Group organization, strategy, and management

With regard to our Group organization, strategy, and management, please refer to the explanations in the combined management report in the 2020 Annual Report. The following changes and/or additions were recorded from the Group’s point of view:

Combination of the cell tower business in the Netherlands and set up of an infrastructure fund. On January 21, 2021, Deutsche Telekom, Cellnex Telecom (Cellnex), the newly established independently managed investment company Digital Infrastructure Vehicle II (DIV), and others signed an agreement to merge Deutsche Telekom’s and Cellnex’s respective Dutch subsidiaries for passive mobile infrastructure into Cellnex Netherlands (Cellnex NL). Following approval of the deal by the national competition authority, the Dutch cell tower company T‑Mobile Infra was sold to DIV effective June 1, 2021 and subsequently contributed into Cellnex NL. Deutsche Telekom received a cash inflow of EUR 0.4 billion. The gain on disposal of EUR 0.3 billion breaks down as follows: EUR 0.2 billion is included in other operating income as of June 30, 2021 and EUR 0.1 billion will be recognized pro rata in subsequent periods through the sale-and-leaseback transactions described below. Immediately prior to the sale, T‑Mobile Infra also paid Deutsche Telekom AG a dividend of EUR 0.3 billion. As of June 30, 2021, Deutsche Telekom indirectly held a 37.65 % stake in the “new” Cellnex NL through the investment in DIV and includes the investment with a carrying amount of EUR 0.4 billion in the consolidated financial statements using the equity method. T‑Mobile Netherlands will continue to have full access to the contributed passive mobile infrastructure by means of a long-term agreement at normal market conditions, primarily on the lease of the corresponding infrastructure. The lease component included in the agreement fulfills the conditions of a sale-and-leaseback transaction. Right-of-use assets in the amount of EUR 0.3 billion and lease liabilities in the amount of EUR 0.4 billion were recognized in this context as of June 1, 2021.

Reassignment of the Internet of Things (IoT) growth area. Effective January 1, 2021, Deutsche Telekom reassigned the responsibility for business and profit and loss for Deutsche Telekom IoT GmbH from the Systems Solutions operating segment to the B2B unit in the Germany operating segment. The Group subsidiary is responsible for the IoT business of Deutsche Telekom. This reassignment puts us in a position to serve the IoT market more quickly and thus to strengthen Deutsche Telekom’s position on this growth market. Prior-year comparatives in both of the segments affected (development of operations, customer development, headcount development, and order entry) were adjusted retrospectively.

Reassignment of the Austrian cell tower business. As of January 1, 2021, Deutsche Telekom reassigned its Austrian cell tower business from the Europe operating segment to GD Towers in the Group Development operating segment to enhance efficiency in the management of the cell tower business. In addition, GD Towers will increase its efforts to expand third-party business, increase profitability, and develop growth areas. Prior-year comparatives in both of the segments affected have not been adjusted.

Reorganization of DT IT. As of January 1, 2021, Deutsche Telekom IT (DT IT) Russia, DT IT Slovakia, and DT IT Hungary were reassigned from the Germany operating segment to the Group Headquarters & Group Services segment. Prior-year comparatives in both of the segments affected have not been adjusted.

Act responsibly. We fulfill our responsibility to society by systematically aligning our core business processes with the principle of sustainability. We have expanded our existing climate strategy to include a new Group program: Our aim with #GreenMagenta is to make a meaningful contribution toward protecting the climate and conserving resources. Carbon neutrality for our own emissions, often referred to as net zero, is to be achieved by 2025 at the latest. The emissions involved from the production stage to operation by the customer are also to be reduced to net zero by 2040 – ten years earlier than originally planned.

Capital Markets Day 2021. In May 2021, we presented our medium-term strategy and the financial outlook at our Capital Markets Day. The dividend will continue to track the development in adjusted earnings per share. This figure is set to rise from the 2020 level of EUR 1.20 to more than EUR 1.75 by 2024. Subject to approval by the relevant bodies, 40 to 60 % of adjusted earnings per share is to be paid out. The dividend floor introduced in November 2019 of EUR 0.60 per share still applies. Over the coming years we are also set to buy shares in T‑Mobile US and thus secure ourselves the majority shareholding (> 50 %) in our U.S. subsidiary in the medium term. An effect of this will be to delay hitting our target range for relative debt of 2.25x to 2.75x by one year, to 2024.

Rating outlook raised. In June 2021 the rating agency Moody’s upgraded the rating outlook for Deutsche Telekom AG from Baa1/negative to Baa1/stable.