Deutsche Telekom AG - The 2009 financial year

Deutsche Telekom’s finance management ensures the Group’s ongoing solvency and hence its financial equilibrium. The fundamentals of Deutsche Telekom’s finance policy are established each year by the Board of Management and overseen by the Supervisory Board. Group Treasury is responsible for implementing the finance policy and for ongoing risk management. The primary instruments used for the Group’s medium- to long-term financ- ing are bonds and medium-term notes (MTNs). Deutsche Telekom issued bonds for EUR 3.1 billion, MTNs for EUR 2.0 billion and promissory notes for EUR 0.2 billion. The individual terms and conditions for the most important financial instruments are explained in the notes to the consoli- dated financial statements under Note 9. To guarantee the solvency and financial flexibility of Deutsche Telekom at all times, a liquidity reserve in the form of credit lines and, where necessary, cash is maintained. For this purpose, the Company has entered into stan- dardized bilateral credit agreements with 24 banks amounting to a total of EUR 14.4 billion. The bilateral credit agreements have an original maturity of 36 months and can, after each period of 12 months, be extended by a further 12 months to renew the maturity of 36 months. No drawdowns under these agreements had been made as of December 31, 2009. Net debt increased by EUR 2.8 billion year-on-year to EUR 40.9 billion, primarily as a result of the first-time full consolidation of OTE in February 2009 and the exercise of the Hellenic Republic’s put option I for a further 5 percent of the shares in OTE effective July 31, 2009, dividend payments, and the acquisition of Zapp. The positive free cash flow of EUR 7.0 billion had a decreasing effect on net debt. The rating of Deutsche Telekom AG. as of Dec. 31 of each year Standard & Poor’s Moody’s Fitch Long-term rating 2007 A– A3 A– 2008 BBB+ Baa1 A– 2009 BBB+ Baa1 BBB+ Short-term rating A–2 P–2 F2 Outlook stable stable stable Net debt.* millions of €, as of Dec. 31 of each year 2009 2008 2007 Bonds 38,508 34,302 32,294 Liabilities to banks 4,718 4,222 4,260 Liabilities to non-banks from promissory notes 1,057 887 690 Derivative financial liabilities 924 1,053 977 Lease liabilities 1,909 2,009 2,139 Other financial liabilities 1,001 974 502 Gross debt 48,117 43,447 40,862 Cash and cash equivalents 5,022 3,026 2,200 Available-for-sale/held-for-trading financial assets 162 101 75 Derivative financial assets 1,048 1,598 433 Other financial assets 974 564 918 Net debt 40,911 38,158 37,236 * Deutsche Telekom considers “net debt” to be an important measure for investors, analysts, and rating agencies. Although many of Deutsche Telekom’s competitors use this measure, its definition may vary from one company to another. 75Group management report Development of business in the Group