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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 of the 2021 Annual Report. Readers are also referred to the DisclaimerDisclaimer at the end of this report.

Risk and opportunity management system

Risk analysis. For the aggregate disclosure of an overall risk position, Group Risk Governance performs an “EBITDA AL at risk” calculation for Deutsche Telekom. This states that, with a particular probability of occurrence, the risk extent ascertained using the simulation will not be exceeded. In a change to the 2021 combined management report, the methodology has been extended to add “Cash flow at risk,” a new calculation that aggregates the risks affecting cash flow. The risk aggregations are carried out using a Monte Carlo simulation, in which a large number of risk-related potential future scenarios are considered. The overall risk positions are set in relation to the assets for covering possible losses.

Corporate risks

Macroeconomic environment. Uncertainty over the global economic outlook remains high. The war in Ukraine has had a significant negative impact on the economic outlook. One repercussion is the sharp rise in energy prices, which in turn are driving up energy, transportation, and manufacturing costs. The general scarcity of energy sources could push up global energy prices further and lead to supply shortages, especially for our Germany and Europe operating segments. The coronavirus pandemic also continues to have implications for the global economy and for society. Although the pandemic has only had a limited negative impact on the telecommunications sector so far, if the pandemic were to re-escalate, it could lead to prolonged and increased supply-side shortages. In this context, China’s central role for global supply and value chains, combined with the zero-tolerance strategy adopted there, poses a particular risk. It is highly likely that the combination of rising prices and prolonged supply bottlenecks will cause a decline in economic output in the latter part of 2022/early part of 2023 while inflation remains high. Moreover, inflation could accelerate if the weak euro against the U.S. dollar sparks further increases in the prices for energy and raw materials. A migration to lower-cost rate plans among customers, as well as larger numbers of customers defaulting on payments, could ensue. Similar developments could also arise in the United States, where pandemic-related government aid programs have come to an end. Interest rate hikes in the United States and Europe and the likelihood of yet further increases could drive down overall investment activity and consumption. Additional risks could potentially result from other geopolitical conflicts and the uncertainty from international trade conflicts. We therefore expect the macroeconomic situation in Germany, the United States, and Europe to deteriorate and are raising the risk significance from low to medium.

Market environment, United States. Following a number of improvements to T‑Mobile US’ market environment over the course of the year, we have reduced the risk significance from very high to high. This is partly due to the successful acquisition of 2.5 GHz spectrum at the FCC Auction 108. T‑Mobile US closed out the bidding phase with a strong portfolio of spectrum for the coming years. Furthermore, high-speed internet not only allows our U.S. subsidiary to offer its own access product, but also provides a solid basis on which to continue the extremely successful business with bundled offerings. T‑Mobile US has also signed a new wholesale agreement with DISH that will generate additional revenues.

Strategic implementation and integration. We have reduced the risk significance of the risk category “Strategic implementation and integration” from high to medium, mainly on the back of developments in the United States. T‑Mobile US is making progress with leveraging synergies from the business combination with Sprint. By combining and optimizing the mobile networks, T‑Mobile US has already been able to migrate the vast majority of customers to its own network. A large number of sites have been shut down and cell tower decommissioning is progressing at a faster rate than planned.

Procurement and suppliers. Deutsche Telekom’s supply chains are currently being negatively impacted by a number of factors, e.g., by a shortage of semiconductor chips, the coronavirus pandemic, geopolitical tensions, and the war in Ukraine. There has been an imbalance between supply and demand on the global market for semiconductor chips for a number of quarters now. In addition, pandemic-related restrictions (for example, lockdowns in Asian countries) and geopolitics (for example, technology sanctions imposed by the United States) are impeding the global logistics stability of raw materials for chip production and related processes such as housing production and tests. Furthermore, the general costs of semiconductor materials, production, energy, wages, and global logistics are rising, leading to general price increases for products and services. Added to that are the supply delays currently being experienced in Europe. However, short-term shortages were avoided thanks to action that was taken. Inventory shortages could also arise in the United States. The establishment of additional production capacities means that the situation regarding the availability of semiconductors is expected to ease in the medium term. We have raised the risk significance of the risk category “Procurement and suppliers” from low to medium, since the situation could deteriorate due to China’s zero-Covid policy and its implications, such as the closure of Chinese ports, as well as unforeseeable consequences of the Ukraine war. We employ organizational, contractual, and procurement strategy measures to counteract these challenges. For example, in early 2021, the Group-wide Supply Chain Resilience was set up to assess the risk situation at regular intervals and, where necessary, take relevant mitigating measures, and monitor their implementation.

Other operational risks. Deutsche Telekom’s success and service provision are dependent on the ability to acquire, retain, and develop specialist staff and talents. Growing competition for experts and the war for talents, coupled with the need to offer increasingly flexible working conditions (e.g., remote working), could lead to key employees (in particular those in technical and IT-related roles) leaving the company, while demand continues to grow unabated. Sharply rising entry-level salaries could exacerbate the situation and increase costs further. The availability of staff with an appropriate skill set at nearshore and offshore sites is crucial when it comes to rendering services on budget, in line with requirements, and on time. The demands of the talents with regard to potential employers have also increased. Alongside remuneration, they also demand other factors such as flexible working, environmental social governance, culture, diversity, and innovations. Due to the intensifying war for talents and potential salary-driven cost increases, we are raising the significance of the risk category “Other operational risks” from low to medium. We systematically work to address these challenges head on, for example, by strengthening Deutsche Telekom and T‑Mobile US as an attractive employer brand and by proactively seeking out new specialist staff and talents worldwide.

Financial risks. Our net debt and new debt are subject to interest rate changes. Over time, higher interest rates will raise the interest expense. Soaring inflation in Europe and the United States has prompted the central banks to roll out a series of interest rate hikes. Further increases with negative effects on our future interest expenses cannot be ruled out. The war in Ukraine and the current situation on the world market are driving sharp rises in energy costs. Energy prices are extremely volatile and expected to rise further or at least remain at a high level. This is having a knock-on effect of amplifying costs for transportation and the procurement of goods. In view of the interest rate hikes and spiking energy costs, we are raising the risk category for “Financial risks” from high to very high.


Claims relating to charges for the shared use of cable ducts. In the claims filed by Vodafone Deutschland GmbH and Vodafone Hessen et al. (now Vodafone West GmbH) against Telekom Deutschland GmbH alleging excessive charges for the use of cable ducts, which were referred by the Federal Court of Justice back to the responsible Higher Regional Courts, the plaintiff Vodafone Deutschland GmbH has since updated its demand for relief, which it now puts at approximately EUR 749 million plus interest for the period from January 2012 to December 2021. The plaintiff Vodafone West GmbH has also updated its demand for relief, which it now puts at around EUR 418 million plus interest for the period from January 2016 to August 2022. It is currently not possible to estimate the financial impact with sufficient certainty.

Proceedings against T‑Mobile US in consequence of the cyberattack on T‑Mobile US. As a result of the August 2021 cyberattack, numerous consumer class actions, including mass arbitration claims, were filed against T‑Mobile US and a derivative action was filed against the members of the Board of Directors of T‑Mobile US and against T‑Mobile US as nominal defendant. The derivative action filed in November 2021 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.

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 (EUR 331 million). In addition, T‑Mobile US has committed to spending a total of USD 150 million (EUR 142 million) in 2022 and 2023 on data security and related technologies. The settlement is subject to final court approval. T‑Mobile US expects that the settlement of the consumer class action, if approved by the court, 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 (around EUR 0.3 billion).

With regard to inquiries by various government agencies, law enforcement and other state authorities, T‑Mobile US continues to give its full cooperation. At present the financial impact of these proceedings cannot be assessed with sufficient certainty.

Anti-trust proceedings

Claims for damages against Slovak Telekom following a European Commission decision to impose fines. Following a decision of the European Commission, competitors filed damage actions against Slovak Telekom with the civil court in Bratislava. A further claim was filed with the court in the reporting period, such that there are now three claims pending, amounting to a total of EUR 219 million plus interest. 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. In connection with the case brought by the independent British mobile phone retailer Phones4U, which has been insolvent since 2014, 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. Phones4U is still seeking damages in an as-yet undisclosed amount. It is still not possible to estimate the financial impact with sufficient certainty.

Assessment of the aggregate risk position

The aggregate risk position has deteriorated compared with the risks and opportunities as described in the combined management report of the 2021 Annual Report due to the war in Ukraine and the resulting consequences for the global economy. 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.

AL – After Leases
Since the start of the 2019 financial year, we have taken the effects of the first-time application of IFRS 16 “Leases” into account when determining our financial performance indicators. “EBITDA after leases” (EBITDA AL) is calculated by adjusting EBITDA for depreciation of the right-of-use assets and for interest expenses on recognized lease liabilities. When determining “free cash flow after leases” (free cash flow AL), free cash flow is adjusted for the repayment of lease liabilities.
Protection against internet crime.
Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing.