Telefonica Deutschland Holding AG

Quarterly Report • May 12, 2017

Interim Condensed Consolidated Financial Statements_ for the period 1January to 31March 2017

Interim Condensed Consolidated Financial Statements — Consolidated Statements of Financial Position_

2

Consolidated Statements of Financial Position_

	Assets (Euros in millions)	Notes	As of 31 March 2017	As of 31 December 2016
A)	Non-current assets		12,752	13,055
	Goodwill		1,932	1,932
	Other intangible assets	[5a]	6,047	6,215
	Property, plant and equipment	[5b]	4,101	4,217
	Trade and other receivables	[5c]	60	77
	Other financial assets		54	60
	Other non-financial assets	[5d]	132	128
	Deferred tax assets		427	427
B)	Current assets		2,141	2,246
	Inventories		91	85
	Trade and other receivables	[5c]	1,158	1,460
	Other financial assets		21	25
	Other non-financial assets	[5d]	260	63
	Cash and cash equivalents		612	613
	Total assets (A+B)		14,893	15,301

	Equity and Liabilities (Euros in millions)	Notes	As of 31 March 2017	As of 31 December 2016
A)	Equity		9,320	9,408
	Subscribed capital		2,975	2,975
	Additional paid-in capital		4,800	4,800
	Retained earnings		1,546	1,634
	Equity attributable to owners of the parent		9,320	9,408
B)	Non-current liabilities		2,599	2,637
	Interest-bearing debt	[5e]	1,720	1,721
	Trade and other payables	[5f]	16	17
	Provisions	[5g]	550	561
	Deferred income	[5f]	314	338
C)	Current liabilities		2,973	3,256
	Interest-bearing debt	[5e]	28	37
	Trade and other payables	[5f]	2,239	2,286
	Provisions	[5g]	148	190
	Other non-financial liabilities		54	79
	Deferred income	[5f]	504	664
	Total equity and liabilities (A+B+C)		14,893	15,301

Interim Condensed Consolidated Financial Statements — Consolidated Income Statements_

Consolidated Income Statements_

			1 January to 31 March
(Euros in millions)	Notes	2017	2016
Revenues	[6a]	1,771	1,858
Other income		28	31
Supplies		(585)	(629)
Personnel expenses		(155)	(173)
Other expenses		(669)	(707)
Operating income before depreciation and amortisation (OIBDA)		390	379
Depreciation and amortisation	[6b]	(481)	(540)
Operating income		(91)	(161)
Finance income		1	2
Exchange gains		0	1
Finance costs		(9)	(11)
Exchange losses		(0)	(1)
Net financial income/(expense)		(8)	(8)
Profit/(loss) before tax		(99)	(170)
Income tax		(0)	0
Profit/(loss) for the period		(99)	(170)
Profit/(loss) for the period attributable to owners of the parent		(99)	(170)
Profit/(loss) for the period		(99)	(170)
Earnings per share
Basic earnings per share in EUR		(0.03)	(0.06)
Diluted earnings per share in EUR		(0.03)	(0.06)

Interim Condensed Consolidated Financial Statements — Consolidated Statements of Comprehensive Income_

4

Consolidated Statements of Comprehensive Income_

			1 January to 31 March
(Euros in millions)	Notes	2017	2016
Profit/(loss) for the period		(99)	(170)
Total other comprehensive income/(loss)
Items that will not be reclassified to profit/(loss)		10	(35)
Remeasurement of defined benefit plans		10	(35)
Total other comprehensive income/(loss)		10	(35)
Total comprehensive income/(loss)		(89)	(204)
Total comprehensive income/(loss) for the period attributable to owners of the parent		(89)	(204)
Total comprehensive income/(loss)		(89)	(204)

Interim Condensed Consolidated Financial Statements — Consolidated Statements of Changes in Equity_

5

Consolidated Statements of Changes in Equity_

(Euros in millions)	Subscribed capital	Additional paid-in capital	Retained earnings	Equity attributable to owners of the parent	Equity
Financial position as of 1 January 2016	2,975	4,800	2,546	10,321	10,321
Profit/(loss) for the period	–	–	(170)	(170)	(170)
Total other comprehensive income/(loss)	–	–	(35)	(35)	(35)
Total comprehensive income/(loss)	–	–	(204)	(204)	(204)
Other movements1	–	–	1	1	1
Financial position as of 31 March 2016	2,975	4,800	2,343	10,117	10,117
Financial position as of 1 January 2017	2,975	4,800	1,634	9,408	9,408
Profit/(loss) for the period	–	–	(99)	(99)	(99)
Total other comprehensive income/(loss)	–	–	10	10	10
Total comprehensive income/(loss)	–	–	(89)	(89)	(89)
Other movements1	–	–	1	1	1
Financial position as of 31 March 2017	2,975	4,800	1,546	9,320	9,320

1 Share-based payments in accordance with IFRS 2. For further information, please refer to the consolidated financial statements for the year ended 31 December 2016 (Note 15, Share-Based Payments).

Interim Condensed Consolidated Financial Statements — Consolidated Statements of Cash Flows_

6

Consolidated Statements of Cash Flows_

			1 January to 31 March
(Euros in millions)	Notes	2017	2016
Cash flows from operating activities
Profit/(loss) for the period		(99)	(170)
Adjustments to profit/(loss)
Net financial income/(expense)		8	8
Gains on disposal of assets		(1)	0
Net income tax expense		(0)	0
Depreciation and amortisation	[6b]	481	540
Changes in working capital and others
Other non-current assets	[5a], [5b], [5c]	13	53
Other current assets	[5a], [5b], [5c]	100	(217)
Other non-current liabilities and provisions	[5d], [5e], [5f]	(16)	(6)
Other current liabilities and provisions	[5d], [5e], [5f]	(214)	(11)
Others
Taxes paid		(0)	–
Interest received		4	4
Interest paid		(18)	(22)
Cash flows from operating activities		257	180
Cash flows from investing activities
Proceeds from disposals of property, plant and equipment and intangible assets		1	(0)
Payments on investments relating to mobile phone frequency auctions		–	(1)
Payments on investments in property, plant and equipment and intangible assets	[5a]	(267)	(197)
Proceeds from financial assets		11	–
Payments for financial assets		(2)	(4)
Cash flows from investing activities		(258)	(201)
Cash flows from financing activities
Proceeds from interest-bearing debt	[5d]	–	250
Repayment of interest-bearing debt1	[5d]	(0)	(275)
Cash flows from financing activities		(0)	(25)
Net increase/(decrease) in cash and cash equivalents		(1)	(47)
Cash and cash equivalents at the beginning of the period		613	533
Cash and cash equivalents at the end of the period		612	486

1 Payments for the repayment of interest-bearing debt included payments related to finance leases of EUR 0.1 million for the three months ended 31 March 2017 and EUR 64 million for the three months ended 31 March 2016.

Condensed Notes to the Interim Condensed Consolidated Financial Statements_ for the period 1January to 31March 2017

The interim condensed consolidated financial statements (hereinafter "interim condensed consolidated financial statements") of Telefónica Deutschland Holding AG have been prepared for the three months ended 31 March 2017 and are comprised of Telefónica Deutschland Holding AG (also referred to as "Telefónica Deutschland") and its subsidiaries as well as any joint operations (together referred to as the "Telefónica Deutschland Group" or the "Group").

Telefónica Deutschland Holding AG is a stock corporation (AG) incorporated under German law.

The company is listed on the regulated market of the Frankfurt Stock Exchange. The German Securities Identification Number (WKN) is A1J5RX, the ISIN (International Securities Identification Number) is DE000A1J5RX9.

As of 31 March 2017, 21.32% of the shares were in free float. 69.22% were held by Telefónica Germany Holdings Limited, Slough, United Kingdom (Telefónica Germany Holdings Limited), an indirect wholly owned subsidiary of Telefónica, S.A., Madrid, Spain (Telefónica, S.A.). The remaining 9.46% were held by Koninklijke KPN N.V., The Hague, Netherlands (KPN).

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

As of 31 March 2017, the companies included in the interim condensed consolidated financial statements of the Telefónica Deutschland Group were organised as shown in the following organisation chart:

Unless otherwise stated, the ownership interests are 100%.

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

10

In the first quarter of the financial year 2017, Telefónica Germany Customer Services GmbH changed its name to TGCS Rostock GmbH, TGCS Bremen Contact Center GmbH to TGCS Bremen GmbH, TGCS Hamburg Contact Center GmbH to TGCS Hamburg GmbH, TGCS Nürnberg Contact Center GmbH to TGCS Nürnberg GmbH, E-Plus Customer Operations GmbH to TGCS Berlin GmbH, E-Plus Financial Services GmbH to TFS Potsdam GmbH and E-Plus Customer Support GmbH to TGCS Essen & Potsdam GmbH.

2. Significant Events and Transactions during the Reporting Period

Shareholders' Meeting

On 28 March 2017, the Management Board of Telefónica Deutschland convened the Shareholders' Meeting for the financial year 2016 on 9 May 2017. The agenda included the Supervisory Board election of all shareholder representatives. The Supervisory Board proposed that current shareholder representatives be re-elected. For further information regarding the Shareholders' Meeting, refer to Note 9, Subsequent Events.

Shareholder structure

Our indirect majority shareholder, Telefónica, S.A., announced on 13 March 2017 that it had entered into an agreement with Koninklijke KPN NV ("KPN") to swap shares in Telefónica, S.A., for 6% of the shares in Telefónica Deutschland previously held by KPN. This transaction has already taken place and thus, the new shareholder structure of Telefónica Deutschland as of 31 March 2017 is as follows:

1 Telefónica Germany Holdings Limited is a 100% subsidiary of Telefónica, S.A.

3. Basis of Preparation

The interim condensed consolidated financial statements of Telefónica Deutschland Holding AG are prepared in accordance with International Accounting Standard (IAS) 34 – Interim Financial Reporting. Accordingly, the interim condensed consolidated financial statements do not contain all of the information and disclosures required for a complete set of consolidated financial statements, and should therefore be read in conjunction with the consolidated financial statements for the year ended 31 December 2016 (see Note 3, Basis of Preparation).

These interim condensed consolidated financial statements as of 31 March 2017 are unaudited.

Functional currency and presentation currency

The interim condensed consolidated financial statements are presented in Euros, which is the functional currency of the Telefónica Deutschland Group.

Unless otherwise stated, the amounts in these interim condensed consolidated financial statements are presented in millions of Euros (EUR million) and are rounded according to established commercial principles. Therefore, recalculations may slightly differ from the totals shown in the respective tables.

Other

The preparation of the interim condensed consolidated financial statements requires management to establish accounting policies that contain estimates and assumptions that affect the amounts reported in the interim condensed consolidated financial statements and accompanying notes. A significant change in the facts and circumstances on which these judgements, estimates and assumptions are based could materially affect the Telefónica Deutschland Group's net assets, financial position and result of operations.

During the three months ended 31 March 2017, management believes there have been no significant changes to the items that we disclosed within our critical accounting policies and estimates in Note 4, Accounting Policies in our consolidated financial statements for the year ended 31 December 2016.

For further information, please refer to the consolidated financial statements for the year ended 31 December 2016 (Note 4, Accounting Policies).

Comparative information

The condensed consolidated statements of financial position presented in these interim condensed consolidated financial statements relate to information as of 31 March 2017, which is compared to the information as of 31 December 2016.

The condensed consolidated income statements and the condensed consolidated statements of comprehensive income relate to the three months ended 31 March 2017 and 31 March 2016. The condensed consolidated statements of cash flows and the condensed consolidated statements of changes in equity compare the three months ended 31 March 2017 to the three months ended 31 March 2016.

Seasonal business activity

Previous earnings performance has provided no indication that the business activity is subject to material seasonal fluctuations.

4. Accounting Policies

The significant estimates, assumptions and judgements made by the management in preparing the interim condensed consolidated financial statements of the Telefónica Deutschland Group do not significantly differ from those included in the consolidated financial statements for the year ended 31 December 2016 (see Note 4, Accounting Policies).

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

The Telefónica Deutschland Group has not applied the following new and revised standards and interpretations that have been issued but were not yet effective:

Standards, interpretations and amendments		Mandatory application for financial years beginning on or after
Amendments to IAS 12	Recognition of Deferred Tax Assets for Unrealised Losses	1 January 20171
Amendments to IAS 7	Disclosure Initiative	1 January 20171
Annual Improvements 2014 – 2016 Cycle	Amendments to IFRS 12	1 January 20171
Annual Improvements 2014 – 2016 Cycle	Amendments to IFRS 1 and IAS 28	1 January 20181
Amendments to IAS 40	Transfers of Investment Property	1 January 20181
IFRIC Interpretation 22	Foreign Currency Transactions and Advance Consideration	1 January 20181
Amendments to IFRS 2	Classification and Measurement of Share-based Payment Transactions	1 January 20181
IFRS 15	Revenue from Contracts with Customers	1 January 2018
Clarifications to IFRS 15	Revenue from Contracts with Customers	1 January 20181
IFRS 9	Financial Instruments	1 January 2018
IFRS 16	Leases	1 January 20191
Amendments to IFRS 10 and IAS 28	Sale or Contribution of Assets between an Investor and its Associate or Joint Venture	2

1 Endorsement by EU still outstanding, information for first-time adoption according to IASB.

2 First-time adoption postponed indefinitely according to IASB resolution of 17 December 2015.

For a comprehensive description of the new standards, amendments to standards and interpretations applicable for the Group, please refer to the disclosures in the consolidated financial statements for the year ended 31 December 2016 (see Note 4, Accounting Policies). An assessment of the expected impact on the net assets, financial position and result of operations of the Group is provided therein; the assessment continues to apply to the interim consolidated financial statements as of 31 March 2017.

5. Selected Notes to the Condensed Consolidated Statements of Financial Position

a) Other intangible assets

The other intangible assets are comprised of the following:

(Euros in millions)	Service concession arrangements and licences	Customer base	Software	Brand names	Others	Construction in progress/ prepayments on intangible assets	Other intangible assets
Net book value
As of 31 December 2016	2,249	2,213	466	62	19	1,206	6,215
As of 31 March 2017	3,004	2,131	482	58	18	354	6,047

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

b) Property, plant and equipment

Property, plant and equipment included the following:

(Euros in millions)	Land and buildings	Plant and machinery	Furniture, tools and other items	PP&E in progress	Property, plant and equipment
Net book value
As of 31 December 2016	174	3,841	87	114	4,217
As of 31 March 2017	161	3,737	85	118	4,101

c) Trade and other receivables

The breakdown of this item included in the consolidated statements of financial position is as follows:

	As of 31 March 2017		As of 31 December 2016
(Euros in millions)	Non-current	Current	Non-current	Current
Trade receivables	66	1,284	84	1,591
Receivables from related parties	–	39	–	42
Other receivables	–	20	–	19
Allowances for bad debts	(5)	(186)	(7)	(192)
Trade and other receivables	60	1,158	77	1,460

d) Other non-financial assets

This item of the consolidated statements of financial position consists of:

	As of 31 March 2017		As of 31 December 2016
(Euros in millions)	Non-current	Current	Non-current	Current
Prepayments	132	255	128	61
Prepayments to related parties	–	4	–	1
Tax receivables for indirect taxes	–	1	–	1
Other non-financial assets	132	260	128	63

The non-financial assets primarily relate to prepayments for rent for antenna locations.

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

e) Interest-bearing debt

Interest-bearing debt consists of the following:

		As of 31 March 2017	As of 31 December 2016
(Euros in millions)	Non-current	Current	Non-current	Current
Bonds	1,106	6	1,107	12
Promissory notes and registered bonds	299	0	299	4
Loans	298	0	298	0
Finance leases	17	15	17	15
Contribution and compensation obligations	–	6	–	6
Interest-bearing debt	1,720	28	1,721	37

Loans

The Group entered into a EUR 750 million revolving syndicated loan facility (revolving credit facility or RCF) on 22 March 2016. The maturity of this syndicated loan facility was extended for the first time in February 2017 by one year to March 2022 and includes the option to renew for one additonal year through March 2023. Due to the long-term nature of the committed line of credit, the relevant loans from the syndicated loan facility are included in non-current financial liabilities. As of 31 March 2017, EUR 50 million (31 December 2016: EUR 50 million) of the revolving credit facility were outstanding.

On 13 June 2016, the Telefónica Deutschland Group signed a EUR 450 million financial agreement with the European Investment Bank (EIB). EUR 250 million of the facility with a fixed interest rate had been drawn as of 31 March 2017 (31 December 2016: EUR 250 million). The funds are intended to finance the consolidation, modernisation and expansion of the Telefónica Deutschland Group's mobile network after the acquisition of the E-Plus Group. The funds already provided by the EIB are due by December 2024 and will be repaid annually in equal instalments of EUR 41.67 million starting in December 2019. The remaining credit facility may be drawn on via floating- or fixed-rate tranches. The interest rates of the fixed-rate tranches are determined according to the principles defined by the bodies of the European Investment Bank for loans of the same type.

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

f) Trade and other payables and deferred income

The composition of trade and other payables and deferred income is as follows:

		As of 31 March 2017	As of 31 December 2016
(Euros in millions)	Non-current	Current	Non-current	Current
Trade payables against third parties	–	832	–	897
Accruals	14	839	15	783
Payables to related parties	–	403	–	425
Trade payables	14	2,074	15	2,105
Other creditors non-trade	2	61	2	81
Other payables to related parties	–	43	–	41
Other payables	–	61	–	58
Other payables	2	165	2	181
Trade and other payables	16	2,239	17	2,286
Deferred income	314	504	338	664

Current trade payables to third parties include the present value of the outstanding payment obligations from the mobile phone frequency auction in the amount of EUR 110 million.

Accruals relate mainly to outstanding invoices for goods and services and for non-current assets.

Other creditors non-trade mainly consists of liabilities due to personnel.

The other liabilities are mainly comprised of debtors with credit balances.

Deferred income primarily includes advanced payments received for prepaid credits and other advanced payments received for future service performance. It further includes the payment received from Drillisch in connection with the Mobile Bitstream Access Mobile Virtual Network Operator (MBA MVNO) agreement.

Other advanced payments received for future service performance and the payment received from Drillisch are presented by maturity according to their expected utilisations. Advanced payments received for prepaid credits are exclusively classified as current.

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

g) Provisions

Provisions are recorded at the following amounts:

	As of 31 March 2017		As of 31 December 2016
(Euros in millions)	Non-current	Current	Non-current	Current
Pension obligations	98	–	106	–
Restructuring	19	91	20	127
Asset retirement obligations	397	48	400	57
Other provisions	36	9	35	5
Provisions	550	148	561	190

The Telefónica Deutschland Group's provisions have decreased from 31 December 2016, particularly due to lower pension obligations, lower restructuring obligations and lower asset retirement obligations. The change in restructuring obligations mainly results from the planned utilisation, while the reduction of the pension obligations and the asset retirement obligations is primarily attributable to the current interest rate trend.

For further information, please refer to the consolidated financial statements for the year ended 31 December 2016 (see Note 5.12, Provisions).

6. Selected Explanatory Notes to the Condensed Consolidated Income Statements

a) Revenues

Revenues are comprised of the following:

	1 January to 31 March
(Euros in millions)	2017	2016
Rendering of services	1,515	1,589
Other revenues	256	268
Revenues	1,771	1,858

Revenues from the rendering of services include mobile service revenues as well as revenues from fixed line/DSL business. Other revenues consist of revenues from the sale of handsets and other revenues.

None of the Telefónica Deutschland Group's customers account for more than 10% of total revenues.

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

The breakdown of revenues from mobile business and fixed line/DSL business is shown in the following table:

	1 January to 31 March
(Euros in millions)	2017	2016
Mobile business	1,545	1,603
Mobile service revenues	1,292	1,336
Handset revenues	252	267
Fixed line/DSL business	223	253
Other revenues	4	2
Revenues	1,771	1,858

b) Depreciation and amortisation

Depreciation and amortisation are as follows:

		1 January to 31 March
(Euros in millions)	2017	2016
Depreciation of property, plant and equipment	231	235
Amortisation of intangible assets	250	305
Depreciation and amortisation	481	540

7. Measurement Categories of Financial Assets and Financial Liabilities

The following tables summarise the fair value of all financial assets and financial liabilities of the Telefónica Deutschland Group in accordance with the measurement categories of IAS 39 and the requirements of IFRS 13.

As of 31 March 2017, the carrying amount of the financial assets and financial liabilities represented an appropriate approximation for the fair value (with the exception of the portion of the bonds that is not hedged – see below).

For further information, please refer to the consolidated financial statements for the year ended 31 December 2016 (see Note 10, Measurement Categories of Financial Assets and Financial Liabilities).

In addition, the tables show the classification of the financial assets and financial liabilities based on the lowest level of input that is significant to the fair value measurement. The fair value hierarchy prioritises the inputs into three levels that may be used to measure fair value:

• Level 1: Primary market value: quoted prices (unadjusted) in active markets for identical assets and liabilities;
• Level 2: Significant other observable input parameters: inputs observable, either directly or indirectly, which are subject to certain limitations;
• Level 3: Significant unobservable input parameters: all unobservable inputs, which might include the entity's own data as a starting point and which should be adjusted if reasonably available information indicates that other market participants would use different data.

Interim Condensed Consolidated Financial Statements — Condensed Notes to the Interim Condensed Consolidated Financial Statements_

As of 31 March 2017

Financial assets

(Euros in millions)	Financial assets at fair value through profit or loss	Available for-sale financial assets	Held-to maturity financial assets	Loans and receiva bles	Level 1 (Quoted prices)	Level 2 (other directly observable market inputs)	Level 3 (inputs not based on observable market data)	Total carrying amount	Total fair value	Not in scope of IFRS 7
Non-current trade and other receivables (Note 5c)	–	–	–	60	–	–	–	60	60	–
Other non-current financial assets	11	23	–	11	–	11	23	44	44	10
Current trade and other receivables (Note 5c)	–	–	–	1,157	–	–	–	1,157	1,157	1
Current other financial assets	1	–	–	19	–	1	–	21	21	–
Cash and cash equivalents	–	–	–	612	–	–	–	612	612	–
Total	12	23	–	1,859	–	12	23	1,894	1,894	11

As of 31 December 2016

										Financial assets
							Measurement hierarchy
(Euros in millions)	Financial assets at fair value through profit or loss	Available for-sale financial assets	Held-to maturity financial assets	Loans and receivables	Level 1 (Quoted prices)	Level 2 (Other directly observable market inputs)	Level 3 (Inputs not based on observable market data)	Total carrying amount	Total fair value	Not in scope of IFRS 7
Non-current trade and other receivables (Note 5c)	–	–	–	77	–	–	–	77	77	–
Other non-current financial assets	12	21	–	18	–	12	21	51	51	9
Current trade and other receivables (Note 5c)	–	–	–	1,458	–	–	–	1,458	1,458	1
Current other financial assets	2	–	–	23	–	2	–	25	25	–
Cash and cash equivalents	–	–	–	613	–	–	–	613	613	–
Total	14	21	–	2,189	–	14	21	2,224	2,224	11

As of 31 March 2017

Financial liabilities

	Measurement hierarchy
(Euros in millions)	Liabilities at fair value through profit or loss	Liabilities at amortised cost	Finance leases	Level 1 (Quoted prices)	Level 2 (Other directly observable market inputs)	Level 3 (Inputs not based on observable market data)	Total carrying amount	Total fair value	Not in the scope of IFRS 7
Non-current interest-bearing debt (Note 5e)	359	1,344	17	–	359	–	1,720	1,771	–
Non-current trade and other payables (Note 5f)	–	14	–	–	–	–	14	14	2
Current interest bearing debt (Note 5e)	–	13	15	–	–	–	28	28	–
Current trade and other payables (Note 5f)	–	2,191	–	–	–	–	2,191	2,191	48
Total	359	3,562	32	–	359	–	3,953	4,004	50

As of 31 December 2016

									Financial liabilities
						Measurement hierarchy
(Euros in millions)	Liabilities at fair value through profit or loss	Liabilities at	amortised cost Finance leases	Level 1 (Quoted prices)	Level 2 (Other directly observable market inputs)	Level 3 (Inputs not based on observable market data)	Total carrying	amount Total fair value	Not in the scope of IFRS 7
Non-current interest-bearing debt (Note 5e)	360	1,343	17	–	360	–	1,721	1,778	–
Non-current trade and other payables (Note 5f)	–	15	–	–	–	–	15	15	2
Current interest bearing debt (Note 5e)	–	22	15	–	–	–	37	37	–
Current trade and other payables (Note 5f)	–	2,218	–	–	–	–	2,218	2,218	68
Total	360	3,599	32	–	360	–	3,991	4,048	70

At 31 March 2017, EUR 11 million of the non-current financial assets and EUR 1 million of the current financial assets are classified as financial assets at fair value through profit or loss. These relate to swap agreements in connection with the bonds.

In addition, EUR 23 million of the non-current financial assets are classified as available-for-sale financial assets. They relate to investments in start-ups and are classified as level 3, because reliable measurement using a market price is not possible. These entities generate start-up losses, and the existing business plans contain numerous unpredictable assumptions. Therefore, their fair value is determined based on IAS 39.46c at amortised cost. The increase of EUR 1 million relates only to investments in start-up companies as there were no gains or losses recognised in the current period.

All other financial assets as of 31 March 2017 are categorised as loans and receivables.

Please refer to the respective notes for further information. At 31 March 2017, EUR 359 million of the noncurrent interest-bearing debt is classified as financial liabilities at fair value through profit or loss and relates to the fair value hedges of the bonds. The fair value hedges include one interest rate swap each.

The fair values of the bonds (non-current interest-bearing debt) are determined based on primary market values (unadjusted quoted prices in active markets).

The non-current and current trade and other payables are classified as financial liabilities at amortised cost.

Please refer to the respective notes for further information.

8. Contingent Assets and Liabilities

The Telefónica Deutschland Group could be subject to claims or other proceedings arising in the ordinary course of business. The possible effects are of minor significance to the Group's net assets, financial position and result of operations.

For further information, please refer to the consolidated financial statements as of 31 December 2016 (see Note 18, Contingent Assets and Liabilities).

1. Subsequent Events

Shareholders' Meeting

The Shareholders' Meeting of Telefónica Deutschland for the financial year 2016 took place on 9 May 2017. In addition to presenting the annual financial statements and consolidated financial statements of Telefónica Deutschland, the resolutions adopted by the Shareholders' Meeting included a dividend payment of EUR 0.25 per entitled share, EUR 743,638,748.25 in total.

There were no other reportable events subsequent to the reporting period.

Munich, 12 May 2017

Telefónica Deutschland Holding AG

The Management Board

Markus Haas Rachel Empey