47 Share-based payment

Share Matching Plan

Members of the Board of Management have a contractual obligation to invest one third of the Short-Term Incentive (STI) set by the Supervisory Board in shares of Deutsche Telekom AG. There is an option to voluntarily increase the investment volume to up to 50 % of the STI. Deutsche Telekom AG will transfer one additional share for every share acquired as part of this Board of Management member’s aforementioned personal investment (Share Matching Plan – SMP) on expiration of the four-year lock-up period starting from the date of purchase.

Specific executives are contractually obligated to invest between a minimum of 10 % and a maximum of 50 % of the gross payment amount of their short-term variable remuneration component, which is based on the achievement of targets set for each person for the financial year (STI), in Deutsche Telekom AG shares. Target achievement is generally determined based on the collective targets set for the respective organizational unit. Deutsche Telekom AG will award one additional share for every share acquired as part of this executive’s aforementioned personal investment (SMP). These shares will be allotted to the beneficiaries of this plan on expiration of the four-year lock-up period.

Other executives in specific management groups who were not contractually obligated to participate in the SMP are given the opportunity to participate on a voluntary basis. This offer is only made when the Group’s free cash flow target for the preceding year has been achieved. To participate, the executives invest between a minimum of 5 % or 10 % and a maximum of 50 % of the target amount (100 %) of the short-term variable remuneration component (STI) in shares of Deutsche Telekom AG. Deutsche Telekom AG will award one additional share for every two shares acquired as part of this executive’s aforementioned personal investment (SMP). The additional shares will be allotted to the beneficiaries of this plan on expiration of the four-year lock-up period.

The following chart illustrates the functioning of the previous SMP based on the example of the Board of Management tranches up to and including the 2024 tranche.

Functioning of the previous Share Matching Plan based on the example of Board of Management members ^a

With the introduction of the new Board of Management remuneration system in 2025, future tranches of the SMP were amended for Board of Management members such that the matching ratio depends on the development of the total shareholder return (TSR) at the end of the four-year lock-up period. Under the new system, Board of Management members receive between 0.8 and 1.5 additional shares for each share acquired as part of their personal investment, depending on the TSR development. If the TSR declines by 20 % or more, no additional shares are awarded. From the 2027 financial year, this design is to be rolled out to other executives below the Board of Management.

The individual SMPs are each recognized for the first time at fair value on the grant date. To determine the fair value, the expected dividend entitlements are deducted from Deutsche Telekom AG’s share price, as there are no dividend entitlements until the matching shares have been allocated. For the Board of Management tranches of the new remuneration system, from 2025, fair value will be determined using a Monte Carlo simulation, so as to reflect TSR development. In the 2025 financial year, a total of 0.5 million (2024: 0.8 million) matching shares were allocated to beneficiaries of the plan at a weighted average fair value of EUR 31.86 (2024: EUR 19.55). The cost is to be recognized against the capital reserves pro rata temporis until the end of the service period and amounted to EUR 12 million in total for all tranches as of December 31, 2025 (December 31, 2024: EUR 13 million). In the reporting year, shares with a total value of EUR 10 million (2024: EUR 12 million) were transferred to plan participants. The capital reserves recognized for the SMP as of December 31, 2025 amounted to EUR 32 million (December 31, 2024: EUR 30 million).

Long-Term Incentive Plan

Since 2021, Board of Management members also participate in the Group’s existing Long-Term Incentive Plan (LTI). The amount of the annual participation is contractually defined individually for each Board of Management member.

Certain executives from the Deutsche Telekom Group also participate in the LTI, provided the achievement of the collective targets (financial, strategic, and ESG targets) of the organizational unit to which the executive belongs is 100 % or higher, or they have an individual contractual commitment. For executives who are offered the option of voluntary participation in the SMP, investment in the SMP is a necessary condition for participation in the LTI. At the inception of the LTI plan, the participating executives receive an award of between 15 % and 43 % of their annual target salary depending on the management group to which they have been assigned.

The initial number of phantom shares is contingent on the participation contribution or the award amount divided by the share price in a reference period at the inception of the plan. Over the term of the four-year plan, the value of the phantom shares changes in line with Deutsche Telekom AG’s share price development. Under the old plan design, the number of phantom shares changed in line with the achievement of the targets for four equally weighted key performance indicators (ROCE, adjusted earnings per share, employee satisfaction, and customer satisfaction), to be determined at the end of each plan year. In addition, a dividend is granted for the phantom shares over the term of the plan. This dividend is reinvested in phantom shares, increasing the number of phantom shares held by each plan participant. At the end of the four-year plan term, the final number of phantom shares will be converted on the basis of a share price calculated in a reference period at the end of the plan and paid out in cash together with the dividend for the last year of the plan, which is not converted into phantom shares.

The following chart illustrates the functioning of the previous LTI based on the example of the Board of Management tranches.

Functioning of the previous Long-Term Incentive Plan based on the example of Board of Management members ^a

With the switch to the new 2025 Board of Management remuneration system, target achievement for the LTI for Board of Management members is determined using two equally weighted key performance indicators (ROCE and adjusted earnings per share) and an ESG multiplier (0.8–1.2), which is derived from the two equally weighted targets energy consumption and CO₂ emissions (Scope 1 and 2). Furthermore, the LTI is only paid out if the TSR has declined by less than 20 % over the four-year plan term. From the 2026 financial year, this design is to be rolled out to other executives below the Board of Management.

The phantom shares are recognized at fair value as of each measurement date. This generally corresponds to the Deutsche Telekom AG share price. For the Board of Management tranches, more complex measurement models are used. For previous Board of Management tranches, a Black-Scholes model was used so as to account for a potential cap on the amount paid out. For Board of Management tranches from 2025, a Monte Carlo simulation is used to take the TSR-related credit risk into account in the fair value. The fair value is multiplied by the proportionate number of vested phantom shares and discounted to the measurement date. Additional expenses since the previous quarter are added to the provision. In the 2025 financial year, a total of 2.39 million (2024: 3.30 million) phantom shares were granted at a weighted average fair value of EUR 29.42 (2024: EUR 21.65). A plan must be remeasured at every reporting date until the end of the service period and expensed pro rata temporis. The cost of the LTI plans amounted to EUR 86 million for all tranches in the reporting year (2024: EUR 192 million). In 2025, the provision was utilized in the amount of EUR 166 million (2024: EUR 110 million). In addition, the carrying amount increased by EUR 5 million as a result of discounting. The provision amounted to EUR 316 million as of December 31, 2025 (December 31, 2024: EUR 391 million).

For detailed information on Board of Management member remuneration, please refer to the Remuneration Report published separately by the Board of Management and the Supervisory Board.

“Shares2You” shares program for employees

Since the 2021 financial year, employees of Group companies in Germany, and since the 2022 financial year, also employees of some Group companies outside Germany have been given the option to voluntarily invest an amount of between EUR 50 and EUR 1,000 per year in shares in Deutsche Telekom. Each participating employee receives one additional free share in Deutsche Telekom AG for every two shares acquired by way of this personal investment (Shares2You). Participation is subject to a short minimum service period. The shares acquired by the participants, including the free shares, are subject to a four-year lock-up period and are blocked during this time, for example with regard to sale.

The cost for the free shares must be recognized against the capital reserves at the inception of the plan. A corresponding expense of EUR 21.4 million was recognized as of December 31, 2025 (December 31, 2024: EUR 19.6 million). In total, 2.2 million shares (2024: 2.1 million shares), of which 0.7 million free shares (2024: 0.7 million free shares), at a fair value of EUR 29.23 (2024: EUR 27.90 ) were transferred to plan participants in the 2025 financial year.

Stock-based compensation at T‑Mobile US

In June 2023, the shareholders of T‑Mobile US approved the 2023 Incentive Award Plan, which replaces the Omnibus Incentive Plan from 2013. Under T‑Mobile US’ 2023 Incentive Award Plan, up to 33 million T‑Mobile US shares are authorized for stock options, stock appreciation rights, restricted stock units (RSUs), and performance awards to employees, consultants, and non-employee directors. As of December 31, 2025, there were around 25 million T‑Mobile US shares available for future grants under this incentive plan.

T‑Mobile US grants RSUs to eligible employees and certain non-employee directors, and performance-based restricted stock units (PRSUs) to eligible key executives of the company. RSUs entitle the grantee to receive shares of T‑Mobile US’ common stock at the end of a vesting period of up to three years. PRSUs entitle the holder to receive shares of T‑Mobile’ US common stock at the end of a vesting period of up to three years if a specific performance goal is achieved. The number of shares ultimately received is dependent on the actual performance of T‑Mobile US measured against a defined performance target.

The RSU and PRSU plans resulted in the following share-related development:

The program is measured at fair value on the grant date and recognized as expense, net of expected forfeitures, following a graded vesting schedule over the related service period. The fair value of stock awards for the RSUs is based on the closing price of T‑Mobile US’ common stock on the date of grant. The fair value of stock awards for the PRSUs was determined using the Monte Carlo model. Stock-based compensation expense was EUR 926 million as of December 31, 2025 (December 31, 2024: EUR 701 million).