UNITED
STATES
SECURITIES AND EXCHANGE COMMISSION
Form 6-K
REPORT
OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR 15d-16
UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2006
Commission file number 001-14540
Deutsche Telekom AG
(Translation of Registrant’s Name into English)
Friedrich-Ebert-Allee 140, 53113 Bonn, Germany
(Address of Principal Executive Offices)
Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F x Form 40-F o
Indicate by check mark whether the registrant by furnishing the information contained in this form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes o No x
This Report on Form 6-K is incorporated by reference into the registration statement on Form F-3, File No. 333-118932, and the registration statement on Form S-8, File No. 333-106591, and into each respective prospectus that forms a part of those registration statements.
Defined Terms and Contact Information
The term “Report” refers to this Report on Form 6-K for the three-month period ended March 31, 2006. Deutsche Telekom AG is a stock corporation organized under the laws of the Federal Republic of Germany. As used in this Report, unless the context otherwise requires, the term “Deutsche Telekom” refers to Deutsche Telekom AG and the terms “we,” “us,” “our,” “Group” and “the Company” refer to Deutsche Telekom and, as applicable, Deutsche Telekom and its direct and indirect subsidiaries as a group. Our registered office is at Friedrich-Ebert-Allee 140, 53113 Bonn, Germany, telephone number +49-228-181-0. Our agent for service of process in the United States is Deutsche Telekom, Inc., 600 Lexington Avenue, New York, N.Y. 10022.
This Report contains forward-looking statements that reflect the current views of our management with respect to future events. Forward-looking statements generally are identified by the words “expects,” “anticipates,” “believes,” “intends,” “estimates,” “aims,” “plans,” “will,” “will continue,” “seeks” and similar expressions. Forward-looking statements are based on current plans, estimates and projections, and therefore you should not place too much reliance on them. Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update any forward-looking statement in light of new information or future events, although we intend to continue to meet our ongoing disclosure obligations under the U.S. securities laws (such as our obligations to file annual reports on Form 20-F and periodic and other reports on Form 6-K) and under other applicable laws. Forward-looking statements involve inherent risks and uncertainties, most of which are difficult to predict and are generally beyond our control. We caution you that a number of important factors could cause actual results or outcomes to differ materially from those expressed in, or implied by, the forward-looking statements. These factors include, among other factors: the development of demand for our fixed and mobile telecommunications services, particularly for new, higher value service offerings; competitive forces, including pricing pressures, technological changes and alternative routing developments; regulatory actions and the outcome of disputes in which the company is involved or may become involved; the pace and cost of the rollout of new services, such as UMTS, which may be affected by the ability of suppliers to deliver equipment and other circumstances beyond our control; public concerns over health risks putatively associated with wireless frequency transmissions; risks associated with integrating our acquisitions; the development of asset values in Germany and elsewhere, the progress of our debt reduction and liquidity improvement initiatives; the development of our cost control and efficiency enhancement initiatives, including in the areas of procurement optimization, personnel reductions and our Excellence program; risks and uncertainties relating to benefits anticipated from our international expansion, particularly in the United States; the progress of our domestic and international investments, joint ventures and alliances; our ability to gain or retain market share in the face of competition; our ability to secure and retain the licenses needed to offer services; the effects of price reduction measures and our customer acquisition and retention initiatives; the availability, term and deployment of capital, particularly in view of our debt refinancing needs, actions of the rating agencies and the impact of regulatory and competitive developments on our capital outlays; delays in the planned merger of T-Online into Deutsche Telekom AG; the progress of our workforce adjustment initiative described in this Report and changes in currency exchange rates and interest rates. If these or other risks and uncertainties (including those described in “Forward-Looking Statements,” “Item 3. Key Information — Risk Factors” and elsewhere in our most recent Annual Report on Form 20-F for the year ended December 31, 2005 filed with the U.S. Securities and Exchange Commission) materialize, or if the assumptions underlying any of these statements prove incorrect, our actual results may be materially different from those expressed or implied by such statements.
World Wide Web addresses contained in this Report are for explanatory purposes only and they (and the content contained therein) do not form a part of, and are not incorporated by reference into, this Report.
2
Accounting in Accordance with IFRS
The unaudited condensed consolidated financial statements contained in this Report, have been prepared in accordance with International Financial Reporting Standards (IFRS), as adopted by the European Union. All IFRSs issued by the International Accounting Standards Board (IASB) that were effective at the time of the preparation of these financial statements, and that were applied by Deutsche Telekom, have been adopted by the E.U. Commission for use within the European Union. Our financial statements for the period ended March 31, 2006, were prepared in compliance with IAS 34.
Please refer to the notes to the consolidated financial statements as of December 31, 2005, for the accounting policies applied to the Group’s financial reporting.
Exchange Rates
Unless otherwise indicated, all amounts in this Report have been expressed in euros.
As used in this document, “euro,” “EUR” or “€” means the single unified currency that was introduced in the Federal Republic of Germany (the “Federal Republic”) and ten other participating Member States of the European Union on January 1, 1999. “U.S. dollar,” “USD” or “$” means the lawful currency of the United States. As used in this document, the term “noon buying rate” refers to the rate of exchange for euros, expressed in U.S. dollars per euro, in the City of New York for cable transfers payable in foreign currencies as certified by the Federal Reserve Bank of New York for customs purposes, as required by Section 522 of the U.S. Tariff Act of 1930, as amended. Unless otherwise stated, conversions of euros into U.S. dollars have been made at the rate of EUR 1.00 to USD 1.2139, which was the noon buying rate on March 31, 2006.
Amounts appearing in this Report that have been translated into euros from other currencies were translated in accordance with the principles described in the notes to the unaudited condensed consolidated financial statements contained in this Report.
3
(Unaudited)
|
|
|
For the three months ended |
|
|
|
|
|
For the year ended |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Total net revenues (total revenues excluding intersegment reveunes) |
|
14,842 |
|
14,288 |
|
554 |
|
3.9 |
|
59,604 |
|
|
Domestic |
|
8,208 |
|
8,511 |
|
(303 |
) |
(3.6 |
) |
34,183 |
|
|
International |
|
6,634 |
|
5,777 |
|
857 |
|
14.8 |
|
25,421 |
|
|
Profit from operations |
|
2,318 |
|
2,287 |
|
31 |
|
1.4 |
|
7,622 |
|
|
Loss from financial activities |
|
(568 |
) |
(715 |
) |
147 |
|
20.6 |
|
(1,410 |
) |
|
Profit before income taxes |
|
1,750 |
|
1,572 |
|
178 |
|
11.3 |
|
6,212 |
|
|
Depreciation, amortization and impairment losses |
|
(2,570 |
) |
(2,534 |
) |
(36 |
) |
(1.4 |
) |
(12,497 |
) |
|
of which : property, plant and equipment |
|
(1,953 |
) |
(1,921 |
) |
(32 |
) |
(1.7 |
) |
(8,070 |
) |
|
of which : intangible assets |
|
(617 |
) |
(613 |
) |
(4 |
) |
(0.7 |
) |
(4,427 |
) |
|
Net profit |
|
1,079 |
|
984 |
|
95 |
|
9.7 |
|
5,584 |
|
|
Earnings per share/ADS(1) Basic/ Diluted(€) |
|
0.25 |
|
0.23 |
|
0.02 |
|
8.7 |
|
1.31 |
|
|
Equity ratio(2) (%) |
|
38.5 |
|
35.8 |
|
n.m |
|
n.m |
|
36.4 |
|
|
Total financial liabalities(3) |
|
49,400 |
|
54,139 |
|
(4,739 |
) |
(8.8 |
) |
46,721 |
|
|
|
|
|
|
|
|
Change |
|
|
|
|
|
|
|
|
|
|
|
|
March 31, 2006/ |
|
|
|
Change |
|
|
|
|
|
|
|
|
December 31, |
|
|
|
March 31, 2006/ |
|
|
|
|
As of |
|
As of |
|
2005 |
|
As of |
|
March 31, 2005 |
|
|
Number of employees at balance sheet date |
|
|
|
|
|
|
|
|
|
|
|
|
Deutsche Telekom Group |
|
248,982 |
|
243,695 |
|
2.2 |
|
243,784 |
|
2.1 |
|
|
Non-civil servants |
|
204,818 |
|
197,741 |
|
3.6 |
|
197,123 |
|
3.9 |
|
|
Civil servants |
|
44,164 |
|
45,954 |
|
(3.9 |
) |
46,661 |
|
(5.4 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Number of fixed-network and mobile customers |
|
|
|
|
|
|
|
|
|
|
|
|
Telephone lines(4) (millions) |
|
53.9 |
|
54.8 |
|
(1.6 |
) |
56.6 |
|
(4.8 |
) |
|
Broadband lines
(in operation)(4) |
|
9.2 |
|
8.5 |
|
8.2 |
|
6.7 |
|
37.3 |
|
|
Mobile customers(5) (millions) |
|
87.7 |
|
86.6 |
|
1.3 |
|
79.0 |
|
11.0 |
|
n.m. — not meaningful
(1) One ADS (American Depositary Share) corresponds in economic terms to one ordinary share of Deutsche Telekom AG.
(2) The ratio equals total stockholders’ equity divided by total assets. Amounts proposed as dividends are treated as short-term debt rather than as equity for purposes of the calculation of this ratio.
(3) Includes current and noncurrent financial liabilities (see “Condensed Consolidated Balance Sheets”) at the balance sheet date.
(4) Number of telephone lines (including those used within the Group) as of the balance sheet date.
(5) The number of customers of the consolidated subsidiaries included within our Mobile Communications strategic business area.
4
DEUTSCHE TELEKOM
AG
Condensed Consolidated Financial Statements as of March 31, 2006 and 2005
and for the year ended December 31, 2005
(Unaudited)
5
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
|
|
|
For the three months |
|
|
|
|
|
For the year |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Net revenue |
|
14,842 |
|
14,288 |
|
554 |
|
3.9 |
|
59,604 |
|
|
Cost of sales |
|
(7,821 |
) |
(7,525 |
) |
(296 |
) |
(3.9 |
) |
(31,862 |
) |
|
Gross profit |
|
7,021 |
|
6,763 |
|
258 |
|
3.8 |
|
27,742 |
|
|
Selling expenses |
|
(3,774 |
) |
(3,435 |
) |
(339 |
) |
(9.9 |
) |
(14,683 |
) |
|
General and administrative expenses |
|
(1,077 |
) |
(1,026 |
) |
(51 |
) |
(5.0 |
) |
(4,210 |
) |
|
Other operating income |
|
350 |
|
279 |
|
71 |
|
25.4 |
|
2,408 |
|
|
Other operating expenses |
|
(202 |
) |
(294 |
) |
92 |
|
31.3 |
|
(3,635 |
) |
|
Profit from operations |
|
2,318 |
|
2,287 |
|
31 |
|
1.4 |
|
7,622 |
|
|
Finance costs |
|
(658 |
) |
(707 |
) |
49 |
|
6.9 |
|
(2,401 |
) |
|
Interest income |
|
73 |
|
99 |
|
(26 |
) |
(26.3 |
) |
398 |
|
|
Interest expense |
|
(731 |
) |
(806 |
) |
75 |
|
9.3 |
|
(2,799 |
) |
|
Share of profit of associates and joint ventures accounted for using the equity method |
|
32 |
|
36 |
|
(4 |
) |
(11.1 |
) |
214 |
|
|
Other financial income (expense) |
|
58 |
|
(44 |
) |
102 |
|
n.m. |
|
777 |
|
|
Loss from financial activities |
|
(568 |
) |
(715 |
) |
147 |
|
20.6 |
|
(1,410 |
) |
|
Profit before income taxes |
|
1,750 |
|
1,572 |
|
178 |
|
11.3 |
|
6,212 |
|
|
Income taxes |
|
(563 |
) |
(466 |
) |
(97 |
) |
(20.8 |
) |
(196 |
) |
|
Profit after income taxes |
|
1,187 |
|
1,106 |
|
81 |
|
7.3 |
|
6,016 |
|
|
Profit attributable to minority interests |
|
108 |
|
122 |
|
(14 |
) |
(11.5 |
) |
432 |
|
|
Net profit (profit (loss) attributable to equity holders of the parent) |
|
1,079 |
|
984 |
|
95 |
|
9.7 |
|
5,584 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Earnings per share(1) /ADS(2) |
|
|
|
|
|
|
|
|
|
|
|
|
Basic (€) |
|
0.25 |
|
0.23 |
|
0.02 |
|
8.7 |
|
1.31 |
|
|
Diluted (€) |
|
0.25 |
|
0.23 |
|
0.02 |
|
8.7 |
|
1.31 |
|
n.m. — not meaningful
(1) Earnings per share for each period are calculated by dividing net profit by the weighted average number of outstanding shares. For more information, see Note 10.
(2) One ADS corresponds in economic terms to one ordinary share of Deutsche Telekom AG.
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
6
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited)
|
|
|
As of March 31, |
|
As of |
|
Change |
|
Change % |
|
As of March 31, |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Assets |
|
|
|
|
|
|
|
|
|
|
|
|
Current assets |
|
21,025 |
|
16,668 |
|
4,357 |
|
26.1 |
|
19,233 |
|
|
Cash and cash equivalents |
|
8,343 |
|
4,975 |
|
3,368 |
|
67.7 |
|
6,260 |
|
|
Trade and other receivables |
|
7,147 |
|
7,512 |
|
(365 |
) |
(4.9 |
) |
7,051 |
|
|
Current recoverable income taxes |
|
595 |
|
613 |
|
(18 |
) |
(2.9 |
) |
441 |
|
|
Other financial assets |
|
1,453 |
|
1,362 |
|
91 |
|
6.7 |
|
2,216 |
|
|
Inventories |
|
1,094 |
|
1,097 |
|
(3 |
) |
(0.3 |
) |
1,082 |
|
|
Other assets |
|
2,393 |
|
1,109 |
|
1,284 |
|
n.m. |
|
2,183 |
|
|
Non-current assets |
|
109,315 |
|
111,212 |
|
(1,897 |
) |
(1.7 |
) |
109,699 |
|
|
Intangible assets |
|
51,985 |
|
52,675 |
|
(690 |
) |
(1.3 |
) |
53,014 |
|
|
Property, plant and equipment |
|
46,837 |
|
47,806 |
|
(969 |
) |
(2.0 |
) |
48,203 |
|
|
Investments accounted for using the equity method |
|
1,864 |
|
1,825 |
|
39 |
|
2.1 |
|
1,751 |
|
|
Other financial assets |
|
778 |
|
779 |
|
(1 |
) |
(0.1 |
) |
1,676 |
|
|
Deferred tax assets |
|
7,263 |
|
7,552 |
|
(289 |
) |
(3.8 |
) |
4,727 |
|
|
Other assets |
|
588 |
|
575 |
|
13 |
|
2.3 |
|
328 |
|
|
Total assets |
|
130,340 |
|
127,880 |
|
2,460 |
|
1.9 |
|
128,932 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities and shareholders’ equity |
|
|
|
|
|
|
|
|
|
|
|
|
Current liabilities |
|
24,469 |
|
24,958 |
|
(489 |
) |
(2.0 |
) |
25,229 |
|
|
Financial liabilities |
|
10,581 |
|
10,374 |
|
207 |
|
2.0 |
|
12,388 |
|
|
Trade and other payables |
|
5,724 |
|
6,902 |
|
(1,178 |
) |
(17.1 |
) |
5,184 |
|
|
Income tax liabilities |
|
1,565 |
|
1,358 |
|
207 |
|
15.2 |
|
1,072 |
|
|
Provisions |
|
3,487 |
|
3,621 |
|
(134 |
) |
(3.7 |
) |
3,491 |
|
|
Other liabilities |
|
3,112 |
|
2,703 |
|
409 |
|
15.1 |
|
3,094 |
|
|
Non-current liabilities |
|
55,735 |
|
53,340 |
|
2,395 |
|
4.5 |
|
56,777 |
|
|
Financial liabilities |
|
38,819 |
|
36,347 |
|
2,472 |
|
6.8 |
|
41,751 |
|
|
Provisions for pensions and other employee benefits |
|
4,668 |
|
4,596 |
|
72 |
|
1.6 |
|
4,256 |
|
|
Other provisions |
|
1,955 |
|
2,036 |
|
(81 |
) |
(4.0 |
) |
2,923 |
|
|
Deferred tax liabilities |
|
8,278 |
|
8,331 |
|
(53 |
) |
(0.6 |
) |
6,302 |
|
|
Other liabilities |
|
2,015 |
|
2,030 |
|
(15 |
) |
(0.7 |
) |
1,545 |
|
|
Liabilities |
|
80,204 |
|
78,298 |
|
1,906 |
|
2.4 |
|
82,006 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shareholders’ equity |
|
50,136 |
|
49,582 |
|
554 |
|
1.1 |
|
46,926 |
|
|
Issued capital |
|
10,747 |
|
10,747 |
|
0 |
|
— |
|
10,747 |
|
|
Capital reserves |
|
49,565 |
|
49,561 |
|
4 |
|
0.01 |
|
49,536 |
|
|
Retained earnings including carryforwards |
|
(13,175 |
) |
(18,760 |
) |
5,585 |
|
29.8 |
|
(16,171 |
) |
|
Other comprehensive income |
|
(1,639 |
) |
(1,055 |
) |
(584 |
) |
(55.4 |
) |
(1,699 |
) |
|
Net profit |
|
1,079 |
|
5,584 |
|
(4,505 |
) |
(80.7 |
) |
984 |
|
|
Treasury shares |
|
(5 |
) |
(6 |
) |
1 |
|
16.7 |
|
(8 |
) |
|
Equity attributable to equity holders of the parent |
|
46,572 |
|
46,071 |
|
501 |
|
1.1 |
|
43,389 |
|
|
Minority interests |
|
3,564 |
|
3,511 |
|
53 |
|
1.5 |
|
3,537 |
|
|
Total liabilities and shareholders’ equity |
|
130,340 |
|
127,880 |
|
2,460 |
|
1.9 |
|
128,932 |
|
n.m. — not meaningful
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
7
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY(Unaudited)
|
|
|
Equity attributable to equity holders of the parent |
|
||||||||||
|
|
|
Equity contributed |
|
Consolidated shareholders’ equity generated |
|
||||||||
|
|
|
Issued |
|
Capital |
|
Retained |
|
Carry- |
|
Net profit |
|
Total |
|
|
|
|
(millions of €) |
|
||||||||||
|
Balance at January 1, 2005 |
|
10,747 |
|
49,528 |
|
(19,829 |
) |
2,063 |
|
1,593 |
|
(16,173 |
) |
|
Changes in the composition of the Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) after income taxes |
|
|
|
|
|
|
|
|
|
984 |
|
984 |
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
1,593 |
|
(1,593 |
) |
0 |
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
8 |
|
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of option and conversion rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
|
|
|
|
2 |
|
|
|
|
|
2 |
|
|
Recognition of other comprehensive income in income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2005 |
|
10,747 |
|
49,536 |
|
(19,827 |
) |
3,656 |
|
984 |
|
(15,187 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2006 |
|
10,747 |
|
49,561 |
|
(22,416 |
) |
3,656 |
|
5,584 |
|
(13,176 |
) |
|
Changes in the composition of the Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) after income taxes |
|
|
|
|
|
|
|
|
|
1,079 |
|
1,079 |
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
5,584 |
|
(5,584 |
) |
0 |
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 2005 anniversary shares |
|
|
|
(1 |
) |
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
|
|
|
|
1 |
|
|
|
|
|
1 |
|
|
Recognition of other comprehensive income in income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at March 31, 2006 |
|
10,747 |
|
49,565 |
|
(22,415 |
) |
9,240 |
|
1,079 |
|
(12,096 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
8
|
|
|
Equity attributable to equity holders of the parent |
|
||||||||||
|
|
|
Other comprehensive income |
|
||||||||||
|
|
|
Fair value |
|
Fair value |
|
Revaluation |
|
Deferred |
|
Difference |
|
Total |
|
|
|
|
(millions of €) |
|
||||||||||
|
Balance at January 1, 2005 |
|
860 |
|
1,429 |
|
63 |
|
(556 |
) |
(4,474 |
) |
(2,678 |
) |
|
Changes in the composition of the Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) after income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of option and conversion rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
95 |
|
(227 |
) |
(2 |
) |
84 |
|
1,074 |
|
1,024 |
|
|
Recognition of other comprehensive income in income statement |
|
(46 |
) |
1 |
|
|
|
|
|
|
|
(45 |
) |
|
Balance at March 31, 2005 |
|
909 |
|
1,203 |
|
61 |
|
(472 |
) |
(3,400 |
) |
(1,699 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2006 |
|
2 |
|
864 |
|
58 |
|
(335 |
) |
(1,644 |
) |
(1,055 |
) |
|
Changes in the composition of the Group |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit (loss) after income taxes |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sale of 2005 anniversary shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
(1 |
) |
88 |
|
(1 |
) |
(32 |
) |
(637 |
) |
(583 |
) |
|
Recognition of other comprehensive income in income statement |
|
|
|
(1 |
) |
|
|
|
|
|
|
(1 |
) |
|
Balance at March 31, 2006 |
|
1 |
|
951 |
|
57 |
|
(367 |
) |
(2,281 |
) |
(1,639 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
9
|
|
|
Equity attributable to equity holders of the parent |
|
|
|
||
|
|
|
Treasury |
|
Total equity |
|
Minority |
|
|
|
|
(millions of €) |
|
||||
|
Balance at January 1, 2005 |
|
(8 |
) |
41,416 |
|
4,332 |
|
|
Changes in the composition of the Group |
|
|
|
|
|
(1,002 |
) |
|
Profit (loss) after income taxes |
|
|
|
984 |
|
122 |
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
8 |
|
|
|
|
Proceeds from the exercise of option and conversion rights |
|
|
|
|
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
|
|
1,026 |
|
2 |
|
|
Recognition of other comprehensive income in income statement |
|
|
|
(45 |
) |
|
|
|
Balance at March 31, 2005 |
|
(8 |
) |
43,389 |
|
3,454 |
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2006 |
|
(6 |
) |
46,071 |
|
3,408 |
|
|
Changes in the composition of the Group |
|
|
|
|
|
2 |
|
|
Profit (loss) after income taxes |
|
|
|
1,079 |
|
108 |
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
(54 |
) |
|
Sale of 2005 anniversary shares |
|
1 |
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
5 |
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
|
|
(582 |
) |
1 |
|
|
Recognition of other comprehensive income in income statement |
|
|
|
(1 |
) |
|
|
|
Balance at March 31, 2006 |
|
(5 |
) |
46,572 |
|
3,465 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
10
|
|
|
Minority interests |
|
|
|
||||||||||
|
|
|
Other comprehensive income |
|
|
|
|
|
||||||||
|
|
|
Revaluation |
|
Deferred |
|
Difference |
|
Other |
|
Total |
|
Total |
|
Total |
|
|
|
|
(millions of €) |
|
||||||||||||
|
Balance at January 1, 2005 |
|
61 |
|
0 |
|
(7 |
) |
1 |
|
55 |
|
4,387 |
|
45,803 |
|
|
Changes in the composition of the Group |
|
|
|
|
|
(2 |
) |
|
|
(2 |
) |
(1,004 |
) |
(1,004 |
) |
|
Profit (loss) after income taxes |
|
|
|
|
|
|
|
|
|
|
|
122 |
|
1,106 |
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds from the exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
8 |
|
|
Proceeds from the exercise of option and conversion rights |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Change in other comprehensive income (not recognized in income statement) |
|
(2 |
) |
|
|
32 |
|
|
|
30 |
|
32 |
|
1,058 |
|
|
Recognition of other comprehensive income in income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
(45 |
) |
|
Balance at March 31, 2005 |
|
59 |
|
0 |
|
23 |
|
1 |
|
83 |
|
3,537 |
|
46,926 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance at January 1, 2006 |
|
63 |
|
0 |
|
39 |
|
1 |
|
103 |
|
3,511 |
|
49,582 |
|
|
Changes in the composition of the Group |
|
5 |
|
(2 |
) |
|
|
|
|
3 |
|
5 |
|
5 |
|
|
Profit (loss) after income taxes |
|
|
|
|
|
|
|
|
|
|
|
108 |
|
1,187 |
|
|
Unappropriated net profit (loss) carried forward |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends |
|
|
|
|
|
|
|
|
|
|
|
(54 |
) |
(54 |
) |
|
Sale of 2005 anniversary shares |
|
|
|
|
|
|
|
|
|
|
|
|
|
0 |
|
|
Proceeds from the exercise of stock options |
|
|
|
|
|
|
|
|
|
|
|
|
|
5 |
|
|
Change in other comprehensive income (not recognized in income statement) |
|
(1 |
) |
|
|
(6 |
) |
|
|
(7 |
) |
(6 |
) |
(588 |
) |
|
Recognition of other comprehensive income in income statement |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1 |
) |
|
Balance at March 31, 2006 |
|
67 |
|
(2 |
) |
33 |
|
1 |
|
99 |
|
3,564 |
|
50,136 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
11
DEUTSCHE TELEKOM
AG
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
|
|
|
For the three months |
|
For the year ended |
|
||
|
|
|
2006 |
|
2005 |
|
2005 |
|
|
|
|
(millions of €) |
|
||||
|
Profit after income taxes |
|
1,187 |
|
1,106 |
|
6,016 |
|
|
Depreciation, amortization and impairment losses |
|
2,570 |
|
2,534 |
|
12,497 |
|
|
Income tax expense (refund) |
|
563 |
|
466 |
|
196 |
|
|
Interest income and interest expenses |
|
658 |
|
707 |
|
2,401 |
|
|
(Gain) loss from the disposal of non-current assets |
|
(279 |
) |
(22 |
) |
(1,058 |
) |
|
Share of (profit) loss of associates and joint ventures accounted for using the equity method |
|
(32 |
) |
(36 |
) |
(152 |
) |
|
Other non-cash transactions |
|
67 |
|
(18 |
) |
(111 |
) |
|
Change in assets carried as working capital |
|
(806 |
) |
(758 |
) |
(360 |
) |
|
Change in provisions |
|
(180 |
) |
25 |
|
(230 |
) |
|
Change in other liabilities carried as working capital |
|
(237 |
) |
(1,015 |
) |
(130 |
) |
|
Income taxes received (paid) |
|
(212 |
) |
(424 |
) |
(1,200 |
) |
|
Dividends received |
|
6 |
|
11 |
|
60 |
|
|
Cash generated from operations |
|
3,305 |
|
2,576 |
|
17,929 |
|
|
Net interest paid |
|
(509 |
) |
(400 |
) |
(2,931 |
) |
|
Net cash from operating activities |
|
2,796 |
|
2,176 |
|
14,998 |
|
|
Cash outflows for investments in |
|
|
|
|
|
|
|
|
Intangible assets |
|
(228 |
) |
(623 |
) |
(1,868 |
) |
|
Property, plant and equipment |
|
(1,816 |
) |
(2,468 |
) |
(7,401 |
) |
|
Non-current financial assets |
|
(115 |
) |
(39 |
) |
(604 |
) |
|
Investments in fully consolidated subsidiaries |
|
(290 |
) |
(2,003 |
) |
(2,051 |
) |
|
Proceeds from disposal of |
|
|
|
|
|
|
|
|
Intangible assets |
|
0 |
|
2 |
|
33 |
|
|
Property, plant and equipment |
|
291 |
|
107 |
|
333 |
|
|
Non-current financial assets |
|
200 |
|
157 |
|
1,648 |
|
|
Net change in short-term investments and marketable securities |
|
(139 |
) |
(856 |
) |
(148 |
) |
|
Other |
|
(63 |
) |
0 |
|
0 |
|
|
Net cash used in investing activities |
|
(2,160 |
) |
(5,723 |
) |
(10,058 |
) |
|
Proceeds from issue of current financial liabilities |
|
174 |
|
434 |
|
5,304 |
|
|
Repayment of current financial liabilities |
|
(565 |
) |
(1,464 |
) |
(14,747 |
) |
|
Proceeds from issue of non-current financial liabilities |
|
3,317 |
|
3,019 |
|
4,944 |
|
|
Repayment of non-current financial liabilities |
|
(83 |
) |
(169 |
) |
(443 |
) |
|
Dividend payments |
|
(64 |
) |
0 |
|
(2,931 |
) |
|
Proceeds from the exercise of stock options |
|
4 |
|
8 |
|
34 |
|
|
Repayment of lease liabilities |
|
(56 |
) |
(56 |
) |
(200 |
) |
|
Net cash from (used in) financing activities |
|
2,727 |
|
1,772 |
|
(8,039 |
) |
|
Effect of foreign exchange rate changes on cash and cash equivalents |
|
5 |
|
30 |
|
69 |
|
|
Net increase (decrease) in cash and cash equivalents |
|
3,368 |
|
(1,745 |
) |
(3,030 |
) |
|
Cash and cash equivalents, at the beginning of the period |
|
4,975 |
|
8,005 |
|
8,005 |
|
|
Cash and cash equivalents, at end of the period |
|
8,343 |
|
6,260 |
|
4,975 |
|
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
12
Note (1) Changes within the consolidated Group
In the past year, we acquired interests in various companies that were not, or were only partially, included in our consolidated financial statements as of March 31, 2005, primarily the Telekom Montenegro group. In addition, T-Systems DSS was sold in the second quarter of 2005 and was no longer included in our quarterly financial statements as of March 31, 2006. In the first quarter of 2006, within the Business Customers strategic business area, T-Systems acquired gedas AG (“gedas”), which was fully consolidated for the first time as of March 31, 2006.
The table below shows the effects of changes in the composition of the Group on our consolidated statement of income for the first quarter of 2006:
|
|
|
Broadband/Fixed |
|
Mobile |
|
Business Customers |
|
Total |
|
|
|
|
(millions of €) |
|
||||||
|
Net revenue |
|
18 |
|
6 |
|
(27 |
) |
(3 |
) |
|
Cost of sales |
|
(10 |
) |
(2 |
) |
24 |
|
12 |
|
|
Gross profit |
|
8 |
|
4 |
|
(3 |
) |
9 |
|
|
Selling expenses |
|
(2 |
) |
(1 |
) |
2 |
|
(1 |
) |
|
General and administrative expenses |
|
(1 |
) |
(1 |
) |
(1 |
) |
(3 |
) |
|
Other operating income |
|
0 |
|
0 |
|
4 |
|
4 |
|
|
Other operating expenses |
|
(1 |
) |
(1 |
) |
1 |
|
(1 |
) |
|
Profit (loss) from operations |
|
4 |
|
1 |
|
3 |
|
8 |
|
|
Finance costs |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Interest income |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Interest expense |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Share of profit (loss) of associates and joint ventures accounted for using the equity method |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Other financial income (expense) |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Profit (loss) from financial activities |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Profit (loss) before income taxes |
|
4 |
|
1 |
|
3 |
|
8 |
|
|
Income taxes |
|
0 |
|
0 |
|
0 |
|
0 |
|
|
Profit after income taxes |
|
4 |
|
1 |
|
3 |
|
8 |
|
|
Profit (loss) attributable to minority interests |
|
0 |
|
1 |
|
0 |
|
1 |
|
|
Net profit (loss) |
|
4 |
|
0 |
|
3 |
|
7 |
|
Business combinations
Effective March 31, 2006, T-Systems acquired IT service provider gedas from Volkswagen AG for a purchase price of approximately EUR 0.3 billion. On the basis of a preliminary purchase price allocation, this resulted in goodwill of EUR 0.2 billion. Cash and cash equivalents in the amount of EUR 41 million were acquired in conjunction with the purchase of the gedas group, which reported a loss of EUR 11 million for the first quarter of 2006 on revenues of EUR 144 million.
|
|
|
Fair value at date of |
|
Carrying amounts immediately |
|
|
|
|
(millions of €) |
|
||
|
Current assets |
|
236 |
|
236 |
|
|
Non-current assets |
|
199 |
|
93 |
|
|
of which: intangible assets |
|
126 |
|
20 |
|
|
|
|
|
|
|
|
|
Current liabilities |
|
283 |
|
279 |
|
|
Non-current liabilities |
|
39 |
|
6 |
|
|
|
|
|
|
|
|
13
Note (2) Loss from financial activities
Loss from financial activities consists of the following:
|
|
|
For the three months |
|
|
|
|
|
For the year |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Loss from financial activities |
|
(568 |
) |
(715 |
) |
147 |
|
20.6 |
|
(1,410 |
) |
|
Finance costs |
|
(658 |
) |
(707 |
) |
49 |
|
6.9 |
|
(2,401 |
) |
|
Interest income |
|
73 |
|
99 |
|
(26 |
) |
(26.3 |
) |
398 |
|
|
Interest expense |
|
(731 |
) |
(806 |
) |
75 |
|
9.3 |
|
(2,799 |
) |
|
Share of (profit) loss of associates and joint ventures accounted for using the equity method |
|
32 |
|
36 |
|
(4 |
) |
(11.1 |
) |
214 |
|
|
Other financial income (expense) |
|
58 |
|
(44 |
) |
102 |
|
n.m. |
|
777 |
|
n.m. — not meaningful
The reduction in loss from financial activities was primarily due to the proportion of the proceeds from the sale of Celcom (EUR 196 million) from 2003 that was not received until the first quarter of 2006, and is now recognized as other financial income. In addition, finance costs were reduced, due to our, on average, lower financial liabilities, as well as to a reduction in the average level of interest rates.
Note (3) Personnel
|
|
|
For the three months |
|
|
|
|
|
For the year |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Personnel costs |
|
(3,439 |
) |
(3,342 |
) |
(97 |
) |
(2.9 |
) |
(14,254 |
) |
Our personnel costs increased, despite an overall decrease in the average number of employees, primarily due to contractually agreed increases in wages and salaries and, at T-Mobile USA, to personnel increases and exchange-rate effects.
Our personnel-cost ratio (personnel costs divided by net revenues) for the first quarter of 2006 was 23.2% of net revenue, an improvement of 0.2 percentage points year-on-year.
Average number of employees
|
|
|
For the three months |
|
|
|
|
|
For the year |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
Deutsche Telekom Group |
|
243,424 |
|
243,967 |
|
(543 |
) |
(0.2 |
) |
244,026 |
|
|
Non-civil servants |
|
199,203 |
|
197,166 |
|
2,037 |
|
1.0 |
|
197,501 |
|
|
Civil servants |
|
44,221 |
|
46,801 |
|
(2,580 |
) |
(5.5 |
) |
46,525 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trainees and student interns |
|
10,447 |
|
10,621 |
|
(174 |
) |
(1.6 |
) |
10,019 |
|
14
Number of employees as of the balance sheet date
|
|
|
As of March 31, |
|
As of December 31, |
|
Change |
|
Change % |
|
As of March 31, |
|
|
Deutsche Telekom Group |
|
248,982 |
|
243,695 |
|
5,287 |
|
2.2 |
|
243,784 |
|
|
Non-civil servants |
|
204,818 |
|
197,741 |
|
7,077 |
|
3.6 |
|
197,123 |
|
|
Civil servants |
|
44,164 |
|
45,954 |
|
(1,790 |
) |
(3.9 |
) |
46,661 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Trainees and student interns |
|
10,468 |
|
11,481 |
|
(1,013 |
) |
(8.8 |
) |
10,568 |
|
The increase in our number of employees at March 31, 2006, was mainly due to the first-time consolidation of gedas.
Note (4) Depreciation, amortization and impairment losses
|
|
|
For the three months |
|
|
|
|
|
As of |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Amortization and impairment of intangible assets |
|
617 |
|
613 |
|
4 |
|
0.7 |
|
4,427 |
|
|
of which: UMTS licenses |
|
222 |
|
213 |
|
9 |
|
4.2 |
|
864 |
|
|
of which: U.S. mobile communications licenses |
|
— |
|
23 |
|
(23 |
) |
n.m. |
|
30 |
|
|
of which: goodwill |
|
10 |
|
— |
|
10 |
|
n.m. |
|
1,920 |
|
|
Depreciation and impairment of property, plant and equipment |
|
1,953 |
|
1,921 |
|
32 |
|
1.7 |
|
8,070 |
|
|
Total depreciation, amortization and impairment losses |
|
2,570 |
|
2,534 |
|
36 |
|
1.4 |
|
12,497 |
|
n.m. — not meaningful
The increase in depreciation, amortization and impairment losses was primarily due to increased depreciation of property, plant and equipment, especially technical equipment and machinery, as a result of additions to assets during the previous year, which resulted in a higher depreciation base, particularly at T-Mobile USA.
Note (5) Intangible assets and property, plant and equipment
The components of intangible assets and property, plant and equipment as of March 31, 2006 and 2005, and December 31, 2005, are as follows:
|
|
|
As of March 31, |
|
As of December 31, |
|
Change |
|
Change % |
|
As of March 31, |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Intangible assets |
|
51,985 |
|
52,675 |
|
(690 |
) |
(1.3 |
) |
53,014 |
|
|
of which: UMTS licenses |
|
13,318 |
|
13,613 |
|
(295 |
) |
(2.2 |
) |
14,246 |
|
|
of which: U.S. mobile communications licenses |
|
16,677 |
|
17,047 |
|
(370 |
) |
(2.2 |
) |
15,378 |
|
|
of which: goodwill |
|
18,415 |
|
18,375 |
|
40 |
|
0.2 |
|
19,903 |
|
|
Property, plant and equipment |
|
46,837 |
|
47,806 |
|
(969 |
) |
(2.0 |
) |
48,203 |
|
The decrease in the total value of intangible assets and property, plant and equipment in the first quarter of 2006 was primarily due to exchange-rate effects totaling EUR 0.9 billion, as well as to a volume of amortization, depreciation and impairment losses that exceeded the level of investment.
15
The additions to assets for the three months ended March 31, 2006 and 2005, and the twelve months ended December 31, 2005, were as follows:
|
|
|
For the three months |
|
|
|
|
|
As of December 31, |
|
||
|
|
|
2006 |
|
2005 |
|
Change |
|
Change % |
|
2005 |
|
|
|
|
(millions of €, except where indicated) |
|
||||||||
|
Additions to assets |
|
2,005 |
|
4,138 |
|
(2,133 |
) |
(51.5 |
) |
11,100 |
|
|
Intangible assets |
|
517 |
|
1,523 |
|
(1,006 |
) |
(66.1 |
) |
2,828 |
|
|
Property, plant and equipment |
|
1,488 |
|
2,615 |
|
(1,127 |
) |
(43.1 |
) |
8,272 |
|
Additions to assets in the first quarter of 2006 primarily included goodwill from the acquisition of the gedas group and the roll-out of the high-speed network in the Broadband/Fixed Network strategic business area. The much higher level of investment in the first quarter of the previous year primarily consisted of the goodwill relating to the acquisition of additional shares in T-Online International AG and the purchase of networks in California and Nevada.
Note (6) Stock-based compensation plans
Deutsche Telekom AG, T-Online International AG, T-Mobile USA, T-Mobile UK and Magyar Telekom all have stock-based compensation plans. The significant stock-based compensation plans are described below.
Stock option plans (SOP).
Deutsche Telekom AG stock option plans
In 2000, we granted stock options to certain employees for the first time. This plan expired in mid-2005. Since neither of the performance targets was achieved during the term of the 2000 Stock Option Plan, the options granted were forfeited on July 20, 2005, without compensation.
In addition, at the shareholders’ meeting in May 2001, the shareholders approved the 2001 Stock Option Plan, resulting in the granting of stock options in August 2001 and July 2002.
The following table provides an overview of the development of the total stock options held under the 2001 plan:
|
|
|
SOP 2001 |
|
||
|
|
|
Stock options (thousands) |
|
Weighted average exercise price (€) |
|
|
Outstanding stock options at January 1, 2006 |
|
11,096 |
|
24.59 |
|
|
Granted |
|
0 |
|
— |
|
|
Exercised |
|
20 |
|
12.36 |
|
|
Forfeited |
|
55 |
|
24.35 |
|
|
Outstanding at March 31, 2006 |
|
11,021 |
|
24.62 |
|
|
Exercisable as of March 31, 2006 |
|
11,021 |
|
24.62 |
|
T-Online International AG stock option plans
In 2000, T-Online International AG adopted the 2000 Stock Option Plan for the Board of Management, specialists and executives of T-Online and its subsidiaries. Since neither of the performance targets were achieved during the term of the 2000 Stock Option Plan, the options granted were forfeited on July 6, 2005. At the 2001 shareholders’ meeting, the shareholders approved a new stock option plan, structured as a premium-priced plan, to enhance the company’s competitiveness.
16
The following table provides an overview of the development of the total stock options held under the plan adopted in 2001:
|
|
|
SOP 2001 |
|
||
|
|
|
Stock options (thousands) |
|
Weighted average exercise price (€) |
|
|
Outstanding stock options at January 1, 2006 |
|
3,551 |
|
10.30 |
|
|
Granted |
|
0 |
|
— |
|
|
Exercised |
|
0 |
|
— |
|
|
Forfeited |
|
32 |
|
10.27 |
|
|
Outstanding at March, 31, 2006 |
|
3,519 |
|
10.31 |
|
|
Exercisable as of March 31, 2006 |
|
3,493 |
|
10.31 |
|
T-Mobile USA (VoiceStream/ Powertel) stock option plan
Before its acquisition on May 31, 2001, VoiceStream (now T-Mobile USA) had granted stock options to its employees. On May 31, 2001, these were converted into options to purchase shares of Deutsche Telekom at a rate of 3.7647 per unvested, outstanding T-Mobile USA option.
At March 31, 2006, 13.1 million shares were available for outstanding options for the 1999 Management Incentive Stock Option Plan (MISOP). The vesting period and option terms relating to the option plan are determined by the MISOP administrator. The options typically vest for a period of four years and have a term of up to 10 years. The plan has now expired and no more options can be issued.
Before its acquisition on May 31, 2001, Powertel had granted stock options to its employees. On May 31, 2001, as a consequence of the acquisition, all unvested, outstanding Powertel options were converted into Deutsche Telekom options at a conversion rate of 2.6353.
In addition, T-Mobile USA issued performance options to certain executives in 2003.
The following table provides an overview of the development of the total stock options issued by T-Mobile USA, including performance options and Powertel options, which were combined in 2004:
|
|
|
Stock options (thousands) |
|
Weighted average exercise price (USD) |
|
|
Outstanding stock options at January 1, 2006 |
|
13,848 |
|
20.36 |
|
|
Granted |
|
0 |
|
— |
|
|
Exercised |
|
474 |
|
9.55 |
|
|
Forfeited |
|
27 |
|
32.62 |
|
|
Expired |
|
237 |
|
27.75 |
|
|
Outstanding at March 31, 2006 |
|
13,110 |
|
20.59 |
|
|
Exercisable as of March 31, 2006 |
|
12,864 |
|
20.73 |
|
Magyar Telekom stock option plan
On April 26, 2002, the shareholders’ of Magyar Telekom approved the introduction of a management stock option plan.
On July 1, 2002, Magyar Telekom used its authority under the shareholders’ resolutions adopted in April 2002 to grant these options for the first tranche (exercisable from 2003) and for the second and third tranches (exercisable from 2004 and 2005, respectively).
The following table provides an overview of the development of the total stock options held:
|
|
|
Stock options (thousands) |
|
Weighted average exercise price (HUF) |
|
|
Outstanding stock options at January 1, 2006 |
|
1,929 |
|
944 |
|
|
Granted |
|
0 |
|
— |
|
|
Exercised |
|
0 |
|
— |
|
|
Forfeited |
|
46 |
|
944 |
|
|
Outstanding at March 31, 2006 |
|
1,883 |
|
944 |
|
|
Exercisable as of March 31, 2006 |
|
1,883 |
|
944 |
|
17
Mid-Term Incentive Plan (MTIP).
Deutsche Telekom AG MTIP
In 2004, Deutsche Telekom AG introduced its first Mid-Term Incentive Plan (MTIP) to ensure competitive total compensation for members of the Board of Management and senior executives of the Deutsche Telekom Group, and other beneficiaries mainly in the United States and the United Kingdom. The MTIP is a global, Group-wide compensation instrument for Deutsche Telekom AG and other participating Group entities that promotes mid- and long-term value creation in the Group, and therefore combines the interests of management and shareholders. The intention is to launch the plan annually on a revolving basis for five years, with each tranche of the plan to run for three years. A decision will be made each year on whether to re-launch the plan, as well as on the specific terms of the plan, in particular the performance targets. The MTIP 2004 came into effect on January 1, 2004, and will end upon the expiration of its three-year term on December 31, 2006. The MTIP 2005 came into effect on January 1, 2005, and will end upon the expiration of its three-year term on December 31, 2007.
The MTIP is a cash-based plan. A certain amount is established as an award to the beneficiaries by the respective employer, and this amount is paid out to the beneficiaries at the end of the plan, subject to the achievement of the two previously defined performance targets.
The first, absolute performance target is reached if, at the end of the term of the plan, i.e., after three years, Deutsche Telekom’s share price has risen by at least 30% since the beginning of the plan.
The second, relative, performance target is achieved if the total return of the T-Share has outperformed the Dow Jones Euro STOXX Total Return Index on a percentage basis during the term of the plan.
If both performance targets are achieved, then the total amount of the award is paid out; if only one performance target is achieved, 50% of the amount is paid out; and if neither performance target is achieved, no payment is made.
T-Mobile USA MTIP
T-Mobile USA’s MTIP is based on the same conditions as Deutsche Telekom AG’s MTIP.
T-Mobile USA LTIP
In addition to the MTIP, T-Mobile USA has established a performance cash plan as a Long-Term Incentive Plan (LTIP) on a revolving basis for the years 2004 through 2006, which is aimed at the top management, from vice presidents upwards. Additional customer growth and profit targets have been agreed for this group of persons.
T-Mobile UK MTIP
T-Mobile UK’s MTIP is also based on the same terms and conditions as Deutsche Telekom AG’s MTIP. In addition to the two performance targets in that plan, however, T-Mobile UK has introduced a third performance target for a defined group of participants, which is based on cash contribution (EBITDA less investments in intangible assets and property, plant and equipment). The third performance target can only be achieved after the two other performance targets have been achieved.
T-Online International AG MTIP
T-Online’s MTIP is also based on the same conditions as Deutsche Telekom AG’s MTIP, with the exception that performance is measured in terms of the development of T-Online’s shares and the TecDAX share index.
Magyar Telekom MTIP
Magyar Telekom’s MTIP is also based on the same terms and conditions as Deutsche Telekom AG’s MTIP, with the exception that performance is measured in terms of the development of Magyar Telekom’s shares and the Dow Jones EuroSTOXX Total Return Index.
A provision in the amount of EUR 25 million for the MTIPs linked to the development of the T-Share was reversed in the first quarter of 2006, due to a sustained shortfall in the performance of the T-Share, relative to the defined performance targets. Expenditures for the 2005 and 2006 LTIP at T-Mobile USA amounted to approximately EUR 10 million.
18
Note (7) Total financial liabilities
The components of total financial liabilities (which includes current and noncurrent financial liabilities) as of March 31, 2006 and 2005, and December 31, 2005, were as follows:
|
|
|
As of March 31, 2006 |
|
As of December 31, 2005 |
|
As of March 31, 2005 |
|
|
|
|
(millions of €) |
|
||||
|
Bonds |
|
39,696 |
|
37,255 |
|
42,275 |
|
|
Liabilities to banks |
|
2,447 |
|
2,227 |
|
3,121 |
|
|
Liabilities to non-banks from promissory notes |
|
641 |
|
645 |
|
656 |
|
|
Liabilities from derivatives |
|
549 |
|
678 |
|
1,143 |
|
|
Lease liabilities |
|
2,374 |
|
2,373 |
|
2,459 |
|
|
Liabilities arising from ABS transactions |
|
1,331 |
|
1,363 |
|
1,487 |
|
|
Other financial liabilities |
|
2,362 |
|
2,180 |
|
2,998 |
|
|
Total financial liabilities |
|
49,400 |
|
46,721 |
|
54,139 |
|
Note (8) Contingencies and other financial obligations
Contingencies and other financial obligations increased slightly during the first quarter of 2006, by EUR 0.3 billion to EUR 34 billion, compared to December 31, 2005. This increase was mainly a result of an increase in the level of purchase commitments. This was offset by a reduction in purchase commitments for interests in other companies in connection with the acquisition of gedas.
Note (9) Segment information
The following tables provide a financial summary of Deutsche Telekom’s strategic business areas, and Group Headquarters and Shared Services, for 2005, as well as for the first quarters of 2006 and 2005. In addition to the details of the segments, there is also a reconciliation line.
|
For the year ended |
|
Net |
|
Inter- |
|
Total |
|
Profit (loss) |
|
Share of |
|
Depreciation |
|
Impairment |
|
|
|
|
(millions of €) |
|
||||||||||||
|
Group |
|
59,604 |
|
— |
|
59,604 |
|
7,622 |
|
214 |
|
(10,291 |
) |
(2,206 |
) |
|
Mobile Communications |
|
28,531 |
|
921 |
|
29,452 |
|
3,005 |
|
133 |
|
(4,745 |
) |
(1,951 |
) |
|
Broadband/ Fixed Network |
|
21,731 |
|
4,304 |
|
26,035 |
|
5,142 |
|
53 |
|
(4,026 |
) |
(8 |
) |
|
Business Customers |
|
9,058 |
|
3,792 |
|
12,850 |
|
409 |
|
3 |
|
(885 |
) |
(11 |
) |
|
Group Headquarters & Shared Services |
|
284 |
|
3,221 |
|
3,505 |
|
(840 |
) |
(1 |
) |
(695 |
) |
(233 |
) |
|
Reconciliation |
|
— |
|
(12,238 |
) |
(12,238 |
) |
(94 |
) |
26 |
|
60 |
|
(3 |
) |
|
For the three months ended |
|
Net |
|
Inter- |
|
Total |
|
Profit (loss) |
|
Share of |
|
Depreciation |
|
Impairment |
|
|
|
|
(millions of €) |
|
||||||||||||
|
Group |
|
14,842 |
|
— |
|
14,842 |
|
2,318 |
|
32 |
|
(2,551 |
) |
(19 |
) |
|
|
|||||||||||||||