Risks and opportunities This section provides important additional information and explains recent changes in the risks and opportunities as described in the combined management report for the 2017 financial year (2017 Annual Report). Readers are also referred to the Disclaimer at the end of this report. Regulation Deregulation of retail products in Germany. Previously, the Federal Network Agency had notified the European Commission of its draft analysis of retail markets and its plans to abolish additional regulation of product bundles for retail customers. Telephone lines with no broadband component in the product bundle were to remain regulated for retail customers. On July 13, 2018, the Federal Network Agency withdrew the draft market analysis. Currently, it is not possible to make any specific statements as to the content of the final market analysis. The regulation of wholesale products will remain unaffected. Changes to regulatory policy and legislation – EU regulatory framework for telecommunications. On September 14, 2016, the European Commission published legislative proposals for a revision of the EU legal framework for telecommunications. These proposals were subsequently the subject of discussions between the European Parliament and the Council. In early June 2018, a political agreement was reached in the form of the European Electronic Communications Code. The aim is to reform central EU regulation of the telecommunications sector, primarily price and access regulation, spectrum policy, sector-specific rules on consumer protection, and the universal service regime. We expect the new rules to enter into force in December 2018. The Member States will then have 24 months to transpose the requirements into national law. Individual rules will enter into force at an earlier date – in particular those governing the regulation of retail customer rate plans for voice calls and text messages within the EU – and take effect as of May 15, 2019 as part of a directly applicable EU Regulation. The agreement provides for less regulation of “very high capacity networks” and more stable regulatory conditions over the long term in cases where competitors invest jointly, as is the case with open co-investment models. In addition to establishing co-ownership and co-financing, co-investment models also include long-term agreements on access-based network usage that comply with specific requirements designed to safeguard competition. Fiber-to-the-building/home (FTTB/FTTH) networks, in particular, could benefit from the new rules. At the same time, the new legal framework gives the regulatory authorities new powers to impose access obligations on all networks independent of whether a company has significant market power (symmetrical regulation). In terms of spectrum policy, the new EU regulatory framework aims to increase the level of harmonization in certain areas and thus improve legal certainty when awarding mobile spectrum, for example, by including a minimum license term of 15 years with an option to extend for a further five years. With respect to consumer protection, fully harmonized obligations are in place at European level – thus negating the need for additional national regulations – whereas obligations in individual areas are more stringent. In particular, since May 15, 2019, the charges for international voice calls and sending text messages within the EU have been limited to EUR 0.19/minute and EUR 0.09/SMS (net) for five years. Planned amendment to the German Telecommunications Act following a Federal Constitutional Court ruling. As the result of a proposed amendment to the Act (TKG), which was approved by the Cabinet of Germany on July 18, 2018, Deutsche Telekom may in future be able to claim the payment of higher rates in some cases also retroactively – at least from major competitors – in the event of a successful complaint against a Federal Network Agency rate ruling. Until now, this has only been possible under very restrictive circumstances. The change to the law became necessary following a Federal Constitutional Court ruling which judged the previous regulation to be unconstitutional. The draft is in the process of becoming law. The amended Act is expected to enter into force in late 2018/early 2019. Litigation Toll Collect arbitration proceedings. On May 16, 2018, Daimler Financial Services AG, Deutsche Telekom AG, and the Federal Republic of Germany reached an agreement to end the Toll Collect arbitration proceedings. The settlement was notarized in early July 2018 and confirmed by the arbitral tribunal, bringing the arbitration proceedings to an end. The agreed settlement amount of around EUR 3.2 billion includes services previously provided to the Federal Republic of Germany. Daimler Financial Services AG and Deutsche Telekom AG have both agreed to make final payments of EUR 550 million each. Claims relating to charges for the shared use of cable ducts. Regarding the legal proceedings brought by Unitymedia Hessen GmbH & Co. KG, Unitymedia NRW GmbH, and Kabel BW GmbH, an appeal filed by the plaintiffs was rejected by the Düsseldorf Higher Regional Court in its ruling of March 14, 2018. An appeal was not permitted. The plaintiffs filed a complaint against the non-allowance of appeal with the Federal Court of Justice. In the parallel proceedings brought by Vodafone Kabel Deutschland GmbH, its claim now stands at approximately EUR 624 million along with another around EUR 9 million for the alleged benefit from additional interest, plus interest in each case. Assessment of the aggregate risk position At the time of preparing this report, neither our risk management system nor our management could identify any material risks to the continued existence of Deutsche Telekom AG or a significant Group company as a going concern.
