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Notes on the management approach

Presentation of GD Towers. On July 13, 2022, Deutsche Telekom reached an agreement with DigitalBridge and Brookfield on the sale of a 51.0 % stake in GD Towers, comprising its tower assets in Germany and Austria, assigned to the Group Development operating segment. This transaction was consummated on February 1, 2023. As a result, the GD Towers business entity has been recognized in the consolidated financial statements as a discontinued operation since the third quarter of 2022. However, in the combined management report we continue to include the contributions by GD Towers in the results of operations according to the management approach.

For further information on the agreement with DigitalBridge and Brookfield on GD Towers, and the presentation of GD Towers according to the management approach, please refer to the sections “Group organization” and “Management of the Group.

Gross vs. net recognition of revenues – change in the principal/agent consideration. In light of the IFRS Interpretations Committee’s agenda decision published in May 2022 on transactions involving the commercial resale of software, Deutsche Telekom has implemented changes to its accounting practices with respect to the recognition of gross vs. net revenues, effective the start of the third quarter of 2022. For Deutsche Telekom, the question arises particularly in the case of branded digital products (e.g., streaming services, software licenses, cloud-based software as a service) provided by and purchased from third parties and sold to customers as part of Deutsche Telekom’s product portfolio. In considering the change in policy, Deutsche Telekom determines that it only acts as a principal and thus must recognize revenues on a gross basis if the customer does not enter into any contractual relationship with the third-party supplier, Deutsche Telekom bears primary responsibility for product acceptance and customer support, and is in a position to set the price for the customer. In contrast to its previous accounting practice, the application of the new policy results in a decline both in revenues and in goods and services purchased of EUR 1.3 billion in each case for 2022, and of EUR 1.0 billion in each case for 2021. The prior-year comparatives for revenue and order entry were adjusted with retrospective effect.

Reassignment of the security business. Effective July 1, 2022, Deutsche Telekom reassigned its subsidiary Deutsche Telekom Security and the security business in Germany, Austria, Switzerland, Hungary, and Slovakia from the Systems Solutions operating segment to the Germany operating segment in order to maintain a consistent focus on implementing our Group strategy pillar “Lead in business productivity.” Prior-year comparatives in both of the segments affected concerning the development of operations, customer development, headcount development, and order entry were adjusted retrospectively.