stock option plan that united the original OTE and Cosmote stock option plans
and now only grants options on OTE shares.
The table
below shows the changes in outstanding options issued by OTE:
|
OTE
group
|
|
Stock
options
(thousands)
|
|
|
Weighted
average
exercise
price
(€)
|
|
|
Stock
options outstanding/exercisable
at
January 1, 2009
|
|
|
6,008 |
|
|
|
15.31 |
|
|
Granted
|
|
|
3,226 |
|
|
|
16.21 |
|
|
Exercised
|
|
|
0 |
|
|
|
- |
|
|
Forfeited
|
|
|
559 |
|
|
|
16.23 |
|
|
Expired
|
|
|
0 |
|
|
|
- |
|
|
Stock
options outstanding at December 31, 2009
|
|
|
8,675 |
|
|
|
15.59 |
|
|
Stock
options exercisable at December 31, 2009
|
|
|
4,485 |
|
|
|
15.05 |
|
|
|
|
|
|
|
|
|
|
|
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
The
characteristics of the options outstanding/exercisable as of the reporting date
are as follows:
|
OTE
group
|
|
|
Options
outstanding as of Dec. 31, 2009
|
|
|
Range
of exercise prices
(USD)
|
|
|
Number
(thousands)
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Weighted
average
exercise
price
(€)
|
|
| |
11.96 |
|
|
|
- |
|
|
|
16.57 |
|
|
|
8,675 |
|
|
|
3.9 |
|
|
|
15.59 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
OTE
group
|
|
|
Options
exercisable as of Dec. 31, 2009
|
|
|
Range
of exercise prices
(USD)
|
|
|
Number
(thousands)
|
|
|
Weighted
average
remaining
contractual life
(years)
|
|
|
Weighted
average
exercise
price
(€)
|
|
| |
11.96 |
|
|
|
- |
|
|
|
16.57 |
|
|
|
4,485 |
|
|
|
3.9 |
|
|
|
15.05 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Mid-Term
Incentive Plans (MTIPs) / Phantom Share Plan.
Deutsche
Telekom has introduced Mid-Term Incentive Plans (MTIPs) and a Phantom Share Plan
(PSP) to ensure competitive total compensation for members of the Board of
Management, senior executives, and other beneficiaries of the Deutsche Telekom
Group.
Mid-Term
Incentive Plans.
In the
2004 financial year, Deutsche Telekom introduced Mid-Term Incentive Plans
(MTIPs) to ensure competitive total compensation for members of the Board of
Management, senior executives, and other beneficiaries of the Deutsche Telekom
Group. The MTIP is a global, Group-wide compensation instrument for Deutsche
Telekom AG and other participating Group entities that promotes mid- and
long-term value creation in the Group, and therefore aligns the interests of
management and shareholders.
The MTIP
is a cash-based plan pegged to two equally weighted, share-based performance
parameters – one absolute and one relative. If both performance targets are
achieved, then the total amount earmarked as an award to the beneficiaries by
the respective employers is paid out; if one performance target is achieved,
50 percent of the amount is paid out, and if neither performance target is
achieved, no payment is made.
The
absolute performance target is achieved if, at the end of the individual plans,
Deutsche Telekom’s share price has risen by at least 30 percent compared
with its share price at the beginning of the plan. The benchmark for the
assessment is the non-weighted average closing price of the
T-Share
in Xetra trading at the Frankfurt Stock Exchange (Deutsche Börse AG) during the
last 20 trading days prior to the beginning and end of the plan.
The
relative performance target is achieved if the total return of the T-Share has
outperformed the Dow Jones EURO STOXX®
Total Return Index on a percentage basis during the term of the individual plan.
The benchmark is the non-weighted average of Deutsche Telekom shares (based on
the Xetra closing prices of Deutsche Telekom shares) plus the value of dividends
paid and reinvested in Deutsche Telekom shares, bonus shares etc., and the
non-weighted average of the Dow Jones EURO STOXX®
Total Return Index during the last 20 trading days prior to the beginning and
end of the plan.
At the
end of the term of the individual plans, Deutsche Telekom AG’s Supervisory Board
will establish whether the absolute and relative performance targets for the
Board of Management have been achieved. Based on these findings, the Board of
Management will establish whether the target has been achieved for Deutsche
Telekom and all participating companies as a whole and will communicate this
decision. Once it has been established whether one or both targets have been
achieved, the relevant amounts will be paid out to the
beneficiaries.
The
General Committee of the Supervisory Board determined at its meeting on February
4, 2009 that the relative plan target for the 2006 tranche of the MTIP had been
achieved. Consequently, 50 percent of the award amount for the 2006 tranche
was paid out in 2009.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
MTIP
plan year
|
Maximum
budget
(millions
of €)
|
Term
of plan
(years)
|
Share
price at start of plan
(€)
|
Absolute
performance target
(€)
|
Starting
value
of
the index
|
|
2007
|
83
|
3
|
13.64
|
17.73
|
551.91
|
|
2008
|
83
|
3
|
15.11
|
19.64
|
601.59
|
|
2009
|
55
|
3
|
11.01
|
14.31
|
328.55
|
|
|
|
|
|
|
|
The
proportionate amount to be expensed is calculated based on a Monte Carlo
simulation.
The MTIP
of Magyar Telekom is
based on the same terms and conditions as the MTIP described above, except that
the assessment benchmark is the performance of Magyar Telekom shares and the Dow
Jones EURO STOXX®
Total Return Index. In addition, the absolute performance target is achieved if,
at the end of the individual plans, Magyar Telekom’s share price has risen by at
least 35 percent compared with Magyar Telekom’s share price at the
beginning of the plan.
The MTIP
of HT-Hrvatske
telekomunikacije is based on the same terms and conditions as the MTIP
described above. The absolute performance target for the 2008 MTIP is, however,
EBITDA, and the relative performance target is a combined index from a basket of
telecommunications shares. The absolute performance target for the 2009 MTIP is
a 30-percent increase in the HT share price; the relative performance target is
the same as for the 2008 MTIP.
The MTIP
of T-Mobile UK is
also based on the same terms and conditions applicable to the MTIP described
above. In addition to the two aforementioned performance targets, however, these
plans are subject to a third performance target for a defined group of
participants, which is based on the cash contribution (EBITDA less investments
in intangible assets (excluding goodwill) and property, plant and equipment).
The third performance target can only be achieved after the two other
performance targets have been met.
PTC has established a
performance cash plan program with long-term incentive plans (LTIPs). The
program provides for additional pay in the form of deferred compensation under
the terms and conditions of the LTIP and is aimed at employees whose performance
is of outstanding significance for the company’s shareholder value. The LTIP is
generally open to high-performers at specific management levels. Participants in
the plans are selected individually by the management of PTC. Each plan
encompasses three consecutive cycles, each running from January 1 through
December 31. Participants receive payments from the plan after three years,
provided the defined EBITDA target has been achieved (EBITDA hurdle). In
addition, a bonus is paid at the end of each cycle. The amount of the bonus is
determined for each cycle individually and depends on the level of target
achievement. The 2007 to 2009 plan is still in operation.
Phantom
Share Plan (PSP).
T-Mobile
USA has established a Phantom Share Plan (PSP) as Long-Term Incentive Plan
(LTIP) on a revolving basis for the years 2005 through 2009, providing benefits
for the top management. Under the PSP, T-Mobile USA grants
performance-based cash bonus awards. These awards are earned (in full or in
part) based upon the customer growth on a sliding scale from 60 to
150 percent of the original number of phantom shares granted. The value of
a phantom share appreciates or depreciates from its USD 10 per share
face value proportionate to the change in the appraised enterprise value of the
subsidiary over the performance period. The value of an award is determined by
multiplying the number of phantom share awards earned by the appraised value of
one phantom share. Awards are earned and paid out ratably over a performance
period of two to three years.
Impact
of all share-based compensation systems.
The
expense incurred for share-based compensation systems totaled EUR 31
million in the reporting year (2008: EUR 96 million; 2007: EUR 79
million). Provisions total EUR 78 million as of the reporting date
(December 31, 2008: EUR 138 million).
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
35
Disclosures on financial instruments.
Carrying
amounts, amounts recognized, and fair values by measurement
category.
|
|
|
|
|
|
|
Amounts
recognized in the statement of financial position according to IAS
39
|
|
|
|
|
|
|
|
|
(millions
of €)
|
Category
in accordance with
IAS
39
|
|
Carrying
amounts
Dec.
31, 2009
|
|
|
Amortized
cost
|
|
|
Cost
|
|
|
Fair
value recognized in equity
|
|
|
Fair
value recognized in profit or loss
|
|
|
Amounts recognized in the statement of financial
position according to
IAS
17
|
|
|
Fair
value
December
31, 2009
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
LaR
|
|
|
5,022 |
|
|
|
5,022 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
5,022 |
|
|
Trade
receivables
|
LaR
|
|
|
6,643 |
|
|
|
6,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,643 |
|
|
Other
receivables
|
LaR/n.a.
|
|
|
2,003 |
|
|
|
1,739 |
|
|
|
|
|
|
|
|
|
|
|
|
264 |
|
|
|
2,003 |
|
|
Other
non-derivative financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Held-to-maturity investments
|
HtM
|
|
|
80 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80 |
|
|
–
Available-for-sale financial assets
|
AfS
|
|
|
609 |
|
|
|
|
|
|
|
411 |
|
|
|
198 |
|
|
|
|
|
|
|
|
|
|
1981 |
|
|
Derivative
financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Derivatives without a hedging relationship
|
FAHfT
|
|
|
653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653 |
|
|
|
|
|
|
|
653 |
|
|
–
Derivatives with a hedging relationship
|
n.a.
|
|
|
395 |
|
|
|
|
|
|
|
|
|
|
|
170 |
|
|
|
225 |
|
|
|
|
|
|
|
395 |
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
payables
|
FLAC
|
|
|
6,294 |
|
|
|
6,294 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,294 |
|
|
Bonds
and other securitized liabilities
|
FLAC
|
|
|
38,508 |
|
|
|
38,508 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
41,813 |
|
|
Liabilities
to banks
|
FLAC
|
|
|
4,718 |
|
|
|
4,718 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,864 |
|
|
Liabilities
to non-banks from promissory notes
|
FLAC
|
|
|
1,057 |
|
|
|
1,057 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,205 |
|
|
Other
interest-bearing liabilities
|
FLAC
|
|
|
933 |
|
|
|
933 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
984 |
|
|
Other
non-interest-bearing liabilities
|
FLAC
|
|
|
3,573 |
|
|
|
3,573 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,573 |
|
|
Finance
lease liabilities
|
n.a.
|
|
|
1,423 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,423 |
|
|
|
1,703 |
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Derivatives without a hedging
relationship
(held for trading)
|
FLHfT
|
|
|
730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730 |
|
|
|
|
|
|
|
730 |
|
|
–
Derivatives with a hedging
relationship
(hedge accounting)
|
n.a.
|
|
|
249 |
|
|
|
|
|
|
|
|
|
|
|
197 |
|
|
|
52 |
|
|
|
|
|
|
|
249 |
|
|
Of
which: aggregated by category in accordance with IAS 39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and receivables (LaR)
|
|
|
|
13,404 |
|
|
|
13,404 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
13,404 |
|
|
Held-to-maturity
investments (HtM)
|
|
|
|
80 |
|
|
|
80 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
80 |
|
|
Available-for-sale
financial assets (AfS)
|
|
|
|
609 |
|
|
|
|
|
|
|
411 |
|
|
|
198 |
|
|
|
|
|
|
|
|
|
|
|
198¹ |
|
|
Financial
assets held for trading (FAHfT)
|
|
|
|
653 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
653 |
|
|
|
|
|
|
|
653 |
|
|
Financial
liabilities measured at amortized cost (FLAC)
|
|
|
|
55,083 |
|
|
|
55,083 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
58,733 |
|
|
Financial
liabilities held for trading (FLHfT)
|
|
|
|
730 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
730 |
|
|
|
|
|
|
|
730 |
|
1 For details, please refer to Note 8.
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (Continued)
|
|
|
|
|
|
|
Amounts
recognized in the statment of financial position according to IAS
39
|
|
|
|
|
|
|
|
|
(millions
of €)
|
Category
in accordance with
IAS
39
|
|
Carrying
amounts
December
31, 2008
|
|
|
Amortized
cost
|
|
|
Cost
|
|
|
Fair
value recognized in equity
|
|
|
Fair
value recognized in profit or loss
|
|
|
Amounts
recognized in the statement of financial position according to
IAS
17
|
|
|
Fair
value
December
31, 2008
|
|
|
Assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
LaR
|
|
|
3,026 |
|
|
|
3,026 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,026 |
|
|
Trade
receivables
|
LaR
|
|
|
7,224 |
|
|
|
7,224 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,224 |
|
|
Other
receivables
|
LaR/n.a.
|
|
|
1,267 |
|
|
|
984 |
|
|
|
|
|
|
|
|
|
|
|
|
283 |
|
|
|
1,267 |
|
|
Other
non-derivative financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Held-to-maturity investments
|
HtM
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
–
Available-for-sale financial assets
|
AfS
|
|
|
406 |
|
|
|
|
|
|
|
288 |
|
|
|
118 |
|
|
|
|
|
|
|
|
|
|
1181 |
|
|
Derivative
financial assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Derivatives without a hedging relationship
|
FAHfT
|
|
|
814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
814 |
|
|
|
|
|
|
|
814 |
|
|
–
Derivatives with a hedging relationship
|
n.a.
|
|
|
787 |
|
|
|
|
|
|
|
|
|
|
|
127 |
|
|
|
660 |
|
|
|
|
|
|
|
787 |
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trade
payables
|
FLAC
|
|
|
7,055 |
|
|
|
7,055 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
7,055 |
|
|
Bonds
and other securitized liabilities
|
FLAC
|
|
|
34,302 |
|
|
|
34,302 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
35,657 |
|
|
Liabilities
to banks
|
FLAC
|
|
|
4,222 |
|
|
|
4,222 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,155 |
|
|
Liabilities
to non-banks from promissory notes
|
FLAC
|
|
|
887 |
|
|
|
887 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
919 |
|
|
Other
interest-bearing liabilities
|
FLAC
|
|
|
1,036 |
|
|
|
1,036 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,042 |
|
|
Other
non-interest-bearing liabilities
|
FLAC
|
|
|
3,545 |
|
|
|
3,545 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,545 |
|
|
Finance
lease liabilities
|
n.a.
|
|
|
1,514 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1,514 |
|
|
|
1,616 |
|
|
Derivative
financial liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
–
Derivatives without a hedging relationship
(held for trading)
|
FLHfT
|
|
|
974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
974 |
|
|
|
|
|
|
|
974 |
|
|
–
Derivatives with a hedging relationship
(hedge
accounting)
|
n.a.
|
|
|
114 |
|
|
|
|
|
|
|
|
|
|
|
114 |
|
|
|
|
|
|
|
|
|
|
|
114 |
|
|
Of
which: aggregated by category in accordance with IAS 39
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Loans
and receivables (LaR)
|
|
|
|
11,234 |
|
|
|
11,234 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,234 |
|
|
Held-to-maturity
investments (HtM)
|
|
|
|
281 |
|
|
|
281 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
281 |
|
|
Available-for-sale
financial assets (AfS)
|
|
|
|
406 |
|
|
|
|
|
|
|
288 |
|
|
|
118 |
|
|
|
|
|
|
|
|
|
|
|
118¹ |
|
|
Financial
assets held for trading (FAHfT)
|
|
|
|
814 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
814 |
|
|
|
|
|
|
|
814 |
|
|
Financial
liabilities measured at amortized cost (FLAC)
|
|
|
|
51,047 |
|
|
|
51,047 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
52,372 |
|
|
Financial
liabilities held for trading (FLHfT)
|
|
|
|
974 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
974 |
|
|
|
|
|
|
|
974 |
|
1 For
details, please refer to Note 8.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Classes
of financial instruments according to IFRS 7.27.
|
|
Dec.
31, 2009
|
Dec.
31, 2008
|
|
(millions
of €)
|
Level
1
|
Level
2
|
Level
3
|
Total
|
Level
1
|
Level
2
|
Level
3
|
Total
|
|
Assets
|
|
|
|
|
|
|
|
|
|
Available-for-sale
financial assets (AfS)
|
|
198
|
|
198
|
|
118
|
|
118
|
|
Financial
assets held for trading (FAHfT)
|
|
653
|
|
653
|
|
814
|
|
814
|
|
Derivative
financial assets with a hedging relationship
|
|
395
|
|
395
|
|
787
|
|
787
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Financial
liabilities held for trading (FLHfT)
|
|
730
|
|
730
|
|
974
|
|
974
|
|
Derivative
financial liabilities with a hedging relationship
|
|
249
|
|
249
|
|
114
|
|
114
|
|
|
|
|
|
|
|
|
|
|
For
further details on the classes of financial instruments, please refer to the
section "Change in accounting policies" in the chapter "Summary of accounting
policies."
Cash and
cash equivalents and trade and other receivables mainly have short-term
maturities. For this reason, their carrying amounts at the reporting date
approximate their fair values.
The fair
values of other non-current receivables and held-to-maturity financial
investments due after more than one year correspond to the present values of the
payments related to the assets, taking into account the current interest rate
parameters that reflect market- and partner-based changes to terms and
conditions, and expectations.
Trade and
other payables, as well as other liabilities, generally have short times to
maturity; the values reported approximate the fair values.
The fair
values of the quoted bonds and other securitized liabilities equal the nominal
amounts multiplied by the price quotations at the reporting date.
The fair
values of unquoted bonds, liabilities to banks, liabilities to non-banks from
promissory notes, and other financial liabilities are calculated as the present
values of the payments associated with the debts, based on the applicable yield
curve and Deutsche Telekom's credit spread curve for specific
currencies.
Net
gain/loss by measurement category.
|
|
From
interest,
dividends
|
From
subsequent measurement
|
From
derecognition
|
Net
gain (loss)
|
|
(millions
of €)
|
At
fair
value
|
Currency
translation
|
Impairment/
reversal
of
impairment
|
2009
|
2008
|
|
Loans
and receivables (LaR)
|
132
|
|
(195)
|
(716)
|
|
(779)
|
(1,577)
|
|
Held-to-maturity
investments (HtM)
|
3
|
|
|
2
|
2
|
7
|
5
|
|
Available-for-sale
financial assets (AfS)
|
64
|
|
|
(8)
|
(11)
|
45
|
68
|
|
Financial
instruments held for trading (FAHfT and FLHfT)
|
n.a.
|
(79)
|
|
|
|
(79)
|
383
|
|
Financial
liabilities measured at amortized cost (FLAC)
|
(2,757)
|
|
183
|
|
|
(2,574)
|
(2,387)
|
|
|
(2,558)
|
(79)
|
(12)
|
(722)
|
(9)
|
(3,380)
|
(3,508)
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Interest
from financial instruments is recognized in finance costs, dividends in other
financial income/expense (please refer to Notes 21 and 23). Deutsche Telekom
recognizes the other components of net gain/loss in other financial
income/expense, except for impairments/reversal of impairments of trade
receivables (please refer to Note 2) that are classified as loans and
receivables which are reported under selling expenses. The net loss from the
subsequent measurement for financial instruments held for trading (EUR 79
million) also includes interest and currency translation effects. The net
currency translation losses on financial assets classified as loans and
receivables (EUR 195 million) are primarily attributable to the
Group-internal transfer of foreign-currency loans taken out by Deutsche
Telekom’s financing company, Deutsche Telekom International Finance B.V., on the
capital market. These were offset by corresponding currency translation gains on
capital market liabilities of EUR 183 million. Finance costs from financial
liabilities measured at amortized cost (EUR 2,757 million) primarily
consist of interest expense on bonds and other (securitized) financial
liabilities. The item also includes interest expenses from interest added back
and interest income from interest discounted from trade payables. However, it
does not include the interest expense and interest income from interest rate
derivatives Deutsche Telekom used in the reporting period to hedge the fair
value risk of financial liabilities (please refer to Note 21).
36
Risk management, financial derivatives, and other disclosures on capital
management.
Principles
of risk management.
Deutsche
Telekom is exposed in particular to risks from movements in exchange rates,
interest rates, and market prices that affect its assets, liabilities, and
forecast transactions. Financial risk management aims to limit these market
risks through ongoing operational and finance activities. Selected derivative
and non-derivative hedging instruments are used for this purpose, depending on
the risk assessment. However, Deutsche Telekom only hedges the risks that affect
the Group’s cash flow. Derivatives are exclusively used as hedging instruments,
i.e., not for trading or other speculative purposes. To reduce the credit risk,
hedging transactions are generally only concluded with leading financial
institutions whose credit rating is at least BBB+/Baa1. In addition, the credit
risk of financial instruments with a positive fair value is minimized by way of
limit management, which sets individualized relative and absolute figures for
risk exposure depending on the counterparty's rating, share price development
and credit default swap level.
The
fundamentals of Deutsche Telekom’s financial policy are established each year by
the Board of Management and overseen by the Supervisory Board. Group Treasury is
responsible for implementing the financial policy and for ongoing risk
management. Certain transactions require the prior approval of the Board of
Management, which is also regularly briefed on the severity and amount of the
current risk exposure.
Treasury
regards effective management of the market risk as one of its main tasks. The
department performs simulation calculations using different worst-case and
market scenarios so that it can estimate the effects of different conditions on
the market.
Currency
risks.
Deutsche
Telekom is exposed to currency risks from its investing, financing, and
operating activities. Risks from foreign currencies are hedged to the extent
that they influence the Group’s cash flows. Foreign-currency risks that do not
influence the Group’s cash flows (i.e., the risks resulting from the translation
of statements of assets and liabilities of foreign operations into the Group’s
reporting currency) are generally not hedged, however. Deutsche Telekom may
nevertheless also hedge this foreign-currency risk under certain
circumstances.
Foreign-currency
risks in the area of investment result, for example, from the acquisition and
disposal of investments in foreign companies. Deutsche Telekom hedges these
risks. If the risk position exceeds EUR 100 million, the Board of
Management must make a special decision on how the risk shall be hedged. If the
risk position is below EUR 100 million, Group Treasury performs the
currency hedging itself. At the reporting date, Deutsche Telekom was not exposed
to any significant risks from foreign-currency transactions in the field of
investments.
Foreign-currency
risks in the financing area are caused by financial liabilities in foreign
currency and loans in foreign currency that are extended to Group entities for
financing purposes. Treasury hedges these risks in full. Cross-currency swaps
and currency derivatives are used to convert financial obligations and
intragroup loans denominated in foreign currencies into the Group entities’
functional currencies.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
At the
reporting date, the foreign-currency liabilities for which currency risks were
hedged mainly consisted of bonds and medium-term notes in Swiss francs, Czech
koruna, Japanese yen, pound sterling, and U.S. dollars. On account of these
hedging activities, Deutsche Telekom was not exposed to any significant currency
risks in the area of financing at the reporting date.
The
individual Group entities predominantly execute their operating activities in
their respective functional currencies. Some Group entities, however, are
exposed to foreign-currency risks in connection with scheduled payments in
currencies that are not their functional currency. These are mainly payments to
international carriers for the processing of international calls placed by
Deutsche Telekom’s customers in Germany, plus payments for the procurement of
handsets and network systems, as well as for international roaming. Deutsche
Telekom uses currency derivatives or, in some cases, currency options to hedge
these payments up to a maximum of one year in advance. On account of these
hedging activities, Deutsche Telekom was not exposed to any significant exchange
rate risks from its operating activities at the reporting date.
For the
presentation of market risks, IFRS 7 requires sensitivity analyses that
show the effects of hypothetical changes of relevant risk variables on profit or
loss and shareholders’ equity. In addition to currency risks, Deutsche Telekom
is exposed to interest rate risks and price risks in its investments. The
periodic effects are determined by relating the hypothetical changes in the risk
variables to the balance of financial instruments at the reporting date. It is
assumed that the balance at the reporting date is representative for the year as
a whole.
Currency
risks as defined by IFRS 7 arise on account of financial instruments being
denominated in a currency that is not the functional currency and being of a
monetary nature; differences resulting from the translation of financial
statements into the Group’s presentation currency are not taken into
consideration. Relevant risk variables are generally all non-functional
currencies in which Deutsche Telekom has contracted financial
instruments.
The
currency sensitivity analysis is based on the following
assumptions:
Major
non-derivative monetary financial instruments (liquid assets, receivables,
interest-bearing securities and/or debt instruments held, interest-bearing
liabilities, finance lease liabilities, non-interest-bearing liabilities) are
either directly denominated in the functional currency or are transferred to the
functional currency through the use of derivatives. Exchange rate fluctuations
therefore have no effects on profit or loss, or shareholders’
equity.
Non-interest-bearing
securities or equity instruments held are of a non-monetary nature and therefore
are not exposed to currency risk as defined by IFRS 7.
Interest
income and interest expense from financial instruments are also either recorded
directly in the functional currency or transferred to the functional currency by
using derivatives. For this reason, there can be no effects on the variables
considered in this connection.
In the
case of fair value hedges designed for hedging currency risks, the changes in
the fair values of the hedged item and the hedging instruments attributable to
exchange rate movements balance out almost completely in the income statement in
the same period. As a consequence, these financial instruments are not exposed
to currency risks with an effect on profit or loss, or shareholders’ equity,
either.
Cross-currency
swaps are always assigned to non-derivative hedged items, so these instruments
do not have any currency effects, either.
Deutsche
Telekom is therefore only exposed to currency risks from specific currency
derivatives. Some of these are currency derivatives that are part of an
effective cash flow hedge for hedging payment fluctuations resulting from
exchange rate movements in accordance with IAS 39. Exchange rate
fluctuations of the currencies on which these transactions are based affect the
hedging reserve in shareholders’ equity and the fair value of these hedging
transactions. Others are currency derivatives that are neither part of one of
the hedges defined in IAS 39 nor part of a natural hedge. These derivatives
are used to hedge planned transactions. Exchange rate fluctuations of the
currencies, on which such financial instruments are based, affect other
financial income or expense (net gain/loss from remeasurement of financial
assets to fair value).
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
If the
euro had gained (lost) 10 percent against the U.S. dollar and the pound sterling
at December 31, 2009, the hedging reserve in shareholders' equity and the fair
values of the hedging transactions before taxes would have been EUR 70
million lower (higher) (December 31, 2008: EUR 45 million lower (higher)).
The hypothetical effect of EUR -70 million on profit or loss results from
the currency sensitivities EUR/USD: EUR -55 million; EUR/GBP: EUR -15
million.
If the
euro had gained (lost) 10 percent against all currencies at December 31, 2009,
other financial income and the fair value of the hedging transactions before
taxes would have been EUR 11 million lower (higher) (December 31, 2008:
EUR 5 million lower (higher)). The hypothetical effect on profit or loss of
EUR -11 million results from the currency sensitivities EUR/USD:
EUR -36 million; EUR/INR: EUR -4 million; EUR/HUF: EUR -4
million; EUR/CHF: EUR -1 million; EUR/PLN: EUR +15 million; EUR/GBP:
EUR +12 million; EUR/CZK: EUR +7 million.
Interest
rate risks.
Deutsche
Telekom is exposed to interest rate risks, mainly in the euro zone and in the
United States of America. To minimize the effects of interest rate fluctuations
in these regions, Deutsche Telekom manages the interest rate risk for net
financial liabilities denominated in euros and U.S. dollars separately. Once a
year, the Board of Management stipulates the desired mix of fixed and
variable-interest net financial liabilities for a period of three years. Taking
account of the Group’s existing and planned debt structure, Treasury uses
interest rate derivatives to adjust the interest structure for the net financial
liabilities of the composition specified by the Board of
Management.
Due to
the derivative hedges, an average of 72 percent (2008: 64 percent) of
the net financial liabilities in 2009 denominated in euros and 73 percent
(2008: 58 percent) of those denominated in U.S. dollars had a fixed rate of
interest. The average value is representative for the year as a
whole.
Interest
rate risks are presented by way of sensitivity analyses in accordance with IFRS
7. These show the effects of changes in market interest rates on interest
payments, interest income and expense, other income components and, if
appropriate, shareholders’ equity. The interest rate sensitivity analyses are
based on the following assumptions:
Changes
in the market interest rates of non-derivative financial instruments with fixed
interest rates only affect income if these are measured at their fair value. As
such, all financial instruments with fixed interest rates that are carried at
amortized cost are not subject to interest rate risk as defined in
IFRS 7.
In the
case of fair value hedges designed for hedging interest rate risks, the changes
in the fair values of the hedged item and the hedging instrument attributable to
interest rate movements balance out almost completely in the income statement in
the same period. This means that interest-rate-based changes in the measurement
of the hedged item and the hedging instrument do not affect income and are
therefore not subject to interest rate risk.
In the
case of interest rate derivatives in fair value hedges, however, changes in
market interest rates affect the amount of interest payments. As a consequence,
they have an effect on interest income and are therefore included in the
calculation of income-related sensitivities.
Changes
in the market interest rate of financial instruments that were designated as
hedging instruments in a cash flow hedge to hedge payment fluctuations resulting
from interest rate movements affect the hedging reserve in shareholders' equity
and are therefore taken into consideration in the equity-related sensitivity
calculations.
Changes
in market interest rates affect the interest income or expense of non-derivative
variable-interest financial instruments, the interest payments of which are not
designated as hedged items of cash flow hedges against interest rate risks. As a
consequence, they are included in the calculation of income-related
sensitivities.
Changes
in the market interest rate of interest rate derivatives (interest rate swaps,
cross-currency swaps) that are not part of a hedging relationship as set out in
IAS 39 affect other financial income or expense (net gain/loss from
remeasurement of the financial assets to fair value) and are therefore taken
into consideration in the income-related sensitivity calculations.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Currency
derivatives are not exposed to interest rate risks and therefore do not affect
the interest rate sensitivities.
If the
market interest rates had been 100 basis points higher (lower) at
December 31, 2009, profit or loss before taxes would have been EUR 194
million (2008: EUR 173 million) lower (higher). The hypothetical effect of
EUR -194 million on income results from the potential effects of
EUR -169 million from interest rate derivatives and EUR -25 million
from non-derivative variable-interest financial liabilities. If the market
interest rates had been 100 basis points higher (lower) at December 31, 2009,
total comprehensive income before taxes would have been EUR 104 million
(December 31, 2008: EUR 57 million) higher (lower).
Other
price risks.
As part
of the presentation of market risks, IFRS 7 also requires disclosures on
how hypothetical changes in risk variables affect the price of financial
instruments. Important risk variables are stock exchange prices or
indexes.
As of
December 31, 2009, Deutsche Telekom did not hold any material investments to be
classified as available for
sale.
Credit
risks.
Deutsche
Telekom is exposed to a credit risk from its operating activities and certain
financing activities. With regard to financing activities, transactions are only
concluded with counterparties that have at least a credit rating of BBB+/Baa1,
in connection with an operational credit management system. At the level of
operations, the outstanding debts are continuously monitored in each area, i.e.,
locally. Credit risks must be taken into account through individual and
collective allowances.
The
solvency of the business with corporate customers, especially international
carriers, is monitored separately. In terms of the overall risk exposure from
the credit risk, however, the receivables from these counterparties are not so
extensive as to justify extraordinary concentrations of risk.
The
maximum exposure to credit risk is partly represented by the carrying amounts of
the financial assets that are carried in the statement of financial position,
including derivatives with positive market values. Except for the collateral
agreements mentioned in Notes 1 and 8, no significant agreements reducing the
maximum exposure to credit risk (such as contractual netting) had been concluded
as of the reporting date. In addition, Deutsche Telekom is exposed to a credit
risk through the granting of financial guarantees. Guarantees amounting to a
nominal total of EUR 41 million had been pledged as of the reporting date
(December 31, 2008: EUR 181 million).
Liquidity
risks.
Please
refer to Note 9.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Hedge
accounting.
Fair
value hedges.
To hedge
the fair value risk of fixed-interest liabilities, Deutsche Telekom used
interest rate swaps and forward interest rate swaps (receive fixed, pay
variable) denominated in CHF, EUR, GBP, and USD in the 2009 and 2008 financial
years. Fixed-income bonds/MTNs denominated in CHF, EUR, GBP, and USD were
designated as hedged items. The changes in the fair values of the hedged items
resulting from changes in the CHF Libor, Euribor, GBP Libor, or USD Libor swap
rate are offset against the changes in the value of the interest rate swaps. The
aim of this hedging is to transform the fixed-income bonds into
variable-interest debt, thus hedging the fair value of the financial
liabilities. Credit risks are not part of the hedging.
The
effectiveness of the hedging relationship is tested prospectively and
retrospectively at each reporting date using statistical methods in the form of
a regression analysis. All hedging relationships, with their effectiveness
having been tested using statistical methods, were effective at the reporting
date.
As the
list of the fair values of derivatives shows (please refer to table under
Derivatives), Deutsche Telekom had interest rate derivatives in a net amount of
EUR +173 million (2008: EUR +660 million) designated as fair
value hedges at December 31, 2009. The remeasurement of the hedged items results
in gains of EUR 293 million being recorded in other financial
income/expense in the 2009 financial year (2008: losses of EUR 695
million); the changes in the fair values of the hedging transactions result in
losses of EUR 291 million (2008: gains of EUR 684 million) being
recorded in other financial income/expense.
Cash
flow hedges – interest rate risks.
Deutsche
Telekom entered into payer interest rate swaps and forward payer interest rate
swaps (receive variable, pay fixed) to hedge the cash flow risk of
variable-interest debt. The changes in the cash flows of the hedged items
resulting from changes in the Euribor and Libor rates are offset against the
changes in the cash flows of the interest rate swaps. The aim of this hedging is
to transform the variable-interest bonds into fixed-income debt, thus hedging
the cash flows of the financial liabilities. Credit risks are not part of the
hedging.
In 2009,
Deutsche Telekom entered into forward payer interest rate swaps totaling
EUR 2.1 billion for loans scheduled to be taken out in 2011. The following
table shows the contractual maturities newly incorporated into a hedging
relationship in 2009 relating to the payments for the aforementioned forward
payer interest rate swaps:
|
Start
|
End
|
|
Nominal
volume
(millions
of €)
|
|
Reference
rate
|
|
January
24, 2011
|
January
24, 2014
|
|
|
500 |
|
3-month
Euribor
|
|
January
24, 2011
|
January
24, 2014
|
|
|
500 |
|
3-month
Euribor
|
|
January
24, 2011
|
January
24, 2014
|
|
|
600 |
|
3-month
Euribor
|
|
January
24, 2011
|
January
24, 2014
|
|
|
500 |
|
3-month
Euribor
|
|
|
|
|
|
|
|
|
The
effectiveness of the hedging relationship is tested prospectively and
retrospectively using statistical methods in the form of a regression analysis.
All hedging relationships of this nature were effective as of the reporting
date.
As the
list of the fair values of derivatives shows (please refer to table under
Derivatives), Deutsche Telekom had interest rate derivatives with a fair value
of EUR –142 million (2008: EUR -67 million) amounting to a nominal
total of EUR 3.7 billion (2008: EUR 2.7 billion) designated as hedging
instruments for cash flow hedges at December 31, 2009. The terms of the hedging
relationships will end in the years 2012 through 2014. The recognition directly
in equity of the change in the fair value of the hedging transactions resulted
in losses of EUR 83 million being recorded in the revaluation surplus
in the 2009 financial year (2008: losses of EUR 86 million). Losses
amounting to EUR 41 million recognized in shareholders' equity were
transferred to other financial income/expense in the 2009 financial year (2008:
gains of EUR 7 million).
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Cash
flow hedges – currency risks.
Deutsche
Telekom entered into GBP/EUR foreign currency derivatives with terms until 2022
to hedge the EUR equivalent of nominal receivables from a GBP-denominated MTN
issued by Deutsche Telekom International Finance. GBP 0.7 billion are
swapped against EUR 0.77 billion as nominal values. The effectiveness of
the hedging relationship is tested prospectively and retrospectively using
statistical methods in the form of a regression analysis. The hedging
relationship was effective as of the reporting date.
In the
2009 financial year, gains totaling EUR 26 million (2008: gains of
EUR 146 million) resulting from the change in the fair values of currency
derivatives were taken directly to equity (hedging reserve). These changes
constitute the effective portion of the hedging relationship. Gains amounting to
EUR 32 million recognized in shareholders' equity were transferred to other
financial income/expense in the 2009 financial year (2008: gains of EUR 89
million). There was no material ineffectiveness of these hedges recorded as of
the reporting date.
As the
list of the fair values of derivatives shows (please refer to table under
Derivatives), Deutsche Telekom had currency forwards of a net fair value of
EUR -2 million (2008: EUR -13 million) and a total volume of
EUR 692 million (2008: EUR 477 million), as well as cross-currency
swaps of a net fair value of EUR +123 million (2008: EUR +90 million)
and a total volume of EUR 1,890 million (2008: EUR 1,156 million)
designated as hedging instruments for cash flow hedges as of December 31, 2009.
The terms of the hedging relationships will end in the years 2010 through
2022.
Derivatives.
The
following table shows the fair values of the various derivatives carried. A
distinction is made depending on whether these are part of an effective hedging
relationship as set out in IAS 39 (fair value hedge, cash flow hedge) or
not. Other derivatives can also be embedded (i.e., a component of a composite
instrument that contains a non-derivative host contract).
|
|
|
Net
carrying amounts
|
|
|
Net
carrying amounts
|
|
|
(millions
of €)
|
|
Dec.
31, 2009
|
|
|
Dec.
31, 2008
|
|
|
Assets
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
94 |
|
|
|
99 |
|
|
In
connection with fair value hedges
|
|
|
225 |
|
|
|
660 |
|
|
In
connection with cash flow hedges
|
|
|
0 |
|
|
|
0 |
|
|
Currency
forwards/currency swaps
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
91 |
|
|
|
261 |
|
|
In
connection with cash flow hedges
|
|
|
15 |
|
|
|
34 |
|
|
Cross-currency
swaps
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
468 |
|
|
|
454 |
|
|
In
connection with cash flow hedges
|
|
|
155 |
|
|
|
90 |
|
|
Other
derivatives in connection with cash flow hedges
|
|
|
0 |
|
|
|
3 |
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities
|
|
|
|
|
|
|
|
|
|
Interest
rate swaps
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
80 |
|
|
|
108 |
|
|
In
connection with fair value hedges
|
|
|
52 |
|
|
|
0 |
|
|
In
connection with cash flow hedges
|
|
|
142 |
|
|
|
67 |
|
|
Currency
forwards/currency swaps
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
46 |
|
|
|
277 |
|
|
In
connection with cash flow hedges
|
|
|
17 |
|
|
|
47 |
|
|
Cross-currency
swaps
|
|
|
|
|
|
|
|
|
|
Held
for trading
|
|
|
555 |
|
|
|
554 |
|
|
In
connection with cash flow hedges
|
|
|
32 |
|
|
|
0 |
|
|
Other
derivatives in connection with cash flow hedges
|
|
|
6 |
|
|
|
0 |
|
|
Embedded
derivatives
|
|
|
49 |
|
|
|
35 |
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Disclosures
on capital management.
The
overriding aim of the Group’s capital management is to ensure that it will
continue to be able to repay its debt and remain financially sound.
An
important indicator of capital management is the gearing ratio of net debt to
shareholders' equity as shown in the consolidated statement of financial
position. Deutsche Telekom considers net debt to be an important measure for
investors, analysts, and rating agencies. It is a non-GAAP figure not governed
by International Financial Reporting Standards and its definition and
calculation may vary from one company to another. The gearing increased to 1.0
as of December 31, 2009 compared with 0.9 in the prior year. The target corridor
for this indicator is between 0.8 and 1.2.
Calculation
of net debt; shareholders' equity.
|
(millions
of €), as of Dec. 31 of each year
|
|
2009
|
|
|
2008
|
|
|
Bonds
|
|
|
38,508 |
|
|
|
34,302 |
|
|
Liabilities
to banks
|
|
|
4,718 |
|
|
|
4,222 |
|
|
Liabilities
to non-banks from promissory notes
|
|
|
1,057 |
|
|
|
887 |
|
|
Derivative
financial liabilities
|
|
|
924 |
|
|
|
1,053 |
|
|
Lease
liabilities
|
|
|
1,909 |
|
|
|
2,009 |
|
|
Other
financial liabilities
|
|
|
1,001 |
|
|
|
974 |
|
|
Gross
debt
|
|
|
48,117 |
|
|
|
43,447 |
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
5,022 |
|
|
|
3,026 |
|
|
Available-for-sale/held-for-trading
financial assets
|
|
|
162 |
|
|
|
101 |
|
|
Derivative
financial assets
|
|
|
1,048 |
|
|
|
1,598 |
|
|
Other
financial assets
|
|
|
974 |
|
|
|
564 |
|
|
Net
debt
|
|
|
40,911 |
|
|
|
38,158 |
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’
equity in accordance with the
consolidated
statement of financial position
|
|
|
41,937 |
|
|
|
43,112 |
|
|
|
|
|
|
|
|
|
|
|
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
37
Related party disclosures.
The
Federal Republic of Germany is both a direct and an indirect shareholder (via
KfW Bankengruppe ) and holds 31.70 percent (December 31, 2008: 31.70
percent) of the share capital of Deutsche Telekom AG. Due to the average
attendance of the shareholders' meeting, the Federal Republic represents a solid
majority at the shareholders' meeting, although it only has a minority
shareholding, making Deutsche Telekom a dependent company of the Federal
Republic. Therefore, the Federal Republic and the companies controlled by the
Federal Republic are classified as related parties of Deutsche
Telekom.
Federal
Republic of Germany.
The
Federal Posts and Telecommunications Agency (Federal Agency) has been assigned
certain tasks by law that affect cross-company issues at Deutsche Telekom AG,
Deutsche Post AG, and Deutsche Postbank AG. The Federal Agency’s
responsibilities include the continuation of the Civil Service Health Insurance
Fund (Postbeamtenkrankenkasse), the recreation service (Erholungswerk), the
supplementary retirement pensions institution (Versorgungsanstalt der Deutschen
Bundespost - VAP), and the welfare service (Betreuungswerk) for Deutsche Telekom
AG, Deutsche Post AG, and Deutsche Postbank AG. The coordination and
administrative tasks are performed on the basis of agency agreements. For the
2009 financial year, Deutsche Telekom made payments in the amount of EUR 56
million (2008: EUR 55 million; 2007: EUR 52 million). Payments are
made according to the provisions of the Posts and Telecommunications
Reorganization Act.
The
Federal Republic of Germany is a customer of Deutsche Telekom who sources
services from the Company. Charges for services provided to the Federal Republic
and its departments and agencies are based on Deutsche Telekom’s commercial
pricing policies. Services provided to any one department or agency do not
represent a significant component of Deutsche Telekom’s net
revenue.
The
Company’s Dutch financing subsidiary, Deutsche Telekom International Finance,
has taken out a loan of GBP 150 million with KfW Bankengruppe. The interest
rate on the loan reflects market conditions and is based on Deutsche
Telekom AG's current rating. The loan has a remaining life of under one
year.
Joint
ventures and associates.
Deutsche
Telekom has business relationships with numerous associates and joint
ventures.
In 2009,
Deutsche Telekom generated revenues from its joint venture Toll Collect
amounting to EUR 0.1 billion (2008: EUR 0.1 billion; 2007:
EUR 0.1 billion).
At
December 31, 2009, the total amount of trade receivables from related companies
was EUR 0.1 billion (December 31, 2008: EUR 0.1 billion). At the same
date, the total amount of trade payables due to related companies was
EUR 0.1 billion (December 31, 2008: EUR 0.0 billion).
Related
individuals.
No major
transaction took place.
NOTES
TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
38
Events after the reporting period.
Changes
in the composition of the Board of Management.
On
January 29, 2010, the Supervisory Board of Deutsche Telekom approved the
proposal by the Board of Management to reassign Hamid Akhavan's responsibilities
on a temporary basis. Board of Management members Guido Kerkhoff and Reinhard
Clemens will assume Hamid Akhavan’s responsibilities in an acting capacity.
Effective February 15, 2010, Guido Kerkhoff will assume temporary responsibility
for the Europe region (United Kingdom, Netherlands, Austria, Poland and Czech
Republic) and International Sales and Service. Reinhard Clemens will, also in an
acting capacity, assume Group-wide responsibility for the remaining COO units,
such as Products & Innovation, Technology, IT and Procurement effective the
same date.
On February 24, 2010 the Supervisory Board of Deutsche Telekom
approved the proposal by the Board of Management to extend Board Member Guido
Kerkhoff’s area of responsibility on a permanent basis. As of April 1, 2010, he
will assume additional responsibility for the mobile-centric companies in
Austria, the Czech Republic, the Netherlands, Poland and the United Kingdom, as
well as for International Sales and Service.
Regulation
of ULL, access to cable ducts, dark fiber.
The
Federal Administrative Court granted the appeal in part with its ruling dated
January 27, 2010 and lifted the regulatory order with legally binding effect
insofar as it concerned access to dark fiber. The reason for the ruling was that
Deutsche Telekom's initial investment in the roll-out of optical fiber had not
sufficiently been taken into account.