39 Contingencies
As part of its ordinary business activities, Deutsche Telekom is involved in various proceedings both in and out of court with government agencies, competitors, and other parties, the outcome of which often cannot be reliably anticipated. As of the reporting date, the Group was exposed to contingent liabilities amounting to EUR 0.1 billion (December 31, 2022: EUR 0.1 billion) and to contingent assets amounting to EUR 0.0 billion (December 31, 2022: EUR 0.0 billion) that can be reliably estimated, and, on the basis of the information and estimates available, do not fulfill the requirements for recognition as liabilities or assets in the statement of financial position. The aforementioned total contingent liabilities only include individual cases that do not have any significant impact on their own. In the event that, in extremely rare cases, Deutsche Telekom comes to the conclusion that the disclosures required by IAS 37 could seriously undermine the outcome of the relevant proceedings, these disclosures will not be made.
Contingent liabilities
On the basis of the information and estimates available, the following issues do not fulfill the requirements for recognition as liabilities in the statement of financial position. As it is not possible to estimate the amount of the contingent liabilities or the group of contingent liabilities with sufficient reliability in each case due to the uncertainties described below, they have not been included in the aforementioned total contingent liabilities.
Claims relating to charges for the shared use of cable ducts. In 2012, Kabel Deutschland Vertrieb und Service GmbH (today Vodafone Deutschland GmbH (VDG)) filed a claim against Telekom Deutschland GmbH to reduce the annual charge for the rights to use cable duct capacities. In similar proceedings, the then Unitymedia Hessen GmbH & Co. KG, Unitymedia NRW GmbH, and Kabel BW GmbH (today all Vodafone West) filed claims against Telekom Deutschland GmbH in January 2013, demanding that it cease charging the plaintiffs more than a specific and precisely stated amount for the shared use of cable ducts, including in the future. The claims were rejected by the Frankfurt/Main Higher Regional Court (VDG) and by the Düsseldorf Higher Regional Court (Vodafone West) and an appeal was not allowed in both cases. In response to the complaints of the plaintiffs against non-allowance of appeal, the Federal Court of Justice allowed the appeal by VDG to the extent that it relates to claims dating from January 1, 2012 onward; the appeal by Vodafone West was allowed to the extent that it relates to claims dating from January 1, 2016 onward. The claims were rejected with legally binding effect for the time periods prior to this. In a ruling on December 14, 2021, the Federal Court of Justice referred the proceedings concerning the remaining claims back to the responsible Higher Regional Courts for a new hearing and decision. VDG has since updated its claim, which it now puts at around EUR 826 million plus interest for the period from January 2012 to December 2022. The plaintiff Vodafone West has also updated its claim, which it now puts at around EUR 418 million plus interest for the period from January 2016 to June 2022. It is currently not possible to estimate the financial impact of both these proceedings with sufficient certainty.
Sprint Merger class action. On June 1, 2021, a shareholder class action and derivative action was filed in the Delaware Court of Chancery against Deutsche Telekom AG, SoftBank, T‑Mobile US, and all of our officers and directors at that time, asserting a breach of fiduciary duties relating to the purchase price amendment to the Merger Agreement, as well as SoftBank’s subsequent monetization of its T‑Mobile US shares. On October 29, 2021, the complaint was amended. The amended complaint is directed at the same defendants and the same underlying transactions as in the original action; however, it includes additional submission on alleged facts. It is currently not possible to estimate the resulting claim and financial risk of these proceedings with sufficient certainty.
Proceedings against T‑Mobile US in consequence of the cyberattack on T‑Mobile US in August 2021. In August 2021, T‑Mobile US confirmed that their systems had been subject to a criminal cyberattack that compromised data of millions of their customers, former customers, and prospective customers. With the assistance of outside cybersecurity experts, T‑Mobile US located and closed the unauthorized access to their systems and identified customers whose information was impacted and notified them, consistent with state and federal requirements. As a result of the cyberattack, numerous consumer class actions including mass arbitrations were filed against T‑Mobile US. The class actions brought before the federal courts were consolidated into one action in December 2021. The plaintiffs are claiming damages in an as yet unspecified amount. On July 22, 2022, T‑Mobile US entered into an agreement to settle the consumer class action in the Federal Court for USD 350 million. In addition, T‑Mobile US had committed to spending a total of USD 150 million in 2022 and 2023 on data security and related technologies. The settlement was approved by the court in June 2023. A member of the class action appealed against the final decision on approval and is objecting to the awarding of lawyers’ fees by the court to the lawyer for the class action. This is further delaying the closure of the proceedings. T‑Mobile US expects that the settlement of the consumer class action, together with further settlements already or still to be concluded with consumers, will satisfy essentially all claims asserted to date by current, former, and potential customers affected by the cyberattack in 2021. T‑Mobile US has recognized corresponding provisions for risks in the statement of financial position of around USD 0.3 billion (EUR 0.3 billion).
Furthermore, in November 2021, a derivative action was brought against the members of the Board of Directors of T‑Mobile US and against T‑Mobile US as nominal defendant. This action has since been withdrawn. In September 2022, a further purported shareholder filed a new derivative action against the members of the Board of Directors of T‑Mobile US and against T‑Mobile US as nominal defendant alleging claims for breach of fiduciary duties relating to the company’s cybersecurity practices. It is currently not possible to estimate the resultant financial risk with sufficient certainty.
In addition, inquiries have been made by various government agencies, law enforcement and other state authorities, with which T‑Mobile US is cooperating in full. It is currently not possible to estimate the resultant financial risk of these proceedings with sufficient certainty.
Proceedings against T‑Mobile US in consequence of the cyberattack on T‑Mobile US in January 2023. On January 5, 2023, T‑Mobile US identified that a bad actor was obtaining data through an application programming interface (API). Investigations by the company have found that the affected API was only able to provide a limited set of customer account data, including name, billing address, email address, telephone number, date of birth, T‑Mobile account number, and information such as the number of lines on the account and plan features. The results of the investigation indicate that, in total, around 37 million current postpaid and prepaid customer accounts were affected, although many of these accounts did not include the full data set. T‑Mobile US assumes that the attacker retrieved data via the affected API for the first time from or around November 25, 2022. In accordance with federal and state requirements, the company has notified those individuals whose data was affected. In connection with this cyberattack, consumer class actions were filed against T‑Mobile US and official inquiries were submitted to the company, to which it will respond and, as a result of which, it may incur substantial expenses. It is currently not possible to estimate the resultant financial risk with sufficient certainty.
Patents and licenses. Like many other large telecommunications and internet providers, Deutsche Telekom is exposed to a growing number of intellectual property rights disputes. There is a risk that Deutsche Telekom may have to pay license fees and/or compensation; Deutsche Telekom is also exposed to a risk of cease-and-desist orders, for example relating to the sale of a product or the use of a technology.
Anti-trust proceedings. Deutsche Telekom and its subsidiaries are subject to proceedings under anti-trust law in various jurisdictions, which may also lead to civil follow-on claims. Taken individually, none of the proceedings has a material impact. Deutsche Telekom believes the respective allegations and claims for damages are unfounded. The outcome of the proceedings cannot be foreseen at this point in time.
Claims for damages against Slovak Telekom following a European Commission decision to impose fines. The European Commission decided on October 15, 2014 that Slovak Telekom had abused its market power on the Slovak broadband market and as a result imposed fines on Slovak Telekom and Deutsche Telekom AG, which were paid in full in January 2015. After the General Court of the European Union partially overturned the European Commission’s decision in 2018 and reduced the fines by a total of EUR 13 million, the legal recourse following the ruling of the European Court of Justice on March 25, 2021 is exhausted. Following the decision of the European Commission, competitors filed damage actions against Slovak Telekom with the civil court in Bratislava. These claims seek compensation for alleged damages due to Slovak Telekom’s abuse of a dominant market position, as determined by the European Commission. Three claims totaling EUR 219 million plus interest are currently pending. It is currently not possible to estimate the financial impact with sufficient certainty.
Claims for damages against Deutsche Telekom AG, including due to insolvency of Phones4U. Phones4U was an independent British mobile retailer, which declared insolvency in 2014. The insolvency administrator is pursuing claims before the High Court of Justice in London against the mobile providers active on the UK market at that time and their parent companies on the grounds of alleged collusion in violation of anti-trust law and breach of contract. Deutsche Telekom AG, which at that time held 50 % of the mobile company EE Limited, has rejected the claims as unsubstantiated. The High Court of Justice in London heard testimony from several witnesses and experts in the period between mid-May and the end of July 2022 with a view to establishing the legal basis for a claim. On November 10, 2023, the High Court of Justice in London rejected all claims made by Phones4U against all defendants. In December 2023, Phones4U filed an application for leave to lodge an appeal with the High Court of Justice in London. The hearing took place on December 19, 2023. The High Court of Justice in London rejected the application by Phones4U for leave to lodge an appeal. Phones4U is pursuing the application further with the Court of Appeal. It is currently not possible to estimate the financial impact with sufficient certainty.
Antitrust class action complaint following the merger with Sprint. T‑Mobile US is defending against an antitrust class action complaint from June 17, 2022, in which the plaintiffs allege that the merger of T‑Mobile US and Sprint violated the antitrust laws and harmed competition in the U.S. retail cell service market. Plaintiffs seek injunctive relief and trebled monetary damages on behalf of a purported class of AT&T and Verizon customers who plaintiffs allege paid artificially inflated prices due to the Merger. It is currently not possible to estimate the financial impact with sufficient certainty.
Tax risks. In many countries, Deutsche Telekom is subject to the applicable tax regulations. Risks can arise from changes in local taxation laws or case law and different interpretations of existing provisions. As a result, they can affect Deutsche Telekom’s tax expense and benefits as well as tax receivables and liabilities.