DEUTSCHE TELEKOM THE 2019 FINANCIAL YEAR = p q 2 SELECTED FINANCIAL DATA OF THE GROUP billions of € Change compared to prior year % 2019 2018 2017 2016 2015 2014 2013 2012 REVENUE AND EARNINGS Net revenue 6.4 80.5 75.7 74.9 73.1 69.2 62.7 60.1 58.2 Of which: domestic % 30.5 32.2 32.8 33.7 36.2 39.9 42.2 44.3 Of which: international % 69.5 67.8 67.2 66.3 63.8 60.1 57.8 55.7 Profit (loss) from operations (EBIT) 18.2 9.5 8.0 9.4 9.2 7.0 7.2 4.9 (4.0) Net profit (loss) 78.5 3.9 2.2 3.5 2.7 3.3 2.9 0.9 (5.4) Net profit (loss) (adjusted for special factors) 8.9 4.9 4.5 6.0 4.1 4.1 2.4 2.8 2.5 EBITDA 24.2 27.1 21.8 24.0 22.5 18.4 17.8 15.8 18.0 EBITDA AL 7.3 23.1 21.6 n.a. n.a. n.a. n.a. n.a. n.a. EBITDA (adjusted for special factors) 23.0 28.7 23.3 22.2 21.4 19.9 17.6 17.4 18.0 EBITDA AL (adjusted for special factors) 7.2 24.7 23.1 n.a. n.a. n.a. n.a. n.a. n.a. EBITDA AL margin (adjusted for special factors) % 30.7 30.5 n.a. n.a. n.a. n.a. n.a. n.a. PROFITABILITY ROCE % 5.1 4.7 5.8 5.7 4.8 5.5 3.8 (2.4) STATEMENT OF FINANCIAL POSITION Total assets 17.4 170.7 145.4 141.3 148.5 143.9 129.4 118.1 107.9 Shareholders’ equity 6.4 46.2 43.4 42.5 38.8 38.2 34.1 32.1 30.5 Equity ratio % 27.1 29.9 30.0 26.2 26.5 26.3 27.1 28.3 Net debt 37.2 76.0 55.4 50.8 50.0 47.6 42.5 39.1 36.9 Relative debt (Net debt/EBITDA (adjusted for special factors)) 2.65 2.4 2.3 2.3 2.4 2.4 2.2 2.1 CASH FLOWS Net cash from operating activities 28.6 23.1 17.9 17.2 15.5 15.0 13.4 13.0 13.6 Cash capex 14.9 (14.4) (12.5) (19.5) (13.6) (14.6) (11.8) (11.1) (8.4) Cash capex (before spectrum investment) 7.3 (13.1) (12.2) (12.1) (11.0) (10.8) (9.5) (8.9) (8.0) Free cash flow (before dividend payments and spectrum investment)a 62.4 10.1 6.2 5.5 4.9 4.5 4.1 4.6 6.2 Free cash flow AL (before dividend payments and spectrum investment)a 15.9 7.0 6.1 n.a. n.a. n.a. n.a. n.a. n.a. Net cash used in investing activities (0.5) (14.2) (14.3) (16.8) (13.6) (15.0) (10.8) (9.9) (6.7) Net cash (used in) from financing activities 119.1 (7.1) (3.3) (4.6) (1.3) (0.9) (3.4) 1.0 (6.6) EMPLOYEES Average number of employees (full-time equivalents, without trainees) thousands (1.6) 213 216 216 221 226 228 230 232 Revenue per employee thousands of € 8.2 378.4 349.7 346.2 331.4 305.9 274.5 261.8 250.4 T-SHARE – KEY FIGURES Earnings per share (basic and diluted) € 78.3 0.82 0.46 0.74 0.58 0.71 0.65 0.21 (1.24) Adjusted earnings per share (basic and diluted) € 8.3 1.04 0.96 1.28 0.89 0.90 0.54 0.63 0.59 Dividend per shareb € (14.3) 0.60 0.70 0.65 0.60 0.55 0.50 0.50 0.70 Total dividendc billions of € (14.3) 2.8 3.3 3.1 2.8 2.5 2.3 2.2 3.0 Total number of ordinary shares at the reporting dated millions 0.0 4,761 4,761 4,761 4,677 4,607 4,536 4,451 4,321 a And before AT&T transaction and compensation payments for MetroPCS employees. b Subject to approval by the relevant bodies and the fulfillment of to her legal requirements. c Subject to approval by the 2020 shareholders’ meeting concerning the dividend payments for the 2019 financial ey ar. For further information, please refer to Note 34 “Dividend per share” in the notes to the consolidated financial ts atements. d Including treasury shares held by Deutsche Telekom AG . millions Change compared to prior year % 2019 2018 2017 2016 2015 2014 2013 2012 FIXED-NETWORK AND MOBILE CUSTOMERS Mobile customers 3.1 184.0 178.4 168.4 165.0 156.4 150.5 142.5 127.8 Fixed-network lines (1.3) 27.5 27.9 27.9 28.5 29.0 29.8 30.8 32.1 Broadband customersa 4.0 21.0 20.2 18.9 18.4 17.8 17.4 17.1 16.9 a Excluding wholesale. The figures shown in this report were rounded in accordance with standard business rounding principles. As a result, the total indicated may not be equal to the precise sum of the individual figures. Changes were calculated on the basis of millions for greater precision. The IFRS 16 “Leases” accounting standard has been applied since January 1, 2019. This led to a change in the definition of some of our financial performance indicators. Prior-year figures have not been adjusted; however, for the redefined ek y performance indicators we show comparatives for 2018 calculated on a pro forma basis. The key parameters used by Deutsche Telekom are defined in het section “Management of the Group” in the combined management report. For further information on the IFRS 16 accounting standard, please refer to the section “Initial application of standards, interpretations, and amendments in the financial ey ar” in the notes to the consolidated financial ts atements. Deutsche Telekom. The 2019 financial ey ar. CONTENTS TO OUR SHAREHOLDERS 4 Letter from the Chairman of the Board of Management 6 Supervisory Board’s report to the 2020 shareholders’ meeting 14 Corporate Governance Report 2019 20 The T-Share 22 Highlights in the 2019 financial year SUSTAINABLE DEVELOPMENT GOALS COMBINED MANAGEMENT REPORT 30 Deutsche Telekom at a glance 32 Group organization 35 Group strategy 40 Management of the Group 44 The economic environment 50 Development of business in the Group 64 Development of business in the operating segments 76 Development of business at Deutsche Telekom AG 80 Corporate responsibility and non-financial ts atement 94 Innovation and product development 99 Employees 104 Forecast 114 Risk and opportunity management 131 Other disclosures CONSOLIDATED FINANCIAL STATEMENTS 147 Consolidated statement of financial position 148 Consolidated income statement 149 Consolidated statement of comprehensive income 150 Consolidated statement of changes in equity 152 Consolidated statement of cash flows 153 Notes to the consolidated financial ts atements RESPONSIBILITY STATEMENT INDEPENDENT AUDITOR’S REPORT BOARDS, SEATS, AND FURTHER INFORMATION 281 Members of the Supervisory Board of Deutsche Telekom AG in 2019 284 Members of the Board of Management of Deutsche Telekom AG in 2019 286 Glossary 289 Disclaimer 290 Financial calendar Deutsche Telekom. The 2019 financial ey ar. = p q To our shareholders 4 TO OUR SHAREHOLDERS LETTER FROM THE CHAIRMAN OF THE BOARD OF MANAGEMENT DEAR SHAREHOLDERS, DEAR FRIENDS OF THE COMPANY, 2019 was a successful year for Deutsche Telekom. Net revenue grew once again. In the United States. In Europe. Our results in Germany were up too.We surpassed our annual targets for adjusted EBITDA AL and free cash flow AL in 2019. The three most important financial performance indicators are ahead of our medium-term guidance for 2017 through 2021. The figures now presented demonstrate very clearly that Deutsche Telekom is on a profitable growth course. We have achieved this despite pouring a record EUR 13.1 billion primarily into building out and upgrading our digital networks worldwide.This is on top of the EUR 2.17 billion we spent in connection with the spectrum auction in Germany.The auction went on for too long and cost us a great deal of money that we would have preferred to invest in the network build-out to benefit our customers. Other countries seem to have a much better handle on the process. The market environment in the European telecommunications sector is far from straightforward.Yet, despite the heavy regulation and inconsistent competitive situation, we emerged from the year just ended even stronger.Not only that, but we are once again the leading European telco, based on both revenue and market value. That was and remains our overarching goal. Let’s take a look at what we achieved in 2019. Overall, net revenue came in at EUR 80.5 billion. That is an increase of 6.4 percent. In organic terms – in other words, assuming constant exchange rates and the same Group structure – revenue grew by 2.8 percent.Adjusted EBITDA AL increased by 7.2 percent to EUR 24.7 billion compared with the prior year.This puts us well ahead of our guidance, which we had already raised in the course of the year to EUR 24.1 billion. Here, too, in organic terms, we surpassed our medium-term forecast.Free cash flow AL tells the same story, up 15.9 percent from EUR 6.1 billion to EUR 7.0 billion and also exceeding our expectations.