Financial Statement 2008

Jahresabschluss und Lagebericht Deutsche Telekom AG Lagebericht 1 1 Deutsche Telekom AG Annual financial statements and management report as of December 31, 2008 Contents. Management report of Deutsche Telekom AG 6 Organizational structure and business activities 10 The economic environment 13 Development of business 17 Corporate responsibility 18 Research and development 21 Employees 24 Risk and opportunity management 32 Supplemental report 32 Other disclosures 33 Outlook Annual financial statements of Deutsche Telekom AG 36 Statement of income 37 Balance sheet 38 Notes to the financial statements 38 Summary of accounting policies 42 Notes to the statement of income 49 Notes to the balance sheet 67 Other disclosures 86 Responsibility statement 87 Auditors’ report Further Information 90 List of abbreviations 92 Contacts 93 Disclaimer Deutsche Telekom AG's single-entity financial statements and management report for the 2008 financial year are published in the electronic Federal Gazette (Bundesanzeiger) and can also be accessed on the website of the register of companies. 4 4 5 Management report of Deutsche Telekom AG 6 Organizational structure and business activities 10 The economic environment 13 Development of business 17 Corporate responsibility 18 Research and development 21 Employees 24 Risk and opportunity management 32 Supplemental report 32 Other disclosures 33 Outlook 6 Management report of Deutsche Telekom AG. Organizational structure and Management, with the consent of the Supervisory Board, to increase the capital stock by up to EUR 38,400,000 by issuing up to 15,000,000 registered no par business activities. value shares for cash and/or non-cash contributions in the period up to May 2, 2011. The new shares may only be issued to grant shares to employees of Deut- Legal and organizational structure. sche Telekom AG and lower-tier companies (2006 authorized capital). Deutsche Telekom AG, Bonn, (hereinafter also referred to as Deutsche Telekom The capital stock has been contingently increased by up to EUR 31,813,089.28 or Company) is the parent of the Deutsche Telekom Group. The annual financial as of December 31, 2008, composed of up to 12,426,988 new no par value re- statements are prepared in accordance with the German Commercial Code gistered shares. The contingent capital increase is exclusively for the purpose (Handelsgesetzbuch – HGB) and the German Stock Corporation Act (Aktien- of meeting preemptive rights to shares from stock options granted in the period gesetz – AktG) and the German version is published1 in the electronic Federal until December 31, 2003 on the basis of the authorization for a 2001 Stock Op- Gazette (elektronischer Bundesanzeiger). tion Plan granted by resolution of the shareholders' meeting on May 29, 2001 (contingent capital II). The capital stock has been contingently increased by The shares of Deutsche Telekom are traded on several stock exchanges, in- EUR 600,000,000 as of December 31, 2008, composed of up to 234,375,000 cluding Frankfurt, New York, and Tokyo. As of December 31, 2008, 68.3 per- no par value shares. The contingent capital increase shall only be implemented cent of the shares were in free float (December 31, 2007: 68.3 percent), to the extent that it is needed to service convertible bonds or bonds with war- 14.8 per cent were held by the Federal Republic of Germany (December 31, rants issued or guaranteed on or before April 25, 2010 (contingent capital IV). 2007: 14.8 percent), and 16.9 percent were held by KfW Bankengruppe (De- cember 31, 2007: 16.9 percent). Accordingly, the shareholding attributable to The shareholders’ meeting on May 15, 2008 authorized the Board of Man- the Federal Republic amounted to 31.7 percent (December 31, 2007: 31.7 per- agement to purchase up to 436,131,999 no par value shares in the Company cent). The share held by the Blackstone Group remained unchanged at 4.4 per- by November 14, 2009, with the amount of capital stock accounted for by cent at December 31, 2008. 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 the other As of December 31, 2008, the capital stock of Deutsche Telekom AG totaled shares of the Company which the Company has already purchased and still EUR 11,164,979,182.08 and was composed of 4,361,319,993 no par value possesses or are to be assigned to it under § 71d and § 71e AktG do not at registered ordinary shares. Each share entitles the holder to one vote. The vot- any time account for more than 10 percent of the Company’s capital stock. ing rights are nevertheless restricted in relation to the treasury shares (around 2 million as of December 31, 2008) and the trust shares (around 19 million as This authorization may be exercised in full or in part. The purchase can be of December 31, 2008). The trust shares are connected with the acquisitions carried out in partial tranches spread over various purchase dates within the of VoiceStream and Powertel in 2001. As part of these acquisitions, Deutsche authorization period until the maximum purchase volume is reached. Depend- Telekom issued new shares from authorized capital to trustees for the benefit of ent Group companies of Deutsche Telekom AG within the meaning of § 17 holders of warrants, options, and conversion rights, among others. As regards AktG or third parties acting for the account of Deutsche Telekom AG or for the the shares issued to trusts, the trustees in question waived voting rights and account of dependent Group companies of Deutsche Telekom AG pursuant subscription rights and, in general, dividend rights for the duration of the trusts’ to § 17 AktG are also entitled to purchase the shares. The purchase may take existence. The shares issued to the trusts can be sold on the stock exchange place without prejudice to the principle of equal treatment through the stock on the instruction of Deutsche Telekom if the beneficiaries do not exercise their exchange or a public purchase offer addressed to all shareholders. By resolu- options or conversion rights or if these expire. The proceeds from the sale ac- tion of the shareholders’ meeting of May 15, 2008, the Board of Management is crue to Deutsche Telekom. authorized to redeem Deutsche Telekom AG's shares purchased on the basis of the aforementioned authorization, without such redemption or its implementa- The Articles of Incorporation2 authorize the Board of Management to in- tion requiring a further resolution of the shareholders’ meeting. crease the capital stock with the approval of the Supervisory Board by up to EUR 2,399,410,734.08 by issuing up to 937,269,818 registered no par value shares for non-cash contributions in the period ending on May 17, 2009 (2004 authorized capital). The Articles of Incorporation also authorize the Board of 1 The financial statements are available upon request from Deutsche Telekom AG, Investor Relations, Postfach 2000, D-53105 Bonn, Germany, fax +49 (0) 228 181 88899. 2 www.telekom.com/articles-of-incorporation Management report Organizational structure and business activities 6 7 The main agreements entered into by Deutsche Telekom AG, which include Management and supervision. a clause in the event of a takeover of Deutsche Telekom AG (change of control), principally relate to bilateral credit lines and several loan agreements. The management and supervisory structures, as well as the compensation In the event of a takeover, the individual lenders have the right to terminate the system for the Board of Management and the Supervisory Board, are aligned credit line and, if necessary, serve notice or demand repayment of the loans. toward the long-term performance of the Group and follow the recommenda- A takeover is assumed when a third party, which can also be a group acting tions of the German Corporate Governance Code. jointly, acquires control over Deutsche Telekom AG. In the 2008 reporting year, Deutsche Telekom strengthened data privacy In addition, the other members of the Toll Collect consortium (Daimler Financial by setting up a new Board department. The Supervisory Board of Deutsche Services AG and Cofiroute S.A.) have a call option in the event that the owner- Telekom AG approved the Board of Management's proposal of setting up ship structure of Deutsche Telekom AG changes such that over 50 percent of a seventh Board department and appointed Dr. Manfred Balz to chair the its capital stock or voting rights are held by a new shareholder, and this change new Data Privacy, Legal Affairs and Compliance department effective Octo- was not approved by the other members of the consortium. § 22 (1) of the Se- ber 22, 2008. curities Trading Act (Wertpapierhandelsgesetz – WphG) similarly applies to the allocation of voting rights. Dr. Karl-Gerhard Eick will resign as Member of the Deutsche Telekom Board of Management responsible for Finance with effect from midnight on February 28, In 2008, Deutsche Telekom acquired 25 percent plus one share in the Greek 2009. The Supervisory Board agreed to Dr. Eick's request to resign on that date company Hellenic Telecommunications Organization S.A. (OTE). In May 2008, at its meeting on December 2, 2008. the Greek government and Deutsche Telekom signed a shareholders’ agree- ment regarding an investment in the telecommunications company. Together, Board of Management responsibilities are distributed across seven Board the two shareholders hold a majority of 50 percent plus two votes in OTE, with departments. In addition to the four Board departments with central functions – Deutsche Telekom being granted the possibility of controlling OTE’s financial the department assigned to the chairman of the Board of Management, the and operating policies once all necessary steps of the transaction have been Finance department, the Human Resources department, and the Data Privacy, completed.

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