43 Related-party disclosures

Federal Republic of Germany and other related parties. The Federal Republic of Germany is both a direct and an indirect shareholder (via KfW Bankengruppe) and holds 31.9 percent (December 31, 2018: 31.9 percent) of the share capital of Deutsche Telekom AG. In previous years, this resulted in the Federal Republic of Germany representing a solid majority at the shareholders’ meetings of Deutsche Telekom AG due to its level of attendance, giving it control over Deutsche Telekom. Thanks to higher levels of attendance, the Federal Republic has not had a majority of the voting rights at the shareholders’ meetings of Deutsche Telekom AG since 2016. As such, it is no longer deemed to have control over Deutsche Telekom, but rather only a significant influence. Therefore, the Federal Republic and the companies controlled and jointly controlled by the Federal Republic, but not the companies over which the Federal Republic can exercise a significant influence are classified as related parties of Deutsche Telekom. In the course of business, Deutsche Telekom deals directly with these companies, and with authorities and other government agencies as an independent party. Deutsche Telekom participates in the spectrum auctions of the Federal Network Agency. The acquisition of mobile spectrum through licenses may result in build-out requirements.

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 Deutsche Bundespost Institution for Supplementary Retirement Pensions for Salaried Employees and Wage Earners (Versorgungsanstalt der Deutschen Bundespost), 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. Up to and including the 2012 reporting year, Deutsche Telekom AG maintained a joint pension fund, Bundes-Pensions-Service für Post und Telekommunikation e.V., Bonn (Federal Pension Service for Post and Telecommunications – BPS-PT), together with Deutsche Post AG and Deutsche Postbank AG for civil-servant pension plans. The German Act on the Reorganization of the Civil Service Pension Fund (Gesetz zur Neuordnung der Postbeamtenversorgungskasse – PVKNeuG) transferred the functions of BPS-PT relating to civil-servant pensions (organized within the Civil Service Pension Fund) to the existing Federal Agency effective January 1, 2013. The civil-servant pension functions are therefore performed by the Civil Service Pension Fund as an integral part of the Federal Agency. This joint Civil Service Pension Fund works for the funds of all three companies and also handles the financial administration of the pension plan for the Federal Republic on a trust basis. For the 2019 financial year, Deutsche Telekom made payments in the amount of EUR 146 million (2018: EUR 123 million; 2017: EUR 94 million). Furthermore, payments are made to the Civil Service Pension Fund in accordance with the provisions of the Act on the Reorganization of the Civil Service Pension Fund.

For further information, please refer to Note 15 “Provisions for pensions and other employee benefits.”

The Federal Republic and the companies controlled and jointly controlled by the Federal Republic, are customers or suppliers of Deutsche Telekom and as such have mutual contractual relationships with Deutsche Telekom.

In May 2019, Deutsche Telekom acquired four frequency blocks in the 2 GHz band and nine lots in the 3.6 GHz band worth a total of EUR 2.17 billion, which the Federal Network Agency auctioned off on behalf of the Federal Republic of Germany. With the auction now over, Telekom Deutschland has filed an application with the Federal Network Agency on using the spectrum to begin building out the 5G network across Germany. In place of a lump-sum payment, government representatives agreed to the payment of the purchase price in annual installments from 2019 through September 13, 2030. Payment by installment was granted on the condition that Deutsche Telekom assumes additional build-out obligations. Deutsche Telekom must build out an additional 333 sites. Build-out obligations were recognized as liabilities in the amount of the financing advantage of EUR 59 million.

Deutsche Telekom Trust e.V. On August 14, 2019, the 11.34 percent stake in Ströer SE & Co. KGaA, which was worth EUR 0.4 million at the time, was transferred to the Group’s own trust, Deutsche Telekom Trust e.V., where it will serve as plan assets to cover pension entitlements.

There are no material revenue, receivables, or liabilities from or to joint ventures.

Related individuals. In the reporting period, expenses for short-term benefits payable to members of the Board of Management and the Supervisory Board amounted to EUR 19.9 million (2018: EUR 17.7 million) and expenses for other long-term benefits amounted to EUR 4.4 million (2018: EUR 5.2 million). Service cost of EUR 2.4 million (2018: EUR 2.8 million) was recorded for Board of Management benefits. In addition, expenses for share-based payment for Board of Management members were incurred in the amount of EUR 2.0 million (2018: EUR 1.5 million). No termination benefits were expensed in 2019 or 2018.

As of December 31, 2019, Deutsche Telekom recognized provisions for Board of Management and Supervisory Board compensation from short-term benefits of EUR 11.4 million (2018: EUR 10.2 million) and from other long-term benefits of EUR 10.3 million (2018: EUR 11.3 million). Furthermore, the present value of the defined benefit obligation (DBO) from the Board of Management pension amounts to EUR 27.1 million (2018: EUR 23.9 million).

The compensation of the Board of Management and the Supervisory Board totaled EUR 29.0 million in the reporting year (2018: EUR 30.4 million).

For further information, please refer to the “Compensation report” in the combined management report and Note 44 “Compensation of the Board of Management and the Supervisory Board.”

Employees elected to the Supervisory Board of Deutsche Telekom AG continue to be entitled to a regular salary as part of their employment contract. The amount of the salary is the adequate compensation for their job or activity within the Company. Besides this, no major transactions took place with related individuals.

The members of the Board of Management and Supervisory Board of Deutsche Telekom AG are members of supervisory boards or management boards of other companies or are shareholders of other companies with which Deutsche Telekom AG maintains relations in the ordinary course of business. All related party transactions are performed on an arm’s length basis.