Annual Report 2013

Highlights in the 2013 financial year.

Developments at senior management level.

On May 15, 2013, the Supervisory Board appointed Timotheus Höttges as René Obermann’s successor as Chairman of our Group’s Board of Management effective January 1, 2014. The decision was also made to appoint Thomas Dannenfeldt as Chief Financial Officer. He succeeded Timotheus Höttges effective January 1, 2014. The Supervisory Board also extended the contract of Niek Jan van Damme as member of the Board of Management for Germany for another five years.

Employees.

Right to return for part-time employees. Since January 2014, we have been one of the first German companies to grant employees who sign a new part-time contract the right to end their part-time employment early and return to their original weekly working hours.

For a more information, please refer to the section “hr-strategy/index.php">Employees”.

Early retirement program for civil servants extended. Our Board of Management resolved to extend the early retirement program for civil servants to 2013. This incurred expenses of EUR 0.5 billion in 2013.

Severance and early-retirement program for Telekom Deutschland. In the first half of 2013, Telekom Deutschland introduced a special severance and early retirement program for staff working in steering and centralized functions. This program made it possible to restructure the workforce in a responsible and socially considerate manner, with the aim of making a substantial contribution to implementing our integrated network strategy by systematically lowering our personnel costs in non-operational units.

For a more information, please refer to the section “hr-strategy/index.php">Employees”.

OTE severance program. In November 2013, OTE finalized a new socially considerate severance program that was launched in the fourth quarter of 2013. Participation in the program, which was mainly directed at employees approaching retirement age, is voluntary. The successful completion of the exit scheme allows OTE to proceed with its transformation plans, to enhance its competitiveness, to significantly reduce its operational expenses, and, at the same time, to create new employment possibilities for young people. Around 1,800 employees accepted the program. OTE estimates the annual cost savings from staff restructuring to be around EUR 94 million. It should be noted that the voluntary exit scheme entails no burden for Greek state pension funds, as OTE bears the entire cost.

Transactions at T-Mobile US.

Business combination of T-Mobile USA and MetroPCS. The business combination of T-Mobile USA and MetroPCS was closed on May 1, 2013. At the shareholders’ meeting on April 24, 2013, the shareholders of MetroPCS approved the business combination, after we had submitted an improved offer on April 10, 2013. The core elements of this offer were a reduction in the shareholder loan from Deutsche Telekom to T-Mobile USA by USD 3.8 billion in total, a lowering of the interest rates for the remaining shareholder loans by 0.5 percentage points, and the extension of the lock-up period for shares in the combined company to 18 months from the closing of the transaction for selling shares on the stock exchange. The responsible U.S. authorities approved the business combination in the first quarter of 2013.

Upon closing of the transaction, we received a 74.29 percent stake (as of May 1, 2013) in the new company. The remaining stake of 25.71 percent is held by the previous shareholders of MetroPCS, who also received a one-time cash payment in the form of a special dividend of USD 1.5 billion. Since May 1, 2013, we have recognized the company in our consolidated financial statements as a fully-consolidated company. It operates under the name T-Mobile US, Inc. and has been traded on the New York Stock Exchange (NYSE) since May 1, 2013. The combined company’s improved position in terms of mobile spectrum and the expanded customer base mean that we are able to compete more aggressively with the other national mobile carriers in the United States.

For a more information on this transaction, please refer to the section “Changes in the composition of the Group and transactions with owners” in the notes to the consolidated financial statements.

Since the business combination, T-Mobile US has achieved significant integration milestones incorporating the MetroPCS business. T-Mobile US has launched HSPA+/LTE devices in multiple historical MetroPCS markets and combined 4G LTE spectrum in Las Vegas. In addition, T-Mobile US has extended the geographic presence of the MetroPCS distribution to 30 additional markets and launched more than 1,700 distribution points in these new markets by year-end.

Sale of T-Mobile US bonds. On October 16, 2013, we sold T-Mobile US bonds worth USD 5.6 billion from our portfolio. This related to five bonds with interest rates of between 6.464 and 6.836 percent and maturities ranging from 2019 to 2023. We are using the funds released by the sale for general corporate financing. The transaction did not increase our net debt. With the completion of the transaction, we still hold T-Mobile US bonds worth USD 5.6 billion.