Development of the economic environment and impact on financial reports

The macroeconomic challenges currently facing society, politics, and business are multi-faceted and often interdependent, such as the sharp rise in energy prices, the energy supply shortage, the coronavirus pandemic, the ongoing high rate of inflation, rising interest rate levels, the devaluation of the euro, geopolitical tensions, and the war in Ukraine. This gives rise to substantial uncertainty in terms of global economic development. Deutsche Telekom is aware that, in view of the current developments, it is only possible to extrapolate past experience to the future to a limited extent. Deutsche Telekom is constantly reassessing the challenges and takes them into account in its consolidated financial statements and financial reporting, e.g., when determining the impairment of goodwill, the recognition of deferred taxes, and the measurement of provisions and financial instruments.

Deutsche Telekom’s business activities and hence its results of operations and financial position are not significantly impacted yet by the consequences of the war in Ukraine. Deutsche Telekom does not operate any networks in Russia or Ukraine. Neither does a stop on gas deliveries from Russia directly impact on the Group’s network operations. Deutsche Telekom is discontinuing its developer activities in Russia. Possible future effects on the measurement of individual assets and liabilities are being analyzed on an ongoing basis. It is not possible to assess with certainty how Deutsche Telekom will be indirectly affected, in particular by the impact on the global economy.

The coronavirus pandemic continues to have implications for the global economy and for society. Due to higher demand for certain telecommunications services, the impact of the crisis is being felt less severely by the telecommunications industry and Deutsche Telekom than by other industries. Business activities and thus the results of operations and financial position of Deutsche Telekom were impacted by the coronavirus pandemic in various business areas, affecting revenue and earnings, although not to any significant extent. Although the pandemic has only had a limited negative impact on the telecommunications sector so far, if the global pandemic were to re-escalate, it could lead to prolonged and increased supply-side shortages. Possible future effects on the measurement of individual assets and liabilities are being analyzed on an ongoing basis. Based on experience so far, the coronavirus pandemic is expected to continue to have only a limited impact on Deutsche Telekom’s business going forward.

Changes in the underlying parameters primarily relate to the exchange rates used for currency translation and to the interest rates for determining defined benefit obligations.

The euro exchange rates of certain significant currencies changed as follows:

The following key discount rates were used when calculating the present value of defined benefit obligations: