42 Capital management

The overriding aim of Deutsche Telekom’s capital management is to strike a balance between the contrasting expectations of the following stakeholders:

• Shareholders expect an appropriate, reliable return on their capital employed.
• Providers of debt capital expect an appropriate return and that Deutsche Telekom is able to repay its debts.
• Employees expect jobs that are secure, prospects for the future, and that any necessary staff restructuring will be done in a responsible manner.
• “Entrepreneurs within the enterprise” expect sufficient investment funding to be able to shape Deutsche Telekom’s future business and develop products, innovations, and services for the customer.
• Society expects Deutsche Telekom to do everything within its power to protect the environment, encourage fair and democratic co-existence, and shape the digital transformation in a responsible manner.

An important key performance indicator for the capital market communication with investors, analysts, and rating agencies is relative debt, i.e., net debt to adjusted EBITDA. This ratio stood at 2.78x at December 31, 2020 (December 31, 2019: 2.65x). Deutsche Telekom briefly exceeded the target corridor for relative debt of 2.25x to 2.75x on account of the business combination of T‑Mobile US and Sprint. As announced in 2018, rating agency Standard & Poor’s downgraded Deutsche Telekom AG’s rating from BBB+ to BBB with a stable outlook on completion of the business combination of T‑Mobile US and Sprint. We are therefore still a solid investment-grade company with access to the international capital markets. Adjusted EBITDA and net debt are non-GAAP figures not governed by International Financial Reporting Standards, and their definition and calculation may vary from one company to another. A further essential key performance indicator is the equity ratio, i.e., the ratio of shareholders’ equity to total assets as shown in the consolidated statement of financial position. The equity ratio was 27.4 % as of December 31, 2020 (December 31, 2019: 27.1 %). The target corridor remains unchanged between 25 % and 35 %. In addition, Deutsche Telekom maintains a liquidity reserve covering all maturities of the next 24 months.

For further information, please refer to the sections “Management of the Group” and “Development of business in the Group,” in the combined management report.