Telekom Slovenije

Annual Report (ESEF) • Apr 22, 2022

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2021-12-31 ifrs-full:SeparateMember ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember 5493003GE7UJGPQAMN79 2019-12-31 ifrs-full:SeparateMember ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember 5493003GE7UJGPQAMN79 2020-01-01 2020-12-31 ifrs-full:SeparateMember ifrs-full:ReserveOfRemeasurementsOfDefinedBenefitPlansMember 5493003GE7UJGPQAMN79 2020-12-31 ifrs-full:SeparateMember 5493003GE7UJGPQAMN79 2021-01-01 2021-12-31 ifrs-full:SeparateMember 5493003GE7UJGPQAMN79 2021-12-31 ifrs-full:SeparateMember 5493003GE7UJGPQAMN79 2019-12-31 ifrs-full:SeparateMember 5493003GE7UJGPQAMN79 2020-01-01 2020-12-31 ifrs-full:SeparateMember iso4217:EUR iso4217:EUR xbrli:shares Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 Integrated reporting on sustainable development indicators in accordance with the GRI Standards Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 Contents 1 THE TELEKOM SLOVENIJE GROUP IN 2021 ........................................................................................... 1 1.1 About the Telekom Slovenije Group .............................................................................................. 1 1.2 Operating highlights of the Telekom Slovenije Group in 2021 ................................................... 4 1.3 Letter from the President of the Management Board................................................................... 9 1.4 Statement of responsibility of the Management Board ............................................................. 12 1.5 Report of the Supervisory Board ................................................................................................. 13 1.6 Markets and companies of the Telekom Slovenije Group ......................................................... 16 1.7 Commitments and membership in associations ........................................................................ 19 1.8 Development strategy and plans ................................................................................................. 20 1.8.1 Vision, mission and values ................................................................................. 20 1.8.2 Business model ................................................................................................... 21 1.8.3 Strategic Business Plan of the Telekom Slovenije Group until 2026, including the plan for 2022 .................................................................................................. 23 1.8.4 Strategic projects ................................................................................................ 26 1.8.5 Achievement of planned objectives by the Telekom Slovenije Group in 2021 ............................................................................................................................... 27 1.9 Significant events and achievements in 2021 ............................................................................ 31 1.10 Corporate governance statement ................................................................................................ 33 1.10.1 Corporate Governance Policy ............................................................................ 33 1.10.2 Statement of compliance with the Code ........................................................... 34 1.10.3 Management and supervisory bodies ............................................................... 36 1.10.4 Other explanations in accordance with the Companies Act ........................... 51 1.11 Share trading and ownership structure ...................................................................................... 54 2 BUSINESS REPORT ................................................................................................................................. 59 2.1 Financial results ............................................................................................................................ 59 2.2 Financial performance of the Telekom Slovenije Group ........................................................... 62 2.3 Investments in fixed assets .......................................................................................................... 64 2.4 Risk management .......................................................................................................................... 65 2.5 Compliance, competition protection and auditing ..................................................................... 76 2.5.1 Compliance and anti-corruption ........................................................................ 76 2.5.2 Competition protection and proceedings before the courts and other bodies ............................................................................................................................... 80 2.5.3 Auditing ................................................................................................................ 81 2.5.4 Regulation of electronic communications ........................................................ 82 2.6 Business environment and trends in the sector ........................................................................ 84 2.6.1 Impact of the macroeconomic environment on operations ............................ 84 2.6.2 Comparison of the Slovenian telecommunications sector with the EU ........ 85 2.7 Marketing and sales ...................................................................................................................... 89 2.7.1 Market and market shares in key service segments ........................................ 89 2.7.2 Management of the portfolio of Telekom Slovenije’s brands ......................... 95 2.7.3 Sales of the Telekom Slovenije Group .............................................................. 98 2.7.4 Market communication ...................................................................................... 107 2.8 Network, technologies and IT ..................................................................................................... 110 2.8.1 Development of networks, services and projects .......................................... 110 2.8.2 Access networks ............................................................................................... 112 2.8.3 ICT and network services ................................................................................. 114 2.9 Sustainable operations ............................................................................................................... 116 2.9.1 About the annual report .................................................................................... 116 2.9.2 Inclusion and participation of stakeholders ................................................... 123 2.9.3 Social environment ............................................................................................ 127 2.9.4 Users ................................................................................................................... 129 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 2.9.5 Employees .......................................................................................................... 136 2.9.6 Quality management systems .......................................................................... 150 2.9.7 Environmental impact ....................................................................................... 153 2.9.8 Supply chain ...................................................................................................... 163 2.9.9 Protecting the Company, networks, systems and services .......................... 165 2.10 Content according to GRI Reporting Standards ...................................................................... 167 2.11 Sustainability report assurance statement ............................................................................... 179 3 ACCOUNTING REPORT OF THE TELEKOM SLOVENIJE GROUP AND TELEKOM SLOVENIJE, D. D. FOR 2021 ................................................................................................................................................. 181 3.1 Financial statements of the Telekom Slovenije Group and Telekom Slovenije .................... 182 3.2 Notes to the consolidated financial statements of the Telekom Slovenije Group and the separate financial statements of Telekom Slovenije .............................................................. 190 3.3 Independent auditor’s report for the Telekom Slovenije Group and Telekom Slovenije ..... 266 4 APPENDIX ................................................................................................................................................ 274 4.1 Telekom Slovenije Group companies ........................................................................................ 274 4.2 Abbreviations of technical terms ............................................................................................... 276 4.3 Alternative performance measures ........................................................................................... 280 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 1 1 THE TELEKOM SLOVENIJE GROUP IN 2021 1.1 About the Telekom Slovenije Group 1 Telekom Slovenije, d. d. (hereinafter: Telekom Slovenije) connects users and simplifies their lives, and ensures security through a range of the most advanced ICT services and solutions. As the leading Slovenian provider of communication solutions, Telekom Slovenije continuously strives for the development and introduction of new innovative technologies, facilitates the connectivity of users in the best network in Slovenia and provides them the most advanced services and an excellent user experience. Telekom Slovenije manages the largest and fastest network that, according to users, is also the best and most reliable. In addition to the national operator in Slovenia, the Telekom Slovenije Group is also present through its subsidiaries in Kosovo, Croatia, Bosnia and Herzegovina, Serbia, Montenegro, North Macedonia and Germany. The Telekom Slovenije Group manages and markets a backbone network in South-East Europe. The activities of the Telekom Slovenije Group comprise: x fixed and mobile communication services, and ICT solutions, x digital and multimedia content and services, x system integration and cloud computing services, x the development and implementation of solutions for managing business content, and tools for managing and monitoring operations, x the construction and maintenance of telecommunication networks, x cyber security and the Internet of Things (IoT), x other services, such as financial services, eCare solutions, insurance, smart home, city, community and industry solutions, and e-mobility, and x the preservation of natural and cultural heritage in the Sečovlje Salina Nature Park. Company: Telekom Slovenije, d. d. Registered office: Ljubljana Address: Cigaletova ulica 15, 1000 Ljubljana Registration number: 5014018000 VAT ID number: SI98511734 Entry in the companies register: 1/24624/00, Ljubljana District Court Number of shares: 6,535,478 Ticker symbol of no-par-value shares: TLSG Telephone: +386 1 234 10 00 Website: https://www.telekom.si/en Email: info@telekom.si LinkedIn: telekom-slovenije Facebook: TelekomSlovenije Instagram: Telekom_Slovenije Twitter: @TelekomSlo YouTube: TelekomSlovenije The shares of Telekom Slovenije are listed on the prime securities market of the Ljubljana Stock Exchange. See section 1.11 Share trading and ownership structure for more information. Telekom Slovenije Group companies See sections 1.6 Markets and companies of the Telekom Slovenije Group and 4.1 Telekom Slovenije Group companies for more information. Contacts for investors, shareholders and other interested users ir@telekom.si and skupscina@telekom.si Contact for information regarding the annual report and sustainable development report 2 Telekom Slovenije, d. d., Cigaletova ulica 15, 1000 Ljubljana Corporate Communications pr@telekom.si 1 GRI GS 102-1, GS 102-3, GRI 102-5 2 GRI GS 102-53 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 2 Key brands of Telekom Slovenije Group companies 3 Company name Description Telekom Slovenije is a corporate brand. It is used for communication with all stakeholder groups (users, investors, business partners, suppliers, employees and the media). The Company manages the following brands: NEO – a platform for smart living that links the best solutions for home and entertainment in one place. VALÚ – a smart wallet that allows users to enjoy a free, mobile lifestyle to the fullest extent. IZI – a brand that addresses young and less demanding users for whom a contemporary prepaid offer is important. TSmedia is a corporate brand. The Company manages the following brands: Siol.net – the leading Slovenian digital media. Najdi.si – an access point to the Slovenian web. TIS – the Slovenian telephone directory. 1188 – value-added call centre services. ADsolution – a brand covering production services. Bizi.si – a business directory. Avtenta is a corporate brand. The company covers medium -sized and large corporations and public institutions in Slovenia and the wider region. It combines advanced and verified business solutions for the optimisation and improvement of the efficiency of companies, organisations and public administration. GVO is a corporate brand. The company provides comprehensive and environmentally friendly solutions in the areas of project design, surveying and the construction, management and maintenance of telecommunications networks. 3 GRI GS 102-2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 3 Company name Description Piranske soline is a corporate brand. The Company manages the following brands: Solnce – a food line. Lepa Vida – a cosmetic line and the Thalasso Spa of the same name. SSNP (Sečovlje Salina Nature Park) – a park responsible for preserving nature and maintaining exceptional natural and cultural values. TSinpo is the corporate brand of a disabled workers’ company. The company primarily operates in the areas of support services and the manufacture of cardboard sleeves. IPKO is a corporate brand in Kosovo. The company provides telecommunication services. Its portfolio includes mobile and fixed telephony, internet and cable TV services. Hej! – covers the segment of young users. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 4 1.2 Operating highlights of the Telekom Slovenije Group in 2021 4 Challenges, opportunities and response to the COVID-19 pandemic We ensured the smooth functioning of networks and the safety of employees For the smooth and continuous functioning of telecommunication networks in extraordinary circumstances, such as the COVID-19 pandemic, we have in place a certified business continuity management system through which we responded rapidly and effectively to the need to change processes. → We continued to invest a great deal of effort in improving the stability of networks and coverage by the 4G and 5G networks, the expansion of the necessary capacities, support for remote work, and the adaptation of work methods in call centres and Telekom centres. For more information, see section 2.8 Network, technologies and IT. → At all Group companies, we carried out an additional quarterly risk assessment of the impact of COVID-19, which is separate from the general risk assessment. Group companies regularly monitor the impact of COVID- 19 and implement control-preventive measures. For more information, see section 2.4 Risk management. → We ensured the smooth functioning of work processes and the safety of employees. We organised remote work for employees where feasible. We adopted strict protective measures and provided the necessary equipment to protect advisers and field technicians. For more information, see section 2.9.5 Employees. x Improved user experience through enhanced digital operations and an expanded portfolio Remote work and the increased scope of contactless operations with users continued due to measures in connection with the epidemic. We provided users an increased number of voice, data and video services, and adapted the portfolio. We thus improved their satisfaction and the user experience. → We introduced new services for residential and business users, including cyber security services, and expanded the offer in the Online Shop. → We upgraded smart home, cities, factories and industry solutions. → We improved the Customer Satisfaction Index (CSI) amongst the users of mobile and fixed services by 2 percentage points. Online shoppers recognised purchases in the Loyalty Programme as the simplest online instalment purchases in the country. For more information, see section 2.7.3 Sales of the Telekom Slovenije Group. Responsibility to the environment and society remains our policy In accordance with strategic policies, we incorporate sustainability principles in business processes, products, services and content to the greatest extent possible. This has not changed during the COVID-19 pandemic. → Parents and their children spend an increasing amount of time online. For that reason, we offered the Varen splet (Safe Web) solution for their protection and safe internet use. → We continuously provide users with special needs the appropriately adapted services and terminal equipment. The eCare service for safer living at home is available to the elderly and their family members. The number of Slovenian municipalities that co-finance the aforementioned service is growing in the scope of the Safe and Connected at Home project. For more information, see section 2.9.4 Users. → We have supported humanitarian, cultural, environmental, educational and scientific projects and institutions, as well as Slovenian athletes and sporting organisations for many years as a sponsor or donator. We earmarked EUR 1.999 million for those purposes in 2021. For more information, see section 2.9.3 Social environment. → Electricity accounts for the highest proportion of energy sources that we use. We reduced electricity consumption at Telekom Slovenije by 1.16%. For more information, see section 2.9.7 Environmental impacts. → To mark the 30th anniversary of mobile telephony in Slovenia, we invited citizens to bring their old mobile phones to points of sale. From there, we will ensure that they are recycled in an environmentally friendly manner. For more information, see section 2.9.7 Environmental impacts. → With our partner ELES, we developed the intelligent management of charging stations with advanced software that ensures the remote, multi-level management of charging power. These solutions contribute to the reduction of CO 2 emissions and are in line with the green goals of the European Union for the decarbonisation of society. 4 GRI GS 201-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 5 Financial indicators for the Telekom Slovenije Group, in accordance with the accounting report in EUR thousand and % 2021 / 31 December 2021 2020 / 31 December 2020 Index 21/20 Sales revenue 648,247 647,177 100 Other operating income 5,303 7,694 69 Total operating revenues 653,550 654,871 100 EBITDA 220,752 209,882 105 EBITDA margin = EBITDA / sales revenue 34.1% 32.4% 105 EBIT 51,696 42,603 121 Return on sales = EBIT / sales revenue 8.0% 6.6% 121 Net profit from continuing operations 37,888 34,084 111 Loss from discontinued operations 0 -9,219 0 Net profit for the financial year 37,888 24,865 152 Assets 1,250,339 1,227,839 102 Equity 600,431 590,484 102 Return on equity (ROE) 6.4% 4.2% 151 Equity ratio 48.0% 48.1% 100 Net financial debt 399,009 378,377 105 NFD / EBITDA 1.8 1,8 100 Investment in property, plant and equipment (CAPEX) 208,173 173,045 120 EBITDA – CAPEX 12,579 36,837 34 Ratio of (EBITDA – CAPEX) to EBITDA (cash margin) 5.47% 17.6% 32 Number of employees as at the last day of the period 3,284 3,392 97 CAPEX as a proportion of operating revenues 31.9% 26.4% 121 * The operations of Planet TV for 2020 are included in the item 'discontinued operations'. The year 2019 is adjusted for a prior-period correction in the financial statements of IPKO and thus of the Telekom Slovenije Group. This applies to all items in the tables and graphs presented below. For more information, see point 41 of the accounting report. Definitions can be found in point 4.3 Alternative performance measures. Other economic performance indicators in EUR thousand 2021 2020 Index 21/20 Distributed economic value 454,886 473,741 97 Value added 164,963 155,881 106 Value added per employee (in EUR) 49,420 45,989 107 Gross value added per employee (in EUR) 99,468 94,699 105 Labour costs 111,271 111,101 100 Corporate income tax, including deferred taxes -7,187 -523 - Payments to owners – dividends 29,275 22,769 129 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 6 Social indicators – employees 2021 2020 Index 21/20 Number of employees 3,284 3,392 97 Employee turnover 6.1% 5.8% 105 Number of training hours per employee 30.3 18.6 163 Direct training costs in EUR thousand 1,397 916 153 Proportion of employees with a master’s degree and doctorate 5.0% 4.7% 106 Number of personal data protection training hours 354 261 136 Social indicators – community Connections / users 2021 2020 Index 21/20 Mobile telephony 1,962,600 1,873,876 105 Fixed voice telephony 508,184 521,068 98 Broadband connections 477,621 464,258 103 Complaint rate as a proportion of all issued invoices 0.53% 0.57% 93 Costs earmarked for sponsorships and donations as a proportion of operating revenues 0.3% 0.3% 100 ** Retail and wholesale. Energy and environmental indicators Telekom Slovenije 2021 2020 Index 21/20 Electricity consumption (in million kWh) 73 74 99 Total direct energy costs (in EUR thousand) 9,122 9,117 100 Total waste (in tonnes) 5,213 8,900 59 - Waste electrical and electronic equipment collected at Telekom centres (in tonnes) 1 2 55 Use of office paper (in EUR) 10,975 14,759 74 Use of fuel for company cars (in litres) 791,053 788,544 100 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 7 Sales revenue and number of employees of the Telekom Slovenije Group EBITDA and EBITDA margin (as a percentage of sales revenue) of the Telekom Slovenije Group EBIT and net profit of the Telekom Slovenije Group 716 715 665 647 648 3.673 3.530 3.387 3.392 3.284 0 500 1.000 1.500 2.000 2.500 3.000 3.500 4.000 0 100 200 300 400 500 600 700 800 2017 2018 2019 2020 2021 Number of employees Sales revenue in EUR million Net sales revenues Number of employees 169 186 215 210 221 23,6% 25,9% 32,3% 32,4% 34,1% 0% 5% 10% 15% 20% 25% 30% 35% 40% 0 50 100 150 200 250 300 2017 2018 2019 2020 2021 EBITDA margin in % EBITDA in EUR million EBITDA EBITDA margin in % 4,6 17,9 41,2 42,6 51,7 9,0 33,3 0,9 24,9 37,9 0 10 20 30 40 50 60 2017 2018 2019 2020 2021 in EUR million EBIT Net profit Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 8 Structure of the Telekom Slovenije Group’s equity and liabilities, and net financial debt CAPEX – investments in property, plant and equipment in EUR million, and as a proportion of operating revenues 681 620 591 590 600 671 613 660 637 650 282 302 403 378 399 0 50 100 150 200 250 300 350 400 450 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 2017 2018 2019 2020 2021 NFD in EUR million Equity, EUR million Liabilities, EUR million Net financial debt, EUR million 159 134 185 173 208 21,9% 18,3% 27,6% 26,4% 31,9% 0% 5% 10% 15% 20% 25% 30% 35% 0 50 100 150 200 250 2017 2018 2019 2020 2021 in EUR milion Capex in mio EUR Share in net oper. revenues in % Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 9 1.3 Letter from the President of the Management Board 5 Dear Shareholders, Investors, Business Partners and Co-Workers, Our way of life, users’ needs for communication services and our operations were affected by the COVID-19 pandemic again in 2021. We nevertheless ensured continuous development, as well as business continuity and the smooth and safe functioning of services. Through the appropriate organisation of work, we provided employees a safe work environment, and optimised our operations by adapting processes. In accordance with the business continuity management system, which is certified according to the ISO 22301 standard, Telekom Slovenije is capable of ensuring key services and processes, even in extraordinary circumstances. Despite the challenges brought about by the COVID-19 pandemic, the Telekom Slovenije Group remains financially stable. The Telekom Slovenije Group generated EUR 653.6 million in operating revenues in 2021, which is in line with plans and similar to the level generated the previous year. Sales revenue totalled EUR 648.2 million, despite the fact that international voice traffic and traffic from the roaming by foreign users in our mobile network were lower than in the pre-pandemic period. IPKO also recorded higher revenues in 2021 than in the previous year. Earnings before interest, taxes, amortisation and depreciation (EBITDA) totalled EUR 220.8 million at the Telekom Slovenije Group level, an increase of 5% relative to 2020 and 5% higher than planned. The EBITDA margin (i.e. EBITDA as a proportion of net sales revenue) was 34% at the Group level. Following the calculation of income tax (including deferred taxes), the Telekom Slovenije Group generated a net profit of EUR 37.9 million in 2021, which is 23% higher than planned and up 52% relative to 2020. Earnings before interest and taxes (EBIT) reached EUR 51.7 million in 2021, an increase of 21% relative to 2020. The Group earmarked EUR 208.2 million for investments in 2021. At a public auction for the allocation of radio frequencies for the provision of public communication services to end-users, Telekom Slovenije secured the radio frequency spectrum in the 700 MHz FDD band, 700 MHz SDL band, 1500 MHz band, 2100 MHz band, 3600 MHz band and 26 GHz band, for which it paid EUR 52.1 million. During the auction, we secured the entire planned frequency spectrum, through which we will continue to provide users the most advanced services and solutions in the future, with the best user experience. The 5G network, which we were the first in Slovenia to introduce back in October 2020, is an important building block for a modern digital society, which we are actively co-creating. We are introducing innovations, and developing smart city and community solutions. Together with our partners, we are an important part of Industry 4.0, while we focus on the areas of public safety and healthcare. We have the largest network: at the end of 2021, we covered 96.8% of the population with the LTE/4G signal, 84% of the population with the LTE-A/4G+ signal and 38.8% of the population with the 5G signal. To that end, we also upgraded and expanded the fibre optic access network in 2021. We facilitated the connection of an additional 42,150 households to that network. We thus facilitate the connection of more than 411,000 households to the fibre optic network, meaning more than half of all Slovenian households. At the end of December 2021, we held the highest market share in the mobile telephony (36.7%) and IPTV (42.4%) services segments in Slovenia, where we also held a 27.8% share of the fixed broadband internet access segment. IPKO held a 49.7% share of the mobile services market at the end of December 2021, and a 28.2% share of the broadband access market. In 2021, we halted the sale of TSmedia and the merger of Avtenta with Telekom Slovenije. Given the ICT market dynamic, Avtenta will continue to strengthen its position on the market of advanced e-business solutions as an independent company within the Telekom Slovenije Group. Telekom Slovenije’s five-year cooperation agreement on the purchase of electricity expired at the end of the year. The Company thus ceased to supply electricity to end users, effective 1 January 2022. 5 GRI GS 102-14 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 10 As the result of the increased scope of digitalisation and remote work and distance learning, we dedicated special attention to security through the development of services for residential and business users, such as the state-of-the-art Cyber Security Operation Centre, in which we are developing solutions adapted to the needs of companies of all sizes. We ensure our own protection in the scope of the aforementioned centre, while an increasing number of companies and organisations are entrusting us with their cyber security. We recorded several important milestones in 2021. Exactly 30 years have passed since the introduction of mobile telephony and the internet in Slovenia. The driver of development throughout that period has been Telekom Slovenije and its subsidiaries. It has also been three years since we entered Slovenian homes with the voice control of content and smart home devices in Slovene. Voice control has become extremely popular: the NEO platform was used by more than 130,000 users at the end of the year, with number of users rising by a third in one year. Users of the VALÚ Smart Wallet, which we included in our portfolio of financial services in 2019, executed more than 2 million transactions in 2021, with the number of VALÚ users rising by more than 40% to exceed 100,000 by the end of the year. We have developed and made available a technical solution, through which Zavarovalnica Sava offers the subscribers of our mobile services a ‘pay-by-use’ travel insurance, meaning payment according to the actual number of days an individual is abroad. There is growing demand for eCare services, while we are also expanding the network through which we offer telemedicine solutions. We are developing and constantly upgrading sustainable solutions for smart cities and communities that facilitate the monitoring of various environmental parameters. We have established systems in several municipalities for measuring and calming traffic flows. Together with ELES and other partners, we have developed an advanced solution for the efficient mass charging of electric vehicles that is managed remotely and ensures the stability of the electricity power grid. The aforementioned solution is part of the concept for the integrated development of the infrastructure for the mass charging of electric vehicles. These are solutions that we are developing for an environmentally friendly future, as they contribute to the reduction of CO 2 emissions and support the European Union’s goals for the decarbonisation of society. Sustainable operations are integrated into all of our business processes, and we report on our activities in this area every year in the scope of the annual report. With the aim of continuing the decarbonisation of society, we have also envisaged in the Strategic Business Plan until 2026 the construction of additional solar power plants through which we will increase existing own production of electricity considerably. We are gradually increasing the proportion of electric cars in the vehicle fleet and will also increase the proportion of electricity obtained from low-carbon sources. We will continue to focus on providing digital services to the highest number of households possible and on the digitalisation of operations We monitor the proportion of reused electronic equipment and are implementing the circular economy concept. We also contribute to the latter by collecting old mobile phones to mark the 30th anniversary of mobile telephony in Slovenia, and in exchange planted 1,000 honey-bearing trees in the spring of 2022. We develop services in a way that is responsible to users, with special attention given to children, adolescents and vulnerable groups. We nurture positive, long-term relationships in the supply chain, and strive for a higher proportion of Slovenian suppliers. We expect suppliers to respect environmental and ethical standards. Dividends were paid to shareholders in 2021 in the gross amount of EUR 4.50 per share. Where the nature of their work allowed, we facilitated remote work by employees again for a part of 2021. Nevertheless, the pandemic brought us together, as a great deal of attention was given to communication with and the inclusion of employees. Our employees are motivated and committed. This can be seen in the results of measurements of organisational vitality, which were carried out by Telekom Slovenije, Avtenta and IPKO at the end of the year. In the context of continuous technological development and the introduction of innovations, we dedicate special attention to training and the strengthening of employee competences. In 2021, Telekom Slovenije raised the average number of training hours per employee by 7% and nearly achieved the pre- pandemic level, which was actually exceeded at the Telekom Slovenije Group level. We are delighted that our activities are recognised in the environment in which we operate, as Telekom Slovenije received an award as the most reputable employer in the sector and ranked as one of the most reputable employers in Slovenia. We received the Socially Responsible Employer Certificate, and were internationally recognised as a TOP Employer in January 2022. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 11 We successfully overcame the challenges that the pandemic brought in the form of altered life and communication habits, and different work and operating methods. Superior quality and the constant development of comprehensive solutions will remain the competitive advantage of the Telekom Slovenije Group in the future. The Telekom Slovenije Group is planning to generate operating revenues of EUR 660.6 million, EBITDA of EUR 211.2 million and a net profit of EUR 27.9 million in 2022, while investing EUR 203.1 million. Development will continue to be based on ensuring a superior user experience and high standards of social responsibility and sustainable development. With the trust of shareholders, other stakeholders and highly trained and committed employees, we consolidated our position as the leading and most advanced provider of comprehensive ICT services and solutions. Cvetko Sršen, President of the Management Board Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 12 1.4 Statement of responsibility of the Management Board The members of the Management Board of Telekom Slovenije, d. d. responsible for compiling the annual report hereby confirm the financial statements of Telekom Slovenije, d. d. and the Telekom Slovenije Group for the year ending 31 December 2021, as well as the accounting policies applied and the notes to the financial statements. The members of the Management Board of Telekom Slovenije, d. d. hereby find that: – to the best of our knowledge, the annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 and all its constituent parts, including the corporate governance statement and the statement regarding non-financial operations, have been compiled and published in accordance with valid legislation and the International Financial Reporting Standards as adopted by the EU; – the accounting report and accompanying notes have been compiled in accordance with the relevant financial reporting framework, and provides a true and fair picture of the assets, liabilities, financial position and operating results of Telekom Slovenije, d. d. and the Telekom Slovenije Group as a whole; – the selected accounting policies were applied consistently in the compilation of the financial statements and any changes to the policies were disclosed, and that accounting estimates were made fairly and with careful consideration, according to the principle of prudence and the diligence of a good manager, and under the assumption that Telekom Slovenije, d. d. and the Telekom Slovenije Group are going concerns; and – the business report includes a fair presentation of the development and operating results of the Company and of its financial position, together with a description of the principal types of risk to which Telekom Slovenije, d. d. and the Telekom Slovenije Group as a whole are exposed. The Management Board is also responsible for taking appropriate measures to secure assets, and for preventing and detecting fraud and other irregularities and unlawful acts. The tax authorities may, at any time within five years following the year for which tax was levied, audit companies’ operations, which can result in an additional tax liability. The Management Board is not aware of any circumstances that could give rise to any significant liability on this account. Cvetko Sršen, President of the Management Board Tomaž Jontes Vice - President of the Management Board Dr Mitja Štular Member of the Management Board Barbara Galičič Drakslar Member of the Management Board Špela Fortin Member of the Management Board and Workers Director Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 13 1.5 Report of the Supervisory Board Telekom Slovenije’s Supervisory Board comprises nine members, and the composition of that body changed during 2021. On 21 January 2021, the General Meeting of Shareholders recalled member of the Supervisory Board and shareholder representative Igor Rozman, and elected Iztok Černoša, Aleksander Igličar, MSc, Marko Kerin and Radovan Cerjak to serve four-year terms of office as members and shareholder representatives, effective 22 January 2021. With the election of new members to the Supervisory Board, the terms of office of the following persons, who were appointed under the decision of Ljubljana District Court of 3 November 2020, were terminated: Boštjan Koler, Dimitrij Marjanović and Štefan Belingar, MSc. On 11 February 2021, the members of the Supervisory Board elected Iztok Černoša to serve as President of the Supervisory Board, while Barbara Kürner Čad and Drago Kijevčanin remained in their functions as Vice- Presidents, the former as shareholder representative and the latter as employee representative. The terms of office of Supervisory Board members and shareholder representatives Barbara Kürner Čad and Barbara Gorjup, MSc expired on 27 April 2021. On 18 June 2021, the Company’s General Meeting of Shareholders elected Karla Pinter, MSc and Dr Jurij Toplak to four-year terms of office as members of the Supervisory Board and shareholder representatives, effective on the day of their election by the General Meeting of Shareholders. On 22 June 2021, the Supervisory Board elected Karla Pinter, MSc to serve as Vice- President of the Supervisory Board. On 21 October 2021, Telekom Slovenije’s Works Council appointed Drago Kijevčanin, Dušan Pišek and Jana Žižek Kuhar to four-year terms of office as employee representatives on the Supervisory Board, effective 14 November 2021. The composition of the Supervisory Board is diverse, as its members complement each other in terms of their expertise, competences, experience, age, gender, work method and other aspects. This facilitates the effective exchange of opinions and views at sessions. The Supervisory Board met at 15 regular and two extraordinary sessions, and held two correspondence sessions in 2021. During the course of 2021, it ensured the responsible and high-quality supervision of the operations of Telekom Slovenije and the Telekom Slovenije Group. The Supervisory Board discussed different aspects of operations and monitored the implementation of plans. Specific topics were discussed in advance by the Supervisory Board’s committees. Based on the findings, proposals and careful assessment of committees, the Supervisory Board adopted the appropriate decisions and continuously informed stakeholders following sessions. In accordance with the Corporate Governance Code, the Supervisory Board hereby declares that all costs in connection with its work are disclosed in this annual report. Most important topics of sessions of the Supervisory Board The most important topics at sessions of the Supervisory Board in 2021 were linked to the monitoring of the ordinary operations and development of the Company, and the composition of the Management Board. The Supervisory Board and Management Board focused on defining the strategy, and on identifying and managing business risks, which is important for the successful future operations of both Telekom Slovenije and the Telekom Slovenije Group. On 10 March 2021, Telekom Slovenije’s Supervisory Board concluded an agreement with the President and three members of the Company’s Management Board on the termination of their employment contracts and their recall from those positions. The Supervisory Board appointed Cvetko Sršen to serve as new President and Dr Mitja Štular and Tomaž Jontes to serve as members of the Management Board. Their four-year terms of office began on 10 March 2021. On 22 March 2021, the Supervisory Board appointed Barbara Galičič Drakslar to serve a four- year term of office as member of the Company’s Management Board, effective 31 March 2021. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 14 Within the scope of its competences, the Supervisory Board made the following responsible decisions in 2021: x adopted the Strategic Business Plan of the Telekom Slovenije Group and Telekom Slovenije for the period 2022 to 2026, with the annual plan for the 2022 financial year; x adopted the audited annual report of the Telekom Slovenije Group and Telekom Slovenije for 2020; x appointed the President, Vice-President and two members to the Management Board; x gave its consent to the appointment of managing directors of subsidiaries; x gave its consent to participation in the public tender for the allocation of radio frequencies for the provision of public communication services to end-users; x gave its consent to halt the merger of Avtenta with Telekom Slovenije; and x gave its consent to halt of the sale of TSmedia. In its supervision of the management of the operations of the Company and Telekom Slovenije Group subsidiaries, the Supervisory Board was briefed regularly on the following in 2021: x reports on the operations of the parent company and subsidiaries; x implementation of the Strategic Business Plan of the parent company and subsidiaries; x assessments of the performance indicators of the Company and subsidiaries in each period; and x other information in connection with the operations of the parent company and subsidiaries. The Supervisory Board continuously resolved conflicts of interest (statements according to the reference code are published on the Company’s website). During the 2021 financial year, one member of the Supervisory Board informed the latter of specific facts that could affect their independence. The Supervisory Board updated its rules of procedure in April 2021. In January 2022, the Supervisory Board tasked itself with assessing its work, and will adopt a resolution in 2022 regarding improvements to that work in the future. Work of the Supervisory Board’s committees The Supervisory Board had four permanent committees in 2021. They were the Audit Committee, HR Committee, Strategy Committee and Marketing and Technology Committee. A Nomination Committee was appointed for the selection of candidates for members of the Supervisory Board, and was dissolved in April 2021, as it had completed all assigned tasks by the set deadline. Committees discussed topics related to the Supervisory Board’s work and advised the latter in important matters. This contributed to the improved work and effectiveness of the Supervisory Board. The Supervisory Board continuously monitored the work of committees and the implementation of resolutions. The work of committees is described in detail in the section 1.10.3 Management and supervisory bodies in the business report section of the annual report. Assessment of the work of the Management Board and Supervisory Board The work of members of the Supervisory Board, including their work on committees, was professional and focused on the effective performance of their functions. Members of the Supervisory Board regularly attended sessions, were well-prepared for topics of discussion and put forth constructive proposals. The Supervisory Board adopted competent decisions in accordance with its rules of procedure, the Company’s internal acts and legally prescribed powers on the basis of professionally prepared written and oral information provided by the Management Board. The work of the Supervisory Board was complemented, in terms of content, by the proposals made by its committees. Based on the above-described continuous monitoring and supervision of the operations and management of Telekom Slovenije and Group companies during the 2021 financial year, and based on the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021, as compiled and submitted by the Management Board, the Supervisory Board assesses that the annual report and disclosures contained therein reflect the actual situation and position of Telekom Slovenije Group subsidiaries and Telekom Slovenije. The Supervisory Board assesses that the Management Board of Telekom Slovenije successfully managed the Company’s transactions during the 2021 financial year and achieved established objectives, particularly taking into account operations in the highly competitive environment in which the parent company and subsidiaries operate. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 15 Approval of the annual report and the proposed use of the distributable profit for 2021 The Supervisory Board discussed the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021 at its session on 20 April 2022. Based on its review of the annual report and financial statements (including the notes thereto), and its review of the Management Board’s proposal on the use of distributable profit and the certified auditor’s report, the Supervisory Board confirmed the audited annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021. Pursuant to the third paragraph of Article 272 of the Companies Act (ZGD-1), Telekom Slovenije’s Management Board submitted the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021, together with the auditor’s report for 2021, immediately after compilation and the issuance of the auditor’s opinion. The annual report was discussed by the Supervisory Board at its session held on 20 April 2022. The annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021 was audited by the audit firm PricewaterhouseCoopers, d. o. o., which issued an unmodified opinion regarding the financial statements of the Telekom Slovenije Group and Telekom Slovenije. At its session held on 11 April 2022, the Audit Committee of Telekom Slovenije’s Supervisory Board discussed the audited annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021 and found that the annual report was compiled in a timely, clear and transparent manner, and in accordance with the provisions of the Companies Act (ZGD-1), the applicable International Financial Reporting Standards, as adopted by the European Community, and other relevant legislation. The Audit Committee had no comments with respect to the annual report for 2021, and proposed that the Supervisory Board approve the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021 in accordance with Article 282 of the ZGD-1. Based on the auditor’s opinion, the position of the Audit Committee, and data and disclosures in the annual report, Telekom Slovenije’s Supervisory Board assesses that the auditor performed its work independently and professionally in accordance with valid legislation and business practices, that the annual report was compiled, in all material aspects, in accordance with the requirements of the ZGD-1, and that the financial statements fairly present, in all material aspects, the assets and financial position of the Telekom Slovenije Group and Telekom Slovenije as at 31 December 2021, and their operating results and cash flows for the year then ended in accordance with the International Financial Reporting Standards, as adopted by the European Community. The Supervisory Board has no remarks regarding the auditor’s report. It also has no comments regarding the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021 that would in any way inhibit its decision to approve that report. Thus, in accordance with the third paragraph of Article 282 of the ZGD-1, the Supervisory Board of Telekom Slovenije hereby approves the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021. The Supervisory Board approved the annual report for 2021 by the prescribed deadline, i.e. within one month from its submission by the Company’s senior management. When adopting the annual report, the Supervisory Board also took a position with regard to the corporate governance statement, which is included in the business report section of the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2021, and assessed that they are a reflection of the actual governance of the Company in 2021. Iztok Černoša, President of the Supervisory Board Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 16 1.6 Markets and companies of the Telekom Slovenije Group 6 The Telekom Slovenije Group comprises the parent company Telekom Slovenije and its subsidiaries. The Telekom Slovenije Group operates in eight countries, seven countries in South-Eastern Europe and Germany. The composition of the Telekom Slovenije Group and participating interests as at 31 December 2021 are presented in the picture below, and in more detail on the website https://www.telekom.si/en/about- us/company/telekom-slovenije-group. Composition of Telekom Slovenije as at 31 December 2021 Telekom Slovenije is the founder of the Heart Foundation, the aim of which is to help the children of employees of Slovenian Telekom Slovenije Group companies who have lost a parent or who are seriously ill. The majority of the foundation’s funds are contributed by the employees of Slovenian Telekom Slovenije Group companies. Changes in the composition of the Group in 2021 7 x On 12 May 2021, Telekom Slovenije halted the merger of the subsidiary Avtenta, napredne poslovne rešitve, d. o. o. (hereinafter: Avtenta) with Telekom Slovenije. Avtenta, the leading partner for managing and implementing SAP solutions and paperless operations on the Slovenian market, will continue to strengthen its position on the market of advanced e-business solutions as an independent company within the Telekom Slovenije Group. x On 12 May 2021, Telekom Slovenije halted the sale of the subsidiary TSmedia, medijske vsebine in storitve, d. o. o. (hereinafter: TSmedia). That process was concluded without the selection of a buyer. TSmedia thus remains part of the Telekom Slovenije Group. 6 GRI GS 102-4, 102-6, 102-18 7 GRI GS 102-10 Slovenia Croatia Bosnia and Herzegovina Serbia Montenegro Kosovo North Macedonia SIOL d.o.o. Zagreb 100% SIOL d.o.o. Sarajevo 100% SIOL d.o.o. Beograd 100% SIOL d.o.o. Podgorica 100% IPKO Telecommunications LLC 100% SIOL DOOEL Skopje 100% GVO, d.o.o. 100% GVO Telekommunikation GmbH, Germany, 100% AVTENTA, d.o.o. 100% TSmedia, d.o.o. 100% TSinpo, d.o.o. 100% SOLINE, d.o.o. 100% Germany Subsidiary Company, owned by subsidiary OPTIC-TEL, d.o.o. 100% INFRATEL, d.o.o. 100% SIOL Prishtina LLC 100% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 17 Management and governance of subsidiaries As the parent company of the Telekom Slovenije Group (also referred to below as the Group), Telekom Slovenije manages the operations of subsidiaries in the scope of corporate governance by defining subsidiaries’ strategic policies and operational objectives, and by monitoring the achievement of established objectives. The Telekom Slovenije Group’s strategy lays out uniform corporate governance within the Group, which facilitates the optimisation of the operations of companies, ensures the improved flow of information and creates synergies at the Group level. Rules, criteria and mechanisms for managing and supervising Group companies are defined in the Telekom Slovenije Group’s Corporate Governance Rules, which is in line with Telekom Slovenije’s Corporate Governance Policy. Management and supervisory tasks are also performed in accordance with Slovenian law and the applicable laws in the home countries of individual subsidiaries. In all business areas, subsidiaries operate in accordance with local legislation, business cooperation agreements with Telekom Slovenije, and with internal rules and instructions adopted by the management of an individual subsidiary or the Management Board of the parent company. The management and supervision of the operations of Telekom Slovenije Group companies is based on the following core principles: x links with the Group’s strategy; x governance in the form of management by objectives, where those objectives derive from the Group’s strategy; x clearly defined roles (tasks, competences and responsibilities) of those responsible for the management and supervision of the Group; and x simplicity and flexibility (the ability to adapt to changes in the organisation and operations of the Group). Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 18 Composition of management and governance bodies at subsidiaries of the Telekom Slovenije Group SLOVENIA GVO, d. o. o. Managing Director: Dr Zef Vučaj Supervisory Board: Dr Mitja Štular, Sabina Merhar (both since 28 May 2021), Helena Jakič (since 17 June 2021) Borut Radi served as the company’s Managing Director until 31 July 2021. Dr Mitja Štular managed the company temporarily from 1 August to 31 August 2021. During that time, his function as member of the Supervisory Board was suspended. Infratel, d. o. o. Managing Director: Dr Zef Vučaj Borut Radi served as the company’s Managing Director until 20 September 2021. Optic-Tel, d. o. o. Managing Director: Dr Zef Vučaj Borut Radi served as the company’s Managing Director until 20 September 2021. Avtenta, d. o. o. Managing Director: Primož Kučič TSmedia, d. o. o. Managing Director: Rajko Gerič Simon Furlan, MSc served as the company’s Managing Director until 31 July 2021. Soline, d. o. o. Managing Director: Klavdij Godnič TSinpo, d. o. o. Managing Director: Sandra Peršak Danilo Tomšič, MSc served as the company’s Managing Director until 31 July 2021. Vesna Lednik served as the company’s procurator until 30 April 2021. OTHER COUNTRIES IPKO Telecommunications LLC, Kosovo CEO: Tomaž Seljak, MSc Robert Erzin, MSc served as CEO until 3 November 2021. SIOL, d. o. o. Zagreb, Croatia Managing Director: Simon Furlan, MSc Matjaž Pogačnik, MBA served as the company’s Managing Director until 31 July 2021. SIOL, d. o. o. Podgorica, Montenegro Managing Director: Simon Furlan, MSc Matjaž Pogačnik, MBA served as the company’s Managing Director until 14 September 2021. SIOL, d. o. o. Sarajevo, Bosnia and Herzegovina Managing Director: Simon Furlan, MSc Matjaž Pogačnik, MBA served as the company’s Managing Director until 3 October 2021. SIOL DOOEL Skopje, North Macedonia Managing Director: Simon Furlan, MSc Matjaž Pogačnik, MBA served as the company’s Managing Director until 21 September 2021. SIOL DOO BELGRADE, Serbia Managing Director: Simon Furlan, MSc Matjaž Pogačnik, MBA served as the company’s Managing Director until 17 September 2021. SIOL Prishtina LLC, Kosovo Managing Director: Simon Furlan, MSc Matjaž Pogačnik, MBA served as the company’s Managing Director until 27 July 2021. GVO Telekommunikation GmbH Managing Directors: Borut Radi, Darko Gradišnik and Roman Mazi Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 19 1.7 Commitments and membership in associations 8 In accordance with the strategic objectives and Code of Ethics of the Telekom Slovenije Group, our employees establish links and exchange experience and expertise through corporate or individual membership in numerous professional organisations and associations. We thus build successful business links, create development opportunities and ensure the professional positioning of the Telekom Slovenije Group. Group companies are members or their employees serve as members of the boards of directors, expert and strategic councils, and other bodies of the following organisations: Slovenia – Telekom Slovenije Membership in international organisations – Telekom Slovenije • Slovenian Association of Facilitators • Marketing Society of Slovenia (also TSmedia): annual partners of the society • European Institute for Compliance and Ethics (EICE) • Slovenian Chamber of Commerce and Industry: participant in the general meeting and member of the management board of the Information Technology and Telecommunications Association, and member of the Section of Electronic Communications Operators • American Chamber of Commerce (also TSmedia) • INIS – Institute for Non-Ionising Radiation: participant in the Forum EMS project • Institute for Corporate Security Studies • Institute of Labour at the Faculty of Law in Ljubljana • Institute for Labour Relations and Social Security at the Faculty of Law in Maribor • Slovenian Chamber of Engineers (also GVO) • Slovenian Chamber of Crafts (also GVO) • Palsit: membership in the ITM and KIRVI clubs • Slovenian Institute of Auditors • Slovenian Institute for Standardisation • Slovenian Initiative for transition to IPv6: gold membership • Slovenian Advertising Chamber (also TSmedia): membership on the board of dire ctors, membership on the council of members, executive board and expert committee of the council of members of MOSS (measurement of visits to Slovenian websites) • Slovenian Public Relations Association • Slovenian Oracle Users Association (SIOUG) • Slovenian Advertising Association (functioning under the auspices of the Slovenian Advertising Chamber) • Slovenian Project Management Association • Slovenian Association of Risk Management and Insurance Management • Smart cities and communities strategic development-innov ation partnership (SRIP PMiS) • Study Centre for Industrial Democracy • IAB – Institute for a Digital Society (also TSmedia) • Institute for Identification and Electronic Data Exchange • ICT Technology Network • Chamber for the Development of Slovenian Private Security • Association of Employers of Slovenia (also GVO) • Cable Operators Association of Slovenia • Slovenian Directors’ Association • Institute of Internal Auditors (IIA) • Slovenian Corporate Treasurers Association • Association of Slovenian Digital Television Operators • Association of Certified Fraud Examiners (ACFE) • Broadband Forum • ECO – European Association of the Internet Industry • European Telecommunications Network Operators’ Association (ETNO) • GSM Association • GEANT: membership in the Trusted Introducer group in the area of Computer Security Incident Response Teams (CSIRT) • Institute of Electrical and Electronics Engineers (IEEE, Slovenian Section) • Information Systems Audit and Control Association (ISACA) • TM Forum – association of ICT service providers, their suppliers, integrators and manufacturers • RIPE Network Coordination Centre (regional web register) • Search and Information Industry Association (SIINDA) – TSmedia Social, environmental and economic initiatives in which Telekom Sloveni je and Group companies are included: • Family-Friendly Company certificate • European Framework for Safer Mobile Use by Younger Teenagers and Children • Activities for safer internet use – SAFE.SI (also TSmedia) • a code for regulating hate speech on websites (Siol.net digital media) • Natura 2000, a European network of special protection areas (Soline) • Alliance of Companies Employing Disabled People of Slovenia (TSinpo, as founding member of interest association) • Slovenian Corporate Integrity Guidelines • Commitment to respect human rights in the course of operations in the scope of the National Action Plan of the Republic of Slovenia on the Respect of Human Rights in Business • Socially Responsible Employer Certificate Kosovo – IPKO • Chamber of Commerce • American Chamber of Commerce • European Investors Council 8 GRI GS 102-12, 102-13 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 20 1.8 Development strategy and plans 1.8.1 Vision, mission and values 9 9 GRI GS 102-16 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 21 1.8.2 Business model We proactively adapt the business model with which we generate value for our stakeholders, and respond to changes in the environment: • Technological development: the latest ICT trends, the development of services and solutions for users, and the provision of cyber security; • Economic conditions: macroeconomic conditions and market competition; • Social conditions: demographic changes, legislation, the protection of privacy and data, and changing user habits; and • Environmental impacts: climate change and the preservation of natural resources. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 22 We create value for stakeholders Our resources Created value • • EUR 600.4 million in capital • EUR 653.6 million in operating revenues • 8,582 shareholders: 93.42% are domestic shareholders • 411,000 Slovenian households connected to the fibre optic network • 1,418 GSM base stations, 908 UMTS base stations, 1,443 LTE/4G base stations and 302 5G base stations • 16 Telekom centres, 8 business centres and 93 authorised agents • EUR 208.2 million in investments in property, plant and equipment • Code of Ethics and Compliance Management Policy of the Telekom Slovenije Group • Gross dividend per share of EUR 4.5 • Net profit of EUR 37.9 million • 1.96 million users of mobile telephony and 508 thousand users of traditional fixed telephony at the Group level • 369 thousand fixed broadband connections in Slovenia • More than 96% of the Slovenian population is covered by the LTE/4G signal, while more than 38% of the population is covered by the 5G signal. • EUR 455 million in distributed economic value • Customer Satisfaction Index (CSI) in the mobile and fixed services segment rose by 2 index points • Overall transactional Net Promoter Score (NPS) rose by 9 index points Economic- governan- ce aspect • • 3,284 Group employees • 90.9% of employees included in training; 30.3 hours of training per employee • development of internal advanced development-training programmes • 150 key and 65 perspective employees • 32.6%: proportion of female employees • Participation in EU research and development projects • EUR 1.999 million in sponsorships and donations • Concern for the online security of users, children and adolescents, disabled persons and the elderly • Cyber Security Operation Centre • Regional fibre optic network • Management of information security in accordance with ISO/IEC 27001 (Telekom Slovenije and IPKO) • More than 130,000 users of the NEO platform, with the use of voice queries rising by 65% in 2021 to exceed 10 million per month • Our telemedicine services are used by 7 hospitals and 8 health centres, while we facilitate the monitoring of vital functions at one retirement home • Full Family-Friendly Company certificate • Socially Responsible Employer Certificate for all four certified areas • Heart Foundation to assist employees’ children • 155 employees who donated blood 275 times • Provision of a healthy and safe work environment, respect for diversity and promotion of intergenerational cooperation • 3.78: organisational vitality index (ORVI), employee commitment at Telekom Slovenije • Successful establishment of smart city systems for several Slovenian companies and municipalities Social aspect • • Energy management in accordance with ISO 50001 (Telekom Slovenije) and environmental management in accordance with ISO 14001 (Telekom Slovenije and GVO) • Responsible waste management • 319 MWh of energy generated by own solar power plants • Management of the Sečovlje Salina Nature Park • 1.16% reduction in electricity consumption at Telekom Slovenije • Carbon footprint of 19.4 tonnes per employee • 323 electromagnetic radiation measurements • 1.1 tonnes of waste electrical and electronic equipment collected at Telekom centres • 13 electric and 10 hybrid vehicles in the Telekom Slovenije Group Environ- mental aspect • Contribution to SDGs Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 23 1.8.3 Strategic Business Plan of the Telekom Slovenije Group until 2026, including the plan for 2022 10 The Telekom Slovenije Group implements its established strategy in accordance with adopted strategic policies. To that end, the Group updates its strategy and drafts a business plan for the next period every year. The Strategic Business Plan is the Telekom Slovenije Group’s core corporate document. Defined in that document through its mission, vision, values, business model, objectives and strategy are the Group’s future development and strategic policies. The document includes the future business strategy of the Telekom Slovenije Group, which comprises the parent company Telekom Slovenije, and its subsidiaries in Slovenia and abroad. The Strategic Business Plan, business plan for 2022 and projections until 2026 were formulated on the basis of data and forecasts available until November 2021, taking into account the regulatory environment and forecasts of macroeconomic trends for the region in which the Telekom Slovenije Group operates. Taken into account during preparations were analyses of the operations and market shares of comparable European operators, analyses of the competition, development expectations and trends in the telecommunications sector, as well as a SWOT analysis for Telekom Slovenije Group companies. Sustainable operations When planning the Group’s future development, we pursue the Sustainable Development Goals (SDGs) of the United Nations and key content of the latter’s 2030 Agenda, as well as the principles of the ESG (environmental, social and governance) model, through which we prevent the risk of greenwashing. We include the principles of sustainability in our operations, products, services and content to the greatest extent possible, while we understand sustainable operations as the responsible management of the economic-governance, social and ecosystem impacts of our operations. Updated material aspects and topics, included in the sustainable aspects of the Telekom Slovenije Group’s operations, take into account the expectations of international guidelines for the responsible operations of telecommunication service providers and the other core activities that we perform, and are in line with the priority areas of the sustainability guidelines of the European Telecommunications Network Operators' Association (ETNO). The latter bind us to constructive cooperation in the mitigation of climate change and digitalisation as the EU’s priority policies, and to the achievement of the United Nations’ global Sustainable Development Goals, to which we can contribute through our activities. Material aspects and topics are presented in point 2.9.1 About the annual report. Competition and the business environment The markets on which the Telekom Slovenije Group operates are characterised by a high level of competition, as users can choose between the competitive portfolios of various operators. Users demand high-quality services at low prices. At the same time, markets are becoming increasingly saturated. Thus, the ability to attract new users is constantly diminishing. Increasingly stiff competition results in the lowering of prices. A drop in revenues from basic telecommunication services is expected to continue on the Slovenian telecommunications market, which is developed and already in the phase of saturation. Telekom Slovenije holds the highest market share in terms of mobile and IP TV services, and the second highest market share in terms of broadband, pay TV and IP telephony services. Competitive operators are gaining market share primarily through an aggressive pricing policy that Telekom Slovenije cannot follow due to regulatory limitations. We maintain our market share and position as the leading operator through continuous technological development, through the development of services and the provision of the best mobile and fixed networks, through targeted investments in the expansion and upgrading of the fibre optic broadband network in combination with the fixed wireless access (FWA) network, through targeted promotional campaigns to attract new and maintain existing subscribers, through the expansion of the portfolio outside the basic telecommunications activity and cross-selling, through the best user experience, and through a comprehensive portfolio of ICT services and solutions. There will be an increasing number of competitors with new services on the ICT solutions market, while operators will consolidate ICT in the scope of their services. 10 GRI GS 103-1, 103-2, 103-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 24 IPKO has been positioned as one of the strongest market brands in Kosovo for a number of years, and is the leading operator in the mobile and fixed segments. IPKO is known on the market as an innovative brand with the fastest mobile internet, the best coverage by the 3G and 4G networks, the best mobile and fixed networks, and the best content. It is also recognised as the most reliable and trustworthy brand, with the best user support. The fixed segment of the market has become exceptionally demanding in recent years, with price-aggressive competition. Competitive operators promote their packages using lower prices and higher internet speeds, and focus on improving and upgrading their digital programme schemes with sports and other TV content. Nevertheless, IPKO, as a premium brand, remains the leading provider of fixed services (DTV and internet), and maintains its leading position and premium prices. The superior quality of its services is and will continue to be the Telekom Slovenije Group’s competitive advantage in the future. The Group’s development will continue to be based on high standards of social responsibility and sustainable operations. Strategic objectives of the Telekom Slovenije Group Leader in user experience The leading user experience is based on the best, most reliable and largest network, while we create that user experience in accordance with the latest trends and changing user habits. Through a superior user experience, we achieve short -term business objectives and strengthen our long-term strategic position to remain the first choice of users. Crucial in that regard are digital excellence, ensuring secu rity, contactless operations and the dynamic adaptation to the needs and habits of the users of communication services. Digitalisation of operations We will improve the efficiency of operations through accelerated digitalisation. In the digital transformation process, we will digitalise key business processes involving users. This, in turn, will significantly improve the speed and efficiency of the Telekom Slovenije Group’s operations, and also facilitate the improved competitiveness of the Group in the future. Growth in ICT services Growth in ICT services and solutions will be based on the existing superior LTE/4G network, and the opportunities offered by fifth generation (5G) mobile networks. 5G technology will facilitate the development of smart industry and smart cities, as well as the introduction of virtual campus networks, which in turn will enable the continued digitalisation of various verticals, such as energy, transportation, logistics, industry, smart cities, healthca re, and protection and rescue (public safety). The Telekom Slovenije Group will ensure the digitalisation of society as a whole on that basis. Overall growth will be achieved through organic growth and the consolidation of the Slovenian ICT market. Stabilisation of the level of revenues from the core activity in Slovenia The basic telecommunications market is stagnating in Slovenia, while Telekom Slovenije is under additional pressure from regulatory bodies. We will preserve revenues through accelerated digitalisation and the development of digital services, the further development of the network, the development of services based on 5G technology, successful cooperation with regulators, and above all the best user experience. Consolidation on individual markets The European telecommunications market is experiencing the consolidation of the sector, the merging of operators and a changing portfolio of services on the one hand, and the entry of new competitors on the ICT market on the other hand, which will further impact the operations of operators. The Telekom Slovenije Group is actively involved in consolidation processes on the markets where it operates. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 25 Optimal employee structure The Telekom Slovenije Group will continue to ensure the optimal employee structure, taking into account the needs of work processes at individual companies. We are optimising the employee structure through the strategic planning of needs for staff, and the appropriate organisational structure and job classification. We build the employer brand through an effective remuneration system, and the development of knowledge and competences. Financial stability and the optimisation of all types of costs We are implementing activities that facilitate the effective management of liquidity, and ensure a high level of financial stability and the optimal level of borrowing. We continuously optimise all types of costs in connection with the performance of individual processes and the provision of services. Creating a sustainable future The Group actively identifies opportunities where it can contribute to the development of the social and economic environment in which it operates, through its expertise, and financial and other resources. The principles of sustainable development are built into our operations, products, services and content, while we also responsibly manage the economic, social and environmental impacts of our operations. Key financial objectives of the Telekom Slovenije Group for 2022 Operating revenues EUR 660.6 million EBITDA EUR 211.2 million Net profit EUR 27.9 million Investments EUR 203.1 million Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 26 1.8.4 Strategic projects NATIONAL FIFTH GENERATION (5G) MOBILE NETWORK 11 Telekom Slovenije is establishing a national fifth generation (5G) mobile network that brings users faster and more reliable mobile data transfer and reduced lags relative to LTE/4G technology. At the end of 2021, the 5G signal covered 38.8% of the population in the 2600 MHz, 3.600 MHz and 700 MHz frequency bands. We are establishing the smart 5G infrastructure in such a way that we will be able to facilitate numerous virtual dedicated networks for specific business verticals, such as eCare, energy, transport, factories, smart cities and communities, etc. In the scope of upgrading the network with 5G technology, we have already connected the first production vertical and thus brought digitalisation closer to the manufacturing sector and the economy as a whole. For more information, see sections 2.8.1 Development of networks, services and projects and 2.8.2 Access networks. TETRA project Telekom Slovenije is the coordinator of the TETRA project for the construction and maintenance of a digital radio system for state authorities, which is being established primarily for the needs of the Ministry of the Interior (Police). Together with our partners, we are responsible for project management, the start-up of base stations, and the set-up of work stations for administrators and dispatchers, including the necessary network equipment. We are also participating in the set-up of central locations and the implementation of a system of archiving and application work for dispatchers. In 2021, the Company and its partners set up the entire central TETRA network and the majority of base stations, which are placed throughout Slovenia. Following implementation, we will be responsible for maintaining base stations, providing a technical help desk for users, and maintaining central equipment and (indirectly through subcontractors) the system of archiving and application work for dispatchers. eHealth and eCare solutions Together with our partners, we have developed eHealth and eCare solutions, and are thus pursuing our strategic policies and upgrading existing healthcare and social security services in Slovenia. Through such solutions, which numerous municipalities are co-financing for their citizens, we are helping address the population’s need for healthcare and social services (ageing population and a rising number of chronic diseases), helping resolve the problem of limited resources (at hospitals and retirement homes, a lack of medical and care staff, financial sources, etc.) and helping shorten waiting lists. 12 Smart cities, smart factories and industry 13 Internet of Things (IoT) services for smart cities and industry and the energy sector represent the next milestone in the development of the fifth generation mobile network. In 2021, we expanded the range of verified partner solutions that use NB-IoT (Narrowband Internet of Things) and LTE-M (Long-Term Evolution Machine Type Communication) communication technologies. The aforementioned technologies facilitate the effective mass communication of devices connected to the Internet of Things. In cooperation with the Faculty of Mechanical Engineering of the University of Ljubljana, we established local coverage with the 5G signal, and included the faculty’s laboratory in our cloud infrastructure in the scope of the demo smart factory centre. Together with the Port of Koper, we are participating in the European 5G-LOGINNOV project, in the scope of which we will set-up a development-test 5G network in the vicinity of the Port of Koper. For more information, see section 2.8.1 Development of networks, services and projects. We also established a solution that facilitates digitalisation, the simplified central management of meters by utilities companies, and the automatic metering of the consumption of energy sources. Together with partners, we designed an advanced smart city solution for the Citypark shopping mall, and prepared a range of Internet of Things solutions for potential subscribers with the common name of Modro mesto (Smart City). 11 SDG 9 12 SDG 3 13 SDG 11 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 27 EXPANSION AND UPGRADING OF THE FIXED NETWORK 14 Through the expansion and upgrading of the fixed network, we facilitate access to state-of-the-art telecommunication services by an increasing number of users in urban, suburban and rural areas. We are investing intensively for the most part in the construction of a fibre optic access network through which we provide users the infrastructure for all existing and future broadband services. To that end, we also pursue the vision of the development of the communications network in Slovenia, which was defined by the Slovenian government in state strategic documents. For more information, see section 2.8.2 Access networks. EXCELLENCE OF THE USER EXPERIENCE The excellence of the user experience is one of the Company’s key strategic initiatives. Within this framework, we have identified user journeys, as well as key physical and digital touchpoints with the user. We have established a transaction system for measuring customer satisfaction (NPS) at touchpoints. We monitor that system daily, while the target level of customer satisfaction has been a part of the personal objectives of the Company’s employees since 2021. We implement recommendations to improve the user experience at touchpoints in our work processes. With the aim of improving employee competences, we introduced the S.M.A.R.T. advanced training and development programme, which defines standards for the excellence of the user experience at key touchpoints. The leading user experience is based on the best network. We strive to remain the first choice of users in order to achieve our short-term business objectives and strengthen our long-term strategic position. Priority tasks in connection with delivering on the brand promise are linked to customer relations, digital excellence, security and dynamic insights regarding users. We monitor the success of programmes and activities through key indicators for residential and business users. Digitalisation of operations In accordance with strategic policies and the digital transformation, we made important steps on the Online Shop in terms of the development of web platforms and the upgrading of existing functionalities and systems. Important innovations for users include the possibility of renewing a fixed subscriber agreement with the purchase of a device, and the signature of subscriber-related documents when purchasing products from subscriber agreements during the purchase process itself. We also automated the process of entering into mobile subscriber agreements via the call centre. We made it possible for My Telekom users to select programme options and manage traditional and eSIM cards. 1.8.5 Achievement of planned objectives by the Telekom Slovenije Group in 2021 Through numerous projects and activities, the Telekom Slovenije Group actively achieved the objectives for 2021 set out in the Strategic Business Plan for the period 2021 to 2025, and the annual business plan for 2021. An overview of activities and achievements is presented in the table below. Strategic objectives from the Strategic Business Plan and their realisation in 2021 Strategic objective Achieved in 2021 Leader in user experience x We introduced the Varen splet (Safe Web) that provides users comprehensive protection in the mobile and fixed network. x The Customer Satisfaction Index (CSI) improved by 2 percentage points in the fixed and mobile segment, and by 6 percentage points in the business user segment. With an index of 109, we exceeded the target value of the overall transactional NPS, which we measure at 21 touchpoints. x We received an award for marketing excellence for the Excellence of 14 GRI GS 103-1, 103-2, 103-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 28 Strategic objective Achieved in 2021 the User Experience project. x We continued to upgrade the network and base stations at existing locations, modernised 4G and 5G equipment, and updated software. We upgraded the network with 5G technology at additional locations in the 2600 MHz, 3600 MHz and 700 MHz frequency bands. x Due to the rising volume of mobile data traffic, we increased network capacities and improved external and internal coverage with the mobile radio signal, in part through the construction of new locations. x We carried out activities to connect 5G technology with DSS technologies, which facilitates the simultaneous use of the frequency spectre by LTE and NR technologies. We began activities to discontinue the use of 3G technology. x There were 1,418 GSM base stations, 908 UMTS base stations, 1,443 LTE/4G base stations and 302 5G base stations connected to Telekom Slovenije’s radi o access network in Slovenia at the end of 2021. We cover more than 96% of the population with the LTE/4G network and more than 38% of the population with the 5G network. We included 241 small cells for internal coverage needs. x We built 42,150 new fibre optic connections and thus facilitate connections to the fibre optic network by more than 411,000 households in Slovenia. We increased speeds on the fibre optic access network, which now includes more than half of our total connections. Digitalisation of op erations x My Telekom subscribers are able to comprehensively manage subscriber relationships remotely, including the confirmation of orders via the call centre using an electronic signature. A single login had been made possible for the use of Telekom Slovenije’s services: website and NEO.IO, mobile NEO application, Online Shop and VALÚ. x We have closely linked the VALÚ Smart Wallet and VALÚ Moneta services in a single ecosystem. We simplified registration in the application for VALÚ Moneta users, and facilit ated the viewing and monitoring of the monthly spending limit. x We introduced the possibility of payment in the App Store via invoices for telecommunication services. Growth in ICT services x We expanded the use of the telemedicine solution to a network of hospitals (general hospitals in Celje, Novo mesto, Murska Sobota, Jesenice and Šempeter, and the Golnik Clinic) and health centres in the scope of the national telemedicine centre for the treatment of COVID-19 patients at the University Medical Centre (UMC) in Ljubljana. We were selected in an international tender issued by the UMC in Ljubljana for the provision of technical telemedicine services for the next two years. With that solution, we supported user cases in the treatment of patients with chronic diseases at the Ljubljana Community Health Centre and at private-sector partners. x We set up traffic guidance systems with smart parking lots and traffic calming systems in several Slovenian municipalities. We upgraded services with the mobile Modro mesto (Smart City) application. x We added the Varen splet (Safe Web) and Varen poslovni splet (Safe Business Web) services to fixed and mobile packages with internet access. Those services protect users against harmful websites. x Cyber Security Operation C entre services are used by more than 50 business users. x We provided for the cyber security of networks and services at the locations of events during Slovenia’s presidency of the EU Council. x We established a digital radio system for Slovenian state authori ties in accordance with the TETRA standard. The system was placed in production in December 2021. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 29 Strategic objective Achieved in 2021 x The eCare service was included in the implementation of national pilot projects in the following test environments: Maribor, Ptuj, Poljčane and Tržič. The Saf e and Connected at Home project was joined by several new municipalities that co- finance the eCare service for their citizens. We also offer the eCare service to AMZS members and their relatives. Maintaining the level of revenues from the core activity in Slovenia x We maintained the highest market share in both the mobile and IPTV services segments in Slovenia. Our market shares were as follows: 36.7% of the mobile telephony segment, 27.8% of the fixed broadband internet access segment and 42.4 % of the IPTV segment (figures for fourth quarter of 2021; source: AKOS). Consolidation on individual markets x The merger of Avtenta with Telekom Slovenije was halted. Avtenta will continue to strengthen its position on the market of advanced e - business solutions within the Telekom Slovenije Group. x The sale of the subsidiary TSmedia was also halted, meaning that company remains part of the Telekom Slovenije Group. Optimal employee structure x We expanded the S.M.A.R.T. advanced training and development programme for strengthening employee competences to the area of customer technical support. x The number of employees was down by 3.2% at the Group level and by 2.1% at Telekom Slovenije. x Group employees received an average of 30.3 hours of training, while that figure was 32 hours at Telekom Slovenije. The proportion of employees included in education and training was 91% at the Group level. Financial stability x We consistently fulfilled the financial commitments set out in loan agreements. x We secured long-term sources for the repayment of bonds and financing of investments in the total amount of EUR 130 million, and reduced the effective interest rate considerably. x Reserve liquidity was secured in the form of revolving loans. Responsibility to the environment and society x We support sports, humanitarian, educational and cultural organisations and projects through sponsorships and donations. x During the Olympic Games, we actively supported the Slovenian Olympic Committee and Slovenian athletes in Tokyo. Together with Janja Garnbret, Tadej Pogačar and Primož Roglič, who appeared in our market communication campaign, we donated EUR 15,000 to thre e associations that support the development of young athletes and help the most vulnerable groups in our society. x Worthy of note in the field of education is our participation in the Reading Badge, Happy School and Eco-Quiz projects. x In 2021, we also suppo rted the LIFFe international film festival, which was held live last year and was also accessible via the NEO platform. x At the end of the year, we earmarked a total of EUR 30,000 to five humanitarian organisations that make life easier for the socially disadvantaged, elderly people who live alone and persons with special needs. x In the scope of the Creating a Green Future sustainability campaign, through which we ensure the appropriate recycling of used mobile phones, we will plant one honey-bear ing tree in Slovenia for every five used mobile phones in cooperation with the company Treecelet. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 30 Fulfilment of the business expectations of the Telekom Slovenije Group for 2021 Planned in 2021 Achieved in 2021 Operating revenues EUR 653.0 million EUR 653.6 million EBITDA EUR 210.6 million EUR 220.8 million Net profit EUR 30.8 million EUR 37.9 million CAPEX EUR 203.7 million EUR 208.2 million * At a public auction for the allocation of radio frequencies for the provision of public communication services to end-users in April 2021, Telekom Slovenije secured the radio frequency spectrum in the 700 MHz FDD band, 700 MHz SDL band, 1500 MHz band, 2100 MHz band, 3600 MHz band and 26 GHz band for EUR 52,078,177.00. The aforementioned amount was not planned in 2021. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 31 1.9 Significant events and achievements in 2021 FIRST QUARTER x In January, Telekom Slovenije made 5G roaming possible for its users for the first time in the 5G network of the Austrian operator Hutchison Drei Austria. x In the scope of the NEO platform, which has brought an entirely new experience to Slovenian homes in terms of managing TV content through voice control functionality, we were the first in Slovenia to offer users cloud gaming. SECOND QUARTER x The number of NEO platform users surpassed 100,000. Voice control of content is becoming increasingly popular among users. Users gave 8.6 million voice commands in March (of which 185,000 were different commands), which translates to an average of 126 voice commands a month per user. x At a public auction for the allocation of radio frequencies for end-users, Telekom Slovenije secured the radio frequency spectrum in the 700 MHz FDD band, 700 MHz SDL band, 1500 MHz band, 2100 MHz band, 3600 MHz band and 26 GHz band for EUR 52 million. Telekom Slovenije will thus provide residential users, companies and operators that roam in its network the most advanced services and solutions in the future, with the best user experience. x We continuously develop the network of international fibre optic connections and actively work with domestic and foreign operators. In the scope of those activities, we upgraded the fibre optic network with two new connections: a fibre optic connection from Ljubljana to Vienna via Völkermarkt and Graz, as an alternative to the existing route through the Karawanks, and the Company’s own fibre optic connection from Ljubljana to Milan. x Telekom Slovenije established a comprehensive range of smart city solutions. Using those solutions, cities and communities can monitor emissions and water loss, improve energy efficiency, ensure the smart management of parking lots and traffic flows, provide smart lighting, etc. To that end, a free public WiFi network is being set up in an increasing number of Slovenian cities in the scope of the WiFi4EU project. THIRD QUARTER x Telekom Slovenije is the only telecommunications operator participating in the European 5G-IANA (Intelligent Automotive Network Applications) project. Based on different scenarios, project partners are developing an open platform that will facilitate the more rapid introduction of comprehensive technological services for the automotive industry, mobility and the road infrastructure. The project includes sixteen partners from eight European countries. x Slovenia celebrated 30 years of mobile telephony in 2021. To mark that occasion, Telekom Slovenije invited all users to bring their old mobile phones to any point of sale. Telekom Slovenije will ensure the recycling of those devices, and plant 1,000 honey-bearing trees in cooperation with the Slovenian Beekeepers’ Association and the company Treecelet. The Post Office and Telecommunications Museum in Polhov Gradec opened an exhibition to commemorate the 30th anniversary of mobile telephony in Slovenia. FOURTH QUARTER x The results of measurements once again showed that Telekom Slovenije has the best mobile network in Slovenia, as it was the best in all seven categories: video experience, gaming, use of voice applications, upload speed, download speed, 4G availability and 4G coverage. x To mark the first anniversary of the largest 5G network in Slovenia, Telekom Slovenije enriched the Naj mobile packages with free additional quantities of gigabytes. More than 50 thousand Telekom Slovenije users selected 5G services during the first year. x Telekom Slovenije developed a technical solution, through which Zavarovalnica Sava offers the subscribers of Telekom Slovenije’s mobile services a new innovative product, which is something entirely new on the Slovenian insurance Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 32 market: the first ‘pay-by-use’ travel insurance. x Together with ELES and other partners, Telekom Slovenije developed an advanced solution for the efficient mass charging of electric vehicles that is managed remotely and ensures the stability of the electricity power grid. x In accordance with a General Meeting of Shareholders resolution, Telekom Slovenije published a treasury share repurchase programme. That programme will be valid until 18 June 2022. x Telekom Slovenije’s five-year cooperation agreement on the purchase of electricity expired at the end of the year. Due to the rationalisation of operations and its continued focus on the development of the most advanced ICT services and solutions, the Company ceased to supply electricity to end users, effective 1 January 2022. Significant events after the balance sheet date are presented in the accounting report in point 46 Events after the reporting date. Recognitions and awards received in 2021: The Telekom Slovenije Group is committed to the excellence of its operations and portfolio, and to a responsible market approach. The success of our operations is confirmed by numerous professional recognitions and awards, and by trust shown by users. x Trusted Brand 2021: Telekom Slovenije received the title of Trusted Brand for mobile telephony and internet services. x Socially Responsible Employer Certificate: Telekom Slovenije received the certificate for all four areas of certification: organisational governance, occupational health and safety, intergenerational cooperation and work-life balance. x Best shop with mobile accessories for 2021: we were selected by Siol.net readers as the best online shop with accessories. x According to research regarding online purchases and loyalty programmes (Valicon, September−October 2021), our Loyalty Programme was recognised for the Simplest online instalment purchase. x VideoTech – Innovation Awards 2021: the NEO platform was nominated for best innovation of the year in the Pay TV Services category. x WEBSI: TSmedia ranked third in the Video category for Siol.net’s Train Like Tadej Pogačar project, and ranked third in the Best Digital Tool category for the Bizi business assistant. x Best Annual Report for 2020: Akademija Finance presented the Company the award for best 2020 annual report for the introductory, risk management and corporate governance sections amongst non-financial institutions. x Most Respected Employer: Telekom Slovenije ranks among the ten most respected employers in Slovenia, and was recognised as the most respected employer in the telecommunications and networks sector in 2021. x Prizma: The Public Relations Society of Slovenia recognised Telekom Slovenije for its comprehensive communication programme, ‘Welcome to the first 5G network in Slovenia’. x Slovenian Advertising Festival: Telekom Slovenije received a silver medal in the Industrial Excellence category for its Creating the Future project. x Marketing excellence in 2021: Telekom Slovenije won in the Transformation category for its Excellence of the User Experience (CEX) project. We increased customer satisfaction at touchpoints by 20% in two years and by 50% over the four-year project period. Contributing to that success were the strong support of senior management, a committed and dedicated team of employees from different areas, and a well-planned, systematic and, above all, long-term approach to the transformation of operations. x Golden Creditworthiness Certificate of Excellence GVO received the AAA Golden Creditworthiness Certificate of Excellence, which is awarded by Dun & Bradstreet. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 33 1.10 Corporate governance statement Telekom Slovenije, d. d. (hereinafter: Telekom Slovenije) hereby issues its corporate governance statement in accordance with the fifth paragraph of Article 70 of the Companies Act, and the recommendations of the Corporate Governance Code and the Corporate Governance Code for Companies with Capital Assets of the State. The corporate governance statement is an integral part of the audited annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021. It relates to the period 1 January 2021 to 31 December 2021. We also disclose significant events after the aforementioned period and up to the publication of the statement. The corporate governance statement is accessible in electronic form, for a minimum of five years from the date of its publication, on the Company’s website at https://www.telekom.si/en/about-us/company/corporate-governance and in the Ljubljana Stock Exchange’s electronic information system at http://seonet.ljse.si. 1.10.1 Corporate Governance Policy Corporate governance at Telekom Slovenije and within the Telekom Slovenije Group is based on the following principles and guidelines: – the Corporate Governance Policy of Telekom Slovenije, d. d., which was initially adopted in December 2011 and last updated on 13 February 2020, – the Corporate Governance Rulebook of the Telekom Slovenije Group, which was adopted on 22 August 2017, and – the Instructions on the Implementation of the Corporate Governance Rulebook of the Telekom Slovenije Group, which were adopted on 18 February 2020. The Corporate Governance Policy defines a system for segregating responsibilities and competences between members of management and supervisory bodies, the role of Supervisory Board’s committees and the protection of employees’ interests. It also defines groups of stakeholders, a strategy for communication and cooperation with those groups, a policy governing links between the Company and its subsidiaries, and a commitment to identify conflicts of interest and to ensure the independence of members of the Supervisory Board and Management Board. The Supervisory Board and Management Board adopt updates to the Corporate Governance Policy, taking into account current guidelines in the area of corporate governance, as well as binding regulations and best practices. The Corporate Governance Rulebook of the Telekom Slovenije Group defines the rules, criteria and mechanisms for managing and supervising companies in the Telekom Slovenije Group. The Instructions on the Implementation of the Corporate Governance Rulebook of the Telekom Slovenije Group defines the way in which the corporate governance of subsidiaries is implemented in individual areas. The Management Board and Supervisory Board function in accordance with the law and other regulations, the Articles of Association of Telekom Slovenije, d. d. and the rules of procedure of the Management Board and Supervisory Board. The Corporate Governance Policy of Telekom Slovenije, d. d., the rules of procedure of the Management Board and the other documents linked to corporate governance are publicly accessible on the website www.telekom.si/en, under https://www.telekom.si/en/about-us/company/corporate- governance. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 34 1.10.2 Statement of compliance with the Code Telekom Slovenije, as a public interest entity whose securities are traded on the regulated securities market, and as a company with capital assets of the State, took into account the corporate governance recommendations set out in the following documents to the greatest extent possible during the 2021 financial year: x the Corporate Governance Code adopted by the Ljubljana Stock Exchange and the Slovenian Directors’ Association on 27 October 2016. The code entered into effect on 1 January 2017 and is published on the website www.ljse.si; x the Corporate Governance Code for Companies with Capital Assets of the State, which was adopted by Slovenski državni holding, d. d. in March 2021, and the Recommendations and Expectations of Slovenski državni holding from August 2020 (both documents are published on the website www.sdh.si); and x the Recommendations to Public Companies Regarding Notification from 19 November 2020, which entered into force on 23 November 2020. The above recommendations were adopted by the Ljubljana Stock Exchange and are published on the website www.ljse.si. In its work and operations, Telekom Slovenije also complies with the guidelines set out in the Code of Ethics of the Telekom Slovenije Group of 1 February 2017 (published on the Company’s website at www.telekom.si/en). Statement of compliance with the Corporate Governance Code Telekom Slovenije explains below deviations from individual recommendations set out in the aforementioned code: Diversity policy Recommendations 4.1 and 4.3: Telekom Slovenije adopted a diversity policy in 2020 in accordance with the recommendation of the code. The policy deviates in part from the recommendation, as it does not specifically define objectives. Objectives are of a descriptive nature, but are not stated in numbers or percentages, except with respect to gender diversity. Disclosure of the composition and remuneration of the Management Board and Supervisory Board Recommendation 5.6: Telekom Slovenije deviates in part from this recommendation because, in accordance with appendices C3 and C4 to the code, the composition and remuneration of members of the Management Board and Supervisory Board are not an integral element of the corporate governance statement, but are published in the another section of the annual report, while reference to the relevant chapter is given in the corporate governance statement. Justification of proposals for the election of Supervisory Board members Recommendation 8.5: Telekom Slovenije deviated in part from this recommendation in 2021 because the justification of a proposal for shareholders at the 33rd General Meeting of Shareholders held on 18 June 2021 regarding the election of new members of the Supervisory Board did not include an assessment of potential conflicts of interest and an assessment of whether the proposed candidates are independent in relation to the Company according to the criteria set out in the code. Those aspects were verified during the candidacy procedure in accordance with legal provisions and the recommendations of the code. Annual training plan for members of the Supervisory Board and its committees Recommendation 13.1: Telekom Slovenije deviates in part from the recommendation with respect to the definition of an annual training plan for members of the Supervisory Board and the members of its committees, as an annual plan as a unique document is not defined. Members of the Supervisory Board have an online overview of Telekom Slovenije’s current internal training programme and attend training in accordance with available dates. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 35 External evaluation of the assessment of the Supervisory Board Recommendation 14.4: Telekom Slovenije did not comply with this recommendation, as an external evaluation of the assessment of the Supervisory Board was not performed. The Supervisory Board is planning an external evaluation for the 2022 financial year. President of the Supervisory Board Recommendation 15.3: Telekom Slovenije deviates in part from this recommendation in 2021, as the President of the Supervisory Board also served as chair of the HR Committee from 4 November 2020 to 21 January 2021 and chair of the Nomination Committee that was appointed during that time. Term of office of external members of the Supervisory Board’s committees Recommendation 18.3: Telekom Slovenije deviated in part from this recommendation in 2021, as the contract with the external member of the Audit Committee stated that the aforementioned contract ceases to be in force on the day the term of office of the Supervisory Board expires, or on the day the function of the external member of the Audit Committee is terminated based on a Supervisory Board resolution. With the appointment of a new external member of the Audit Committee on 11 February 2021, that deviation from the recommendation was eliminated in the associated contract. Succession system for the Management Board Recommendation 20.1: Telekom Slovenije deviates in part from this recommendation, as it does not have in place a succession system for the Management Board. However, internal candidates were included in the process of appointing Management Board members in 2021 and were appropriately evaluated in that process. Independence of members of the Supervisory Board and its committees Recommendation 23: Telekom Slovenije deviated in part from this recommendation in 2021, as a member (and President) of the Supervisory Board, Boštjan Koler, was not independent from Slovenski državni holding, d. d., where he was also a member of the Management Board from 3 November 2020 to 21 January 2021. Disclosure of the remuneration of members of the Management Board and Supervisory Board Recommendation 29.7: Telekom Slovenije deviates from this recommendation to a lesser degree because the variable element of the remuneration of Management Board members is not disclosed separately in terms of qualitative and quantitative criteria. Publication of rules of procedure of bodies Recommendation 29.9: Telekom Slovenije deviates in part from this recommendation, as it has only published the rules of procedure of the Management Board on its website. Statement of compliance with the Corporate Governance Code for Companies with Capital Assets of the State Telekom Slovenije explains below deviations from individual recommendations set out in the aforementioned code: Independence of management and supervisory bodies from SDH and the state Recommendation 4.1: Telekom Slovenije deviated in part from this recommendation in 2021, as a member (and President) of the Supervisory Board, Boštjan Koler, was not independent from Slovenski državni holding, d. d., where he was also a member of the Management Board from 3 November 2020 to 21 January 2021. Recommendation 4.1 is in contravention of recommendation 6.7, which stipulates an exception for a link with a shareholder. Succession policy Recommendations 6.1, and 6.2.1 to 6.2.3: Telekom Slovenije deviates in part from these recommendations, as it does not have a succession policy in the form of a unique document. The succession process involves the identification of key and perspective employees, as well as potential successors. In the scope of the process, potential internal candidates are also assessed every time members are appointed to the Management Board. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 36 Justification of proposals for the election of Supervisory Board members Recommendation 6.8: Telekom Slovenije deviated in part from this recommendation in 2021 because the justification of a proposal for shareholders at the 33rd General Meeting of Shareholders held on 18 June 2021 regarding the election of new members of the Supervisory Board did not include an assessment of potential conflicts of interest. There was likewise no information provided as to whether the proposed candidates are independent in relation to the Company according to the criteria set out in the code. Those aspects were verified during the candidacy procedure in accordance with legal provisions and the recommendations of the code. Number of sessions of the Audit Committee Recommendation 6.14.2: Telekom Slovenije deviates in part from this recommendation. Given the current relevance and complexity of individual matters, the Supervisory Board’s Audit Committee met at more sessions in 2021 than the recommended number. Disclosure of the remuneration of members of the Management Board and Supervisory Board Recommendation 8.3: Telekom Slovenije deviates from this recommendation to a lesser degree because the variable element of the remuneration of Management Board members is not disclosed separately in terms of qualitative and quantitative criteria. The Company does not disclose the remuneration and other rights of the management staff of subsidiaries in its annual report. It does, however, present that information for the three largest subsidiaries at the General Meeting of Shareholders. Disclosure of the costs of the Supervisory Board’s work Recommendation 8.4: Telekom Slovenije deviates in part from this recommendation, as all costs incurred by the Supervisory Board are not disclosed separately as stated in the recommendation because they are not booked to a separate cost centre. Compliance and integrity officer Recommendation 11.2.1: Telekom Slovenije deviates in part from this recommendation, as the position of compliance and integrity officer is not classified separately. The compliance and integrity officer is appointed by resolution of the Management Board. Recommendations and expectations of Slovenski državni holding Telekom Slovenije adheres to the Recommendations and Expectations of Slovenski državni holding to the greatest extent possible. Telekom Slovenije’s position regarding the recommendations and expectations is published on the Company’s website at: https://www.telekom.si/o-podjetju/upravljanje- druzbe/Opredelitev-glede-priporocil-in-pricakovanj-SDH-ANG-2020.pdf. 1.10.3 Management and supervisory bodies Telekom Slovenije is a public limited company. Its bodies comprise the General Meeting of Shareholders, Supervisory Board and Management Board. The Company has a two-tier system of governance. It is managed by the Management Board and supervised by the Supervisory Board. General Meeting of Shareholders and shareholders’ rights We ensure the equal treatment and consistent exercising of the rights of all shareholders in accordance with the corporate governance system and a communication strategy for shareholders and other stakeholders. The convening, competences and functioning of the General Meeting of Shareholders are set out in the ZGD-1, the Company’s Articles of Association and the rules of procedure of the General Meeting of Shareholders. The Company convenes the General Meeting of Shareholders at least once a year, when it benefits the Company or whenever required in accordance with the law and its Articles of Association. The date that the convening of the General Meeting of Shareholders is published on the website of the Agency of the Republic of Slovenia for Public Legal Records and Related Services is deemed the official date of that convocation and the date from which the deadlines apply. Shareholders exercise their rights at the General Meeting of Shareholders in person or through authorised representatives. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 37 Shareholders have the right to participate in the management of the Company, the right to dividends and the right to an appropriate share of residual assets after the Company’s liquidation or bankruptcy. Shareholders exercise their right to information at the General Meeting of Shareholders. Detailed information regarding shareholders’ rights set out in the first paragraph of Article 298, the first paragraph of Article 300, Article 301 and Article 305 of the ZGD-1 are available on the Company’s website at (https://www.telekom.si/en/investor-relations/shareholders-meeting). Shareholders who are entered in the central register of securities at KDD (Central Securities Clearing Corporation) at the close of business seven days prior to the General Meeting of Shareholders (cut-off day) are entitled to participate and vote at the General Meeting of Shareholders, if they have registered in writing at least three days prior to the General Meeting of Shareholders. Telekom Slovenije’s shareholders met at the 33rd General Meeting of Shareholders held on 18 June, when 80.76% of shares with voting rights were represented. At the General Meeting of Shareholders, the Company’s shareholders: x were briefed on the written report of the Supervisory Board on the approval of the annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2020, on the remuneration of the Company’s Management Board and Supervisory Board and the management bodies of subsidiaries in 2020, and on information regarding the remuneration of members of the management and supervisory bodies of the Company and the management bodies of its subsidiaries in 2020; x approved the proposed use of distributable profit for the 2020 financial year; x conferred official approval on the Management Board and Supervisory Board for the 2020 financial year; x were briefed on the expiry of the terms of office of Supervisory Board members, and elected two new members to that body; x defined the remuneration of members of the Supervisory Board; and x authorised the Company’s Management Board to purchase and dispose of treasury shares. No challenges against resolutions adopted by the General Meeting of Shareholders were announced. The resolutions of General Meetings of Shareholders and documentation from previous meetings are published on the Company’s website. According to the Company’s financial calendar, the 34th General Meeting of Shareholders for 2022 is planned for 16 June 2022. Management Board 15 Composition of the Management Board Pursuant to the Company’s Articles of Association, any person who, in addition to meeting the relevant legal requirements, has a university-level qualification, at least five years of work experience in management positions and active knowledge of at least one foreign (global) language, and who fulfils other conditions defined by the Supervisory Board may be appointed as a member of the Management Board. The Supervisory Board also takes into account the Policy Governing the Diversity of the Management Board and Supervisory Board when selecting candidates to serve as members of the Management Board. These conditions do not apply to the Workers’ Director as member of the Management Board. The conditions and criteria that apply to the aforementioned person are defined jointly by the Supervisory Board and Works Council. Telekom Slovenije’s Management Board comprises five members who were appointed for a four-year term of office. On 10 March 2021, Telekom Slovenije’s Supervisory Board concluded an agreement with the President and three members of the Company’s Management Board on the termination of their employment contracts and their recall from those positions. Accordingly, the terms of office of the President of the Management Board Tomaž Seljak, MSc and members Dr Vida Žurga, Matjaž Beričič, 15 GRI GS 102-18, GS 405-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 38 MSc and Tomaž Jontes were terminated, effective 10 March 2021. The Supervisory Board appointed Cvetko Sršen to serve as new President and Dr Mitja Štular and Tomaž Jontes to serve as members of the Company’s Management Board. Their terms of office began on 10 March 2021. On 22 March 2021, the Supervisory Board appointed Barbara Galičič Drakslar to serve as member of the Company’s Management Board, effective 31 March 2021. The composition of the Management Board was as follows in 2021: Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 39 Name Office Area of work on the Management Board First appointment to function Completion of function/term of office Gender Nationality Year of birth Education / professional profile Membership in supervisory bodies of unaffiliated companies Cvetko Sršen President Human Resource Management and General Affairs, Public Relations, Legal Affairs and Regulation, and Security, Compliance and Risk Management, and the subsidiaries: IPKO and TSinpo 10 March 2021 9 March 2025 Male Slovenian 1966 Holds a master’s degree in intercultural mana gement. GEN energija, d. o. o. INFRA izvajanje investicijske dejavnosti, d. o. o. Tomaž Jontes Member Member Vice - President B2C, B2B, Central Marketing, and the subsidiaries: Avtenta and Soline. 22 June 2020 10 March 2021 22 March 2021 10 March 2021 22 March 2021 9 March 2025 Male Slovenian 1971 Holds a bachelor’s degree in economics. Triglav, pokojninska družba, d. d. Dr Mitja Štular Member ICT and Network Services, Access Networks and the subsidiaries: GVO, SIOL Zagreb, SIOL Podgorica, SIOL Sarajevo, SIOL Skopje, SIOL DOO Belgrade and SIOL Prishtina. 10 March 2021 9 March 2025 Male Slovenian 1970 Holds a doctorate in electrical engineering. Barbara Galičič Drakslar Member Finance and Accounting, Controlling and Strategy, Wholesale Market, Procurement, Logistics and Real Estate, Internal Auditing and the subsidiary: TSmedia. 31 March 2021 30 March 2025 Female Slovenian 1971 Holds a bachelor’s degree in economics. Špela Fortin Member of the Management Board and Workers’ Director Responsibilities derive directly from the law. 14 September 2019 13 September 2023 Female Slovenian 1978 High school graduate. Tomaž Seljak, MSc Vice-President President Corporate Governance, Human Resource Management and General Affairs, Public Relations, Legal Affairs and Regulation, Compliance, Risk Management, Security and the subsidiaries: IPKO and TSinpo. 1 May 2014 10 December 2019 10 December 2019 10 March 2021 Male Slovenian 1972 Holds master’s and bachelor’s degrees in electrical engineering. Dr Vida Žurga Member Finance and Accounting, Controlling and Strategy, Wholesale Market, 1 February 2019 22 January 2020 Female Slovenian 1984 Holds a doctorate in science and a Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 40 Name Office Area of work on the Management Board First appointment to function Completion of function/term of office Gender Nationality Year of birth Education / professional profile Membership in supervisory bodies of unaffiliated companies Vice-President Procurement, Logistics and Real Estate, Internal Auditing and the subsidiary: TSmedia. 22 January 2020 10 March 2021 bachelor’s degree in economics . Matjaž Beričič, MSc Member ICT and Network Services, Access Networks and the subsidiaries: GVO, SIOL Zagreb, SIOL Podgorica, SIOL Sarajevo, SIOL Skopje, SIOL DOO Belgrade and SIOL Prishtina. 10 December 2019 10 March 2021 Male Slovenian 1974 Holds master’s and bachelor’s degrees in electrical engin eering. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 41 Work of the Management Board The Management Board manages transactions and represents the Company independently, and is liable for its own actions in that regard. It makes decisions that are in line with the Company’s strategic objectives, taking into account the principles of sustainable development and the interests of shareholders and other stakeholders. The areas of responsibility of specific Management Board members are set out in the Rules of Procedure of the Management Board to which the Supervisory Board grants its consent. The Management Board met at 63 regular and nine correspondence sessions in 2021. It dedicated special attention to the establishment of a national fifth generation (5G) network, and to the preparation and implementation of preventive measures following the declaration of the COVID-19 pandemic. The Management Board adopted decisions regarding the following: x the halting of the sale of TSmedia; and x the halting of the merger of Avtenta with Telekom Slovenije. The Management Board also adopted numerous business decisions and carried out activities that included the following: x ensuring development and the achievement of established objectives; x the introduction of new and upgraded services; x the development of cyber security, healthcare, financial, transport, logistics and smart city services; x the adaptation of network capacities as the result of the mass migration of users to work from home and distance learning; x the adaptation of processes for business continuity during the pandemic; x additional attention to ensuring cyber security during the pandemic; x the development of new opportunities to use mobile networks in connection with the introduction of the 5G network, and ensuring a superior user experience; x the upgrading of the comprehensive portfolio of ICT services and solutions; x the optimisation and rejuvenation of the employee structure; and x the optimisation of business processes. Remuneration of the Management Board The remuneration, composition and amount of earnings of the Management Board are set out in members’ employment contracts, taking into account the Act Governing the Earnings of Management Staff at Companies Under the Majority Ownership of the Republic of Slovenia and Self-Governing Local Communities (ZPPOGD). The Supervisory Board sets objectives for the Management Board for every financial year, based on the approved annual business plan and certain key indicators. The Management Board’s objectives comprise quantitative and qualitative objectives, as well as financial and non-financial objectives that are defined for the purpose of monitoring the performance of Management Board members. The conditions for profit sharing by the Management Board are governed by the Company’s Articles of Association. The earnings of the Management Board in 2021 are presented in the accounting report in point 41 Transactions with related parties. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 42 Supervisory Board Composition of the Supervisory Board 16 The Supervisory Board comprises nine members, six of whom are shareholder representatives and three of whom are employee representatives. When selecting candidates for Supervisory Board members, diversity in terms of knowledge, skills, experience and other personal circumstances of candidates (gender, age, education, etc.) is taken into account, in addition to the required level of qualifications, reputation and integrity. At the 32nd General Meeting of Shareholders held on 21 January 2021, shareholders recalled member of the Supervisory Board and shareholder representative Igor Rozman, and elected Iztok Černoša, Aleksander Igličar, MSc, Marko Kerin and Radovan Cerjak to serve four-year terms of office, effective 22 January 2021. With the election of new members to the Supervisory Board, the terms of office of the following persons, who were appointed under the decision of Ljubljana District Court of 3 November 2020, were terminated: Boštjan Koler, Dimitrij Marjanović and Štefan Belingar, MSc. On 11 February 2021, the members of the Supervisory Board elected Iztok Černoša to serve as President of the Supervisory Board, while Barbara Kürner Čad and Drago Kijevčanin remained in their functions as Vice-Presidents, the former as shareholder representative and the latter as employee representative. The terms of office of Supervisory Board members and shareholder representatives Barbara Kürner Čad and Barbara Gorjup, MSc expired on 27 April 2021. On 18 June 2021, the Company’s General Meeting of Shareholders elected Karla Pinter and Dr Jurij Toplak to four-year terms of office as members of the Supervisory Board and shareholder representatives, effective on the day of their election by the General Meeting of Shareholders. On 22 June 2021, the Supervisory Board elected Karla Pinter, MSc to serve as Vice-President of the Supervisory Board. On 21 October 2021, Telekom Slovenije’s Works Council appointed Drago Kijevčanin, Dušan Pišek and Jana Žižek Kuhar to four-year terms of office as employee representatives on the Supervisory Board, effective 14 November 2021. The composition of the Supervisory Board is diverse, as its members complement each other in terms of their expertise, competences, experience, age, gender, work method and other aspects. This facilitates the effective exchange of opinions and views at sessions. The Supervisory Board comprised the following members in 2021: 16 GRI GS 102-18, 405-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 43 Name Office First appoint- ment to function Completion of function/ term of office Shareholder/ employee representative Particip ation in Supervi sory Board session s with respect to total number Gen- der Nationality Year of birth Education / professional profile Independ ence in accordan ce with Article 23 of the Code Existenc e of conflicts of interest during the financial year Members hip in supervis ory bodies of other compani es Employment Iztok Černoša President 22 January 2021 21 January 2025 Shareholder representative 20/20 Male Slovenian 1984 Holds a bachelor’s degree in civil engineering / technology YES NO Istrabenz Turizem, d. d., turizem in storitve Managing Director of RGP d.o.o. Karla Pinter, MSc Vice- President 18 June 2021 17 June 2025 Shareholder representative 9/9 Fem ale Slovenian 1982 Holds a bachelor's degree in law and a master’s degree in law. YES NO Director General of the Internal Market Directorate at the Ministry of Economic Development and Technology Radovan Cerjak Member 22 January 2021 21 January 2025 Shareholder representative 20/20 Male Slovenian 1967 Holds a bachelor's degree in law. YES NO Slovensk a tiskovna agencija, d. o. o., Ljubljana Attorney at law Aleksander Igličar, MSc Member 22 January 2021 21 January 2025 Shareholder representative 20/20 Male Slovenian 1962 Holds a master's degree in economics / accounting. YES NO Iskra Mehaniz mi Holding, Senior lecturer at the University of Ljubljana’s faculty of economics Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 44 Name Office First appoint- ment to function Completion of function/ term of office Shareholder/ employee representative Particip ation in Supervi sory Board session s with respect to total number Gen- der Nationality Year of birth Education / professional profile Independ ence in accordan ce with Article 23 of the Code Existenc e of conflicts of interest during the financial year Members hip in supervis ory bodies of other compani es Employment d. d. Lipnica, Slovensk a tiskovna agencija, d. o. o., Ljubljana Marko Kerin Member 22 January 2021 21 January 2025 Shareholder representative 20/20 Male Slovenian 1978 Holds a bachelor’s degree in economics / accounting, auditing, business finance department, risk management. YES NO Head of the office for monitoring and controlling the intra -group business operations and transactions of the Slovenske Železnice Group Dr Jurij Toplak Member 18 June 2021 17 June 2025 Shareholder representative 9/9 Male Slovenian 1977 Holds a bachelor's degree in law/doctorate in constitutional law. YES NO MEJA kmetijsko podjetje Šentjur, d. d. Head of the Department of Public Law and a full professor in the area of law at the Faculty of Law at the University of Maribor. He is also the Managing Director and a full professor at Alma Mater Europaea ECM. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 45 Name Office First appoint- ment to function Completion of function/ term of office Shareholder/ employee representative Particip ation in Supervi sory Board session s with respect to total number Gen- der Nationality Year of birth Education / professional profile Independ ence in accordan ce with Article 23 of the Code Existenc e of conflicts of interest during the financial year Members hip in supervis ory bodies of other compani es Employment Boštjan Koler ** President 3 November 2020 21 January 2021 Shareholder representative 1/1 Male Slovenian 1961 Holds a bachelor's degree in law. NO NO Barbara Kürner Čad ** Vice- President 27 April 2017 27 April 2021 Shareholder representative 10/10 Fem ale Slovenian 1964 Holds a bachelor's degree in law. YES NO Attorney at the Čad Law Firm Barbara Gorjup, MSc ** Member 27 April 2017 27 April 2021 Shareholder representative 10/10 Fem ale Slovenian 1973 Holds a master’s degree in science. YES NO Managing Director of Baklus, d. o. o. Štefan Belingar, MSc ** Member 3 November 2020 21 January 2021 Shareholder representative 1/1 Male Slovenian 1965 Holds a master’s degree in science. YES NO / Dimitrij Marjanović ** Member 13 May 2016 3 November 2020 13 May 2020 21 January 2021 Shareholder representative 1/1 Male Slovenian 1970 Holds a bachelor’s degree in economics. YES NO Iskra ESV, d. d. Senior manager in the Financial Management Department at Slovenski državni holding, d. d. Igor Rozman ** Member 30 August 2019 21 January 2021 Shareholder representative 1/1 Male Slovenian 1959 Holds a bachelor's degree in computer engineering. YES NO Expert in the areas of television production, programme production systems and information systems at RTV Slovenija Drago Kijevčanin Vice- President 19 September 2018 (first term of office) 14 November 2021 Employee representative 21/21 Male Slovenian 1964 Telecommuni cations engineer/tech nology. YES NO NO Telekom Slovenije, network engineer in the ICT and Network Services organisational unit, Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 46 Name Office First appoint- ment to function Completion of function/ term of office Shareholder/ employee representative Particip ation in Supervi sory Board session s with respect to total number Gen- der Nationality Year of birth Education / professional profile Independ ence in accordan ce with Article 23 of the Code Existenc e of conflicts of interest during the financial year Members hip in supervis ory bodies of other compani es Employment 15 November 2021 ( current term of office) 14 November 2025 President of the SELEKS trade union and member of the Works’ Council. Dušan Pišek Member 19 September 2018 (first term of office ) 15 November 2021 ( current term of office) 14 November 2021 14 November 2025 Employee representative 21/21 Male Slovenian 1964 Telecommuni cations engineer/tech nology. YES NO NO Telekom Slovenije, team leader in the ICT and Network Services organisational unit and President of the Works’ Council. Jana Žižek Kuhar Member 19 September 2018 (first term of office ) 15 November 2021 ( current term of office) 14 November 2021 14 November 2025 Employee representative 20/21 Fem ale Slovenian 1974 Holds a bachelor’s degree in economics/re al estate management. YES NO NO Telekom Slovenije, expert in the Procurement, Logistics and Real Estate organisational unit, member of the Works Council. * Participation in sessions convened during the term of office of a specific member (number). ** The data relate to the date on which the term of office ended. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 47 Work of the Supervisory Board The Supervisory Board met at 15 regular and two extraordinary sessions, and held two correspondence sessions in 2021. It ensured the responsible and high-quality supervision of the operations of Telekom Slovenije and the Telekom Slovenije Group. The Supervisory Board discussed different aspects of operations and monitored the implementation of plans. Specific topics were discussed in advance by the Supervisory Board’s committees. Based on the findings, proposals and assessments of committees, the Supervisory Board adopted the appropriate decisions. The Supervisory Board performed its work in accordance with the powers and competences prescribed by the law, the Company’s Articles of Association and its own rules of procedure. It is fully liable for the performance of its supervisory function and makes its decisions independently. All members of the Supervisory Board submitted statements of compliance with the criteria of independence in accordance with the Corporate Governance Code (the statements are published on the website of Telekom Slovenije). Composition and functioning of Supervisory Board committees The Supervisory Board had four permanent committees: the Audit Committee, HR Committee, Strategy Committee and Marketing and Technology Committee. The aforementioned committees discussed individual areas of expertise in accordance with their respective competences and tasks. The composition and most important tasks of individual committees in 2021 are described below: Following change in the members of the Supervisory Board, that body reconstituted its committees on 11 February, 12 May and 22 June 2021. The Audit Committee assists the Supervisory Board in its supervision of financial reporting, internal controls and risk management at Telekom Slovenije and at the Telekom Slovenije Group level, and in cooperation with external and internal auditors. The Audit Committee’s key tasks are to ensure professional cooperation in the corporate governance process, where it functions for the good of the Company and protects the interests of its stakeholders. In accordance with valid legislation, Telekom Slovenije’s Supervisory Board decided that the tasks of the audit committee of Soline, which became a public interest entity in 2021, will be performed by the Audit Committee of Telekom Slovenije’s Supervisory Board from 24 May 2021 on. The Audit Committee’s members were as follows as at 31 December 2021: x Aleksander Igličar, MSc (chair), x Marko Kerin, x Drago Kijevčanin, x Barbara Gorjup, MSc – external member, and x Dr Marko Hočevar – external member. The composition of the Audit Committee changed in 2021. Barbara Gorjup, MSc chaired the Audit Committee until 27 April 2021. She was succeeded by Aleksander Igličar, MSc on 12 May 2021. Dr Marko Hočevar was appointed external member of the Audit Committee on 11 February 2021, while Barbara Gorjup, MSc was appointed to that position on 22 June 2021. Information regarding the members of the Audit Committee who are also members of the Supervisory Board in 2021 is presented in the table detailing the members of the Supervisory Board on pages 43 to 46, while information regarding the external members is presented in the table below: Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 48 Name Committee Participation in committee sessions with respect to total number Gender Nationality Level of education Year of birth Professional profile Membership in supervisory bodies of other companies Dr Marko Hočevar Audit Committee 13/14 Male Slovenian Holds a doctorate in economics. 1962 Accounting Member of the Supervisory Board of Hidria holding, d. o. o. Barbara Gorjup, MSc Audit Committee 6/6 Female Slovenian Holds a master’s degree in science. 1973 Accounting, auditing, business finance, business valuation Barbara Nose Audit Committee 1/1 Female Slovenian Holds a bachelor’s degree in economics and specialises in auditing and accounting. 1964 Auditing and accounting * Participation in sessions convened during the term of office of a specific external member (number). The Audit Committee met at eleven ordinary sessions, and held four correspondence sessions and two extraordinary sessions in 2021. As a rule, all members were present at sessions. Members of the Supervisory Board who are not members of the Audit Committee were kept abreast about the latter’s work through the review of the minutes of the committee’s sessions. The chair of the Audit Committee also regularly reported on the committee’s work and findings at sessions of the Supervisory Board. The Audit Committee addressed issues in accordance with the ZGD-1, recommendations for the work of audit committees, the Audit Committee’s rules of procedure, its work plan adopted for 2021 and the resolutions of Telekom Slovenije’s Supervisory Board. Key tasks performed by the Audit Committee in 2021 were as follows: x it monitored and discussed financial reporting procedures, and monitored the progress of the external audit of the annual report and annual financial statements of the Telekom Slovenije Group and Telekom Slovenije; x it discussed the annual report of the Telekom Slovenije Group and Telekom Slovenije for 2020; x it discussed the Internal Audit Service’s reports regarding audits performed and the implementation of issued recommendations; x it discussed the annual report on the work of the Internal Audit Service for 2020, the service’s work plan for 2021 and 2022, and the strategic plan of the Internal Audit Service for the period 2022 to 2026, and discussed the service’s independence in the absence of the Management Board; x it periodically monitored the risk management system, the functioning of internal controls, compliance, reports on lawsuits and supervision proceedings, and reports on suspected breaches of corporate integrity; x in accordance with the Guidelines for Ensuring the Independence of the Auditor of the Annual Report and Financial Statements of the Telekom Slovenije Group and Telekom Slovenije, which define the methods and procedures for monitoring the independence and impartiality of the auditor, as well as protective measures, the selection of the auditor and procedures for non-audit services: – it discussed all transactions with audit firms and assessed the independence of the certified auditor of the annual report and financial statements of the Telekom Slovenije Group and Telekom Slovenije; – it monitored and assessed the quality of the work of the certified auditor for 2020; and Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 49 x it performed the tasks of the audit committee of Soline in accordance with the resolution of Telekom Slovenije’s Supervisory Board. The Director of the Telekom Slovenije’s Internal Audit Service was invited to all sessions of the Audit Committee. The Audit Committee also invited the certified auditor to sessions at which quarterly reports on the operations of Telekom Slovenije and the Telekom Slovenije Group were discussed. With the aim of continuously improving the quality of its work, the Audit Committee performed a self- assessment in January 2021 and adopted an action plan of improvements. All resolutions adopted under the aforementioned action plan were implemented by the end of the financial year. The HR Committee met at seven regular sessions and one extraordinary session. Significant activities of the HR Committee included: x implementation of the process of appointing Management Board members; x the discussion of proposals of the Management Board on the appointment of managing directors at Telekom Slovenije Group subsidiaries; and x the discussion of the objectives of Management Board members for 2021, and the methodology for calculating the performance factor and criteria in connection with the right of Management Board members to the variable component of wages for 2020. The HR Committee’s members were as follows as at 31 December 2021: x Radovan Cerjak (chair), x Iztok Černoša, x Marko Kerin, x Drago Kijevčanin, and x Dr Jurij Toplak. The HR Committee was chaired by Boštjan Koler until 21 January 2021, and has been chaired by Radovan Cerjak since 11 February 2021. Dr Jurij Toplak was appointed member of the HR Committee on 22 June 2021. Information regarding the members of the HR Committee in 2021 is presented in the table detailing the members of the Supervisory Board on pages 43 to 46. The Marketing and Technology Committee met at three sessions. It discussed the Company’s market position by key segment, as well as the marketing strategy. It also discussed activities in connection with the development of the 5G network and activities relating to the eCare service. The Marketing and Technology Committee’s members were as follows as at 31 December 2021: x Dušan Pišek (chair), x Aleksander Igličar, MSc, and x Karla Pinter, MSc. Dušan Pišek chaired the Marketing and Technology Committee until 11 February 2021, when the Supervisory Board appointed Aleksander Igličar, MSc to chair that committee. Dušan Pišek was reappointed chair of the committee on 12 May 2021. Karla Pinter, MSc was appointed member of the committee on 22 June 2021. Information regarding the members of the Marketing and Technology Committee in 2021 is presented in the table detailing the members of the Supervisory Board on pages 43 to 46. The Strategy Committee met at two sessions in 2021. At its first session, it discussed the draft strategy of TSmedia for the period 2021 to 2026. At its next meeting, it discussed the amended draft of TSmedia and the bases of the Strategic Business Plan of the Telekom Slovenije Group for the period 2022 to 2026. The Strategy Committee’s members were as follows as at 31 December 2021: x Marko Kerin (chair), x Radovan Cerjak, and x Jana Žižek Kuhar. The Strategy Committee was chaired by Štefan Belingar, MSc until 21 January 2021, and has been chaired by Marko Kerin since 11 February 2021. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 50 Information regarding the members of the Strategy Committee in 2021 is presented in the table detailing the members of the Supervisory Board on pages 43 to 46. Remuneration of Supervisory Board members Supervisory Board members are entitled to attendance fees, basic payment for performing their functions and additional payments for participation in Supervisory Board committees. The remuneration of Supervisory Board members is defined by a resolution of the General Meeting of Shareholders. Also defined are the maximum annual amounts of and eligibility criteria for the reimbursement of transportation expenses, daily allowances and costs of overnight stays. The amounts of payments made to members of the Supervisory Board are disclosed in the accounting report. When they assumed their function, every member of the Supervisory Board submitted a statement of compliance with the criteria of independence according to point C.3 of the appendix to the Corporate Governance Code. Those statements are accessible on the website of Telekom Slovenije. Diversity policy The aim of the Policy Governing the Diversity of the Management Board and Supervisory Board of Telekom Slovenije, d. d. (hereinafter: the Policy) is the improved effectiveness of the Management Board and Supervisory Board, and the increased diversity of the members of both bodies. The Management Board and Supervisory Board can use the diversity of members in terms of knowledge, skills, experience, professional qualifications, age, gender, work methods and other aspects to the good of the Company. The Policy is published on Telekom Slovenije’s website at https://www.telekom.si/en/about-us/company/corporate-governance. In accordance with the Policy and in addition to legal requirements and requirements set out in the Company’s Articles of Association, the following primary objectives and/or aspects of diversity must be taken into account to the greatest extent possible when determining the optimal composition of the Company’s Management Board and Supervisory Board, to ensure the effectiveness of an individual body as a whole: professional profile, continuity, experience, gender, age and personal integrity. In terms of gender, the Policy pursues the objective of heterogeneity, whereby an under-represented gender should account for 40% of all members of the Supervisory Board and 33% of all members of the Management Board and Supervisory Board together by the end of 2026. The Company achieved that objective in 2021 in terms of composition of the Management Board. With regard to the composition of the Supervisory Board, that objective was achieved in 2021 until the expiry of the terms of office of two female members of the Supervisory Board in April. The proportion of members accounted for by the under-represented gender is currently 22.22%. In accordance with point 7 of the fifth paragraph of Article 70 of the ZGD-1, Telekom Slovenije presents the representation of both genders on the Company’s Management Board and Supervisory Board: Diversity of members of the Management Board in terms of gender 17 31 December 2021 Men Women Total Number of Management Board members 3 2 5 Proportion 60% 40% 100% Diversity of members of the Supervisory Board in terms of gender 31 December 2021 Men Women Total Number of Supervisory Board members 7 2 9 Proportion 77.78% 22.22% 100% 17 GRI GS 405-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 51 1.10.4 Other explanations in accordance with the Companies Act Pursuant to the fifth paragraph of Article 70 of the Companies Act (ZGD-1), Telekom Slovenije hereby issues the following explanations: Main features of internal control systems and risk management within the Group in connection with financial reporting procedures Risk management and the system of internal controls represent integral elements of corporate governance within the Group. The established risk management framework also includes a system of internal controls, which serves as the basis for the identification, assessment, management, reporting on and monitoring of risks, with the aim of responding and mitigating exposure to risks in a timely manner. In connection with the financial reporting process, the system of internal controls ensures the appropriate management of risks, the ethical operations of Group companies, and reliable, timely and transparent external and internal financial reporting that is in accordance with the law, the adopted accounting framework and regulations, and the guidelines and policies of the Group. Information support is provided for the accounting process. Internal controls are therefore linked with controls built into the IT infrastructure, which comprises controls over restrictions on access to data and applications, and controls over the accuracy and completeness of data capture and processing. Established internal accounting controls are an integral part of the Group’s system of internal controls in the processes and organisational units of companies, and at all levels of operations. The Telekom Slovenije Group strives to ensure an appropriate system of internal controls that includes precisely defined procedures, competences and responsibilities for specific tasks, as well as automated and manual controls in all processes. Internal controls are regularly adapted to legislation, standards, processes, organisational changes, findings from self-assessments of internal controls, findings from other reviews, recommendations of internal and external audits, and best practices. The owners of internal controls are responsible for the consistent implementation of controls, the documentation of the functioning of internal controls and proposals for improvements. A report is drafted once a year on the self-assessment of internal controls at the parent company and subsidiaries to provide a comprehensive overview of the establishment and functioning of internal controls. Implementation is systematic, planned and structured, and is appropriately documented. Data and explanations related to the Mergers and Acquisitions Act – Share capital of Telekom Slovenije There were no changes to the structure of share capital in 2021. The value of Telekom Slovenije’s share capital is EUR 272,720,664.33 and is divided into 6,535,478 ordinary registered no-par-value shares. All shares constitute one class and are issued in dematerialised form. Each share represents the same stake and corresponding amount in share capital, while all shares have been paid up in full. Each share gives its holder the right to one vote at the General Meeting of Shareholders, a proportionate share of profits (payment of dividends) and a proportionate share of residual assets after the liquidation or bankruptcy of the Company. Shares are listed on the prime securities market of the Ljubljana Stock Exchange. Detailed information regarding shares and the ownership structure is presented in section 1.11 Share trading and ownership structure. – Restrictions on the transfer of shares All shares are freely transferable. – Qualifying holdings according to the Takeovers Act There were two holders of a qualifying holding as set out in the Takeovers Act as at 31 December Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 52 2021: the Republic of Slovenia with 4,087,569 shares or 62.54% of the issuer’s share capital and Kapitalska družba, d. d. with 365,175 shares or 5.59% of the issuer’s share capital. – Holders of securities that provide special controlling rights Telekom Slovenije has not issued securities that would provide special controlling rights. – Share scheme for shareholders Telekom Slovenije does not have a share scheme for shareholders. – Agreements between shareholders that might place limits on the transfer of securities or voting rights Telekom Slovenije is not aware of any such agreements. – Rules on the Appointment and Replacement of Members of Management and Supervisory Bodies The Supervisory Board appoints members of the Management Board in accordance with its legal powers and statutory provisions. To that end, it prudently and responsibly assesses the fulfilment of the required qualifications. In accordance with the above, the Supervisory Board also defined the candidate selection process, additional conditions that candidates must meet and procedures for determining the appropriateness of candidates in the Criteria and Procedures for Determining the Appropriateness of Candidates for Members of the Management Board. The Supervisory Board formulated criteria and professional profiles for members of the Company’s Supervisory Board (competence profile) in June 2016, taking into account the specific nature of the Company. Those criteria ceased to apply with the adoption of the Competence Profile for Members of the Supervisory Board of Telekom Slovenije, d. d. of 12 February 2020. That profile is publicly accessible on Telekom Slovenije’s website. – Rules on amendments to the Articles of Association Telekom Slovenije does not have any special rules governing changes to its Articles of Association. Changes to the Company’s Articles of Association are made in accordance with the law and the Articles of Association themselves. – Special agreements that come into effect, are amended or terminated on the basis of a change in control at the Company as the result of a bid as defined by the act governing mergers and acquisitions Telekom Slovenije is not aware of any such agreements. – Agreements concluded between the Company and the members of its management or supervisory body or employees that envisage compensation if they resign or are laid off without justification in the event of a bid as set out in the act governing mergers and acquisitions or if their employment is terminated Telekom Slovenije has no such agreements in accordance with the Takeovers Act. Telekom Slovenije constantly strives to improve corporate governance practices in its operations, including proactive corporate communication with various stakeholders. The Company communicates in the manner set out in Telekom Slovenije, d. d.’s Corporate Governance Policy, the Communications Strategy of Telekom Slovenije, d. d. and the Policy on Communication with the Shareholders of Telekom Slovenije, d. d. With the listing of its shares on the prime market of the Ljubljana Stock Exchange, Telekom Slovenije undertook to comply with the relevant reporting standards. Telekom Slovenije once again provided investors with high-quality, timely, relevant and reliable information in 2021. With the aim of ensuring that Telekom Slovenije Group companies and employees comply with the law, other rules, applicable recommendations and bylaws, the Telekom Slovenije Group’s Compliance Management Policy defines the purpose and objectives of compliance management, an integrity plan and powers and responsibilities. The compliance management system facilitates the identification of risks and the implementation of measures to manage those risks. Playing an important role in that framework are preventive actions, and rapid and effective measures in the event of identified breaches. For more information, see section 2.5.1 Compliance and anti-corruption. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 53 Telekom Slovenije will continue to strive in the future to comply with and introduce the highest standards and best practices in the area of corporate governance, both at the parent company and at other Telekom Slovenije Group companies. Cvetko Sršen, Iztok Černoša, President of the Management Board President of the Supervisory Board Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 54 1.11 Share trading and ownership structure 18 General information regarding Telekom Slovenije shares as at 31 December 2021 General information regarding shares Ticker symbol TLSG ISIN SI0031104290 Listing Ljubljana Stock Exchange, prime Share capital (EUR) 272,720,664.33 Number of ordinary registered no-par value shares 6,535,478 Number of shares held in treasury 30,000 Number of shareholders as at 31 December 2021 8,582 Trading in TLSG shares in 2021 The shares of Telekom Slovenije are listed on the prime securities market of the Ljubljana Stock Exchange under the ticker symbol TLSG. The shares are included in the SBITOP and SBITR share indices, and accounted for 4.11% of those indices according to the quarterly review of computational parameters conducted on 20 December 2021. The SBITR is the Slovenian ‘blue chip’ total return index, which was introduced on 3 May 2021 and takes into account both market prices and confirmed dividends in its calculation. TLSG shares are also included in the ADRIAprime share index, which is a composite index of selected companies listed on the prime markets of the Ljubljana Stock Exchange and Zagreb Stock Exchange. It is a total return index that takes into account both changes in share prices and dividend yield. The TLSG share price closed at EUR 56.20 on the last trading day of 2021 and gained 28.90% in value during the year. The SBITOP index, which provides information regarding the movement of the most liquid and largest shares on the stock exchange, was up by 39.81% during the same period. Total turnover in Telekom Slovenije shares (including block trades) was EUR 12.89 million. The Company’s shares ranked eighth amongst all shares on the Ljubljana Stock Exchange in terms of turnover, excluding block trades. The market capitalisation of Telekom Slovenije’s shares stood at EUR 367.29 million at the end of the year, and accounted for 3.86% of the market capitalisation of all shares on the stock exchange. Trading statistics for TLSG shares on the Ljubljana Stock Exchange Standard price in EUR 2021 2020 Highest daily price 64.60 59.60 Lowest daily price 44.00 41.00 Average daily price 54.37 48.00 Volume in EUR thousand 2021 2020 Total volume for the year 12,892.90 16,650.20 Highest daily volume 558.10 572.82 Lowest daily volume 0.00 0.10 Average daily volume 51.16 66.34 18 GRI GS 102-10 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 55 Movement in the TLSG share price compared to the SBITOP index and volume of trading in TLSG shares Sources: Ljubljana Stock Exchange, archive of share prices. Key financial data relating to shares 31 December 2021 31 December 2020 Closing price of one share on the last trading day of the period in EUR 56.20 43.60 Book value of one share in EUR 91.87 90.35 Net earnings per share in EUR 5.82 3.82 P/BV 0.61 0.48 Capital return per share during the period in % 28.90 -19.85 * The book value of one share is calculated as the ratio of the book value of the Telekom Slovenije Group’s equity on the last day of the period to the number of issued ordinary shares. ** Net earnings per share is calculated as the ratio of the Telekom Slovenije Group’s net operating profit for the accounting period to the average number of issued ordinary shares, excluding treasury shares. *** The capital return per share is calculated as follows (share price on the final trading day of the period – share price on the final trading day of the previous period) / share price on the final trading day of the previous period. 900 1,000 1,100 1,200 1,300 1,400 1,500 40 42 44 46 48 50 52 54 56 58 60 62 64 SBITOP TLSG EUR TLSG in EUR SBITOP SBITR Index SBITR 0 50 100 150 200 250 300 350 400 450 500 550 600 EUR thousand Turnover in EUR thousand Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 56 Ownership structure and largest shareholders at the end of 2021 19 Telekom Slovenije had 8,582 shareholders at the end of 2021, a decrease of 283 relative to the previous year. The number of individual shareholders was down by 262. Ownership structure of shareholders at the end of 2021 With a total stake of 93.42% at the end of the year, domestic investors were predominant in the Company’s ownership structure. Among them, the Company’s largest shareholder remained the Republic of Slovenia, together with Kapitalska družba, Slovenski državni holding, the First Pension Fund of Modra zavarovalnica and the latter’s guarantee fund. A total of 73.36% of the Company’s shares were directly or indirectly held by the State at the end of the year. Changes in the ownership structure by shareholder category Shareholder category % of ownership as at Annual change in percentage points (21/20) 31 December 2021 31 December 2020 Individual shareholders (domestic and foreign) 13.72 13.74 - 0.02 Domestic legal entities 3.91 3.90 0.01 Domestic financial corporations and funds 3.06 3.14 0.08 Foreign legal entities 6.47 6.38 0.09 Ten largest shareholders The structure of the ten largest shareholders changed slightly, as evident from the graph below. The concentration of ownership, as measured by the ownership stake held by the ten largest shareholders, stood at 80.10% at the end of the year, an increase of 0.25 percentage points in year-on-year terms. 19 GRI GS 102-5 Republic of Slovenia 62.54% Individual shareholders (domestic and foreign) 13.72% Foreign legal entities 6.47% Kapitalska družba d.d. (pension fund manager; KAD) 5.59% Slovenian Sovereign Holding , d.d. 4.25% Domestic companies 3.91% Domestic financial companies and funds 3.06% Treasury shares 0.46% 62.54% 5.59% 4.25% 2.69% 1.86% 1.22% 0.73% 0.46% 0.38% 0.37% 0%10%20%30%40%50%60%70% Republic of Slovenia Kapitalska družba, d.d. Slovenian Sovereign Holding,… Citibank N.A. - fiduciary account Raiffeisen Bank International… Perspektiva FT, d.o.o. Guarantee Fund of the First… Telekom Slovenije, d.d. Lisca d.o.o. NLB Funds – Multi -… 31.12.2021 62.54% 5.59% 4.25% 2.55% 1.77% 1.22% 0.73% 0.46% 0.38% 0.36% 0%10%20%30%40%50%60% 70% Republic of Slovenia Kapitalska družba, d.d. Slovenian Sovereign Holding,… Citibank N.A. - fiduciary account Raiffeisen Bank International… Perspektiva FT, d.o.o. Guarantee Fund of the First… Telekom Slovenije, d.d. Lisca d.o.o. Guaranteed fund of… 31.12.2020 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 57 Members of the Management Board and Supervisory Board held 974 TLSG shares as at 31 December 2021. Name Office Number of shares % in equity Management Board Cvetko Sršen President of the Management Board 150 0.00230 Dr Mitja Štular Member of the Management Board 470 0.00719 Barbara Galičič Drakslar Member of the Management Board 100 0.00153 Supervisory Board Marko Kerin Member of the Supervisory Board 2 0.00003 Drago Kijevčanin Vice-President of the Supervisory Board 212 0.00324 Dušan Pišek Member of the Supervisory Board 36 0.00055 Jana Žižek Kuhar Member of the Supervisory Board 4 0.00006 Total Management Board and Supervisory Board 974 0.01490 When the Company’s shares are traded by its representatives and when reporting on such transactions at Telekom Slovenije, we comply with the applicable legislation and the Rules Restricting Trading in the Shares of Telekom Slovenije. Investor relations 20 In the area of investor relations, we adhere to the principle of ensuring equal treatment, transparency, timeliness and the accuracy of information. We communicate regularly and comprehensively with existing and potential shareholders, and other interested parties. The transparency of operations is achieved by complying with the criteria and standards that apply to the issuers of shares on the prime market. The Company communicated with interested domestic and foreign investors and analysts at individual meetings and investor conferences, and via conference calls and email (ir@telekom.si and skupscina@telekom.si). Shareholders may send proposals and suggestions via the investor relations email (ir@telekom.si). In addition to regular communication, we carried out the following activities in 2021: – we sent the quarterly TLSG newsletter to registered domestic and foreign recipients following the publication of operating results. That publication included a selection of the most important news for a specific period, supported by actual data regarding operations; – we attended two meetings with investors; and – we organised two General Meeting of Shareholders. We regularly publish price-sensitive and other important information on the website in the Investor relations section and in the Ljubljana Stock Exchange’s SEOnet system. A total of 38 press releases were issued in 2021, with simultaneous publication in Slovene and English. Financial calendar The financial calendar for 2021 is published in the Ljubljana Stock Exchange’s SEOnet system, and is also accessible on the Company’s website at https://www.telekom.si/en/investor-relations/financial- calendar. Any changes to the financial calendar are also published on the same websites. Dividend policy Telekom Slovenije has a clearly defined stable dividend policy that facilitates a balance between profits for owners and the use of free cash flow for the financing of investments. Such a policy ensures long-term growth and the maximisation of value for owners. At the 33rd General Meeting of Shareholders held on 18 June 2021, shareholders adopted a resolution on the use of distributable profit for 2020. The Company paid shareholders gross dividends of EUR 4.50 per share on 3 August 2021. In accordance with the Common European Standards for Corporate Actions, dividend payments are carried out via KDD and its members, brokerage firms and banks. 20 GRI GS 102-43 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 58 Treasury shares The number of treasury shares was unchanged in 2021, as it has been since the last acquisition in 2003. The Company held 30,000 treasury shares on the final day of 2021, representing 0.46% of equity. The 33rd General Meeting of Shareholders authorised the Company’s Management Board to purchase and dispose of treasury shares. In accordance with the relevant General Meeting of Shareholders resolution, the Company published a treasury share repurchase programme in the Ljubljana Stock Exchange’s SEOnet system on 4 November 2021. That programme is also accessible on the Company’s website at https://www.telekom.si/en/investor-relations/tlsg-share/share- repurchase-programme. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 59 2 BUSINESS REPORT 2.1 Financial results Analysis of the consolidated income statement The Telekom Slovenije Group generated EUR 653.6 million in operating revenues in 2021, similar to the level generated the previous year. Sales revenue amounted to EUR 648.2 million. Revenues were higher in the mobile segment of the end-user market, primarily on account of higher revenues from the sale of mobile merchandise at Telekom Slovenije and higher revenues at IPKO. IPKO is attracting new users through intensive marketing activities, while revenues were also higher due to an increased number of visits by expatriates in 2021. Revenues were lower in the fixed segment of the end-user market due to a decline in revenues from traditional voice telephony, as the result of the falling number of traditional connections and their replacement with mobile and IP telephony, and due to lower revenues from the sale of licences, which resulted in lower costs of subcontractors. Revenues on the wholesale market were higher than in 2020, primarily due to higher revenues from the roaming of foreign users in the mobile networks of Telekom Slovenije and IPKO, and higher revenues from incoming international traffic at IPKO. The operating expenses of the Telekom Slovenije Group amounted to EUR 601.9 million, a decrease of 2% relative to 2020. Primarily the following costs were lower: the costs of subcontractors and licences, as the result of lower revenues from the sale of licences, the costs of multimedia services and content, and the costs of telecommunication services, as the result of lower revenues from international voice services. Earnings before interest and taxes (EBIT) reached EUR 51.7 million in 2021, an increase of 21% or EUR 9.1 million relative to the previous year. Earnings before interest, taxes, amortisation and depreciation (EBITDA) totalled EUR 220.8 million at the Telekom Slovenije Group level, an increase of 5% relative to 2020. The EBITDA margin (i.e. EBITDA as a proportion of sales revenue) was 34.1% at the Group level (2020: 32.4%). Finance income and finance costs were both down relative to 2020 to stand at EUR 2.0 million and EUR 8.6 million, respectively. Following the calculation of income tax (including deferred tax assets), the Telekom Slovenije Group generated a net profit of EUR 37.9 million in 2021, an increase of EUR 13.0 million relative to 2020. The Telekom Slovenije Group also uses the Alternative Performance Measures (APMs) defined by the ESMA to present its operating results (for more information, see point 4.3 Alternative performance measures). Analysis of the consolidated balance sheet Total assets as at 31 December 2021 amounted to EUR 1,250.3 million, an increase of 1.8% or EUR 22.5 million relative to the situation as at 31 December 2020. Non-current assets totalled EUR 1,033.2 million, an increase of 3.1% or EUR 31.1 million relative to the end of 2020. The proportion of the Group’s total assets accounted for by non-current assets rose to 82.6% (2020: 81.6%). Primarily intangible assets were higher on account of concessions acquired in 2021 for the frequency spectre for the 5G network. Current assets amounted to EUR 217.1 million, a decrease of 3.8% or EUR 8.6 million. Of that amount, trade and other receivables were down by EUR 6.8 million. Equity totalled EUR 600.4 million, an increase of 1.7% or EUR 9.9 million relative to the end of 2020, and represented 48.0% of total assets (2020: 48.1%). Non-current liabilities in the amount of EUR 424.6 million represented 34.0% of total assets. Those liabilities were up by EUR 104.4 million relative to the end of 2020, primarily on account of new long- term loans, which were up by EUR 124.8 million as at 31 December 2021 relative to the end of 2020. Other non-current liabilities were down by EUR 20 million. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 60 Current liabilities amounted to EUR 225.3 million, a decrease of EUR 91.9 million relative to the end of 2020. The proportion of total assets accounted for by current liabilities fell to 18.0% (2020: 25.8%), primarily due to the repayment of maturing bonds classified as current financial liabilities. Analysis of the consolidated statement of cash flows The Group recorded investments in fixed assets in the amount of EUR 199.0 million and outflows for loans granted and deposits placed in the amount of EUR 0.3 million in outflows for investing activities. The Group’s inflows from investing activities in 2021 primarily comprised proceeds from the sale of fixed assets in the amount of EUR 5.8 million (with the sale of real estate accounting for EUR 5.5 million of that amount) and inflows from dividends in the amount of EUR 0.1 million. The Group’s outflows from financing activities included the repayment of the issued bonds in the amount of EUR 100 million in June, the repayment of the short-term portion of long-term loans in the amount of EUR 35.5 million, the repayment of a short-term loan in the amount of EUR 26 million at the end of the year, net outflows from revolving loans in the amount of EUR 1.5 million, and the payment of interest on loans received and assets under lease in the amount of EUR 8.5 million. Outflows for the approval of loans received amounted to EUR 0.6 million. Based on the dividends approved by the General Meeting of Shareholders, the total amount of EUR 29.3 million was paid to Telekom Slovenije’s shareholders in August. In accordance with the entry into force of IFRS 16, payments of lease liabilities (excluding interest) in the amount of EUR 12.6 million were included in outflows from financing activities. The Group’s inflows from financing activities include the receipt of two long-term (syndicated) loans in the total amount of EUR 170 million, and a short-term loan received during the first quarter of the year in the amount of EUR 26 million. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 61 Key financial indicators for the Telekom Slovenije Group and Telekom Slovenije, in accordance with the accounting report 21 Telekom Slovenije Group Telekom Slovenije in EUR thousand and % I – XII 2021 / 31 December 2021 I – XII 2020 / 31 December 2020 Index 21/20 I – XII 2021 / 31 December 2021 I – XII 2020 / 31 December 2020 Index 21/20 Sales revenue 648,247 647,177 100 577,630 591,693 98 Other operating income 5,303 7,694 69 3,421 5,254 65 Total operating revenues 653,550 654,871 100 581,051 596,947 97 EBITDA 220,752 209,882 105 175,773 174,281 101 EBITDA margin = EBITDA / sales revenue 34.1% 32.4% 105 30.4% 29.5% 103 EBIT 51,696 42,603 121 33,598 36,930 91 Return on sales = EBIT / sales revenue 8.0% 6.6% 121 5.8% 6.2% 93 Net profit from continuing operations 37,888 34,084 111 - 24,174 - Loss from discontinued operations 0 - 9,219 0 - 0 - Net profit for the financial year 37,888 24,865 152 34,371 24,174 142 Assets 1,250,339 1,227,839 102 1,237,941 1,226,566 101 Equity 600,431 590,484 102 612,241 605,784 101 Return on equity (ROE) 6.4% 4.2% 151 5.6% 4.0% 141 Equity ratio 48.0% 48.1% 100 49.5% 49.4% 100 Net financial debt 399,009 378,377 105 408,293 390,050 105 NFD / EBITDA 1.8 1.8 100 2.3 2.2 104 Investment in property, plant and equipment (CAPEX) 208,173 173,045 120 188,704 164,680 115 EBITDA – CAPEX 12,579 36,837 34 -12,931 9,601 - Ratio of (EBITDA – CAPEX) to EBITDA (cash margin) 5.7% 17.6% 32 - 7.4% 5.5% - Number of employees as at the last day of the period 3,284 3,392 97 2,119 2,165 98 Investments as a proportion of operating revenues 31.9% 26.4% 121 32.5% 27.6% 118 * The operations of Planet TV for 2020 are included in the item 'discontinued operations'. The year 2019 is adjusted for a prior- period correction in the financial statements of IPKO and thus of the Telekom Slovenije Group. This applies to all items in the tables and graphs presented below. Definitions can be found in point 4.3 Alternative performance measures. More information can be found in the accounting report beginning on page 181. Segment reporting The criterion for segment reporting is the registered office where an activity is performed. The Telekom Slovenije Group thus presents its operations in two segments: Slovenia and other countries. More details are provided in the accounting report in point 6 Segment reporting. 21 GRI GS 102-7, 201-1, 102-10 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 62 2.2 Financial performance of the Telekom Slovenije Group Through the implementation of the Telekom Slovenije Group’s financial policy, we ensure the financial stability of the entire Group. We achieve this through successful operations, the active planning and management of cash flows, ensuring the appropriate maturities and the diversification of financial debt, financing within the Group, the optimisation of working capital and the effective management of financial risks. For the purpose of ensuring a high level of liquidity, the Group has open short-term credit lines at banks that are regularly rolled over taking into account planned needs. The Group’s liquidity reserves amounted to EUR 74 million at the end of 2021, and took the form of approved but undrawn revolving credit lines. Indebtedness is relatively low at the Group level. The net financial debt to EBITDA ratio was 1.8 at the end of 2021. The Group’s total financial liabilities amounted to EUR 415.7 million at the end of 2021, and primarily comprised two long-term syndicated loans in the amount of EUR 309.9 million, a long- term loan from the European Investment Bank in the amount of EUR 40 million and liabilities from finance leasing in the amount of EUR 66.6 million. Net financial debt (NFD) of the Telekom Slovenije Group * The results of Planet TV for 2020 and 2019 are included in the item ‘discontinued operations’. This applies to all accounting items in the tables and graphs presented below. The Group regularly settles its liabilities to creditors. A total of EUR 35.5 million in long-term loans was repaid in 2021, as were five-year bonds in the amount of EUR 100 million that matured in June 2021. Repayment plan for existing long-term debt (loans and bonds) As a rule, subsidiaries secure borrowings from the parent company. Internal financing within the Group and the reallocation of surplus cash between companies facilitate more effective cash management and the optimisation of net financial debt, as well as a reduction in the Group’s exposure to external borrowing, which in turn ensures greater flexibility. The Group further stabilised the structure of its financing in 2021, when Telekom Slovenije signed a long-term loan agreement with a syndicate of domestic banks in the amount of EUR 130 million. The full amount of that loan was drawn down in 2021. That loan ensured the liquidity required for the 1,5 1,6 1,7 1,8 1,9 2,0 0 50 100 150 200 250 300 350 400 450 31.12.2019 31.12.2020 31.12.2021 NFD / EBITDA in mio EUR Financial liabilities Net financial debt (NFD) NFD / EBITDA 0 50 100 150 200 250 300 350 2021 2022 2023 2024 2025 2026 v mio EUR Principal repayment Oustanding debt Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 63 repayment of issued bonds in the amount of EUR 100 million that fell due for payment in June 2021. The Company will earmark the remainder of the loan for investments in connection with the continued implementation of its established strategy. The first tranche of a loan from the European Investment Bank in the amount of EUR 40 million was also drawn down in 2021. The Company may draw down the remaining EUR 60 million until the end of 2023. Maturity breakdown of financial liabilities Loans included in the balance at the end of the year bear variable interest rates linked to the 6-month EURIBOR. The weighted mark-up on the variable portion of the interest rate on all loans within the Group stood at 126 basis points at the end of 2021. Fixed or hedged interest rates account for 28.4% of interest-bearing financial liabilities at the Group level. 22 Financial risk management A detailed description of financial risk management is found in section 2.4 Risk management and in the accounting report in point 44 Financial risk management. Fulfilment of financial commitments Creditor banks require the maintenance of the values of financial commitments and indicators set out in loan agreements. Failure to fulfil those commitments could result in the early maturity of loans. All financial commitments at the Group level were met as at 31 December 2021. 22 Takes into account loan principal and finance leases. 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% 31.12.2019 31.12.2020 31.12.2021 Dolgoročne finančne obveznosti Kratkoročne finančne obveznosti Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 64 2.3 Investments in fixed assets Investments in fixed assets 23 The Telekom Slovenije Group earmarked EUR 208.2 million for investments in fixed assets in 2021, an increase of 20% or EUR 35.1 million relative to 2020. Of the aforementioned amount, 90.6% of all investments or EUR 188.7 million was earmarked for investments by Telekom Slovenije, an increase of 15% relative to the previous year. The remainder was earmarked for investments in development by subsidiaries. The altered conditions due to the increased scope of work from home and distance learning resulted in increased network traffic and thus an increase in investments to ensure capacities in both the mobile and fixed networks. Representing a particular challenge due to the closure of borders and the adoption of measures to prevent the spread of the pandemic were ensuring materials and equipment, and an adjusted regime for implementing works to realise investments. Through investments in the construction, modernisation and development of networks and services, we are creating a platform to attract new and retain existing subscribers, and to secure new revenue sources and maintain a high level of quality. The majority of investments in 2021 were earmarked for the expansion of the fibre optic access network, which will provide users a superior user experience in terms of broadband content and high-speed internet access. Investments were also earmarked for the modernisation of the mobile network and the establishment of the first national fifth generation (5G) mobile network, and for the development of new services and the further optimisation of operations. For more details, see section 2.8 Network, technologies and IT. Investments by company in EUR thousand 2021 2020 Index 21/20 Telekom Slovenije 188,704 164,680 115 Other companies in Slovenia 5,734 3,246 177 IPKO – Kosovo 13,343 8,728 153 Other companies abroad 1,900 1,365 139 Exclusions and adjustments -1,508 -4,974 170 Telekom Slovenije Group 208,173 173,045 120 * Excluding Planet TV for 2020. Structure of investments by purpose 23 GRI GS 103-1, 103-2, 203-1, GRI IO1 Frequency fees 25.8% Network 36.1% CPE - Customer equipment 7.7% Customers solutions 14.6% IT, internal ICT infrastructure, R&R projects 7.5% IFRS 16 4.4% Other 3.9% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 65 2.4 Risk management The identification and management of risks are an integral part of our business processes and decisions, and are crucial for achieving established objectives and exploiting opportunities. There is a risk management framework in place that serves as the basis of the corporate governance of the Telekom Slovenije Group. The maintenance of that framework is a permanent and recurring process. We continuously strive to raise awareness, which facilitates the effective identification and assessment of risks, and the management of those risks through appropriate measures, reporting and monitoring, and a suitable control environment. We have defined four types of risks for which we identify external and internal factors: x strategic risks, x financial risks, x operational risks, and x regulatory and compliance-related risks. We define risks as potential events that could have an adverse on the achievement of our objectives, while opportunities are potential events with a positive impact on the Company’s ability to achieve its objectives. The Internal Audit Service’s audit activities include an audit of risk management and a self- assessment of internal controls. The Management Board is briefed continuously on risk assessments, the findings of internal audits and other reviews of operations. It responds to assessments and findings appropriately through a range of measures to manage risks and ensure compliance. It reports to the Supervisory Board and the latter’s committees regularly with regard to key risks, findings and adopted measures. Risk management framework The risk management framework is integrated into all Group companies, and includes a model comprising three lines of defence against risks. That model provides an overview of risks and a uniform basis for understanding them. Transparent and effective communication about risk management is ensured through the definition of duties, powers and responsibilities. That process facilitates the identification and assessment of risks, and the management of those risks, reporting and monitoring. The result of risk identification is risk assessment. Risk owners assess risks based on the effect and probability of an event. They are also responsible for formulating measures to manage those risks. The identified level of risk takes into account measures and internal controls. The Company also monitors exposure to risk based on calculations using an internal risk quantification methodology, and draws up strategies for responding. Subsidiaries report to the parent company with regard to all risks. Representing an integral part of risk management is the review of key internal controls that are in place in the implementation of business processes. The Group verifies the functioning and establishment of internal controls once a year in accordance with the methodology on the self- assessment of internal controls, and reports to the Internal Controls Committee, Risk Committee and Supervisory Board’s Audit Committee in that regard. The self-assessment of internal controls contributes to the more transparent identification of weaknesses and to more effective risk management. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 66 The risk officer reports on risks quarterly to the Supervisory Board’s Audit Committee for both the parent company and subsidiaries. 4 sessions The risk officer reports on key risks to the Risk Committee , which discusses exposure to risks, the implementation of measures and target levels of risk, as well as risk management documents. The committee meets quarterly and more frequently as required. 5 sessions The risk officer reports to the Internal Controls Committee regarding the self- assessment of internal controls within the Group. The committee also discusses new internal controls and the bases for changes to existing internal controls. 3 sessions Improvements to the risk management framework The risk management framework is continuously upgraded. We continued to improve the risk identification and assessment process in 2021. We enhanced the review of key risk factors, and took an even more dynamic approach to assessing risks and monitoring measures. We take an active approach to the review of key internal controls and to the development of risk assessment models, and we monitor events in the environment and identify new risks. Risks in connection with the achievement of objectives When planning the objectives and strategy of the Telekom Slovenije Group, we take into account opportunities and identified risks, as well as measures to manage those risks. Having the most significant impact on the achievement of established objectives are risks linked to the market and competition, risks relating to the confidentiality, integrity and availability of networks (including cyber security risks), risks associated with the regulatory framework, the risk of disruptions in the supply chain and HR risks, and pressures for change that derive from new technologies and rapid development. Supplementation of the bases for risk assessment Based on the monitoring of risk factors in the external and internal environment, we supplemented internal risk assessments with the acceptable levels of individual risks. We also updated the assessment of the target risk level, which depends on planned measures and factors affecting risks. Quantification of risks at subsidiaries We monitor risk exposure based on an internal Monte Carlo simulation. Key risk indicators We supplemented key risk indicators for major risks in the scope of the quarterly risk assessment. Risks and scenarios We address risks individually, and assess various scenarios for the improved and more comprehensive understanding of the spectre of those risks. Self-assessment of internal controls We updated the bases for the self-assessment of internal controls, and established the digital signing of statements regarding exposure in connection with and the functioning of those controls. Risk assessment models Models are continuously updated and adjusted to the requirements and needs of the Group. In the areas of business continuity and information security, we assess risks in connection with key services Identification of risks Assessment of risks Management of risks Reporting on risks Monitoring of risks Risk Committee Internal Controls Committee OU responsible for compliance and risk management Risk owners Risk management process Internal audit Supervisory Board Audit Committee of the Supervisory Board Management Board Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 67 and processes in terms of confidentiality, integrity and availability. Those models are discussed once a year by the Risk Committee. We drew up an assessment of internal risks for the integrity plan and fraud prevention programme. Culture of risk and opportunity management We build the risk culture and develop the appropriate employee competences through training and awareness-raising, as the environment, and methods and measures for managing risks are constantly changing. We organise mandatory training at the Group level every year in cooperation with the Internal Audit Service and compliance officers. New risks The identification of new, emerging risks is crucial for long-term successful operations. We regularly monitor the effects of the external and internal environment, and assess new risks and their impact on existing risks on that basis. New risks may comprise additional regulations or the expectations of stakeholders with respect to ESG (the environmental, social and economic aspects of operations). Also representing additional challenges are risks from the environment (e.g. natural disasters and outbreak of disease). These are seen more frequently and with greater intensity, and increase assessments of risk linked to the functioning of services and systems, and the provision of security. Risk management strategies The risk environment is increasingly complex. It is therefore important that we remain agile when identifying and responding to risks. We will thus continue to develop the risk management process in 2022 to ensure the most effective support possible for the objectives and strategies of Group companies. We will supplement key risk indicators with the monitoring and management of risks in the area of sustainable operations. Risks within the Telekom Slovenije Group The risk management and internal controls framework is based on the practices of the COSO and is in line with the ISO 31000 standard. Risks are classified with regard to the level of risk (very high, high, moderate and low). Presented below are key risks during the final quarter of 2021, assessed for the next 12 months, and a comparison of their trend relative to the same period in 2020. The level of risk takes into account measures and internal controls. Probability Impact Very high High H Moderate M Low Low probability Possible Very possible Almost certain Very high High Moderate Low Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 68 Trends are indicated as follows: → assessed risk is unchanged ↓ assessed risk is lower ↑ assessed risk is higher Risk assessment due to the impact of COVID-19 for all Group companies We carried out an additional quarterly risk assessment at all Group companies of the impact of COVID-19, which is separate from the general risk assessment, and only includes factors that are connected with COVID-19. Group companies regularly monitor the impact of COVID-19 and have control-preventive measures in place. When analysing the response to COVID-19, we search for opportunities to enhance our ability to manage and maintain the resilience of our network, even in critical conditions. We continue to develop state-of-the-art and digitally supported solutions for products and services. Risk What is the risk? What is the effect? How is the risk managed? Impact of COVID-19 Delayed projects, closed points of sale, less roaming, disruptions in the supply chain, higher prices of products and services, and less development of services. Malfunctioning of services. Absence of employees. Economic recession. Lower revenues and loss of revenues. Higher costs. Impact on cash flow. Implementation of measures to protect the health and safety of employees. Ensuring the continuity of services and processes. Intensive communication with suppliers, the search for more supply sources and increase in stock of strategic goods. Telekom Slovenije Strategic risks On the Slovenian market, we face stiff competition, regulatory effects, price-sensitive users, and the migration of voice traffic to OTT platforms (services that function independent of the network). Users demand high-quality and more extensive services at lower prices. Their habits are changing. The management of such risks requires a flexible market approach and the constant introduction of innovations that track market trends and the expectations of users. We place emphasis on the high-quality and availability of services for all user segments. At the forefront of the development of services is the digitalisation of processes, where the emphasis is on the digital ordering of services. Risk What is the risk? What is the effect? How is the risk managed? Diminishing profitability and the loss of subscribers – B2C Aggressive competition on the market of services and package offers, reduction of the general level of prices of services, rapid changes to the portfolio and unlimited packages. Loss of subscribers due to migrations between operators. Delays in digitalisation. Loss of revenues. Lower margin. Loss of market share. Competitive offer and programmes to maintain subscribers. Target -oriented approach by subscriber segment . Improvement of the user experience. Product lifecycle management. Lean business model and the digitalisation programme. Use of advanced programmes to analyse data. Level of risk → Trend Strategic objective Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 69 Risk What is the risk? What is the effect? How is the risk managed? Drop in revenues due to regulatory obligations and diminishing profitability of services – wholesale market New and/or additional regulatory obligations on regulated markets. Saturated wholesale services market, migration of voice traffic to OTT platforms, and ever increasing competition in terms of services and the infrastructure. Loss of revenues. Lower margin. Proactive participation in market analysis and supervision processes by the regulator, and the monitoring of market development. Adaptation of the wholesale portfolio in accordance with regulatory obligations and the needs of the market. Competitive offer on the wholesale market. Conclusion of longer - term agreements and an agreed traffic volume. Expansion of roaming capacities. Level of risk → Trend Strategic objective Loss of subscribers and diminishing profitability – B2B Aggressive competition with a range of alternative solutions, and switching of subscribers between operators. New technologies and price erosion. Migration of traffic to OTT. Increased scope of services at a lower price. Loss of revenues. Lower margin. Integrated solutions for the ‘cross sell’ and ‘upsell’ programme. Programme to maintain subscribers. Strategic partnerships for innovative solutions in the following areas: cyber security, safe internet, modern workplace, 5G mobile ICT solutions, telemedic ine, smart cities and smart mobile infrastructure. Reduced development time for new solutions. Events for business users, webinars. Level of risk ↓ Trend Strategic objective Financial risks We regularly monitor changes in the financial environment that are reflected in various types of financial risks to which we are exposed in our operations. We manage long-term solvency and capital adequacy through the regular planning and balancing of cash flows for different time periods. We ensure the appropriate maturity and diversification of financial debt, the optimisation of working capital and the appropriate use of liquid assets. We manage credit risk through the active monitoring of the operations of subscribers and their credit ratings, and by limiting maximum allowable exposures. We further hedge against the risk of the deteriorating financial position of subscribers through credit insurance and by regularly monitoring the appropriateness thereof. Monitoring of the settlement of contractual obligations and the active recovery of past-due debt are also elements of comprehensive credit risk management. Risk What is the risk? What is the effect? How is the risk managed? Long-term solvency and capital adequacy Additional long-term borrowings. Reduced financial flexibility. Higher net debt . Creation of a structure of financing for the fulfilment of financial commitments from loan agreements. Appropriate debt - to- equity ratio. Level of risk ↑ Trend Strategic objective Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 70 Subscriber credit risk Increased proportion of past -due receivables. Scope and structure of receivables. Write- offs of unrecoverable receivables. Subscriber credit assessment, credit check process, obtaining credit insurance. Recovery of past -due receivables. Level of risk → Trend Strategic objective Regulatory and compliance-related risks Telekom Slovenije processes a large quantity of personal data relating to users, business partners, employees and other stakeholders. The processing of personal data brings risks that we monitor and assess. On that basis, we formulate the appropriate measures for the management of those risks. We ensure compliance with regulations governing personal data protection through the continuous monitoring of personal data protection processes, and by updating and improving personal data processing and internal control processes. In our operations, we comply with valid legislation, as well as decisions and aspects of sectoral regulations and other competent bodies. We manage regulatory risks through organisational and procedural measures in the Company’s operations, through constructive dialogue, by putting forth opinions, comments and suggestions in public consultations regarding drafts of general and specific laws issued by the regulator, and by taking legal action against issued regulatory decisions, whenever that is justified. Through constructive and professional proposals, we are involved in the process of drafting the new Electronic Communications Act (ZEKom-2), which will transpose the European Electronic Communications Code (EECC) into Slovenian law, and the drafting of the new Personal Data Protection Act (ZVOP-2). At the European level, the Digital Services Act (DSA) package is currently the subject of public consultations. That legislative package includes proposed new and amended rules for the strengthening of the Single Market for digital services. Also in the process of being drafted is a new directive on privacy and electronic communications (e-privacy), which will affect the processing of data in the provision of our services, in particular the processing of data on communications. Risk What is the risk? What is the effect? How is the risk managed? Risk of regulatory pressures on the markets of fixed and mobile electronic communications New models for setting prices and additional obligations for regulated services. Higher costs and loss of revenues. Active participation in market analyses, and in the adoption of new laws and other acts. Appropriate implementation of issued regulatory decisions and regulatory compliance. Monitoring of changes in the EU regulatory framework. Level of risk → Trend Strategic objective Compliance in the area of personal data protection Breach of personal data protection. Loss of users’ trust. Payment of fines and claims for damage. Implementation of internal controls for maintaining records of personal data, the handling of personal data and assessments of effects. Monitoring of changes in the regulatory framework in Slovenia and the EU. Employee training in the area of personal data protection. Level of risk → Trend Strategic objective Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 71 Operational risks Telekom Slovenije gives a great deal of attention to managing ICT-related operational risks. The complexity of comprehensive risk management in this area is increasing due to the development of new ICT technologies and services, and the growing expectation of users and regulatory requirements. We manage those risks through the development and management of subsystems, by improving operational efficiency and through employee training. The comprehensive management of the aforementioned area also facilitates the identification of new business opportunities. In the scope of business continuity, we ensure the necessary topologies and capacities of the infrastructure and ICT services, and of the transmission, backbone and access segments. The risks associated with the malfunctioning of connections and services provided by other entities are managed by introducing processes to monitor and report on service-level agreements on leased networks, and by standardising our requirements vis-à-vis network providers for newly leased networks. We update and increase capacities through redundancy in those network segments where we have identified increased functional and security-related risks. We continuously develop systems for monitoring technologies and anomalies in the infrastructure and ICT services, and conduct internal and external penetration testing. We have in place the state-of-the- art Cyber Security Operation Centre. We manage risks through the implementation of the security policy, by identifying security threats and vulnerabilities, and by spreading the security culture to employees and users. We manage procurement risks through a centralised procurement function, a standard process for the implementation of procurement procedures and a methodology for assessing the risk of cooperation with suppliers. To that end, we monitor compliance with contractual provisions. The Supplier Code of Conduct falls into this category of activities. We ensure the timely supply of equipment and services in changing market conditions through more frequent contacts with suppliers. We ensure the necessary safety stocks of strategic materials, and at least two supply sources where possible. We are also exposed to human resource risks, in particular the risk of retaining and recruiting key staff with specific expertise and certificates, as there is increased demand for professionally qualified employees on the labour market. We manage that risk in the scope of the system for managing key and perspective employees, through career planning, internal mobility, the transfer of knowledge, inclusion in development-training programmes and the mentoring system, and through a flexible remuneration and motivation system. We attract potential jobseekers with our enticing employer brand. We ensure the development of the appropriate staff in strategically important areas by offering scholarships to the best pupils and students, and by establishing and maintaining new strategic partnerships with faculties and schools. We thus create a database of potential new employees. The range of operational risks also includes risks relating to sustainable operations, where we classify environmental risks, risks in connection with the development of and care for employees, and risks relating to a safe work environment. Those risks derive from compliance with regulations, and the corporate policy governing respect for human rights, ethical principles and environmental standards. We have also identified reputation risk, which includes the management of stakeholder relations. Risk What is the risk? What is the effect? How is the risk managed? Functioning of systems – ICT security Threats to the confidentiality, integrity and availability of networks, systems or data that are the result of a cyber -attack. Weak security culture. Loss of revenues and reputation, higher costs and user dissatisfaction. Strict implementation and updating of the security policy and processes of planned works, and internal and external assessments. Strengthening of the employee structure of the Operational Service Centre, processes and tools. Ensuring the appropriate identification, redundancy and suitable capacities to protect against Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 72 DDoS (distributed denial of service) attacks. Focus on user security. Adequate ext ernal insurance. Level of risk → Trend Strategic objective Functioning of systems – fixed core, aggregation and package core The disruption or limited performance of key business processes due to the failure of network elements in national or international fixed telephony, and on the mobile and fixed aggregate network, where the traffic of mobile base stations and fixed network CPE devices are concentrated. Malfunctioning of services, poor quality of services, loss of revenues and reputation, and dissatisfied users. Preventive inspections of the functioning of systems and the adaptation of capacities, and regular upgrades of software and the aggregate part of the mobile and fixed elements of the network. Continuous improvements to operational and security procedures and knowledge; strengthening of personnel. Comprehensive information security management system (ISMS). Level of risk ↑ Trend Strategic objective Management of procurement process Dependence on suppliers. Strength of suppliers, weaker negotiating position of the Company. Supply delays. Ability of suppliers to execute transactions. Breach of contractual provisions by suppliers. Higher costs of goods and services. Higher stocks of strategic materials. Impact on the Company's reputation. Longer delivery times. Longer procurement procedures. Termination of agreements with suppliers. Centralised procurement. More frequent communication with suppliers. Management of the impact of rising prices through intensive negotiations and improvements in the procurement process. Collection of offers from several suppliers and search for new suppliers. Monitoring of the cooperation of strategic partners, and supplier assessment. Ensuring the necessary safet y stocks of strategic materials. Level of risk → Trend Strategic objective Departure of key employees, appropriate employee structure and organisational culture Departure of key employees, and employees with crucial knowledge and certificates. Lack of competences and major certificates for strategic projects and the smooth implementation of business processes. Systematic approach in the scope of the system for managing key and perspective employees, career planning, internal mobility, the transfer of knowledge, inclusion in development -training programmes and mentoring systems, and a flexible remuneration and motivation system. Company scholarships. Activities that actively support the building of the employer brand. Level of risk → Trend Strategic objective Presentation of risks by risk category The graph presents levels of risk at Telekom Slovenije by risk category during the final quarter of 2021 and a comparison with target levels of risk. Target levels reflect risk management efforts at the Company, and are reviewed and defined once a year. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 73 Avtenta Risk What is the risk? What is the effect? How is the risk managed? Human resource risks Lack of experts for project implementation. Higher costs and impact on project implementation. HR strategy focused on retaining and recruiting staff. Employee motivation. Level of risk → Trend Strategic objective GVO Risk What is the risk? What is the effect? How is the risk managed? Risks associated with rising prices of construction services and materials Rising prices of subcontractors on account of economic growth and an increase in demand for construction works. Higher costs and loss of revenues. Coordination with subcontractors and the continuous review of implemented works. Adaptation of the work organisation and processes. Level of risk → Trend Strategic objective TSinpo Risk What is the risk? What is the effect? How is the risk managed? Risks associated with achieving planned revenues Reduced volume of sales, rising raw material prices, supply delays and pressure from the competition. Lower revenues and higher costs. Conclusion of annual agreements, modernisation of production and introdu ction of new programmes. Level of risk ↑ Trend Strategic objective Failure of systems and disruptions to operations Credit risks Corporate governance Internal and external fraud and material damage Interest-rate risks Regulatory and compliance-related risks Business risks Development and management of products/services Capital adequacy, long-term and short- term solvency Compliance with regulations and business practices Financial risk management Market risks Data management Management and implementation of processes Currency risks Management of projects and work teams HR management and workplace safety Level of residual risk Q4 2021 Target level of risk Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 74 TSmedia Risk What is the risk? What is the effect? How is the risk managed? Risks associated with achieving planned revenues Reduction in the scope of advertising. Lower revenues. Conclusion of annual agreements, new advertising products, new sales campaigns and new contextual video projects. Level of risk → Trend Strategic objective Soline Risk What is the risk? What is the effect? How is the risk managed? Risks associated with adverse weather conditions Loss of salt production due to adverse weather conditions. Reduced salt production, insufficient inventories and drop in number of visits to the spa. No insurance product to transfer risk. Level of risk → Trend Strategic objective IPKO Risk What is the risk? What is the effect? How is the risk managed? Failure to achieve the planned number of postpaid subscribers – mobile segment Risk of failure to achieve planned number of postpaid subscribers due to the traditional prepaid market. Changing user habits and aggressive competition through favourably priced prepaid packages. Lower revenues. Innovative offers to attract new users. Up selling of existing private users and maintenance of existing postpaid subscribers. Adaptation of offer. Level of risk → Trend Strategic objective Falling number of prepaid residential users – fixed segment Aggressive competition, lower prices of competitors, migrations of users of prepaid services to other operators. Loss of revenues. Reduced number of subscribers. Innovative offers to attract new users and maintain existing users, upselling and maintenance of existing users and campaigns to attract inactive users. Adaptation of offer. Level of risk → Trend Strategic objective Diminishing profitability of users and services – fixed segment Aggressive competition, low prices and migration of users to more affordable packages. Lower margin. Monitoring of market development. Additional benefits for users, increase in sales and cross -selling. Level of risk → Trend Strategic objective Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 75 Removal of local TV channels from IPKO’s platform Failure to achieve planned number of fixed network users due to removal of major local TV programmes from IPKO’s platform. Loss of revenues and higher costs. Negotiations with other local TV channels. Production of appropriate local TV content. Intensive promotion of other content available via IPKO’s platform. Level of risk New Trend Strategic objective Risk associated with ensuring high -quality programme content Change in programme content. Increased funds for exclusive content. Loss of premium segment users. Lower revenues and higher costs. Loss of customers. Constant monitoring of broadcast content. Regular communication and negotiations with suppliers. Search for new partners to deliver content. Intensive promotion of alternative content. Level of risk ↓ Trend Strategic objective Risks associated with the payment of copyright fees for the transmission of programmes via the cable network Additional fees paid to the collective association for programme broadcasting. Higher costs. Negotiations with government bodies regarding the level of fees. Lawsuits before the courts. Active communication with all stakeholders. Level of risk → Trend Strategic objective Compliance with tax legislation governing VAT and corporate income tax Compliance risks associated with tax legislation. Higher costs. Inclusion of a tax consultant. Preparation of documentation. Communication with the tax authorities. Level of risk ↑ Trend Strategic objective Payment of additional fees for the use of the infrastructure in municipalities Additional fees for the fixed and mobile infrastructure in municipalities. Higher costs. Use of all legal remedies. Level of risk ↑ Trend Strategic objective Unfavourable outcome from the purchase of frequencies and potential delays Higher prices than planned for the purchase of frequencies and additional conditions. Delay in the acquisition of frequencies for the provision of broadband mobile services. Higher costs. Inability to ensure new traffic. Reduced quality of services and impact on brand. Commitment to 800 MHz frequencies, which are important for the development of mobile services in Kosovo, and the completion of digital programmes. Preparations for the purchase of frequencies and the restructuring of the network, as required. Lev el of risk ↑ Trend Strategic objective Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 76 2.5 Compliance, competition protection and auditing 2.5.1 Compliance and anti-corruption 24 The Telekom Slovenije Group has identified compliance as a crucial element for long-term successful operations. By ensuring compliance, we safeguard the rights and legitimate interests of Group companies, senior management, employees and other stakeholders. We also ensure compliance with the law, regulations and internal acts, and thus contribute to the strengthening of the integrity and reputation of Group companies. Key areas of the compliance management system The compliance management system is based on the identification and mitigation of risks. To that end, special emphasis is placed on measures in the area of competition law, the prevention of corruption, conflicts of interest, personal data protection and the prevention of money laundering and terrorist financing. Playing an important role in that process are the prevention of irregularities through preventive actions, and rapid and effective measures in the event of identified breaches. The area of compliance is governed by the Telekom Slovenije Group’s Compliance Management Policy, which applies to all Group companies. Telekom Slovenije has appointed officers for specific areas of compliance. Those persons perform their functions independently. Through Telekom Slovenije’s integrity plan, we have established an additional mechanism for operations that are compliant with legislation, other rules, applicable recommendations, internal regulations and ethical principles. That plan is a strategic, development and operational document used to enhance the integrity of Telekom Slovenije’s operations. We use the plan, which we update regularly, to assess risks and monitor measures. The Code of Ethics of the Telekom Slovenije Group governs the basic principles of operations and the responsibilities of employees in mutual relationships, and in relationships with the users of services and all other stakeholders. It commits us to fair and transparent operations, to the protection of personal data, information and business data, to the avoidance of conflicts of interest and the pursuit of personal interests, to the prevention of corrupt acts, money laundering and the restriction of competition, and to report dishonest conduct. Certain areas of the aforementioned code are also defined in more detail in other internal acts. The content of the code is verified and updated by the compliance and integrity officer. The importance of ethical and business standards for successful operations is presented regularly during employee training. The code is published on Telekom Slovenije’s website. By signing the Commitment to respect human rights in the course of operations, Telekom Slovenije further committed itself to respect human rights in the course of operations and to prevent potential negative effects on human rights. The aforementioned commitment is part of the National Action Plan of the Republic of Slovenia on the Respect of Human Rights in Business. We dedicated special attention to compliance along the entire supply chain. To that end, we adopted the Code of Conduct for the Suppliers of the Telekom Slovenije Group back in 2018. The content of that code is included in business relationships with suppliers, while the code binds suppliers to act in accordance with valid national and international regulations in their operations, and to respect the highest standards of ethics and business conduct. 24 GRI GS 103-1, 103-2, 103-3, 102-16, 102-12 Prevention of corruption and conflicts of interest Competition law Protection of personal data Prevention of money laundering and terrorist financing Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 77 We manage conflicts of interest through the transparency of business and personal connections. The Rules Governing Conflicts of Interest define the activities expected of employees to prevent the occurrence of conflicts of interest. They also define the obligation of management staff to submit annual statements regarding conflicts of interest, and the role of the Compliance Committee, which assesses employee notifications (regarding the disclosure of circumstances that could result in the existence of potential conflicts of interest) via an online application. The rules also include basic rules on lawful lobbying before the bodies of the central government and local communities, and the holders of public authorisations. When transacting with related parties, Telekom Slovenije complies with the provisions of the new ZGD-1k, which in certain cases requires the Supervisory Board’s prior consent for the conclusion of such transactions, as well the publication of transactions with related parties in certain cases. We established an internal procedure for that purpose in 2021. In the scope of that procedure, we regularly verify whether a specific transaction is concluded in the ordinary course of operations and under typical market conditions. With the Rules on the Acceptance and Offering of Gifts and Invitations, we defined in more detail rules regarding the acceptance and offering of gifts and invitations in the course of daily transactions with business partners, public servants and officials. We thus further protect Telekom Slovenije Group employees from erroneous assessments regarding the acceptance and offering of gifts and invitations, which could result in financial damage, and damage to the reputation of management, employees or the company. We updated the Rules on Ensuring Compliance with Competition Law in 2021 by supplementing the internal process of ensuring compliance with competition law and taking into account changes to regulatory obligations. Those rules define procedures and internal controls for ensuring compliance with competition law, and provide various instructions to employees on how to act in certain situations. To that end, we also organise regular employee education and training. Via different channels, employees and other stakeholders may anonymously and confidentially report breaches of the Code of Ethics and other internal acts, or potential illegal conduct. A system for receiving, handling and investigating reports was established at the Telekom Slovenije Group level in 2014, and is defined in the Rules on the Management of Reports and Protection of Whistleblowers. We updated those rules in 2021 taking into account the guidelines set out in Directive (EU) 2019/1937 on the protection of persons who report breaches of Union law (the Whistleblower Directive). The Whistleblowing Committee is responsible for the receipt, handling and investigation of complaints, and proposes the adoption of measures when breaches are identified. Telekom Slovenije manages potential risks associated with corruption in sponsorship and donation activities through the Rules on the Treatment and Approval of Sponsorships and Donations. Those rules are in line with the Code of Ethics, which states that Group companies may not use their financial resources or in any other way support political parties. 25 No cases of corruption were identified and confirmed within the Telekom Slovenije Group in 2021. 26 Protection of privacy and personal data 27 The Telekom Slovenije Group is aware that the protection of the privacy and data of our users and other stakeholders is crucial for maintaining trust in the Group and its services. High standards of personal data protection and privacy form an integral part of our operations, and are supported by our mission, vision and values. Telekom Slovenije processes a large quantity of personal data relating to users, as well as the personal data of other stakeholders (e.g. employees and business partners) as a large company. We developed new services in 2021, such as a comprehensive IT solution for secure remote work, smart city and safe web services, and an innovative insurance product. Data processing represents an important element in all of those solutions, services and products. In that respect, we carefully verify data processing rules and processes, and formulate them in such a way to ensure the safety and compliance of data processing. We are aware that users will only use our services if they are confident 25 GRI GS 415-1 26 GRI GS 205-3 27 GRI GS 103-1, 103-2, 103-3, SASB: TC-TL-220a.1, TC-TL-230a.2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 78 that their data are safe. Also important in the context of the ever-increasing digitalisation of operations is constantly ensuring cyber security. We thus ensure the cyber security of personal data at the Group level through Cyber Security Operation Centre services and the continuous updating thereof. We ensure the necessary level of employee awareness and knowledge through training in the area of personal data protection and through instructions on how to work with personal data. We organised mandatory personal data protection training in 2021 that was also mandatory for all employees who come into contact with the personal data of users at authorised agents. Authorised agents also received a total of seven hours of training on the substantive requirements the GDPR and practical instructions. Telekom Slovenije employees completed 2,669 hours of training in the areas of information security, safe/unsafe web, information security in work from home and phishing. We also organised 332 hours of training at which we presented the basics of personal data protection and the lawful processing thereof, improved knowledge of rules governing the protection and processing of personal data and increased employee awareness. GVO organised a total of six hours of training in this area, while TSmedia organised 16 hours, Soline eight hours and IPKO 3,381 hours. 28 Telekom Slovenije ensures the protection of the personal data and communication privacy of users. Based on the law, we are also obliged to submit data regarding users to official authorities and facilitate the lawful interception of communications. We thoroughly review and discuss every such request. We received 1,926 requests from official authorities for user data in 2021, and rejected 38 requests as inappropriate. 29 We continuously monitor, update and improve personal data processing processes and procedures, taking into account feedback from users and other stakeholders, as well as information obtained in the scope of internal and external controls, in complaint resolution procedures and in the handling of potential breaches of personal data protection. We also adapt processes and procedures with respect to changes in the environment, which include changes due to measures in connection with the COVID-19 pandemic, and changes in the regulatory environment. Six supervision proceedings were conducted at Telekom Slovenije in 2021 (including three proceedings that began in 2020) by the Information Commissioner and AKOS. Three proceedings have already been completed, without identified breaches. We received 57 reports of events relating to the privacy of users in 2021. No breaches were identified that could threaten the rights and freedom of individuals. There was thus no reason to file reports with supervisory authorities. In cases where irregularities were identified, we adopted measures to rectify them. In no cases that we handled did we identify material breaches of personal data protection. 30 We did not record any losses in 2021 from legal proceedings against the Company as the result of events in connection with privacy or the protection of the personal data of individuals. 31 Telekom Slovenije is bound to comply with the Prevention of Money Laundering and Terrorist Financing Act, as it provides payment services (VALÚ Moneta) and electronic money issuing services (VALÚ), and also transacts in own real estate. A system is in place for the aforementioned services, as are rules, measures, procedures and internal controls aimed at the prevention of money laundering and terrorist financing. In the scope of these activities, we did not identify any transactions in 2021 for which money laundering or terrorist financing was suspected. The Telekom Slovenije Group organises regular training, workshops and e-learning on the subject of compliance for employees and authorised agents. We organised 349 hours of training in 2021 regarding compliance, competition law and the regulatory framework. TSinpo organised additional training for the company’s management staff, while IPKO organised training regarding anti-corruption policies and practices. We inform employees via the intranet or electronically about the importance of compliance, current topics and challenges, and about specific activities and previously implemented mechanisms in the area of compliance. 32 28 GRI GS 412-2 29 SASB: TC-TL-220a.4 30 GRI GS 418-1, SASB: TC-TL-230a.1 31 SASB: TC-TL-220a.3 32 GRI GS 205-2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 79 Together with all subsidiaries, we strive to pursue the highest ethical and business standards, such that we have established and regularly upgrade the compliance management system for the entire Group. TSmedia adopted rules and appointed a compliance and whistleblowing officer in 2021. Information of a public nature In accordance with the Access to Public Information Act (ZDIJZ), we publish on the websites of Telekom Slovenije and individual subsidiaries basic information regarding representatives, members of management and supervisory bodies (the agreed amount and payment of remuneration to those bodies), and regarding transactions concluded in connection with donations, sponsorships, consultancy and copyright or other intellectual services (type of transaction, contractual partner, value of transaction, date of conclusion and duration of transaction). We published 532 proactive announcements in accordance with the ZDIJZ in 2021 and handled two new requests for access to information, and implemented support activities (e.g. employee training). Slovenian companies appointed officers responsible for the dissemination of information of a public nature. Employees at Telekom Slovenije have an internal portal at their disposal with all relevant information. Contact data for the submission of requests for electronic access to information of a public nature can also be found on the websites of Telekom Slovenije and individual subsidiaries. Reporting on taxes 33 The organisation and functioning of the tax function are governed at Telekom Slovenije by the document Organisation of the Tax Function at Telekom Slovenije, d. d., which is approved by the Company’s Management Board. The Finance and Accounting organisational unit is responsible for drafting and monitoring the tax policy. The Telekom Slovenije Group is committed to legally compliant operations. Tax-related risks are therefore unacceptable. We have in place internal controls and procedures in accordance with the Methodology on the Self-Assessment of Internal Controls and Reporting within the Telekom Slovenije Group, which ensures proper tax treatment. The document Tax Strategy and Tax Management within the Telekom Slovenije Group defines a tax policy at the Group level, the management of tax-related risks and transfer prices. The underlying principle of the Telekom Slovenije Group’s tax policy is the functioning of all Group companies in accordance with local tax legislation in the countries where those companies are registered to perform an activity. The Telekom Slovenije Group’s tax policy has been defined to ensure the appropriate organisation and functioning of the tax function within the Group, with the aim of optimising the tax burden through the accurate, lawful and timely calculation and payment of taxes. Tax-related risks are included in the risk assessment and reporting process. The Company’s catalogue of identified risks includes risks associated with compliance with tax legislation, i.e. the accurate and timely fulfilment of all types of tax obligations. Telekom Slovenije reports on taxes for itself and the Telekom Slovenije Group, while subsidiaries report for themselves in accordance with the laws of the countries in which they are registered. Subsidiaries are obliged to establish the appropriate internal controls, and to report all deviations from the provisions of the adopted tax policy to the parent company regularly and in a timely manner. Every subsidiary must define the areas and adopt the general guidelines set out in the tax policy independently, taking into account valid laws in the specific tax jurisdiction in which a company operates. Telekom Slovenije cooperates with the tax authorities in the course of ordinary operations, while complying with valid legislation and fulfilling all tax obligations (registration, record keeping, accounting, reporting, payment, etc.) in a timely manner. 33 GRI GS 103-1, 103-2, 103-3, 207-1, 207-2, 207-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 80 2.5.2 Competition protection and proceedings before the courts and other bodies 34 No new proceedings were initiated against Telekom Slovenije in 2021 due to the potential breach of competition protection rules. There were two proceedings in this area before the Competition Protection Agency (AVK) in previous years. Those proceedings are still pending. In 2021, the AVK halted the proceedings to determine the breach of the prohibition of the abuse of a dominant position as set out in the Prevention of Restriction of Competition Act and the Treaty on the Functioning of the European Union, which it initiated on 19 March 2009. The AVK was unable to obtain evidence in the retrial that would support the existence of Telekom Slovenije's predatory and exclusionary strategy in Itak Džabest package. There were also no new proceedings initiated against Group subsidiaries. Telekom Slovenije was party to the following significant proceedings before the courts in 2021: x On 2 March 2021, Telekom Slovenije was notified by the Ljubljana District Court of a lawsuit filed against the Company by T-2 for the payment of ordinary damages in the amount of EUR 12,195,656, payment for lost profit in the amount of EUR 35,760,909 and the non-existence of claims in the amount of EUR 1,778,033, with appertaining amounts. The aforementioned claim represents damages that the plaintiff allegedly incurred in the period 1 September 2018 to 31 July 2020. Telekom Slovenije believes that the plaintiff’s lawsuit will be rejected in full. x Telemach filed a lawsuit against Telekom Slovenije (on 2 August 2021) for the payment of damages in the amount of EUR 28,795,802 plus legally prescribed default interest from 1 June 2021 until payment. Telemach’s lawsuit is based on the alleged breach of regulatory decisions issued by the Agency for Communication Networks and Services of the Republic of Slovenia, and the alleged abuse of a dominant position. Telekom Slovenije believes that the plaintiff’s lawsuit will be rejected in full. x On 29 November 2021, Telekom Slovenije (previously Mobitel, d. d.) received a ruling and decision from the Higher Court in Ljubljana in the economic dispute with the plaintiff Sky Net in connection with the execution of an agreement under two lawsuits (total of EUR 33 million) and in connection with the nullification of the agreement under a counterclaim (in the amount of EUR 25 million). Under that ruling and decision, the Higher Court rejected Sky Net’s claim and upheld the ruling of the court of the first instance, which rejected the remainder of Sky Net’s claim regarding the issue of orders for the construction of 414 base stations and orders to obtain documentation for 434 base stations. The court also ruled that Sky Net is obliged to reimburse Telekom Slovenije’s legal fees in the amount of EUR 39,611.52 and the costs of appeals proceedings in the amount of EUR 5,480. The Higher Court also amended the decision of the court of the first instance regarding Telekom Slovenije’s counterclaim in connection with the nullification of the agreement in question. The Higher Court determined that the agreement concluded between the contracting parties in 2001 is null and void and without any legal effect. With that decision, the Higher Court also rejected Sky Net’s subordinated claim. Provisions for obligations arising from legal actions are disclosed in the accounting report in point 31 Provisions. External supervision proceedings 35 The Telekom Slovenije Group has established the uniform recording and monitoring of external supervision proceedings initiated against the Company and/or its responsible person, and outlined the conduct of employees in such proceedings. We define external supervision as an examination of the Company’s operations to verify compliance with legal or contractual provisions or standards in the performance of its activities. There was a total of 91 external supervision proceedings within the Telekom Slovenije Group in 2021: 69 at Telekom Slovenije and 22 at subsidiaries. A total of 81 external supervision proceedings were completed, 73 at Telekom Slovenije and eight at subsidiaries. More than one-third of external supervision proceedings within the Telekom Slovenije Group derive from verification of compliance with measures in connection with COVID-19. No breaches were identified at Telekom Slovenije in that respect. 34 GRI GS 206-1, SASB: TC-TL-520a.1 35 GRI GS 307-1, 419-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 81 Review of supervision proceedings within the Telekom Slovenije Group in 2021 by area 2.5.3 Auditing Internal auditing The Internal Audit Service (IAS) performs transactions for all Telekom Slovenije Group companies, and provides internal auditing services for two subsidiaries as an external contractor. The IAS performs its work in accordance with expert bases, included in the Hierarchy of Internal Auditing Rules and the Rules of Procedure for Internal Auditing within the Telekom Slovenije Group. The compliance and quality of the IAS’s work are confirmed every year by internal quality assessment. An independent external quality assessment was also carried out in 2021. The IAS works with senior management and the supervisory body, and reports regularly to both with regard to its work. The IAS’s work is performed by a team of professional and highly motivated internal auditors, each of whom holds a professional title in the area they audit. They attend professional training regularly and are active members of professional associations. Their experience facilitates the in-depth understanding of the complex operations of the Telekom Slovenije Group. The IAS plans transactions based on a collection of various data and information regarding operations and risks, global trends, the Telekom Slovenije Group’s strategy, and information provided by senior management and the supervisory body. When planning its work, it takes into account key business objectives and the associated risks. Through audit transactions, objective assurances and other transactions, including consultancy, it contributes to the strengthening and protection of the organisation’s value, to continuous improvements in the effectiveness of risk management, control procedures and corporate governance at Group companies, and to the fulfilment of the Group’s mission. Work in 2021 was defined in the IAS’s current work plan, which was prepared on the basis of its multi- year plan for the period 2021 to 2025. Annual and multi-year plans are adopted by the Management Board, and were also reviewed by the Audit Committee and approved by the Supervisory Board. In addition to the transactions set out in the annual plan, two extraordinary audits were also performed in 2021. Based on transactions performed, we find that risk management systems for achieving objectives are in place and functioning. There are opportunities for improvements. For this reason, the IAS also submitted recommendations for improving internal controls and the more effective management of risks in areas subject to audit. In addition to internal recommendations, we also monitor the recommendations of the external auditor and certain other assurance providers. We have a well- developed system in place for monitoring recommendations that facilitates transparency in the monitoring and assessment process, and ensures an appropriate reporting system. 0 5 10 15 20 25 30 35 40 Consumer protection Electronic communications Environment and spatial planning Finance, taxes and accounting Audio-visual content, culture, media Employment relationships, safety and health… Compliance with COVID measures Personal data protection Energy, traffic, fire safety Other Completed in 2021 New in 2021 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 82 External auditing In accordance with the Guidelines for Ensuring the Independence of the Auditor of the Financial Statements of the Telekom Slovenije Group, the audit firm PricewaterhouseCoopers (PwC) was appointed to audit the financial statements of Telekom Slovenije and the Telekom Slovenije Group for the 2020, 2021 and 2022 financial years at Telekom Slovenije’s 31st General Meeting of Shareholders. Costs associated with the auditor are disclosed in the accounting report in point 42 Auditor’s fee. 2.5.4 Regulation of electronic communications Frequencies The public tender issued by the AKOS for the allocation of radio frequencies for the provision of public communication services to end-users in the fifth generation (5G) mobile network was completed in April 2021. Telekom Slovenije secured the radio frequency spectrum in the 700 MHz FDD band, 700 MHz SDL band, 1500 MHz band, 2100 MHz band, 3600 MHz band and 26 GHz band. We received a decision on the allocation of radio frequencies on 10 June 2021. On 26 November 2021, the AKOS published its strategy for managing the frequency spectrum for the period 2021 to 2023. Development of next generation broadband networks In March 2021, the Ministry of Public Administration published a tender for the co-financing of the construction of the next generation of open broadband networks (5G). The ministry also began to draw up the Digital Slovenia 2030 strategy, which will define in detail strategic guidelines for the digitalisation of society in the future. National legislation and EU regulations The Ministry of Public Administration formulated the draft text of the new Electronic Communications Act (ZEKom-2). That act transposes into Slovenian law the directive on the implementation of the European Electronic Communications Code (EECC), which entered into force on 20 December 2018. Telekom Slovenije submitted comments and proposed amendments to the draft act. Relevant markets The regulatory body (AKOS) conducted various inspections with respect to Telekom Slovenije in connection with imposed obligations on regulated relevant markets. Single rates for call termination in the mobile and fixed networks entered into force in July 2021 in accordance with Commission Delegated Regulation (EU) 2021/654. The AKOS published analyses of two relevant markets on its website in April 2021: relevant market 1 ‘Wholesale local access at a fixed location’ (formerly relevant market 3a) and relevant market 3b ‘Wholesale central access at a fixed location for mass-market products’. In September 2021, it published supplemented and partially amended analyses with corrections following public consultations, and put them forth for further public debate. Relevant market Change Relevant market 1 (2014/710/EU) ‘Wholesale call termination in individual public telephone networks at a fixed location’ Relevant market 2 (2014/710/EU) ‘Wholesale voice call termination in individual mobile networks’ Relevant market 1 (2020/2245/EU) ‘Wholesale local access at a fixed location’ Relevant market 3b (2014/710/EU) ‘Wholesale central access at a fixed location for mass- market products’ Decision regarding the enforcement of a single call termination rate at the EU level; the new call termination rate entered into force on 1 July 2021. Decision regarding the enforcement of a single call termination rate at the EU level; the new call termination rate entered into force on 1 July 2021. The agency published and called for public consultation regarding market analysis. The agency published and called for public consultation regarding market analysis. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 83 Universal services On 12 February 2021, the AKOS published changes to two general acts, through which it raised the transfer speed for the universal service of internet access to 10/1 Mbit/s (previously 4 Mbit/s/512 kbit/s). The changes to those general acts entered into force on 13 April 2021. Resolution of disputes in proceedings before the regulatory body We inform users regularly and correctly about special conditions, sales offers, prices and changes in the portfolio, which reduces the number of complaints. We also strive for the continuous improvement of the complaint resolution at the first instance. According to data from the AKOS, Telekom Slovenije has the lowest proportion of complaints before the aforementioned agency amongst Slovenian operators. Findings from the resolution of complaints are always implemented in the process of improving services and operations. New services Telekom Slovenije’s insurance, payment and energy services are also subject to the law and to regulation by the competent supervisory authorities. Telekom Slovenije takes into account all regulations and laws in the provision of those services. Regulatory development in Kosovo On 1 June 2021, the electronic communications regulator in Kosovo (ARKEP) issued IPKO a decision regarding the allocation of rights to use 2x5 MHz in the 1800 MHz frequency band. The ARKEP began the process of analysing relevant markets 3a and 3b in August 2021. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 84 2.6 Business environment and trends in the sector 2.6.1 Impact of the macroeconomic environment on operations Slovenia The COVID-19 pandemic had a diminished impact on economic activity in Slovenia in 2021 compared with 2020, primarily due to the gradual adjustments made by companies and consumers to the new situation. Measures to prevent the spread of COVID-19 primarily limited service activities, while other activities largely linked to international trade for the most part functioned smoothly. Service activities also recovered in the course of 2021 with the improving conditions. Growth in economic activity in the euro area was higher than expected during the first half of 2021 (6.1% in year-on-year terms), with growth expected to continue in the future according to the forecasts of international institutions. Euro area GDP is expected to grow by 5.1% in 2021, followed by 4.4% growth in 2022, with the pre-crisis level expected to be achieved in the final quarter of 2021. In its autumn forecast, the UMAR is expecting 6.1% GDP growth in Slovenia in 2021. Growth is then expected to slow to 4.7% in 2022 and 3.3% in 2023. The situation on the labour market will improve over the next two years, while limits in connection with the availability of the workforce will increase. Risks and opportunities in connection with faster economic growth primarily relate to the epidemiological conditions, the release of high savings, inflation and shocks in the economic and social structure (bankruptcies, job losses, the impact on the banking and financial sectors, etc.). Global growth and the more efficient use of funds from the Next Generation EU instrument could also result in higher economic growth in Slovenia. Key macroeconomic indicators in Slovenia Sources: SURS, Bank of Slovenia, ECB and UMAR calculations and forecasts (Autumn Forecast of Economic Trends, September 2021). Kosovo Kosovo is a developing country, with GDP that is six times lower than Slovenia’s. Due to low GDP and high unemployment, the prices of telecommunication services in Kosovo, where IPKO operates, are still significantly lower than in Slovenia. The economy remains dependent on economic and employment developments in Western Europe, and on foreign direct investments. The economy is recovering quickly after the COVID-19 pandemic, and is expected to surpass the level recorded in 2019 already in 2021. Economic activity will grow by 7.1% due to a stronger recovery in the number of visits by expatriates, renewed consumer confidence and higher consumer lending. Merchandise exports have been rising since 2020. Lower GDP growth of 4.1% is forecast for 2022, while growth is expected to rise to 4.4% in 2023. Significant inflationary pressures, primarily due to higher import prices, could undermine a stronger recovery in private investments. 4.4 3.3 -4.2 6.1 4.7 3.3 2018 2019 2020 2021 2022 2023 GDP, real growth in % 3.6 4.8 -6.6 5.6 6.0 3.1 3.0 2.0 4.2 1.8 1.5 1.0 2018 2019 2020 2021 2022 2023 Private consumption (real growth %) Government consumption (real growth %) Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 85 Gross domestic product in Kosovo Source: World Bank Group estimates and projections, Western Balkans regular economic report, No.20, Fall 2021. 2.6.2 Comparison of the Slovenian telecommunications sector with the EU Source: European Commission, Digital Economy and Society Index, DESI 2021, Slovenia; AKOS – Household penetration rate of active mobile telephony users (source for EU: GSMA). Fixed broadband access market Coverage by the very high-capacity fixed network is very good in Slovenia (66% compared with the EU average of 59%). The penetration of broadband connection with a speed of at least 100 Mb/s has increased in Slovenia (from 21% of households in 2019 to 29% in 2020), but continues to lag behind the EU average (34% of households in 2020). A total of 88% of Slovenian households are covered by high-speed next-generation networks, which is one percentage point higher than the EU average. The coverage of households in rural areas has fallen to 63%. A total of 66% of Slovenian households access the internet via fibre optics (figures for 2020) compared with 43% of EU households. FTTX connections accounted for 48.7% of all broadband connections in Slovenia in the fourth quarter of 2021. The fixed broadband connection market in Slovenia continues to grow at a slow pace. IP television (IPTV) continues to record growth, which is otherwise slowing, while IP telephony (VoIP) records the lowest growth. Telekom Slovenije is upgrading and expanding its fibre optic access network, and is thus laying the infrastructure foundations for the future of the telecommunications activity. 3.4 4.8 -5.3 7.1 4.1 4.4 2018 2019 2020 2021 2022 2023 GDP (real growth in %) 80% 29% 0.02% 88% 66% 73% 99.9% 124% 98% 72% 77% 34% 1.3% 87% 59% 71% 99.7% 131% 51% 69% Overall fixed broadband take-up, % households At least 100 Mbps fixed broadband take- up, % households At least 1 Gbps take- up, % households Fast broadband (NGA) coverage, % households Fixed Very High Capacity Network (VHCN) coverage, % households Mobile broadband take-up, Subscriptions per 100 people 4G coverage, % households (average of operators) Mobile take-up (voice or data), subscriptions per 100 people 5G readiness (Assigned spectrum as a % of total harmonised 5G spectrum) Broadband price index, Score (0 to 100) Slovenia EU Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 86 Growth in fixed broadband connections in Slovenia Source: AKOS, SURS, Q3 2021 Pay TV market According to the forecasts of analysts from Analysys Mason, IPTV will continue to grow in Central and Eastern Europe until 2026, both in terms of the number of connections and value (from 20.1 million connections in 2021 to 24.9 million in 2026). Outlooks for growth in operator revenues focus on OTT video services. By 2026, OTT video services will be used by nearly as many people as IPTV services. IPTV accounts for 58.0% of all TV connections in Slovenia and continues to grow. It is followed by cable TV (36.6%), where the number of connections has stagnated (fourth quarter of 2021; source: AKOS). At 42.4% (fourth quarter of 2021), Telekom Slovenije holds the highest share of the IPTV market (source: AKOS). Mobile broadband access Mobile broadband internet access remains one of the fastest growing segments in Europe. Primarily smart phones are used for that access, followed by tablets and laptop computers. Europeans primarily use fixed technologies to access the internet at home, while an increasing number of households are also opting for mobile internet services. The household mobile broadband access penetration rate stood at 91.2% in Slovenia in the fourth quarter of 2021 and will continue to rise. In 2020, Telekom Slovenije was the first in Slovenia to establish a national fifth mobile generation (5G) network on existing base stations and in the existing 2600 MHz frequency spectrum, which is also used for the fourth mobile generation network. Coverage with the 5G network stood at 38.8% at the end of 2021. Fixed and mobile telephony According to the forecasts of analysts at Analysys Mason, the fixed telephony market will contract at an annual rate of 5.0% (CAGR) in Central and Eastern Europe until 2026, to stand at EUR 2.8 billion in revenues in 2026, compared with EUR 3.7 billion in 2020. The proportion of VoIP connections stood at 89,4% in Slovenia at the end of the fourth quarter of 2021. That proportion is rising, albeit more slowly than in previous years. The proportion of traditional telephony continues to decline and stood at 10.6%. In the mobile segment, Slovenia’s per capita penetration rate of active mobile telephony users is lower than in the EU (123.6% in the fourth quarter of 2021), meaning there is sufficient manoeuvring room for further development. The introduction of 5G services will have a minimum impact on average revenue per user (ARPU) in Central and Eastern Europe until 2026. After declining in the majority of countries due to uncertainty 0 100,000 200,000 300,000 400,000 500,000 600,000 700,000 800,000 4q2017 4q2018 4q2019 4q2020 4q2021 BB connections VOIP IP TV 2% 5% 9% 2% 1% 8% 1% 4% 4% 2% 3% 3% 3% 1% 4% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 87 in connection with the COVID-19 pandemic, ARPU will recover in Central and Eastern Europe due to increased data usage. Average revenue per user (ARPU) in Central and Eastern Europe until 2026 Source: Analysys Mason – Central and Eastern Europe telecoms market: trends and forecasts 2021–2026, January 2022, based on data up to 2Q 2021. B2B market 36 Revenues from telecommunications and ICT services for large enterprises in Western Europe will rise from USD 32.5 billion in 2020 to USD 37.3 billion in 2025, at an annual growth rate (CAGR) of 2.8%. Revenues in Central and Eastern Europe will rise from USD 8.7 billion in 2020 to USD 10.2 billion in 2025, at a CAGR of 3.4%. The majority of operator revenues in Western Europe will derive from dedicated connections and ICT services, while growth in revenues is expected on account of the increased use of mobile data. Growth in Central and Eastern Europe will be driven by the increased use of ICT services and a recovery in the use of mobile data services. Revenues from voice services will continue to decline with the discontinuation of copper networks across Europe, which will in turn accelerate the transition to alternative cloud services. Revenues from small and medium-sized enterprises in Western Europe will rise from USD 44 billion in 2020 to USD 48 billion in 2025, at a CAGR of 1.9%. Revenues in Central and Eastern Europe will rise from USD 10.7 billion in 2020 to USD 11.5 billion in 2025, at a CAGR of 1.6%. According to the forecasts of analysts at Analysys Mason, growth in revenues from ICT services in Slovenia is expected to be 5.6% in 2021 (relative to 2020) and 6.8% in 2022. CAGR of 6% is expected to be achieved until 2025. Growth in the ICT services and solutions of the Telekom Slovenije Group will be based on the existing superior LTE/4G network, and the opportunities offered by fifth generation (5G) mobile networks. 5G technology will facilitate the development of the smart industry and the further development of smart cities, as well as the introduction of virtual campus networks, which in turn will enable the continued digitalisation of various verticals, such as energy, transportation, logistics, industry, smart cities, healthcare, and protection and rescue. The Telekom Slovenije Group will ensure the digitalisation of society as a whole. Overall growth will be achieved through organic growth and the consolidation of the Slovenian ICT market. The number of cyber security threats will continue to grow. Ensuring appropriate information security and the continuous control of the network and services therefore serve as the basis of the operations of Telekom Slovenije. We thus facilitate the secure connectivity of fixed and mobile services via the internet and provide cloud services for residential and business users. 36 SDG 8.2 4.3 4.3 4.5 4.8 5.0 5.2 5.4 5.6 5.8 5.9 6.1 6.2 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 ARPU (EUR na mesec) Bulgaria Croatia Czech Republic Estonia Hungary Latvia Lithuania Montenegro Central and Eastern Europe 17.9 17.1 16.2 15.9 15.5 14.6 14.3 14.0 13.8 13.5 13.3 13.3 4.3 4.3 4.5 4.8 5.0 5.2 5.4 5.6 5.8 5.9 6.1 6.2 0.0 2.0 4.0 6.0 8.0 10.0 12.0 14.0 16.0 18.0 20.0 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 ARPU (EUR na mesec) Poland Romania Russia Serbia Slovakia Slovenia Turkey Ukraine Central and Eastern Europe Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 88 Revenues from ICT services, forecast for Slovenia, EUR million Source: Analysys Mason – Central and Eastern Europe telecoms market: trends and forecasts 2019–2025, February 2021, based on data up to 3Q 2020. 21.8 25.9 30.7 33.8 35.6 37.5 39.6 42.3 44.8 48.0 50.6 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 CAGR 2019 - 2025 = 6 % Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 89 2.7 Marketing and sales 2.7.1 Market and market shares in key service segments 37 Key indicators of the Slovenian communications market Source: Analysys Mason, Slovenia telecoms market report 2021, February 2021, Figures updated in July 2021 with data to 1Q 2021; AKOS, SURS (fourth quarter of 2021). The fixed and mobile segments of the Slovenian communications market are dominated by four convergent operators. Telekom Slovenije, A1 Slovenija (Telekom Austria Group), Telemach (United Group) and T-2 compete amongst each other with a range of package services. Competition is stiff, while the purchase of smaller operators by larger ones is common. 37 GRI GS 102-6, SDG 8.10 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 90 Leading operators on the Slovenian communications market OPERATOR TELEKOM SLOVENIJE A1 SLOVENIJA TELEMACH T2 FIXED TELEPHONY PSTN, ISDN, VoIP VoIP VoIP VoIP FIXED INTERNET ADSL, VDSL, FTTH ADSL, VDSL, FTTH, CABLE VDSL, CABLE, FTTH VDSL, FTTH PAY-TV IPTV, CABLE, OTT IPTV, OTT CABLE, DTH, IPTV, OTT IPTV, OTT MOBILE SERVICES 9 9 9 9 INTEGRATED IT SERVICES 99 XX Market shares of leading operators in key segments, in % Source: AKOS, fourth quarter of 2021. Market shares in key service segments The Slovenian telecommunications market (including systems integration and cloud services) is developed and already in the phase of saturation. Telekom Slovenije maintains a high market share in all segments in which it operates, and provides the most advanced services, tailored to the needs of users. We maintain the leading market share in the IPTV, mobile telephony and mobile internet segments. Changes in the number of connections on the electronic communications market in Slovenia Source: Statistical Office of the Republic of Slovenia, fourth quarter of 2021. 2,443,172 2,465,857 2,511,979 2,550,895 2,607,268 718,006 704,564 691,468 691,658 684,320 601,820 612,737 627,936 651,604 671,642 0 500,000 1,000,000 1,500,000 2,000,000 2,500,000 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 2017 2018 2019 2020 2021 mobile telephony fix telephony BB connections 2, 50 0 0 0 0 0, 0 0, , 00 0 500 000 1, 00 00 00 00 00 0 0 00 00 0 00 00 00 00 0 0 00 0 00 0, 0, 0, 0 0 0 0, 0 0, 00 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 0 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 91 Telekom Slovenije’s market shares in key segments Source: Report on the development of the electronic communications market for the fourth quarter of 2021, AKOS; internal Telekom Slovenije figures. Fixed broadband access There was a total of 671,642 broadband connections in Slovenia at the end of the fourth quarter of 2021 (compared with 651,604 during the same period in 2020), 86.2% of which were accounted for by residential connections. The household fixed broadband access penetration rate reached 86.7% in Slovenia (84.8% in 2020). 38 Telekom Slovenije holds a 27.8% market share in the aforementioned segment. The trend of a rising proportion of fibre optic connections and the offer of high-speeds in operator packages continue. At the end of the fourth quarter of 2021, the number of active fibre optic connections in Slovenia was already 327.006, which represents 48.7% of all connections. The number of fibre optic connections rose by 13.7% in one year. Market shares of fixed broadband technologies in terms of the number of broadband internet connections in Slovenia Source: Report on the development of the electronic communications market for the fourth quarter of 2021, AKOS. Pay TV market IPTV accounts for 58.0% of all TV connections in Slovenia, and is followed by cable TV (36.6%), where the number of connections has stagnated (fourth quarter of 2021). According to figures from the AKOS, pay TV is already present in 82.6% of households, compared with 81.7% in 2020. 38 Source: AKOS: amongst the most important indicators of the level of development of the electronic communications market is broadband access penetration, which is calculated as the number of residential and business broadband connections relative to the number of citizens or households in the Republic of Slovenia. Fixed broadband access IP TV VOIP Market share 27.8% 42.2% 32.1% 36.7% Annual change (p.p.) -1.1% -2.0% -0.8% -1.2% Connections 199,386 166,691 181,760 955,648 Annual change -1.0% -0.8% -0.8% -1.1% Mobile telephony 28% 72% 42% 58% 37% 63% 32% 68% IP TV VOIP M obile telephon y ADSL: 8.8% VDSL: 13.6% DOCSIS 2.0: 2.7% DOCSIS 3.0: 24.5% FTTH: 48.7% Other technologies: 1.7% Telekom Slovenije had more than 103,000 users on FTTH connections at the end of the fourth quarter of 2021 (2020: 94,700). Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 92 Market shares of TV connections by technology Source: Report on the development of the electronic communications market for the fourth quarter of 2021, AKOS. Mobile telephony The number of active mobile telephony users in Slovenia was up by 2.2% in the fourth quarter of 2021 or by more than 56,000 users relative to the same period the previous year. The penetration rate was also up, to stand at 123.6%. At 36.7%, Telekom Slovenije maintains the leading share of the mobile telephony market. Shares of the mobile telephony market in Slovenia Source: Report on the development of the electronic communications market for the fourth quarter of 2021, AKOS. The volume of data traffic in 4G networks and the most advanced networks with mobile broadband access is growing. At 31.8%, Telekom Slovenije holds the highest share of the mobile broadband internet access market. The household mobile broadband access penetration rate stood at 91.2% in Slovenia in the fourth quarter of 2021 and will continue to rise. Cable television: 36.6% IPTV: 58.0% Satellite television: 4.8% MMDS: 0.7% At 42.4%, Telekom Slovenije holds the highest share of the IPTV market. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 93 Advertising market in Slovenia IPKO and the competitive environment in Kosovo IPKO is one of the strongest market brands in Kosovo, and is the leading operator in the fixed segment and the second largest operator in the mobile segment, where it enjoys a continuous growth trend. IPKO is known on the market as an innovative brand with the fastest mobile internet, the best coverage by the 3G/4G network, the best mobile and fixed network, and the best content. It is also known as the most reliable and trustworthy brand, with the best user support. On the mobile services market, IPKO holds a share of 49.7% in terms of revenues and 48.0% in terms of users (fourth quarter of 2021). The household penetration rate of active mobile telephony users has reached 97.9%, which translates to 1.8 million users (source: Kosovo ARKEP regulatory authority). The mobile segment in Kosovo is dominated by two mobile network operators: Vala and IPKO. Vala has been stagnating for years, while Zmobile (MVNO) has been dormant since 2019. The third operator, MTS, operates to a limited extent with a temporary licence as the local subsidiary of Telekom Srbija. The mobile market remains largely prepaid, with the widespread use of OTT applications and a significant shift from voice to data services. IPKO remains the only operator in Kosovo with a fully implemented internal country code (+383). Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 94 Market shares of operators in the mobile telephony segment in Kosovo Source: Kosovo regulatory authority (ARKEP), Q4 2021 report. The fixed services market has become extraordinarily demanding in recent years. Three main players compete for market share: IPKO, Kujtesa and Artmotion, followed by PTK and Telkos/Orange/Ardi net (as an interconnected group). These operators promote their packages using lower prices and higher internet speeds, and continue to focus on improving and upgrading their digital programme schemes with sports and other TV content. IPKO, as a premium brand, remains the leading provider of fixed services (DTV and internet), and maintains its leading position and premium prices. Despite stiff competition, IPKO has succeeded with a range of long-term subscriber agreements, and has maintained a stable base of fixed subscribers by offering certain benefits. Both the mobile and fixed segments are heavily influenced by the seasonal effect of expatriates, which due to the easing of measures in connection with COVID-19, made an above-average contribution to total growth in the number of users and revenues in 2021. Market shares of operators in the internet segment in Kosovo Source: Kosovo regulatory authority (ARKEP), Q4 2021 report. 50% 59% 59% 50% 37% 39% 39% 48% 12% 2% 2% 2% 2% 2018 2019 2020 2021 TK - VALA IPKO Zmobile mts Doo IPKO: 28% KUJTESA: 18% Artmotion: 26% PTK: 7% Others: 21% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 95 2.7.2 Management of the portfolio of Telekom Slovenije’s brands The Telekom Slovenije Group develops the most advanced digital technologies and services. We believe in simple and secure solutions, and act prudently and responsibly in our everyday work to achieve that end, with the knowledge that we generate benefits. We pay constant attention to the portfolio of brands through the development of services. We thus registered six new brands in 2021, which are presented below. Identity of the umbrella brand The main communication theme of the Telekom Slovenije brand in 2021 was ‘Creating the future’, which we are doing on the basis of superior connectivity (with a superior fibre optic network: super- fast, safe and reliable internet), the best TV experience (with content for the entire family: film experiences, animated adventures, sporting spectacles and new worlds of games), the fastest mobile network (5G), socially responsible conduct (donations, sponsorships and partnerships) and concern for a sustainable future. On the fixed services market, the Telekom Slovenije brand reassumed the role of strongest operator, and remains the first choice and the brand with the highest recall rate on the market. Through our efforts invested in the development of the network, we maintain our position as the leading Slovenian operator with the best and fastest network. The brand is making advancements in terms of trust and recognition as the brand that offers the most for the money. Users also highlight strong technical support, loyalty and a feeling of security (BrandTrack, autumn 2021). Telekom Slovenije is also the leader in brand strength in the mobile services category. It offers more choices that the competition, while its strength derives from a base of satisfied and loyal users. (BrandTrack, autumn 2021). The brand ranked amongst the 10 most reputable Slovenian companies again in 2021 in the eyes of both the general public and business public (Reputation of Slovenian Companies, autumn 2021). As an employer brand, the Telekom Slovenije brand is accompanied by the slogan #connected. We use the slogan in the communication of HR activities, in communication with employees and in communication on social networks. The common theme of activities is the commitment of the employer brand: Co-creating the digital future of Slovenia. Portfolio of brands The Telekom Slovenije Group has 291 registered brands, while Telekom Slovenije has 198 39 brands, broken down as follows: • 142 national brands, • 18 European brands, • 20 international brands, • 8 national brands in North Macedonia, • 8 national brands in Kosovo, • 1 brand in Bosnia and Herzegovina, and • 1 brand in Serbia. * Due to Brexit, we further protected 18 European brands and two international brands in the United Kingdom in 2021. Telekom Slovenije registered six new brands in 2021: Brihtanavt, Brihtanavtka, Brihtaplac, Modro mesto, Supr and Zavarovanje brezskrbni. 39 GRI GS 102-7 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 96 We extended the registration of 13 brands, while we let the registration of 14 brands expire. Registered brands owned by the Company include Mobitel, SiOL, Mobi, Itak, PIAZZ, NekiNeki, TViN, Moneta and WiFreeLjubljana (a partner brand). The complete list can be found on the website http://www2.uil-sipo.si/. Key brands in the portfolio The NEO brand is a platform for smart living that links the best solutions for home and entertainment in one place: simplified viewing and advanced searches for TV content, including voice-control in Slovene, the simplified management of smart devices, and purchases via the TV screen. NEO facilitates back viewing for up to seven days and recording for later viewing for up to 30 days. It offers safe content for children and cloud gaming for the entire family, which can be used without a console on the user’s television. The NEO platform had more than 130,000 satisfied users in 2021. We continuously add new features, and develop and upgrade NEO. The new graphical adaptation of the interface in 2021 provides users a standard user experience on all devices (including PC, mobile phone and tablet). VALÚ is more than a smart wallet and payment and identification system; it is a comprehensive service that changes a mobile phone into a handy smart device for accessing everything the user needs in today’s life. In 2021, we linked the VALÚ Smart Wallet and the VALÚ Moneta payment service, and thus further simplified the use of both services for users. We added to the VALÚ ecosystem the new related Sitium application that is intended for accessing services in the municipalities of Novo Mesto and Nova Gorica. We also enriched the portfolio of products in the VALÚ Market, where we also sell Paysafe products, prepaid cards for the mobile telephony services of Slovenian operators, and tickets for skiing, events, trains and city buses in Maribor. We will also supplement the range of products in the future. At the request of the regulator, we introduced an additional authentication element (PIN) in VALÚ Moneta. At the end of 2020, we also offered users the VALÚ MasterCard that they can use to make payments at 53 million points of sale across the globe. The IZI brand addresses young and less demanding users for whom a contemporary prepaid offer is important. Additional operator services are not so important to them, and they are not interested in a subscriber relationship. At the identity level, the brand is friendly and affable, while relationships are important for the brand, whose tagline is ‘Simply IZI’. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 97 Values and brands Brands have defined elements, such as a brand’s essence and the values of the umbrella brand, followed by a brand’s own values, approach strategy, primary segment, possibility of extensions and key indicators. All elements are reviewed and updated every year. More detailed guiding principles for all key brands are accessible at https://www.telekom.si/o- podjetju/skupina-telekom-slovenije/blagovne-znamke. Other Telekom Slovenije Group companies operate on the market independently, and are represented by their own logo and corporate identity. In addition to the corporate brand, the portfolio of subsidiaries in Slovenia also includes the key sub-brands of individual companies and their services. A detailed description of individual brands and services can be found on the websites of the associated companies. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 98 2.7.3 Sales of the Telekom Slovenije Group 40 The number of the Telekom Slovenije Group’s retail and wholesale broadband connections was up by 3% at the end of 2021 relative to the previous year. The total number of connections was up by 2% in Slovenia and by 6% in Kosovo. The number of retail and wholesale mobile telephony users was up by 1% in Slovenia and by 11% in Kosovo. The total number of mobile telephony users was up by 5%. The number of traditional fixed voice telephony connections is in constant decline on developed markets. In Slovenia, the number of connections was down by 4% in 2021 relative to the end of 2020. Together with VoIP services, the number of voice telephony connections was down by 2% relative to the previous year. TELEKOM SLOVENIJE GROUP CONNECTIONS AND SERVICES BY TYPE AND MARKET Broadband connections Number of connections as at 31 December 2021 31 December 2020 Index 21/20 Slovenia – retail 199,386 201,420 99 Slovenia – wholesale 169,937 160,323 106 Slovenia total 369,323 361,743 102 Kosovo – retail 108,298 102,515 106 Telekom Slovenije Group 477,621 464,258 103 Mobile telephony Number of connections as at 31 December 2021 31 December 2020 Index 21/20 Slovenia – retail 955,648 965,867 99 Slovenia – wholesale 150,341 132,861 113 Slovenia total 1,105,989 1,098,728 101 Kosovo – retail 856,611 775,148 111 Telekom Slovenije Group 1,962,600 1,873,876 105 Fixed telephony and VoIP services Number of connections as at 31 December 2021 31 December 2020 Index 21/20 Slovenia – traditional fixed voice telephony 291,335 302,867 96 Slovenia – VoIP 181,760 183,174 99 Slovenia total 473,095 486,041 97 Kosovo – VoIP 35,089 35,027 100 Telekom Slovenije Group 508,184 521,068 98 40 GRI PA4, GRI GS 102-2, 102-6, 102-7, SASB: TC-TL-000.A, TC-TL-000.B, TC-TL-000.C Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 99 Sales revenue of the Telekom Slovenije Group The Telekom Slovenije Group's net sales revenue totalled EUR 648.2 million in 2021, a slight increase relative to 2020. Data for 2020 do not include the revenues of Planet TV. Breakdown of sales revenue by company 41 in EUR thousand 2021 2020 Index 21/20 Telekom Slovenije 577,630 591,693 98 Other companies in Slovenia 77,710 78,180 99 IPKO – Kosovo 70,904 56,156 126 Other companies abroad 3,897 3,908 100 Exclusions and adjustments -81,894 -82,761 - Telekom Slovenije Group 648,247 647,177 100 * Excluding Planet TV. TELEKOM SLOVENIJE Telekom Slovenije’s sales revenue was down by 2% or EUR 14.1 million in 2021 relative to 2020, to stand at EUR 577.3 million. Revenues from the mobile segment of the end-user market were up relative to the previous year, primarily due to higher revenues from the sale of mobile merchandise. Revenues were lower in the fixed segment of the end-user market due to a decline in revenues from traditional voice telephony, as the result of the falling number of traditional connections and their replacement with mobile and IP telephony, and due to lower revenues from the sale of licences, which resulted in lower costs of subcontractors. B2C market We face very price-aggressive competition on the mobile and fixed services market. The mobile telephony market continues in the direction of unlimited call minutes and messages, both in Slovenia and countries covered by the EU tariff. We have been facing a rising number of subscribed agreement terminations on the fixed market since the introduction of an ERT model of regulation by the AKOS (the use of Telekom Slovenije’s network by alternative operators). We have partially halted that trend through continuous activities. In accordance with the relevant EU directive, we have increased data transfer quantities included in mobile packages and in options for additional purchases of quantities for use in countries covered by the EU tariff. With the aim of facilitating the 5G experience, we updated packages, and transformed the old Naj C package into the Naj 5G package. We also standardised the line of Naj packages and increased the quantity of gigabytes (GB). In February, we offered users the new Za dva mobile package, which facilitates the conclusion of two subscriber agreements on a joint account. An extended period of work from home and distance learning led to an increase in users’ needs for higher mobile data transfer quantities. To meet those needs, we developed the new Mobilni Net Neomejeni 5G package, which facilitates unlimited data transfer at home. Users thus have at their disposal an additional three Mobilni Net packages. We developed an entirely new strategy in the segment of young users. At the beginning of the school year, we launched the mobile SUPR package for young users between the ages of 15 and 31 years. The service includes two exceptionally innovative ways to obtain additional gigabytes. The first is a reward for loyalty, where we increase the quantity of gigabytes by 1 GB every month. The second way is to obtain additional gigabytes by staying active and exploring Slovenia. We also updated the packaging in which new users receive a SIM card. With stylishly adapted packaging from recycled paper, we have covered another of the main values of today’s youth. In accordance with the updated portfolio, we discontinued the sale of NekiNeki packages in September. We adapted the portfolio of small and medium-sized business users who were forced to adapt their operations due to the COVID-19 pandemic. We stood by their side and helped them implement changes in their operations with services for the digitalisation of operations. We offered them 41 GRI GS GS 201-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 100 affordable services that serve as the basis for successful operations. We updated mobile internet packages and added the Mobilni Net Neomejeni 5G package, which facilitates the exploitation of all advantages of the 5G network. We offered business users who work in the field or smaller retail outlets the compact portable Sunmi V2 PRO, which combines a printer and tablet for petty cash operations in one device. Entrepreneurs get everything in one place that they need for quick transactions at mobile points of sales. In the segment of prepaid users, we prepared different specially priced offers for Mobi users throughout the year: 10+10 e-vouchers, double quantities for the Mini Mobi and Čvekaj Mobi packages at the end of the school year and SIM cards for EUR 1 at the beginning of the school year. We gifted the MultiSIM Mobi package with the purchase of a smart watch for kids, and facilitated the free transfer of numbers to Mobi packages. We offer IZI users: the IZI SuperKUL package at the end of the school year, SIM cards for EUR 1 at the beginning of the school year, the use of HR-internet Plus during summer holidays and the free transfer of numbers to IZI. We began to optimise and simplify the portfolio, updated additional purchases of quantities, and discontinued the existing IZI Diskont and IZI Vračilo packages. We updated packages for the users of SPAR MOBIL, where we discontinued the Spar 6000 and Spar 500 packages, and introduced the Spar XL and Spar L. The transfer of numbers to SPAR MOBIL was free throughout 2021. In the fixed segment, we upgraded the basic internet speed in the NEO Svet B package free-of- charge to meet the growing needs of users for higher data transfer speeds. We upgraded internets speeds to 60/30 Mbit/s free-of-charge for users who do not yet have a fibre optic connection and use a copper connection to access the internet and IPTV. We increased the number of wireless fixed package subscribers in all locations where there is no fibre optic connection. We can thus provide those users data transfer speeds of up to 100/20 Mbit/s, while users can watch two TVs at the same time. They also have at their disposal the same programme scheme as subscribers on fibre optic and copper connections. We upgraded 54 older fixed packages with current NEO packages free-of-charge, and facilitated the use of the most advanced services. We launched NEO Games in the scope of the NEO platform and introduced a new form of entertainment to TV screens. Telekom Slovenije is consolidating its position as the most advanced operator, as we are the first and only operator on the Slovenian market to offer cloud gaming. We refreshed the online NEO experience on the neo.io portal and in the mobile NEO application. With the NEO Smartbox, we offered users numerous new functionalities and several new TV programmes, including new Disney Junior programmes for kids, the Cinestar TV 2 and Cinestar TV Fantasy movie channels, Fox News and Pickbox TV, Adria Music Television, Folx Music Television, Slovenija and One Adria Music Television, and the Arena Sport 3, Arena Sport 4 and Arena Fight sports programmes. Sport is home again on NEO with the connection of the entire range of Arena programmes. We were the only operator in Slovenia to offer NEO Smartbox users the programme option Chess with Laura Unuk, Slovenia’s leading chess player and holder of the title ‘International Master’. Via the video store on the NEO platform, Laura Unuk offers chess lessons for complete beginners and more experienced players. For sports enthusiasts, we set up the thematic page Olympic Games Tokyo 2020 in NEO, where users could watch broadcasts by category and Olympic sport on different TV programmes. Users were able to access the thematic page on all platforms. We introduced the new Highlights function. We also provide smart home services in the scope of the NEO platform, where users can select between a range of different smart sensors, cameras and other devices for controlling, managing and automating the home. We added 11 new radio stations to the TV programme scheme. The Ljubljana International Film Festival (LIFFe) made it possible for Telekom Slovenije’s subscribers to watch movies from the comfort of their homes again last year due to the restriction on the number of visitors to cinemas. We made 44 films from the festival available to our subscribers in Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 101 the DKino video store. As the main sponsor of the festival, we also facilitated the exclusive viewing of four films from last year’s LIFFe after LIFFe series. We brought the advanced VALÚ and VALÚ Moneta payment services even closer to users in 2021: we facilitated the use of higher monthly limits and deferred payments, and ensured an even higher level of payment security and full control over use in the upgraded user interface of the mobile application. Users of iOS mobile phones can pay for purchases in the App Store via invoices for telecommunication services. We made an important step forward in the Online Store in terms of the development of online platforms and the upgrading of existing functionalities and systems, such as the possibility of extending subscriber agreements for fixed packages online and the fully digital signing of subscriber documentation. We continued to expand the portfolio by making products for home, work, school, sports and entertainment available to users and customers in one place. We expanded the portfolio to over 5,200 products spanning more than 130 categories, with more than 2,900 of those products available in the Loyalty Programme with the option of instalment payments. When selecting products, we place special emphasis on sustainable use. We increased the number of products available for sale in the Online Store by 25%. Online shoppers recognised purchases in the Loyalty Programme as the simplest online instalment purchases in the country (source: research regarding online purchases and loyalty programmes, Valicon, September-October 2021), which is further proof that our strategy of continuous development is appropriate. The VALÚ KLUB loyalty programme remains an important factor in ensuring customer satisfaction, which we achieve through continuous development and the personalised treatment of members. The number of members continues to grow. We enhanced the insurance of mobile devices in 2021 with new coverages. Amongst risks covered by insurance, we added an extended guarantee of up to 36 months from the date of purchase for mobile phones, and coverage for the unauthorised use of the VALÚ Smart Wallet in the event of burglary, theft or pick-pocketing. We also expanded extended guarantees to tablets, laptops and smart watches. We presented an important milestone in the Slovenian insurance sector. We developed an innovative solution, through which Zavarovalnica Sava offers the subscribers of mobile services the Worry-Free travel insurance product. This is the first ‘pay-by-use’ travel insurance, meaning payment according to the actual number of days an individual is abroad. This technical solution is the result of our own expertise, and was patented with the Slovenian Intellectual Property Office by Telekom Slovenije. We supplied electricity to households and small business customers in 2021. We withdrew from the electricity supply market on 1 January 2022. Points of sale and sales network Our points of sales were closed from the beginning of the year until 9 February 2021 due to the COVID-19 pandemic. During that time, we transformed them into pick-up points where users could pick up or exchange equipment with prior notice. We also made available to users a video call option to Telekom centres (TC) via the Viber and WhatsApp platforms during that period. We moved 37 sales counsellors from Telekom centres, 16 advisers for small and medium-sized enterprises and five sales trainers to various call centre teams. We accelerated the execution of outgoing call campaigns for the retention of users and the migration to the fibre optic network, and for obtaining approvals. We made a total of 198,314 calls in 2021, compared with 157,446 calls in 2020. We also introduced universal work stations, meaning users can satisfy all of their needs in one place. Net revenues from the sale of additional equipment were up by 53% in 2021 relative to 2019, prior to the COVID-19 pandemic, and by 46% relative to 2020. We recorded record sales of NEO Smartboxes in an extremely positive user response during NEO action week. We continued to implement the Sales Excellence programme and introduced the certification of sales staff in all sales channels. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 102 B2B market Through a comprehensive approach, we provide the private and public sectors vertical solutions and access to the most advanced technologies. For the provision of comprehensive ICT solutions, we obtain the requisite certificates and partner statuses, and strengthen employee competences. Worthy of mentioning are the following important partner statuses and certificates: x CSP (Cloud Solution Provider) status and Direct Partner for the sale of Microsoft cloud services (Microsoft 365, Azure and Express Route). In that respect, we also supply Microsoft software through SPLA (Service Provider Licence Agreement) channels and high-volume agreements (Open License and Open Value Program). We have Gold Partner Status for eight competences and Silver Partner Status for four competences. The most important are Gold Partner Status for Cloud Productivity and Cloud Platform, and Silver Partner Status for Security. We have become the leading provider of business telephony in the MS Teams environment. Our comprehensive portfolio also includes our own services, such as management, maintenance, migration and various consultancy services. x We enjoy Premier Partner Status in the area of systems integration (Premier Integrator) for Cisco technological solutions. x We have HP Partner First Platinum Status for the sale of personal and printing systems, and are an HP Amplify Power Services Partner – Workstations Specialist. We are registered with HPE as a Business Partner for the sale of server and network systems, and data storage systems, while we have also received the statuses of Silver Hybrid Cloud Specialist, Silver Aruba Specialist and Silver Pointnext Services Sales Specialist. x Platinum Solution Provider status for Dell Technologies, which combines Dell, EMC, VMware and AirWatch, and security portfolio that primarily comprises RSA and CarbonBlack. Cyber security is an element of operational risk management at an increasing number of organisations. The Cyber Security Operation Centre (CSOC) monitors, analyses and responds to security events for Telekom Slovenije, and other organisations and companies. An integral part of the CSOC is the Telekom Slovenije Computer Emergency Response Team (TSLO-CERT), which is a member of the community of Trusted Introducer response centres. Through cyber security solutions, services and projects, we round off the increasingly well-established concept of zero trust, which dictates constant verification at all points in the IT system. We continuously upgrade the portfolio of business data and mobile services, and combine it with the Safe Business Web service. We presented the 360 Safe mobile package to business users. Together with Cisco, we expanded business telephony with the globally recognised Webex tool for cooperation between teams and virtual meetings. DIGITALISING THE FUTURE Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 103 Telekom Slovenije’s cyber security solutions and services In 2021, we upgraded IoT services for smart cities, which are provided in an environment with NB- IoT communication protocols. In the scope of a single platform, we facilitate the collection and processing of data, the inclusion of the solutions of partners who are experts in specific areas and a single overview of data. The platform includes a control application for municipalities and the mobile Smart City application for residents. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 104 At various utilities companies that supply water and energy and provide rubbish collection services, we implemented pilot projects for the advanced collection of data regarding consumption via our mobile network. We participate in major projects relating to the smart supply of water and energy and smart farming. We implemented three major projects aimed at introducing solutions for smart parking lots. We established a traffic-calming system in three municipalities. It is a sectional speed measurement system used to measure vehicle speeds on specific road sections. Comprehensive 360° review of IoT services for smart cities The smart system of integrated healthcare allows healthcare institutions to provide telemedical treatment to treat patients with the most common chronic diseases (chronic heart failure, asthma, chronic obstructive pulmonary disease, diabetes and high blood pressure), and to monitor and treat them remotely. A solution for the telemedicine treatment of COVID-19 patients with milder indications who are recovering at home has been introduced in clinical practice at the national level via the national telemedicine centre at the University Medical Centre in Ljubljana. The solution is in place in a network of hospitals and health centres throughout Slovenia. We ensure the centralised, real-time monitoring of the vital functions of patients seriously affected by the coronavirus (in so-called COVID-19 wards) at the University Medical Centre in Ljubljana and the Celje General Hospital. The smart system of integrated healthcare makes it possible for chronic patients to remain in constant contact with healthcare staff from anywhere (e.g. from their home environment). Vital functions can also be monitored remotely, without visiting a clinic. A special remote care eCare service is available to patients, the elderly, disabled persons and others requiring assistance to live independently in their home environment. One of the things that the aforementioned service facilitates is the detection of falls at home. Inter-operator segment Domestic wholesale services On the domestic wholesale market, we increased the number of broadband connections on our fibre optic access network in 2021, and decreased the number connections on the copper network, while recording total growth of 5.7%. Revenues in 2021 were at the level recorded in 2020. We achieved higher revenues from broadband services in connection with operators who roam in our fibre optic access network, and higher revenues from the leasing of the mobile infrastructure. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 105 International wholesale services Revenues on the international wholesale market were also at the level recorded in 2020. We recorded growth in data services relative to 2020, primarily due to the monetisation of the Milan–Sofia section of the network. Due to reduced travel opportunities (impact of COVID-19) during the first six months of the year, we saw negative effects primarily in roaming and voice services, while revenues from roaming services were up during the summer. The drop in voice traffic was also due to the increased scope of work from home and growth in the use of alternative technologies that facilitate user calls and content in one place. Despite that and falling prices, we were able to maintain a solid market position. Special attention was given to cost control in the area of roaming services, as the traffic of Telekom Slovenije’s subscribers in countries covered by the EU tariff is rising sharply as the result of roaming services on the single market (‘roam like at home’). Internet traffic was up, forcing us to increase existing capacities. The regional fibre optic network, which is based on Telekom Slovenije’s backbone network, brings an alternative connection between the Balkans and other major hubs in Western Europe. That network represents an important strategic advantage of Telekom Slovenije on the data services market in the region. We sell free capacities on the regional network to our international partners and large end- users on the wholesale and retail markets. In 2021, we modernised and upgraded the network between Milan and Vienna, where we noticed growth in revenues. Telekom Slovenije’s regional fibre optic network TSMEDIA 42 TSmedia is the leading provider of digital media content and advanced advertising solutions in Slovenia. The company co-creates the media space with one of the leading online media in the form of Siol.net and represents a business information centre with the Bizi.si business assistant, the only official telephone directory in Slovenia (itis.si), the najdi.si website and outdoor digital screens. In 2021, TSmedia introduced a new registration system and upgraded several functionalities in the Siol.net online media, replaced old screens with higher quality equipment and expanded the network 42 GRI TA2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 106 of screens it manages (Nova Gorica, Kranj and Novo Mesto). It published the TIS 2022 telephone directory in print and DVD form and upgraded the itis.si website. TSmedia generated sales revenues of EUR 6.1 million in 2021. Revenues were up by 9% relative to the previous year, primarily as the result of advanced and creative forms of advertising in the scope of the SiOl product. AVTENTA Avtenta is the leading partner for managing and implementing SAP solutions and paperless operations on the Slovenian market. It specialises in: • the implementation of SAP ERP solutions; • the implementation of paperless operations; • the provision of expert support and assistance to more than 15,000 users of solutions (SLA); and • information support for business processes with standardised package solutions (SAPaaS and BCaaS) and integration with various systems. Avtenta generated net sales revenue of EUR 8.6 million in 2021, an increase of 6% relative to 2020. Revenues were up primarily due to improved results in the sale of document system solutions. SOLINE As the manager of the Sečovlje Salina Nature Park (SSNP), Soline protects and sustainably preserves natural and cultural heritage in the park and produces salt using a traditional method. It also offers salt-based cosmetic and food products, and manages the Lepa Vida Thalasso Spa. Soline generated net sales revenue of EUR 4.3 million in 2021, an increase of 51% relative to 2020, but still below the pre-pandemic level. Soline produced 1,671 tonnes of salt in 2021, which is lower than the long-term average. Lower production was the result of climate change. The Lepa Vida Thalasso Spa received 7,201 visitors, an increase of 11% relative to the previous year, while the SSNP received 31,000 visitors, an increase of 73% relative to 2020. GVO GVO is the leading provider of comprehensive solutions in the areas of project design, and the construction, management and maintenance of telecommunications networks in Slovenia. The company is also expanding to related activities in the construction and maintenance of infrastructure facilities. projects co-financed by the European Union from the European Regional Development Fund and by funds from the Slovenian budget. These are projects to construct and manage open broadband networks in rural areas. The company generated sales revenue of EUR 53 million in 2021, a decrease of 9% relative to 2020. The company continues to record growth in revenues from the management and maintenance of open broadband networks, and revenues from services for the parent company. The company generated lower revenues from investments and maintenance for the parent company and on the market. IPKO IPKO has developed from the first internet provider to cover all of Kosovo into a contemporary company that offers a comprehensive range of convergent mobile communication, fixed telephony, internet and cable TV services. The company generated sales revenue of EUR 70.9 million in 2021, an increase of 26% relative to 2020. That increase was the result of intensive marketing activities and less-stringent covid-related measures relative to the previous year, which led to the influx of expatriates to Kosovo from abroad, which in turn had a positive effect on sales in all segments. IPKO remains the strongest brand amongst telecommunication companies in Kosovo. TSINPO TSinpo is a service and disabled workers’ company. The company produces and markets cardboard tubes and packaging under its own brand. The company is present primarily on the Slovenian market with small-batch production, but is also present to a lesser extent in neighbouring countries, almost exclusively on the B2B market. TSinpo provides the parent company various support services, such as the control, servicing and distribution of telecommunications terminal equipment, the technical preparation of telecommunication works, the compilation of sales and other packages, the Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 107 distribution of marketing materials, the preparation and distribution of CRM materials for end-users, the maintenance of the documentary material archive and a correspondence contact centre. It is also present on the market with documentary material scanning and packaging services. TSmedia generated sales revenues of EUR 1.4 million in 2021, similar to the level generated the previous year. 2.7.4 Market communication 43 With the aim of rejuvenating our umbrella brand and building awareness that we are the operator with the best network in Slovenia, we presented three new creative platforms in the spring: Creating the Future (for residential users), Small Company. Big Entrepreneur. (for small and medium-sized enterprises) and 360˚ Do Business Safely, Do Business Digitally. (for large enterprises). Review of market communication activities We executed more than 120 advertising campaigns and projects (compared with 100 in 2020), with a major emphasis on targeted segments and digital campaigns. Through communication based on the Creating the Future platform, we communicate that, with the best services in the best network, the future is literally in our hands and we are actively creating it today. In the scope of that platform, we presented the range of NEO Svet packages and mobile NAJ packages. We rounded off the year in the mobile segment of the portfolio with various promotional offers and the associated communication activities, with an emphasis on the 5G network, Naj packages and promotional offers of different mobile phones. We presented NEO as an integrated platform throughout the year via different new content, with the launch of NEO Igre in January and thereafter with an emphasis on expanding the range of the most popular sport content. The 2020 Summer Olympic Games were held in Tokyo in 2021, with Telekom Slovenije serving as a traditional partner of the Slovenian Olympic Committee. For this reason, we recruited Olympic athletes for advertising in the summer: Janja Garnbret, Primož Roglič and Tadej Pogačar, who presented the potential uses of the NEO platform. All three won Olympic medals. We also recruited athletes to support 5G technology in all mobile packages. We continuously supported sales activities by communicating the ever-expanding portfolio of the Loyalty Programme. According to research regarding online purchases and loyalty programmes (Valicon, September−October 2021), our Loyalty Programme was recognised for the Simplest online instalment purchase. We celebrated 30 years of mobile telephony in Slovenia with a New Year’s campaign. During the first half of the year, we primarily addressed the segment of young users through digital activities with special mobile phone offers. We launched an entirely new offer in September in the form of the SUPR package or movement for young people. We communicated the range of VALÚ Smart Wallet services via digital activities in which we encouraged the updating of profiles and attracted new users (prize games, cooperation with the Slovenian Student Union). We also presented the VALÚ Market offer. We presented the eCare service to the elderly and their families. The service facilitates carefree and safe living for older people, especially if they live alone. We supported services in the autumn months with a broad communication campaign. 43 GRI GS 103-1, 103-2, 103-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 108 Monthly campaigns included Smart Phone and Black Friday (in November). Two Smart Phone campaigns were also of a charitable nature. Through the communication of IZI prepaid services, we addressed the target group of simple, primarily young users. We supported the spring campaign with entertaining radio advertisements and advertisements on YouTube, which we continued in the autumn, together with activities on social networks. As the first sustainable story in the scope of the Creating the Future platform, we presented the Creating a Green Future campaign in the autumn. In exchange for used mobile phones brought by users to any Telekom Slovenije point of sale, we planted 1,000 honey-bearing trees in Slovenia in March 2022. Users receive a Treecelet sustainable bracelet for every used mobile phone they bring. In the small and medium-sized enterprise segment, we presented the new communication platform, ‘Small Company. Big Entrepreneur’. The emphasis of communication throughout the year was on the digitalisation of operations, and was supported by products such as Pantheon Web Light, Mobile Cash Register, e-pricelist, Business Net and NEO Business. We addressed Slovenian farmers with a special offer. We addressed the large enterprise segment with the ‘360˚’ communication platform under the slogan ‘Do Business Safely. Do Business Digitally’. In 2021, we organised fourteen webinars and four events at which we presented current topics in the areas of cyber security, Microsoft web services, the smart infrastructure, workplace management, 5G, eCare and video communications. We also organised three major events: x a meeting with business partners, with whom we celebrated 30 years of mobile telephony and presented the opportunities brought by 5G technology; x together with ELES, we presented a solution for the mass charging of electric vehicles, and demonstrated for the first time in Slovenia a link between the charging and energy infrastructure, and the functioning of the remote management of electrical vehicle charging; and x with Akademija Finance, we organised the event ‘Smart municipalities through digitalisation’, at which we presented smart city solutions. Through lectures and presentations, we actively participated in the Digital Innovation Hub Slovenia during Slovenia’s presidency of the EU Council. Events, promotions and communications with users We participated in more than 40 events and promotions that were organised live, virtually and in hybrid form. We addressed users via 450 campaigns using text messages and direct mail. We presented Telekom Slovenije’s portfolio to users in seven catalogues, three of which were sales catalogues, while two catalogues were intended for small and medium-sized enterprises and two catalogues of products were for members of the Loyalty Programme. We also prepared more than 100 other pieces of printed materials (flyers, leaflets and brochures). Over a three-month period, we visited more than 15 cities and towns, and addressed more than 4,000 people at 44 promotional events with the NEO house. Digital presence The main website www.telekom.si/en recorded more than 24 million visits, which is slightly less than the record number of visits in 2020. The proportion of total visits using mobile devices has stabilised at 70%. On social networks (Facebook, Twitter, Instagram, YouTube and LinkedIn), we have one of the largest bases of followers among companies in Slovenia who transact directly with users, while we are a leader amongst telecommunication operators in that regard. We refreshed our communication on Instagram and brought it closer to a younger audience, and thus increased the number of followers by 18%. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 109 Facebook Twitter Instagram YouTube LinkedIn 209,349 12,136 16,222 3,941 8,689 Also rising is the number of followers of the VALÚ and IZI brands on social networks, where we are present on Facebook, and on Instagram where we are present with the VALÚ brand. We repeated a communication campaign for the IZI brand on the still fast-growing TikTok social network. For effective user lifecycle management, we updated rules on the execution of campaigns in 2021, and adjusted the timing of user contacts, so that the latter would be continuously informed about new developments, the current portfolio and personalised content to the greatest extent possible. We added special automated campaigns to celebrate users’ birthdays and thank them for their loyalty. We sent more than 12 million emails (an increase of 20% relative to 2020) in the scope of more than 400 e-campaigns, organised 1,300 text-message campaigns, sent more than 1.5 million short text messages and organised nearly 700 call campaigns with more than 35,000 calls. Ethical marketing Telekom Slovenije is a signatory of the code of conduct for providers of electronic communication services for the protection of users, the code of mobile operators and internet providers aimed at user protection, and the ETNO Corporate Responsibility Charter. To that end, we follow the recommendations of the AKOS relating to concern for users. Through its responsible editorial policy, TSmedia ensures safe and transparent access to freely accessible content in our media. We call on those making comments on the Siol.net website to respect the etiquette of online communication, and moderate user comments, so that comments encouraging hate speech are not published. The market communication activities of Telekom Slovenije and TSmedia are in line with the Media Act and the Slovenian Advertising Code, while we also self-regulate our advertising. This means we verify compliance with the law and codes every time communication projects are planned. We also adhere to the examples of best practices drawn up by the Slovenian Advertising Chamber (www.soz.si/projekti_soz/dobra_praksa/). IPKO also complies with general professional advertising codes. 44 In 2021, the Healthy Society movement raised concerns about the ‘Experience 5G in the best network’ advertisement due to the use of children to promote the use of a mobile phone and the 5G network. A young girl appears in the advertisement, standing in front of an athletics stadium. Via a mobile phone, which she used solely as a training aid, she received instructions from top athletes on how to train to achieve even better results. At the same time, she was able to connect with other young athletes to support and encourage each other. The purpose of the campaign was to encourage and motivate users to achieve their goals. The aforementioned movement also reported the advertisement to the Slovenian Advertising Tribunal, which ruled that we did not breach Article 18 of the Slovenian Advertising Code. As a socially responsible company, we comply with professional recommendations and guidelines, and warn and teach adolescents and children about the correct and safe use of screens and the internet. The advertisement in question was of an informative nature and did not contain direct commercial content. No Telekom Slovenije Group companies breached codes or voluntary standards in the area of market communication in 2021. 45 44 GRI GS 103-1, 103-2, 103-3 45 GRI GS 417-3 g Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 110 2.8 Network, technologies and IT 2.8.1 Development of networks, services and projects 46 Research projects Participation in European projects facilitates the development of new services and technologies in the international environment, as well as cooperation with domestic and foreign partners. It also opens new business opportunities on the ICT market. The majority of European research projects in 2021 were carried out in the scope of the Horizon 2020 programme. We focus on areas where the intensive development of new technologies is in progress, in particular the Internet of Things, cyber security and support for critical communications. Major research and development projects in which we participated included: x 5G Safety, x 5G-LOGINNOV, x 5G-IANA, and x PRECINCT. We are closely monitoring and applying for new tenders together with international partners. We have applied for the SUNRISE, ATLANTIS, LIZARD, DRONECIS2 and CROSS-DEAL projects, which will contribute to the improved reliability of networks. The strategic objective of the 5G Safety project (https://5gvarnost.iskratel.com/), which was completed on 30 November 2021, was the development of 5G products and services adapted to the needs of the Public Protection and Disaster Relief (PPDR) sector, and the development of a new generation of user-oriented applications for the personal security needs of citizens. The project also studied strategies for introducing user-oriented applications in a virtualised 5G environment for shared use, with security, privacy and compatibility with current PPDR communication systems ensured. In the scope of the project, we carried out studies relating to the radio network and mobile core to ensure a mobile network that will meet the needs of PPDR users. We studied the needs of PPDR users in connection with the information security of the mobile network and mobile terminals. We also identified different user groups in the PPDR system. Various rights for individual services or the system itself are allocated to those users depending on their role. The project was co-financed by the Ministry of Education, Science and Sport as part of the Operational Programme for the Implementation of European Cohesion Policy in the period 2014 to 2020. The project included four consortium partners: Iskratel, the Faculty of Electrical Engineering at the University of Ljubljana, Telekom Slovenije and OSI. 46 GRI GS 103-3, 203-1, IO1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 111 The 5G-LOGINNOV project (https://5g-loginnov.eu/) focuses on the 5G network, and the development of innovative logistics solutions in the scope of Industry 4.0. Solutions will be tested at the ports in Koper, Hamburg and Piraeus. We are setting up a development-test 5G network with additional MEC (Multi-Access Edge Computing) capacities in the vicinity of the Port of Koper in the scope of the project. That network is intended for the development and testing of solutions for optimising processes, increasing efficiency and reducing environmental impacts in the management of transport logistics. When testing solutions, we and our project partners will use the latest fifth generation mobile network technologies and devices, sensors, automation, analytics and traffic management systems, including the use of self- driving freight vehicles. As part of the project, we defined in detail potential applications that will be implemented in the test environment at the Port of Koper. We analysed the 5G network in order to make the necessary adaptations to the network in the test-development environment, taking into account the specific needs of ports. 5G-LOGINNOV is a European development project that is being financed by the European Commission in the scope of the Horizon 2020 programme. The project consortium comprises 15 partners from eight European countries, including three partners from Slovenia: the Port of Koper, Telekom Slovenije and Internet Institute. The project is expected to be completed in September 2023. The aim of the European 5G-IANA project (https://www.5g-iana.eu/) is to establish an open 5G experimental platform for the needs of the automotive industry. The platform will be intended primarily for small and medium-sized enterprises, and will facilitate the development, set-up and testing of innovative solutions in connection with self-driving vehicles and communication between devices in vehicles. Telekom Slovenije participates in the project with fifteen partners from eight European countries. In the scope of the project, we will provide the 5G infrastructure necessary to test the experimental 5G platform. In addition to the 5G network, we will provide a cloud service infrastructure and the necessary virtualised environment, in which partners will establish virtual network functions (VNFs). The aim of the European PRECINCT project (https://www.precinct.info/) is to connect critical infrastructure managers to protect against cyber threats and natural disasters in a specific geographical area. In the scope of the project, we will use simulations and artificial intelligence to develop tools for identifying security vulnerabilities, and various measures for the more effective provision of critical Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 112 infrastructure security. Successfully developed security concepts will then be transferred to other geographical areas and used to upgrade security mechanisms there. They will thus contribute to the increased security of the population and the improved reliability of the European critical infrastructure. The project is expected to last until the end of September 2023, and will include 40 international partners from different European countries, including seven from Slovenia. With those Slovenian partners, we will establish a test environment to ensure the security of the critical infrastructure at the Ljubljana train station and the surrounding area. 2.8.2 Access networks Through the fixed access network, we ensure broadband coverage, and the high performance of the cable network and active access devices. We continued to modernise radio and fibre optic access networks in 2021, while development activities focused on the Internet of Things, 5G technology and the provision of services through the mobile network. FTTH fibre optic access network and access devices We have provided users transfer speeds of up to 1 Gbit/s on the fibre optic network since 2007, and up to 10 Gb/s upon request, which more than meets the bandwidth needs of current and future telecommunication services. We continue to expand and upgrade Telekom Slovenije’s fibre optic access network. We facilitated the connection of an additional 42,150 Slovenian households to the fibre optic infrastructure in 2021. Together, more than 411,000 households in Slovenia have access to the fibre optic network. We provide users higher internet speeds and a superior user experience in terms of broadband content. We are also optimising cost efficiency and working to achieve the objectives of the Digital Agenda for Europe, which lays down development until 2025 (Connectivity for a European Gigabit Society). We introduced an advanced technological access solution that enables symmetrical gigabit connections on the fibre optic network with a speed of up to 10 Gb/s. We are also introducing GPON and XGS-PON technologies on the existing FTTH network using point to point topology, which allows us to optimise the number of functional locations with active equipment, reduce the scope of required active equipment and achieve higher speeds throughout the entire network. We are making a technological migration from the copper to the fibre optic network. ADSL2+ technology is making way for VDSL2 technology on the copper network. The latter facilitates higher speeds and the improved transmission symmetry, in particular from the user to the network. Transmission systems We continued to expand the DWDM ROADM network, and included 100G and 10G interfaces in accordance with traffic requirements. We tested synchronisation distribution for the 5G network via DWDM systems and achieved excellent results, which served as the basis for the planned upgrade of the DWDM network. We will thus facilitate synchronisation transmission in the network. We built the Ravne na Koroškem–Vienna and Nova Gorica–Milan DWDM sections on the regional optical network (RON). We included a higher number of 100G connections on the Balkan– Vienna/Milan section. Representing a major project on RONs in 2021 was the inclusion of a 12 x 100G connection on the Sofia–Ljubljana–Milan section. Telecommunications cable network We are building a network in urban centres and rural areas in accordance with the development strategy, economic criteria and the expectations of users and owners. In that respect, we are consistently fulfilling all commitments we have given regarding the construction of a fibre optic network in locations where we have expressed interest. We are working with municipalities, local communities and other infrastructure operators in the joint construction and upgrading of the infrastructure, and are thus facilitating the more rapid and efficient construction and connection of users to the broadband network. We are expanding fibre optic connections to base stations and for business users. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 113 Radio network We continued to upgrade base stations at existing and new locations in 2021, and upgraded software and modernised 4G and 5G equipment. We modernised and upgraded additional locations with 5G technology in the 2600 MHz frequency band, and in the newly acquired 700 MHZ and 3600 MHz frequency bands. We increased the capacities of base stations due to the rising volume of mobile data traffic, and improved the external and internal coverage of the mobile radio signal, in part through the construction of base stations at new locations. At the frequency auction organised by the AKOS, we acquired new radio frequencies in the 700 MHz, 700 MHz DSL, 1500 MHz, 2100 MHz, 3600 MHz and 26 GHz frequency bands for a period of 15 years. The following were connected to Telekom Slovenije’s radio access network in Slovenia at the end of 2021: x 1,418 GSM base stations, x 908 UMTS base stations, x 1,443 LTE/4G base stations, and x 302 5G base stations. We cover more than 96% of the population with the LTE/4G network, more than 84% of the population with the LTE-A/4G+ network, and more than 38% of the population with the 5G network. We included 241 small cells for internal coverage needs. The superior user experience of our mobile network is confirmed by internal measurements, according to which we are the leader in terms of: x coverage of territory and the population; x average download speeds; x average upload speeds; x the time required to establish a call and the success of that process. Internal measurements are also confirmed by independent international research, which reaffirmed in 2021 that Telekom Slovenije’s mobile network is the leader or shares the leading position in all categories of the measurement of user experience quality. Users’ needs for even higher-capacity mobile internet access are growing every year. That trend was particularly evident in 2021 due to the COVID-19 pandemic. We increased the number of 5G base stations to 302 in 2021. We continued with the first phase of the upgrading of the network with 5G technology according to the NSA (non-standalone) principle. We are also planning implementation according to the SA (standalone) principle. With the connection of the first production verticals, we brought digitalisation even closer to the manufacturing sector and the economy as a whole. We ensure coverage with the 5G network in the 2600 MHz, 3600 MHz and 700 MHz frequency bands, primarily in cities, business centres and along transport routes, and also in some rural areas. 5G technology has brought users faster and more reliable mobile data transfer. We are planning the smart 5G infrastructure in such a way that facilitates numerous virtual dedicated networks for specific business verticals, such as e-healthcare, energy, transport, factories, smart cities and communities, etc. Provision of services to users We provide services to the entire segment of residential users and to companies of all sizes. We ensure the rectification of service-related incidents, and the inclusion of new users and changes to the configurations and user devices. We also implement technical solutions adapted to the needs of large business users and provide connectivity at major sports and social events. We are implementing the S.M.A.R.T. development and training programme, which affects the excellence of the user experience. We achieved a high transactional NPS (technician visit), which was 85 index points in 2021, an increase of 4 index points relative to the previous year. We also provide consultancy services to users. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 114 We carried out the ‘Lightning-quick visit’ communication campaign again in 2021, through which we raised users’ awareness about the consequences of lightning strikes, and advised users to disconnect their electronic devices from the electricity and communications networks during storms and when they are away for extended periods. Users in Slovenia also have at their disposal the text-message alarm service, which provides real-time information regarding lightning strikes close to their connection. Activities bring tangible results, a reduction in the amount of damaged terminal equipment and fewer interventions by field technicians. We launched an application that gives technicians standard access to digital tools and improves communication between them. We continued to optimise the organisation, which can be seen in the reduction of labour costs, improved efficiency, and reduced time to market and fault clearance times. We adapted to conditions in connection with the COVID-19 pandemic again in 2021, and continuously provided services without disruptions. 2.8.3 ICT and network services 47 We have drawn up a key technological tender for the upgrading of the core network with 5G technology. Procurement procedures are in progress and will be completed in 2022. In order to prepare the network and infrastructure for 5G technology, we are upgrading the core and aggregation network, implementing cyber security elements at the level of the telecommunications signal, and introducing containerisation technology. In terms of the development of private 5G networks, we have set up a dedicated 5G network for smart factories in conjunction with the Faculty of Mechanical Engineering at the University of Ljubljana, and have begun to set up a dedicated 5G network at the Port of Koper (as part of the 5G-LOGINNOV project). We ensure the smooth functioning of the network and services 24 hours a day, every day of the year. In 2021, we expanded the offer of proactive control for business users, which is an integral part of the Security and Control Centre. The Technical Help Desk achieved the best results in terms of success, response time and average fault clearance time for both residential and business users. All of this is reflected in a high level of customer satisfaction. We also provide technical support to users via bot technology. We continued to develop the Cyber Security Operation Centre by ensuring additional employee competences and developing tools. We thus provide an increasing number of companies and organisations cyber security services, as well. 48 Ensuring cyber security and business continuity is one of the strategic priorities of our operations, which was seen quite clearly during the COVID-19 pandemic. Both areas represent important support processes in ensuring the functioning and security of the network, and in the management of key services and processes. We successfully completed various specialist certifications in the area of information technology and cyber security. Our activities included: x the renewal of the ISO 27001 certificate for the information security management system (ISMS); x the renewal of the ISO 22301 certificate for its business continuity management system (BCMS); and x the acquisition of ISO 27018 certificates for the protection of personal data in Telekom Slovenije’s cloud. ISO 27018 represents the international Code of practice for the protection of personally identifiable information (PII) in public clouds acting as PII processors. It includes guidelines for the establishment of generally accepted control objectives, controls and guidelines for the implementation of measures to protect personal data. It thus helps Telekom Slovenije, as a provider of cloud services, to ensure high standards of protection for the information and data of its users. 47 GRI PA6 48 SASB: TC-TL-550a.2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 115 We increased capacities in the network and at inter-network connections due to users’ needs for increasingly higher data transfer speeds. Due to an increase in data traffic on the network and growth in traffic in the public ICT cloud, we have updated certain elements of the network and upgraded various service platforms. We implemented numerous activities to ensure the maximum availability of the fixed and mobile network. The reliability of the network is also seen in a high network availability rate of 99.99%. The average duration of network disruptions was 0.86 hours during the year. The average actual continuous data transfer speed in Telekom Slovenije’s network is illustrated in the table below. 49 IP traffic, average in Gbit/s Residential users Business users Mobile network download 46.9 19.5 4.7 upload 789.1 31.6 32.8 We established alternative channels for emergency calls to 113 during the upgrading of the network. We have discontinued the majority of the TDM-based exchanges for voice services and migrated all remaining TDM users to a single TDM switch, which will remain in the network until the final retirement of TDM technology. We fully upgraded the core element of the MPLS backbone network and began the upgrading of the aggregation network, which also serves as the basis for the development of 5G technology in the 3600 MHz spectrum. We continued to implement projects on the B2B market for atypical ICT solutions, such as network solutions, technical support and the maintenance of communications equipment, workstation support, etc. Through the continued development of the NEO platform, we have facilitated new functionalities; we launched cloud gaming and continuously improve voice control in Slovene. We updated the online and mobile NEO applications, added safe home functions and devices, provided a comprehensive range of programmes via Adaptive Video Streaming (OTT), and added new programmes and content. In the area of IoT, we expanded the first commercial smart parking project, which currently includes eight parking lots with more than 300 parking spaces, and implemented several pilot projects in the area of remote meter reading. To support business processes and BSS/OSS, we are carrying out a number of activities to support sales campaigns, new packages and new products. We updated the application for managing telephone numbers on the cloud infrastructure as part of the modernisation of OSS. We continued activities in connection with solutions to prevent customer turnover, and expanded the option of concluding a binding subscriber agreement in the fixed segment with the purchase of products in the Online Store. We integrated the new Safe Web service into our portfolio for residential and business users to protect them against online fraud, while the service is also appropriate for parental control. In September, we introduced something new on the Slovenian market in the form of the SUPR subscriber package for young people, which rewards customer loyalty with an additional 1 GB of data per month. Together with Zavarovalnica Sava, we developed an advanced travel insurance product that is linked to mobile roaming, where users only pay a premium for days they are actually abroad. To simplify and optimise work at the Technical Help Desk, we linked the ITSM Remedy fault management and CRM systems, and thus facilitated the more efficient recording and clearing of non- technical service faults. 49 SASB: TC-TL-520a.2, TC-TL-550a.1; GRI PA4 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 116 2.9 Sustainable operations Slovenia celebrated 30 years of mobile telephony and the internet in 2021. The driver of development throughout that period has been the Telekom Slovenije Group. Through our infrastructure and services and the most advanced solutions, we are contributing to Slovenia’s development into a digital society. We develop the most advanced digital technologies and services, and generate benefits with ICT. Benefits for the Company and its employees. Benefits for shareholders. Benefits for society. Benefits for the environment. Benefits for all stakeholders. We responsibly manage the economic, social and environmental impacts of our operations, and build principles of sustainable development into our operations, products, services and content. When reporting on sustainable development, we focus on the material topics that are presented in the table below, and include content throughout the entire report. Material topics regarding the Telekom Slovenije Group’s sustainable development 50 Material sustainability aspects Material sustainability topics Superior user experience x Provision of high-quality access to telecommunication services x Superior quality and the prompt elimination of faults x Development of innovative products and services x Cyber security x Personal data protection Responsible and successful operations in the long term x Ethical and transparent operations x Effective corporate governance x Long-term value of investment x Performance that facilitates a stable dividend policy x Compliance x Respect for human rights Concern for talented employees and a stimulating work environment x Healthy and safe working environment x Attractive employment opportunities for perspective employees x Employee involvement in decision-making x Training and personnel development x Diversity of employees and equal opportunity Digitalised and inclusive society x Promotion of digital literacy x Technological solutions for tackling today’s social challenges x Wide access to services and responsible infrastructure expansion x Support for sport, culture, science and humanitarian causes Mitigation of climate change and the efficient consumption of natural resources x Responsible consumption and protection of natural resources x Climate change, biodiversity and carbon footprint x Circular economy and waste management x Energy efficiency Comprehensive supply chain management x Partnerships and long-term cooperation x Management of sustainability aspects in the supply chain x Clear supplier selection criteria 2.9.1 About the annual report Statement regarding the non-financial operations of the Telekom Slovenije Group Reporting on the operations of the Telekom Slovenije Group and Telekom Slovenije is carried out in line with the requirements of the International Financial Reporting Standards and national legislation (ZGD-1K). Our progress in environmental, social, governance and economic areas (ESG) is presented comprehensively in the annual report in accordance with the international Global Reporting Initiative (GRI) standards. We have been reporting in accordance with the GRI guidelines since 2009 and in accordance with that organisation’s Global Standards since 2016, while taking into account previous 50 GRI GS 102-47 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 117 generations of GRI recommendations for the ICT and IT sectors, and the media. Compliance with those guidelines is verified by independent external institutions. We also disclose in the annual report our contribution to the sustainable development goals of the United Nations and, for the first time this year, compliance with certain indicators of the SASB (Sustainability Accounting Standards Board) standard for the ICT sector. Non-financial information is included in all chapters, which can be seen from the references to GRI indicators throughout the report and from the transparent GRI content index. The inclusion of information regarding non-financial operations and the diversity of management and supervisory bodies is thus in line with the requirements of the new Companies Act (ZGD-1K) adopted in 2021. The operating highlights take into account the Alternative Performance Measures set out in the ESMA Guidelines, while we also monitor the relevant legislation in the area of non-financial reporting. The Company established a permanent task force for sustainable operations that monitors legislation and trends in the area of sustainable development, and adopts recommendations and measures for their implementation in the operations of the Telekom Slovenije Group. The Company will subsequently publish disclosures of shares of taxonomy eligible and non-eligible economic activities as set out in Commission Delegated Regulation (EU) 2021/2178 of 6 July 2021 supplementing Regulation (EU) 2020/852. Drafting of the report and scope of reporting 51 The Controlling and Corporate Communications organisational units coordinate the compilation and publication of the annual report. Data and information are captured with the help of structured questionnaires, the content of which is prepared by experts for specific areas from Telekom Slovenije, GVO, TSmedia, Soline, Avtenta, TSinpo and IPKO. The accounting report is compiled by the Finance and Accounting organisational unit. Information regarding operations and indicators of sustainable operations in the annual report relates to the calendar year from 1 January to 31 December. The most recent annual report, for 2020, was published on 26 April 2021. The report is primarily intended for shareholders and the financial public, as well as users, employees and other stakeholders. Reporting relates primarily to the Telekom Slovenije Group and Telekom Slovenije. For content where standard reporting guidelines are not yet in place for the entire Group, we explain in each specific case that the content applies only to the parent company or a specific Group company. There were no significant changes to data from previous years or to reporting limitations. In the event of changes in a methodology used to disclose data, those changes and the associated reasons are clarified in the accompanying comments. When defining the scope and content of the annual report, we have been performing materiality and stakeholder analyses for a number of years. We again verified the scope, content and topics of the annual report for 2021 using a questionnaire found on the website www.telekom.si/en. That questionnaire was completed by 407 stakeholders from Slovenia, broken down as follows: 226 employees from the Telekom Slovenije Group, 111 suppliers, 111 users, 65 shareholders and investors, 17 representatives of the media, 14 representatives of local communities, seven representatives of analysts and other financial publics, and three regulatory bodies. We asked each stakeholder group to assess individual interest on a scale of 1 to 5, where 1 means least important and 5 means most important. We also asked stakeholders which content from the annual report is most important to them and which content they would like us to report on to a greater extent. The results indicate that stakeholders identified the following as the most important elements of the annual report: the development strategy and plans, technology, the network and IT, financial results, the HR policy and concern for employees. They would like to see more information regarding the strategy and projects, and regarding technology and development. Based on the results, we defined categories of interests most important to individual stakeholders. Their importance in terms of their impact on the operations of the Telekom Slovenije Group was assessed by 17 directors of Telekom Slovenije’s organisational units. This year, we also verified which existing topics are gaining in importance, and which new and emerging topics must be taken into account in the future. A materiality matrix is presented below. 51 GRI GS 102-46, 102-48, 102-49, 102-50, 102-51, 102-52 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 118 The results of stakeholder analyses are reviewed every year by experts who prepare the content for the annual report of the Telekom Slovenije Group and Telekom Slovenije. That review was carried out in 2021 via an online workshop attended by 54 persons responsible for preparing content. Verification of non-financial reporting Disclosures of non-financial data and the sustainable development report are submitted for independent external verification, which includes the verification of reporting according to the GRI Standards. The statement regarding external verification of the sustainable development report according to the GRI GS may be found in section 2.11. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 119 Matrix of the materiality of stakeholders’ interests 1 2 3 4 5 6 7 8 9 10 111213 14 15 16 17 18 20 21 22 24 25 26 27 28 29 30 Guaranteed functioning of the network in emergency situations Provision of high-quality access to telecommunication services Cyber security Superior quality of the network and the development of services that meet users’ needs and expectations Best quality-to-price ratio for services Personal data protection Compliance with regulations and decisions of the regulatory body Healthy and safe working Medium-high High Importance for the Telekom Slovenije Group Importance for stakeholders Medium-high High Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 120 Key: Superior user experience 1. Guaranteed functioning of the network in emergency situations 2. Provision of high-quality access to telecommunication services 3. Cyber security 4. Superior quality of the network and the development of services that meet users’ needs and expectations 5. Best quality-to-price ratio for services 6. Personal data protection 7. Prompt fault clearance 8. Simple and prompt communication with Telekom Slovenije advisers Responsible and successful operations in the long term 9. Compliance with regulations and decisions of the regulatory body 10. Business ethics and compliance 11. Operations that enable the payment of stable dividends 12. Effective corporate governance 13. Long-term value of investment 14. Respect for human rights Concern for talented employees and a stimulating work environment 15. Healthy and safe working environment 16. Professional and effective management 17. Acquisition of further knowledge 18. Career development opportunities 19. Employee involvement in decision-making Digitalised and inclusive society 20. Wide access to services and responsible infrastructure expansion (fixed and mobile network) 21. ICT solutions to tackle today’s healthcare challenges 22. Social responsibility (support for sport, culture, science and humanitarian causes in the form of sponsorships and donations) 23. Media and ICT literacy Mitigation of climate change and the efficient consumption of natural resources 24. Limitation of environmental impacts and a focus on sustainable development 25. Reducing electromagnetic interference Comprehensive supply chain management 26. Respect for the rights of workers, and the safety and health of employees in the supply chain 27. Client responsiveness and approach 28. Responsible energy and waste management in the supply chain 29. Long-term cooperation 30. Clear supplier selection criteria and compliance with business agreements EMERGING TOPICS x Attractive employment opportunities for perspective employees x Diversity of employees and equal opportunity x Responsible consumption and protection of natural resources x Climate change, biodiversity and carbon footprint x Circular economy and waste management x Energy efficiency Topics that are gaining in importance Realisation of the United Nation’s Sustainable Development Goals We strive to include the Sustainable Development Goals (SDGs) of the United Nations and key content of the latter’s 2030 Agenda in our operations and the management of sustainable impacts to the greatest extent possible. Below we present an overview of how and in what areas we contribute to the achievement of those goals and which goals the Telekom Slovenije Group has set itself in that respect. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 121 Overview of the realisation of SDGs SDG Our efforts Our objectives To provide all persons, particularly the poor and vulnerable groups, equal access to economic resources, basic services, natural resources, new technologies and financial services. x Broad access to our services: more information in point 2.9.4. x Services for vulnerable user groups: more information in point 2.9.4. x Employment and training of disabled persons: more information in point 2.9.5. x Sponsorship and donation activities: more information in point 2.9.3. x To ensure access to 5G technology by 99% of the Slovenian population by 2026. x We are committed to giving back to the social environment and vulnerable groups to the best of our ability, and to ensuring the security of the internet, connections and systems. x We follow strategic policy of earmarking 0.3% of total sales revenue per year for sponsorships and donations. To develop a high-quality, sustainable and reliable infrastructure that will support economic development and human welfare, with an emphasis on affordable and attractive access. To achieve universal access to healthcare, high -quality healthcare services, and safe, effective and affordable medicines. x Smart system of integrated healthcare: more information in point 2.7.3. x To provide eCare and technical ICT telemedicine services to 10% of the Slovenian population older than 65 years (around 40,000 citizens) by 2030. To improve energy efficiency. x Efficient energy management system: more information in point 2.9.7. x To increase the proportion of electricity obtained from low-carbon sources by 8 percentage point s until 2026. x To increase electricity generated by own solar power plants. To achieve the sustainable management and efficient use of natural resources. x Efficient energy management system: more information in point 2.9.7. x Paperless operations: see point 2.9.7 of this report for more information. x To increase the proportion of electric vehicles in the car fleet by 7 percentage points until 2026. x We will increase the proportion of all customer invoices issued accounted for by e- invoices by 15 percentage points until 2026. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 122 SDG Our efforts Our objectives To promote inclusive and sustainable economic growth, full employment and decent work. x Comprehensive ICT solutions: more information in point 2.7.3. x Family-friendly company: more information in point 2.9.5. x We are committed to respecting human rights, and will draw up rules and appoint a human rights officer by 2023. x In the scope of intergenerational cooperation, we established a standard mentor ing system with the aim of retaining key knowledge at the Company. We ensure the development of mentors and their mentoring skills. To promote sustainable urbanisation, and the sustainable planning and management of cities. Implementation of an integrated policy for inclusion, the efficient use of resources and the mitigation of and adaptation to climate change. x Smart cities, smart factories and industry: more information in point 1.8.5. x To design and ensure an integrated solution for managing traffic flows in urban settlements, to provide subscribers an overview of air and water quality, with services to support the smart and efficient management of energy. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 123 2.9.2 Inclusion and participation of stakeholders 52 The key stakeholders of the Telekom Slovenije Group include employees, shareholders and potential investors, users of our services, regulatory and state authorities, financial analysts and other financial publics, suppliers and other business partners, the media, and the local and wider communities. We strive for an inclusive and long-term relationship with stakeholders, through which we strengthen trust and cooperation. The strategy for communication with those groups is defined in Telekom Slovenije’s Corporate Governance Policy. Based on direct and indirect relations (research, data analyses, statistics, etc.), we identify mutual impacts and the interests of stakeholders. Communication with stakeholders is open, balanced, proactive and reactive. We focus on the provision of accurate, relevant and clear messages. We also report on communication with stakeholders in specific sections where they are addressed comprehensively. Overview of Telekom Slovenije’s stakeholders and the inclusion thereof Stakeholders What is most important to them? How they are included and frequency of contact Activities Shareholders, analysts and other financial circles – Effective corporate governance; – long-term value of an investment; – operations that facilitate the payment of stable dividends; – relevant, current and timely information regarding operations and TLSG shares. – Investor relations section of the Company’s website; – General Meeting of Shareholders (at least once a year); – participation at investment conferences (occasional); – via email ir@telekom.si, skupscina@telekom.si ; answers to questions; – publication of business information in the Ljubljana Stock Exchange’s SEOnet system; – quarterly contact through the publication of reports on operations and the issue of the electronic TLSG newsletter; – once a year in conjunction with the publication of the annual report. – We communicated regularly, proactively and comprehensively with existing and potential shareholders regarding the operations of the Telekom Slovenije Group. We communicated transparently about the impact of the COVID-19 pandemic on operations. – We organised two General Meeting of Shareholders. – We paid shareholders gross dividends of EUR 4.50 per share in August 2021. Users – Prompt fault clearance; – security of personal data; – superior quality networks and the development of services that meet their needs and expectations; – the best quality-to- price ratio for services; – Personal contacts (regular): Telekom centres, 24/7 contact centre, communication via info@telekom.si and social networks. – web services; – regular communication regarding the portfolio, services and innovations in broad- reaching media and communication via other channels (invoices, direct mailing, catalogues, trade fairs, social – We present users new services, the portfolio and content that is important to them through numerous personal and electronic channels. – We currently cover 96.8% of the population with the LTE/4G signal, 84.0% of the population with the LTE/4G+ signal and 38 .8% of the population with the 5G signal. A total of 241 small cells were included for internal coverage needs. 52 GRI GS 102-40, 102-42, 102-43, 102-44 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 124 Stakeholders What is most important to them? How they are included and frequency of contact Activities – simple and prompt communication with the Group. networks, promotions at events, special events, etc.); – possibility of selecting a return call option to avoid extended waits for responses to calls to the contact centre; – twice a year through migration analyses according to the mystery shopping principle; – through annual user satisfaction research; – regular contact through page view statistics; – regular measurement of the NPS ( Net Promoter Score) at touchpoints. – We improved the satisfaction of the users of fixed and mobile services by 2 percentage points (CSI). – In 2021, we received 482,892 calls and 146,910 emails from users, and made 10,984 video identification calls. More than 30,000 users have contacted the digital adviser Maks. Employees – Healthy and safe working environment; – professional and effective management; – acquisition of additional knowledge and competences; – inclusion in decision- making; – education and career development opportunities; – information regarding the Company’s operations and strategic plans, and on current developments at the Company and in its activities. – Regular briefing of employees on events and current activities at the Company and within the Group via established channels (intranet, electronic screens, bulletin boards, email, the system of meetings, etc.); – promotion of innovation in the scope of the Brihta programme; – cooperation with the Works Council and trade unions (regular dialogue); – activities relating to employee health, in the scope of the Modro jabolko (Wise Apple) portal and the Živijo, stres! (Hello, Stress!) projects, and inclusion via the TSsport sports club; – measurement of organisational vitality and culture (every other year) and appraisal-development interviews with employees (twice a year). – A total of 90.9% of Group employees were included in education and training in 2021. – During the 2020/2021 scholastic year, Telekom Slovenije supported five secondary school and university students by providing them company scholarships, bringing the total to 24 scholarship holders. – Persons with a level VII education account for the highest proportion of employees at the Telekom Slovenije Group level (35.3%). – We maintained regular dialogue with social partners (notifications, joint consultations, issuing of consents, etc.). – The Works Council met at 12 regular sessions in 2021. – We include employees in the design and development of systems and tools. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 125 Stakeholders What is most important to them? How they are included and frequency of contact Activities Suppliers and other business partners – Clear supplier selection criteria and compliance with business agreements; – responsiveness and approach of the orderi ng party; – long-term cooperation; – respect for the rights of workers, and the safety and health of employees in the supply chain; – responsible energy and waste management in the supply chain. – Clear communication and feedback regarding satisfaction with servic es rendered; – compliance with the Rules on the Procurement of Goods and Services at Telekom Slovenije, and other internal acts; – Code of Conduct for the Suppliers of the Telekom Slovenije Group; – establishment of long-term relationships with suppliers; – cooperation in the fulfilment of contractual obligations; – common marketing approach; – common development of services; – questionnaires for the purpose of risk assessment; – meetings and presentations. – annual questionnaire; – cooperation in the scope of tenders and procurement procedures. – The transparent and equal treatment of potential suppliers is ensured through a standardised procurement procedure. – We dedicated a great deal of attention to addressing challenges as they arose. – Based on an assessment of each supplier, we define a development strategy, possibilities for additional cooperation, or measures to mitigate/eliminate risks. – We settle liabilities by the agreed payment deadlines, and even before those deadlines in the event of surplus liquid funds. – Telekom Slovenije cooperates with 3,021 suppliers from 40 countries. The majority or 97% of suppliers are from the European Union. – Total turnover between Telekom Slovenije and its Slovenian subsidiaries and their business partners amounted to more than EUR 677 million in 2021, including VAT. Regulatory and government bodies – Compliance with regulations and decisions of the regulatory body; – provision of high-quality access to telecommunication services; – limitation of environmental impacts and a focus on sustainable development. – Expert responses to decisions of regulatory bodies; – participation in the drafting of legislation, with expert comments (as required); – regular contact following inspections in co nnection with imposed obligations by the AKOS on regulated relevant markets. – We consistently adhered to applicable laws, regulatory measures, regulations and best practices in all phases of the business process and operations. – We responded by preparing comments to published analyses of relevant markets. – We submitted comments, independently or together with professional organisations, in the process of amending legislation relevant to our operations. Local and wider community – Wide access to services and responsible infrastructure expansion (fixed and mobile network); – respect for human rights; – ICT solutions to tackle today’s healthcare challenges; – guaranteed functioning of – Support for sporting, cultural, education and humanitarian organisations and projects (regular activities); – selection of projects with an emphasis on social responsibility and the monitoring of associated effects; – assessment of environmental impacts as an integral aspect of all development activities; – Sponsorships and donations were earmarked for organisations and projects at the national and regional levels. The Telekom Slovenije Group earmarked close to EUR 2 million for those purposes in 2021. – Due to the expansion of the LTE/4G network and establishment of the 5G network, we performed additional measurements of electromagnetic radiation and thus ensured that they do not exceed Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 126 Stakeholders What is most important to them? How they are included and frequency of contact Activities the network in emergency situations. – regular contact with local communities when upgrading and building networks. the legally prescribed thresholds. We conducted 323 measurements in Slovenia in 2021. The results of measurements of electromagnetic radiation are accessible by local communities. Media – Business ethics and compliance; – media and ICT literacy; – social responsibility; – continuous and current information about the operations of the Telekom Slovenije Group and the development of services. – Proactive and reactive management of media relations (press conferences, press releases and responses to journalists’ questions, maintenance of formal and informal relationships); – organisation of occasional events; – regular communication about corporate to pics, new services and products, and other topics related to the Company’s operations. – We responded to around 250 questions from journalists in 2021 and drafted 43 press releases for the Slovenian media and three for foreign outlets, while around 4,400 art icles about Telekom Slovenije were published in the media. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 127 2.9.3 Social environment 53 The Telekom Slovenije Group actively identifies opportunities where it can contribute to the development of the social and economic environment in which it operates through its expertise, and financial and other resources. We have supported humanitarian, cultural, environmental, educational and scientific projects and institutions, as well as Slovenian athletes and sporting organisations for many years as a sponsor or donator. Special emphasis is placed on sports, as we provide assistance to individuals and teams, sporting associations and sporting events. As the leading Slovenian operator, closely tied to the environment in which we operate, we wish to give back responsibly to the society in which we live. We are thus one of biggest supporters of Slovenian sport and athletes, while Primož Roglič, Tadej Pogačar and Janja Garnbret, who later won Olympic medals, appeared in our market communication campaign that coincided with the Summer Olympic Games. Requests for sponsorships and donations are reviewed by a committee that makes decisions regularly throughout the year. That committee takes into account the interests of those requesting help and Telekom Slovenije Group’s strategic business plan when allocating funds. The Telekom Slovenije Group earmarked a total of EUR 1.999 million or 0.3% of its operating revenues for sponsorships and donations in 2021. Proportion of sponsorships and donations in the Telekom Slovenije Group in 2021 Major sponsorships and donations in 2021 Humanitarian projects We are regularly included in humanitarian projects, both voluntarily and at the social level. Our activities in 2021 included the support of the following organisations: - the Slovenian Red Cross for the renovation of the Martinček Youth Home at that organisation’s Debeli rtič youth spa and resort; - the Humanitarček organisation for providing assistance to socially disadvantaged elderly people; 53 GRI GS 201-1 6% 81% 4% 5% 4% Education and training Sport Culture Humanitarian activities Other Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 128 - the Olympic Committee’s Foundation for athletes from socially disadvantaged backgrounds; - the Zlata mreža institute to provide free transportation for elderly people who live alone; - the Ljubljana Moste-Polje chapter of the Friends of Youth Association in the Botrstvo child sponsorship project, and - the Friends of Youth Association for the TOM telephone intended for children and adolescents in distress; - the Association of Counsellors to help those in distress via telephone line; - the Association of Disabled Persons – Forum of Slovenia; - the Slovene Federation of Pensioners’ Associations (ZDUS); - the Elvira Vatovec Strunjan Training Centre; and - the CIRIUS Kamnik Centre for Training and Rehabilitation. Education and science For many years, we have supported numerous educational and scientific projects, conferences and events, and serve as an important sponsor of projects and organisations, including: - the Reading Badge project, - the Varno na kolesu (Safe Cycling) project, - the Happy School project, - the Eco-Quiz project for primary schools, - the Corporate Security Days conference, - the Technical Culture Association of Slovenia, - the multimedia educational programme at the Faculty of Electrical Engineering at the University of Ljubljana, and - the Post and Telecommunications Museum, which Telekom Slovenije co-founded. Culture In the area of culture, we support contextually varied and geographically dispersed events, as well as cultural events that with our support have become an essential element of cultural expression, both in Slovenia and internationally. Such events in 2021 included: - the Ljubljana Festival, - the Ljubljana International Film Festival – LIFFe, - the Ljubljana Puppet Theatre, - the Maribor Puppet Theatre, - the National Opera and Ballet in Maribor, - Carnival in Ptuj, and - Felina Films (sponsorship of the film Gajin svet 2). Sports We continuously support numerous major and minor events that are intended primarily for children and adolescents. Our sponsorship activities in 2021 included support for the following: - sporting associations: the Slovenian Olympic Committee, the Slovenian Football Association, the Ski Association of Slovenia, the Ice Hockey Federation of Slovenia, the Slovenian Volleyball Association, the Slovenian Athletics Association, the Slovenian Kayaking Association, the Slovenian Handball Association, the Alpine Association of Slovenia, the Slovenian Cycling Federation, the Slovenian Sailing Federation, the Shooting Union of Slovenia, the Slovenian Gymnastics Association and the Rowing Association of Slovenia; - sporting clubs: the Maribor football club, the Cedevita Olimpija basketball club, the Krka and Domžale basketball clubs, the Celje Pivovarna Laško and Gorenje Velenje handball clubs, the Mura Football School and others; - sporting events: the 2021 Ski Flying World Championship in Planica, the 2021 World Cup women’s ski jumping competition in Ljubno, the Tour of Slovenia, the Franja Marathon, the Red Bull Goni Pony na Vršič event, the Spartan Race in Slovenia, the I Feel Slovenia Ironman event in Slovenian Istria, the Triglav The Rock Ljubljana international climbing spectacle, the 3-on-3 national basketball championship and others. Socially responsible conduct is integrated into all Telekom Slovenije Group companies. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 129 We made donations of EUR 15,000 in the name of medal winners at the 2020 Summer Olympic Games in Tokyo. Janja Garnbret, Primož Roglič and Tadej Pogačar, our medal winners at the Summer Olympic Games in Tokyo, selected three institutions to which we donated EUR 5,000 for a total of EUR 15,00 0. Telekom Slovenije shares common values with the best athletes. We fight and strive to be better every day on the one hand, while we are a responsible member of society on the other, and never forget those who we can help to develop and overcome obstacles through funding or other resources. We thus made a donation to the Palčica pomagalčica in dobrodelni škratki association to help two - year old Urban who is fighting a genetic disease that has left him unable to walk or talk, and whose only help lies in a drug being developed in Australia. We made a donation to Pogi Team for the development of young cyclists, and another donation to the Primož Roglič Foundation to help young athletes from socially disadvantaged backgrounds. 2.9.4 Users 54 5.7 million 0.53% NO. OF ISSUED INVOICES PROPORTION OF COMPLAINTS Significant activities We put a great deal of effort in to user lifecycle management. Conditions as the result of the COVID- 19 pandemic demanded an even more in-depth understanding of users and the environment, and the inclusion of the user lifecycle in business processes through segmentation of users and by addressing them with personalised and relevant market messages. In 2021, we celebrated the 10th anniversary of My Telekom as the central point that allows users to independently manage services and subscriber agreements. It is used by more than 60% of the users of our services, while more than 100,000 different users visit My Telekom an average of twice a month. In 2021, we made it possible for the subscribers of mobile services to conclude Worry-Free travel insurance, while young people can only take advantage of certain benefits from the SUPR package via My Telekom. Users can also enter into a binding subscriber agreement via My Telekom. New services in our portfolio are increasingly conditional on the use of My Telekom, through which users can manage services remotely and thus take advantage of numerous benefits. Satisfaction with the use of My Telekom applies to business users, for which a broader range of services for integrated, secure and reliable operations will be available in the future. 10,984 video identification calls 482,892 received calls 146,910 answered emails 30,000 users of the digital adviser Maks Technical Help Desk We launched the digital adviser Maks for the Technical Help Desk in 2020. Maks eased the burden on advisers at support touchpoints and contributed to the faster resolution of users’ technical challenges. Maks upgraded his technical knowledge and expanded to the Technical Help Desk for VALÚ services in 2021, and also expanded his knowledge of the NEO platform. He thus helps users by answering questions about smart homes, NEO TV Lite and WiFi access points. Transparency in the charging of services 55 We issued 5.7 million invoices for telecommunication services (excluding non-standard invoices and credit notes), compared with 6.2 million in 2020. The complaint rate relative to the total number of invoices issued was 0.53%, compared with 0.57% in 2020. 54 GRI GS 103-1, 103-2, 103-3 55 GRI PA10 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 130 Because we are aware of the importance of sustainable operations and concern for the environment, we implement numerous initiatives and activities to reduce the number of printed invoices and gradually discontinue paper operations. The proportion of invoices issued in some electronic form rose from 25% in 2020 to 30% in 2021. We improved the transparency of invoices in terms of content and form. We thus improved the visibility of the amount due for payment and due date, as well as the number and date of issue of invoices. We will continue to make improvements in the future. Customer satisfaction 56 The results of customer satisfaction measurements provide us important feedback that serves as a guide in the development and upgrading of services tailored to the needs of users. We monitor the satisfaction of residential and business users through regular surveys, while we regularly measure surveyed monthly and transactional NPS (recommendation). NPS is one of the key indicators for monitoring customer satisfaction, and tells us whether or not users recommend Telekom Slovenije. Satisfaction of residential users with Telekom Slovenije’s services Telekom Slovenije maintains a high level of customer satisfaction (Valicon, autumn 2021). The proportion of satisfied and completely satisfied users remains high and stable. Fewer negative experiences with Telekom Slovenije also contributes to a stable level of satisfaction. Amongst the five highest rated elements in the mobile services segment are the best and fastest network, while the scores of competitive operators are nearly one-half lower (Valicon market research, Monitoring of brand strength and image in the mobile category; October 2021, n = 728). In the category of fixed services, the best network is amongst the top three elements, while the fastest network receives a similar score to fastest internet and is ranked somewhere in the middle, but is still ranked higher than the competition (Valicon market research, Monitoring of brand strength and image in the fixed category; October 2021, n = 720). The satisfaction of users of the Online Shop is measured in the scope of the Certified Shop measurement. Users rated their satisfaction with Telekom Slovenije’s Online Shop as excellent (9.6). We improved customer satisfaction with the following elements: x internet speed, which remains our strong competitive advantage; x the responsiveness of the call centre; and x the price-to-quality ratio in the mobile segment. General satisfaction and advantages of Telekom Slovenije: x reliability of the operator (mobile and fixed segments); x functional stability (network, internet, TV and mobile internet); and x fault clearance (fixed segment). Satisfaction index for Telekom Slovenije’s users Source: Valicon, Satisfaction of the users of telecommunication services; autumn 2021, n= 1,003. 56 GRI GS 103-1, 103-2, 103-3, GS 102-43, 102-44 15% 61 62 63 64 65 66 67 68 69 6% 11% 16% 21% 26% Autumn 2019 Autumn 2020 Autumn 2021 Customer satisfaction index (CSI) - mobile segment (growth in one year) CSI CSI % completely satisfied +2% YOY 9% 60 61 62 63 64 65 66 6% 8% 10% 12% 14% 16% 18% 20% Autumn 2019 Autumn 2020 Autumn 2021 Customer satisfaction index (CSI) - fixed segment (growth in one year) CSI CSI % completely satisfied +2% YOY Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 131 NEO is a generator of positive experiences. It wins over users primarily as an interface with simplified voice control and quick start-up (Valicon, Monitoring of product brands – NEO, December 2021, n = 1,020). A total of 89% of NEO users are satisfied, while 49% of them are completely and very satisfied. More than 90% of users are satisfied with the most commonly used user functions in TV services: content search functions (92% of satisfied users), voice-controlled searching and continue viewing option (91% of satisfied users), and all-in-one functionality and WiFi access point (90% of satisfied users) (Valicon, Satisfaction of the users of telecommunication services; autumn 2021, n = 1,003). Payment cards and cash remain the most frequently used forms of payment, while the share of e- wallet users was up by 3 percentage points (e-wallets are now used by every fourth inhabitant of Slovenia aged 15 to 75 years). In the mobile payment services and mobile wallet category, the visibility of the VALÚ brand has improved significantly in the last year. The VALÚ brand continues to maintain its strength (Valicon, Monitoring of product brands – VALÚ; December 2021, n = 1,020). Satisfaction of business users The overall satisfaction of Telekom Slovenije’ users is high, and continues to improve over time (Valicon, autumn 2021). Most important to business users are the quality and functioning of services, reliability, responsiveness, fault clearance speed and availability. Index of business user satisfaction Source: Valicon, Satisfaction amongst business users; autumn 2021, n = 470. Satisfaction with Telekom Slovenije’s points of sale We measure satisfaction with our points of sales twice a year via Mystery Shopper research. To that end, we measure the satisfaction of visitors to points of sale, and satisfaction with contact centres and 20% 6% 11% 16% 21% 26% Autumn 2019 Spring 2020 Spring 2021 Autumn 2021 58 60 62 64 66 68 70 Customer satisfaction index (CSI) - business users (growth in one year) CSI CSI % completely satisfied +6% YOY NEO achieves the highest satisfaction scores amongst users of the smart living platform for: x the quick and easy (voice-controlled) search for content; x the quick start-up of the interface; x innovativeness and the best platform for smart living; and x the best coverage in the area of smart homes, device management and TV gaming. Users perceive VALÚ as follows: x easy to use; x trustworthy; x backed by a friendly provider; and x it’s intended for different purposes and situations. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 132 responsiveness to messages sent via email to info@telekom.si. All measurements achieve high ratings, which are continuously on the rise. Source: Valicon, Mystery Shopper research; autumn 2021. Net Promoter Score (NPS) Net Promoter Score (NPS) is the most widely used measure for monitoring user experience. It indicates to what extent users are prepared to recommend services to others. It combines in one figure the indicator of a user’s willingness to recommend a company/product/service, user satisfaction, perception of user experience excellence and an expression of the user’s loyalty to a provider. Telekom Slovenije takes measurements monthly for the users of fixed and mobile services, and at the most important touchpoints. Telekom Slovenije ranks in the top third compared with the NPS of telecommunication operators from foreign markets. Transactional NPS: Source: Telekom Slovenije, Transactional NPS, 2021. The satisfaction index for Telekom Slovenije’s users is rising continuously. It has risen by more than 20% in the past two years (December 2021 relative to 2019). The 2021 financial year was characterised by the COVID-19 pandemic for the second year. Our points of sale were closed at the beginning of the year. For this reason, the work load of our call centres and digital touchpoints was high. Satisfaction was above-average during the first quarter of the year, while users showed their satisfaction with our excellent response to conditions with very high NPS. The second half was stable, without major fluctuations in the mood of users. Spring 2018 Autumn 2018 Spring 2019 Autumn 2019 Spring 2020 Autumn 2020 Spring 2021 Autumn 2021 Overall assessment by sales channel Telekom centres Authorised dealers jan.19 feb.19 mar.19 apr.19 maj.19 jun.19 jul.19 avg.19 sep.19 okt.19 nov.19 dec.19 jan.20 feb.20 mar.20 apr.20 maj.20 jun.20 jul.20 avg.20 sep.20 okt.20 nov.20 dec.20 jan.21 feb.21 mar.21 apr.21 maj.21 jun.21 jul.21 avg.21 sep.21 okt.21 nov.21 dec.21 ((t)NPS_total of 21 contact points Achieved tNPS Linear (achieved tNPS) Visitors to Telekom Slovenije’s points of sale express general satisfaction with the following factors (Mystery Shopper research): 9 the orderliness of surroundings and the interior of branches; 9 the pleasant atmosphere created by sales staff at points of sale; 9 the pleasantness and helpfulness of sales staff; 9 the advice given by sales staff in response to users’ wishes and needs. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 133 Customer satisfaction at other companies TSmedia measures customer satisfaction using the research of online products with the help of web analytics (e.g. MOSS, which measures visits to Slovenian websites, the number of views, the number of visitors and bounce rate) and using online questionnaires and forms to collect users’ opinion regarding all products. Avtenta measures the satisfaction of business partners once a year using various KPIs, such as CSI, NPS and CIT (ratio of negative experiences to positive experiences). Avtenta’s customer satisfaction index (CSI) fell to the level recorded in 2018 to stand at 61, a decrease of 3 points relative to the previous year. The proportion of users fully satisfied with Avtenta’s services remains high at 17% (as recorded the previous year), while falling sharply was the proportion of users fully satisfied with implementation deadlines (from 15% in 2020 to 8% in 2021), partnerships (from 20% to 15%) and the stability of operations (from 15% to 10%). Affecting the aforementioned results was a reduced personal presence at the premises of users due to the COVID-19 pandemic, while Avtenta also implemented several more complex projects in 2021. GVO regularly measures customer satisfaction after the completion of construction works using a questionnaire. In accordance with the international ISO 9001 standard, it also analyses the areas of construction and project design once a year. In the area of construction, GVO received 150 assessments from Telekom Slovenije in 2021, with an average score of 4.68, with 1 being the lowest score and 5 being the highest score. GVO received 26 assessments in the area of project design, 17 from Telekom Slovenije and nine from external partners. The average assessment from Telekom Slovenije was 4.76, while external partners gave project design an average assessment of 4.68. TSinpo carries out unstructured interviews with users once a year. Qualitative assessments of satisfaction were at the level recorded in previous years. IPKO regularly monitors the user experience via market research, social networks and internal quantitative studies. Measurements of customer satisfaction and NPS are carried out for fixed and mobile services. The findings of primary research (BrandTrack Study) indicate that there has always been an upward trend in NPS amongst users, while NPS for both mobile and fixed services was higher than those of competitive operators on the market. IPKO also measures customer satisfaction and NPS regularly by surveying users who visit points of sale, using surveys via the call centre and through surveyors in the field. The overall satisfaction score in the mobile segment was 8.3 in 2021 (on a scale of 1 to 10) and 7.6 in the fixed segment. Both scores were at the level recorded in 2019. No measurements were performed in 2020. Soline does not measure satisfaction. Concern for the security of children and adolescents 57 As a responsible operator, Telekom Slovenije dedicates special attention to the security of users in the use of communication services. Children are spending an increasing amount of time online, while the scope of distance learning has risen recently. Children are able to access a great deal of online content using smart mobile phones and mobile devices. We offer the Varen splet (Safe Web) solution to protect children while they are online and thus facilitate the safe use of the internet. In addition to protecting devices, the aforementioned solution also allows parents to limit access to websites they deem inappropriate. The service can also be managed via My Telekom using pre-set content categories that ensure a child cannot access inappropriate content immediately after it is activated. The Safe Web solution can be connected to all mobile devices without additional installation, meaning the user is protected in both the domestic mobile network and abroad. The NEO Smartbox facilitates the creation of various profiles, through which it is possible to switch on parental control and thus determine which TV content requires the entry of a PIN. In the scope of the NEO platform, we continue to carefully select a range of cartoons and other content for our youngest users, which are available in the Children’s Park. We thus provide children (and parents) a carefree area in which they can only view content that is appropriate depending on their age. Da Vinci Kids content is also available to children through the NEO platform. The aforementioned content 57 GRI G4-DMA, G4-M4 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 134 brings children closer to science, math, technology, history, culture, nature and sports in Slovene in a humorous and interesting way. We provide advice to users regarding the safe use of modern communication devices and services at our points of sale and on the website in the tab Recommendations for the safe use of mobile devices and services. Accessible on the website is the Moja prva pogodba (My First Contract) project, through which parents can make a plan and set rules for using a mobile phone as their child takes their first steps into the world of telecommunications. We gave the parlour game Vprašaj me, vprašaj se (Ask Me, Ask Yourself) to children and their parents to mark various occasions. We developed the aforementioned game in conjunction with the Logout organisation. The game is designed in such a way that carefully selected questions stimulate conversation through which parents, guardians, teachers, grandmothers and grandfathers encourage children in a fun way to use the internet and mobile devices responsibly. We have published on the intranet and website educational videos produced by the Logout organisation, through which we warn young people about the dangers and pressures they could face, particularly during a period of distance learning. Services for vulnerable user groups 58 We continuously adapt the portfolio to the needs of vulnerable user groups. Available to retirees is the Ugodni package, which includes fixed internet, advanced television and fixed telephony services at an affordable price. If they link that package to the Naj A package, they also receive unlimited communication and sufficient mobile internet quantities for an affordable monthly subscription fee. We provide users with special needs the appropriate services, terminal equipment and a list of public telephones and terminals accessible by wheelchair. We give priority to them in connection to the public communications network and fault clearance, and provide access to the universal directory service (the blind and visually impaired and the deaf and hearing impaired) and emergency services for the deaf and hearing impaired. With a valid disability status certificate, disabled persons are afforded a discount of EUR 2 on their monthly subscription fee for fixed packages. The Gluhi A mobile package is available for the deaf and hearing impaired for worry-free communication. We offer volunteer protection and rescue organisations mobile service packages with no subscription fee. The members of fire fighter and police associations and trade unions and their immediate family members are entitled to a discount on the monthly subscription fee for mobile packages. The eCare service for safer living at home is available to the elderly and their family members in the scope of the smart system of integrated healthcare (see section 2.7.3 for more about the service). The aforementioned socially responsible service ensures a continuous (24/7) link to an assistance centre. A call may be made by a user or triggered by a fall or a sudden change in movement detected by sensor equipment installed in a user’s home, and the assistance centre informed accordingly. The service is co-financed by a number of Slovenian municipalities in the scope of the Safe and Connected at Home project (https://www.telekom.si/Documents/Moznost-subvencije-E-oskrba-seznam-obcin.pdf). 58 PA2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 135 Broad access to Group services 59 We ensure access to the most advanced ICT services and content in urban and rural areas, and thus contribute to the bridging of the digital divide in society. The mobile telephony signal is accessible by 99.74% of the Slovenian population, while a large portion of territory is covered by broadband internet access and fixed telephony. Fixed services are provided to users via the mobile network in areas where setting up a fixed connection is not possible. We are constructing at an accelerated pace the most advanced fibre optic network, to which we already facilitate connections by more than 411,000 Slovenian households. 60 Coverage of the population with individual radio network technologies in Slovenia on 31 December 2021: 2G/GSM 3G/UMTS 4G/LTE 4G+/LTE-A 5G 99.74% 93.07% 96.8% 84.04% 38.8% IPKO in Kosovo also facilitates broad access to ICT services. A project to upgrade hardware and software at five 2G/4G locations was implemented in 2021 and will facilitate the upgrade to 5G technology. The Ministry of Economy in Kosovo is co-financing 80% of the project. IPKO continuously upgrades locations in city centres and moves existing equipment to rural areas and areas with a low population density. Coverage of the population with individual radio network technologies in Kosovo on 31 December 2021: 2G 3G 4G 99.74% 93.07% 96.8% 59 GRI PA1, PA2, SDG 9.1 60 GRI PA4, SDG 1.4 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 136 2.9.5 Employees The Telekom Slovenije Group strives to provide a stimulating and pleasant work environment, open to innovation and cooperation. To that end, we provide for continuous employee training and education in various areas, and introduce innovative approaches for empowering employees. We are active in the areas of health and the prevention of burnout, and upgrade employee remuneration and motivation systems. We dedicate special attention to young families, facilitate flexible working hours to simplify the balancing of work and personal obligations, and organise numerous activities to strengthen the employer brand and our organisational culture in the direction of mutual cooperation. 61 We promote fair and ethical treatment, and operations in line with valid legislation. The Code of Ethics of the Telekom Slovenije Group lays down the guiding principles and responsibilities in mutual relationships and in relationships with users, shareholders and other stakeholders (for more about the Code, see section 2.5.1). To that end, we reject all forms of bullying, harassment or discrimination on the basis of gender, race, skin colour, age, state of health, religious, political or other conviction, national and social origin, financial status, sexual orientation or other personal circumstances. Individual Group companies have appropriate mechanisms in place for identifying potential cases of discrimination and for taking action in such cases. Similar to previous years, Telekom Slovenije Group companies did not receive any complaints due to discrimination in 2021. 62 Structure of employees 63 The Telekom Slovenije Group had 3,284 employees on the last day of the year, with Slovenian companies accounting for 2,795 of that number, a decrease of 3.2% relative to 2020. The number of employees was down primarily due to the termination of employment for business reasons and retirements at Telekom Slovenije, GVO and IPKO. IPKO has an additional 106 workers who are not full-time employees. 61 GRI GS 103-1, 103-2, 103-3 62 GRI GS 406-1 63 GRI GS 401-1, GS 102-7 Telekom Slovenije Group 150 new hires 218 departures 65.4% men 34.6% women 98.1% permanent 6.13% turnover 98.1% full time 3,284 employees 98.5% collective agreement 97 disabled workers Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 137 At 6.1%, employee turnover within the Telekom Slovenije Group was up by 0.3 percentage points relative to 2020. Structure of employees at Telekom Slovenije Group companies 64 Other Telekom Slovenije Group companies that are not presented in the above graph and companies of the subsidiary GVO do not have employees. Number of new hires and departures in 2021 by age group 65 Telekom Slovenije Group Telekom Slovenije Other companies in Slovenia Kosovo – IPKO Age group New hires Depar- tures New hires Depar- tures New hires Depar- tures New hires Depar- tures 18–30 86 27 37 3 20 14 29 10 31–40 32 54 14 15 11 18 7 21 41–50 24 48 13 33 11 11 0 4 51–60 6 72 3 49 3 23 0 0 61–65 2 17 2 15 0 2 0 0 Total 150 218 69 115 45 68 36 35 The average age of employees at Telekom Slovenije is 45.9 years. The average employee age at IPKO is 37 years, followed by GVO with an average age of 40.3 years. At 52.1 years, TSinpo has the highest average employee age. A total of 98.5% of Telekom Slovenije Group employees have an employment contract based on a collective agreement, which was close to the same proportion in 2020 (98.3%). The remaining 1.5% of employees have contracts outside the collective bargaining system. These are primarily employees in management positions. 66 64 GRI GS 102-8 65 GRI GS 401-1 66 GRI GS 102-41 2182 444 55 40 95 43 528 3429 2165 462 58 46 89 44 528 3392 2119 445 54 46 86 45 489 3284 Telekom Slovenije GVO TSmedia Avtenta Soline TSinpo IPKO Telekom Slovenije Group 31.12.2019 31.12.2020 31.12.2021 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 138 Employees by type of employment and gender 67 A total of 92.3% of Telekom Slovenije Group employees are on permanent contracts (men account for 68% of those employees), while that proportion is 98.1% at Telekom Slovenije (men account for 65% of those employees). A total of 92.2% of employees at Slovenian Group companies are on permanent contracts (men account for 81% of those employees), while that proportion is 67.3% at IPKO (men account for 58% of those employees). The main reason Slovenian companies employ workers for a fixed period of time is to cover temporary increases in the work load. There are more employees on fixed contracts in Kosovo, which is an indication of local legislation and the company’s employment policy. Full-time employees account for the largest proportion (98.1%) of employees at the Group level, while part-time workers account for 1.9%. 68 Men accounted for 67.4% of all Telekom Slovenije Group employees in 2021, while women accounted for 32.6%. Men are prevalent at companies in Slovenia, while the gender ratio in favour of men is slightly lower at IPKO (56.6%). 69 This ratio differs from company to company depending on their activity. Educational structure of employees At 35.3%, persons with a level VII education account for the highest proportion of employees at the Telekom Slovenije Group level, followed by persons with a level V education (29.5%) and those with a level VI education (21.4%). The Group has 165 employees with a master’s degree or doctorate (5% of employees). Employment and training of disabled persons 70 The Telekom Slovenije Group strives to facilitate the continuation of the regular employment of persons with work limitations due to disability. The Group has 97 employees of various disability levels (2.9% of all employees). Of those persons, 48.5% are full-time workers. In that respect, Telekom Slovenije and GVO regularly exceed the legally prescribed quota of disabled employees. The quota for the information and communications sector is 2%, while the quota for the construction sector is 3%. These companies were therefore entitled to compensation in the amount of 20% of the minimum monthly wage for each disabled employee over the prescribed quota. Companies abroad do not have such a compensation system in place. Functioning within the Telekom Slovenije Group is TSinpo, a service and disabled workers’ company that facilitates the employment and training of disabled persons, and the adaptation of jobs to their needs. The company employs disabled persons from within the Group and from the labour market. The company, which has 45 employees, addressed the temporary increase in the workload in 2021 by employing disabled persons from the labour market for a fixed period of time. In cooperation with external authorised organisations and with the help of its own mentoring team, TSinpo trains 67 GRI GS 102-8 68 GRI GS 102-8 69 GRI GS 405-1 70 GRI GS 405-1, SDG 1 92% 8% Permanent employment Temporary employment 67% 33% Men Women Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 139 employees with work limitations for adapted work. In this way, it increases the employment of disabled persons in the wider social community and opens opportunities to advance their careers. Training and HR development 71 We dedicate a great deal of attention to strengthening employee competences and the acquisition of new knowledge, which we share in our everyday work, as only in this way can we develop the most advanced services and new business opportunities. Through continuous planned education and training, and the management and transfer of knowledge, we ensure the growth and development of the Company and its employees. The training and education programme is updated every year with new and current content. Employee education and training at Telekom Slovenije are defined by annual plans in accordance with the Education and Training Rules. Employee development and training plans are drafted every year in the context of annual development interviews, and are based on the Education and Training Programme. In the planning process, we define the purpose and objectives of education and training, which derive from the organisation’s overall objectives. Objectives are clear and measurable, which is important for monitoring the effectiveness of education and training. We also assess the effects of education and training by measuring the satisfaction of participants. We receive an assessment of the implementation of education or training and feedback regarding its usefulness through an electronic questionnaire. We use internal coaching, workplace mentoring and focus groups to measure acquired knowledge and skills. We continued with the implementation of projects and planned education and training in 2021. A number of locally organised and international training events were cancelled or shifted to the virtual environment. We continued with best practices from the previous year when organising employee education and training, and organised a number of workshops that could not be held live virtually in the form of webinars. Employees expressed a great deal of interest in technical content and soft skills, stress management workshops, workplace endurance, safety and health in work from home, etc. Practice has indicated that online forms of training are appropriate for shorter courses, while live workshops are preferred for longer training, more interactive training and teamwork. Key figures regarding employee training 72 Telekom Slovenije Group Telekom Slovenije 2021 2020 2019 Index 21/20 2021 2020 2019 Index 21/20 Number of participants in training 2,985 3,085 3,150 97 2,163 2,170 2,205 100 Number of training hours 99,660 63,069 91,368 158 67,884 54,635 75,131 124 Proportion of employees included in training 90.9% 90.9% 92% 100 100% 100% 100% 100 Number of training hours per employee 30.3 18,6 26.6 163 32,0 25.2 34.4 127 * The proportion of employees included in education and training also includes persons who attended training in 2021 but were no longer employed by the Telekom Slovenije Group as at 31 December. With the adaptation to current conditions and the introduction of new forms of education and training, the number of education and training hours was up by 58% and 24% at the Telekom Slovenije Group and Telekom Slovenije, respectively, in 2021 relative to 2020. At Telekom Slovenije, 57% of education and training was organised remotely, 31% took the form of traditional workshops and 12% was in the form of e-courses in the scope of the internal Znam! learning portal. Internal lecturers conducted 42% of education and training hours or 66% of all courses. Men accounted for 65% and women for 35% of Telekom Slovenije employees included in education and training, which corresponds to the ratio of employees by gender. 71 GRI GS 103-1, 103-2, 103-3 72 GRI GS 404-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 140 Of the total of 99,660 education and training hours, 62.8% or 62,588 hours were organised for technicians and sales staff. Number of education and training hours by employee category 73 Employment category Telekom Slovenije Group Telekom Slovenije 2021 2020 2019 Index 21/20 2021 2020 2019 Index 21/20 Technology and sales 62,588 42,096 58,071 149 45,484 36,064 47,873 126 Administration 9,914 6,843 11,668 145 8,831 6,396 10,810 138 Team leaders 8,376 6,922 10,771 121 7,333 6,321 9,606 138 Middle management 9,201 4,545 8,469 202 4,416 3,817 5,836 116 Others 9,582 2,664 2,390 360 1,820 2,037 1,006 116 Total 99,660 63,069 91,368 158 67,884 54,635 75,131 124 Structure of training by area The majority or 28% of education and training within the Telekom Slovenije Group was in the area of products and services, followed by content from the area of occupational health and safety. In the scope of the Živijo, stres! (Hello, Stress!) project, Telekom Slovenije educated employees and raised their awareness about stress management and the prevention of burnout. Because we performed work remotely for part of the year where the nature of work so allowed, we informed employees about occupational safety and health at home, a healthy lifestyle, etc. We also dedicated a great deal of attention to education and training in the areas of information security and personal data protection, and the professional training of managers. Structure of training by area within the Telekom Slovenije Group in 2021 We published 271 e-courses on the Znam! e-training portal, meaning 30% of all training at Telekom Slovenije. The portal, with the latest knowledge, is accessible by all employees of Telekom Slovenije, TSmedia, Avtenta and TSinpo, and by our authorised agents. 73 GRI GS 404-1 Product knowledge: 28% Occupational health and safety: 24% Sales: 12% Other knowledge/skills: 9% Information and communication technology: 8% Business communication and business skills: 7% IT and computer science: 4% Management: 4% Legislation: 2% Economy: 1% Foreign languages: 1% Energy and machinery: 0% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 141 S.M.A.R.T. – an advanced development-training programme 74 S – self-responsible and simple M – motivated and wise A – engaged and authentic R – serious and committed T – team player and precise Through the S.M.A.R.T. training and development programme, we ensure the excellence of the user experience at all major touchpoints with the users of services. Through that programme, we are building four key elements in contact with users: a uniform approach, the raising of values, the development of competences and team work. We enhanced activities at existing touchpoints in 2021: sales channels (e.g. call centres, Telekom centres and field teams), customer technical support and field technicians. Advisors, technicians and sales staff participated in numerous training events and workshops to improve the desired behaviours. Through a consistent and systematic approach, we empower employees to achieve a superior user experience. Investments in employee knowledge Activities that we carry out for employees include the financing of on-the-job studies and paid leave to prepare for study requirements. At the end of 2021, a total of 42 employees had contracts with the Telekom Slovenije Group to obtain a higher level of education, 38 employees at Telekom Slovenije, three employees at GVO and one employee at Avtenta. Knowledge Transfer Competence Centre 75 The aim of the Knowledge Transfer Competence Centre is to promote the internal transfer of knowledge. That centre has four pillars. In the scope of each, we develop tailored development and training programmes that help knowledge ambassadors develop the necessary skills, themselves, mutual links and the exchange of knowledge. During the year, the competence centre trained 190 knowledge ambassadors in the areas of presentation skills, the preparation of e-courses, and mentoring and coaching skills. Mentorship 76 Systematic development and the preservation and upgrading of key knowledge is ensured through a single mentoring system. To that end, we keep records of technical and key knowledge and the persons who possess it. The latter transfer that knowledge to employees in the mentoring process – successors, new employees, employees who change work areas or who return to work after a prolonged absence, and high school and college students completing their internship, working via student services or on scholarship. We trained 29 mentors in 2021, while 50 employees were included in the mentoring process. Key and perspective employees 77 Included in Telekom Slovenije’s system of key and perspective employees are individuals who contribute an above-average share to the achievement of the Company’s objectives, who have highly developed competences or who demonstrate potential and the motivation for further development. We break them down into the following categories: x key personnel – creators who with their creativity and commitment achieve better results, and who have high development potential to take on more demanding work and to advance to higher professional and management positions; 74 GRI GS 404-2 75 GRI GS 404-2 76 GRI GS 404-2 77 GRI GS 404-2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 142 x key personnel – experts are the bearers of knowledge that is crucial and specific to the Company, and that has been gained through rich experiences and is difficult to find on the labour market; and x perspective employees are young employees who are still developing as managers or professionals. This involves a continuous process in which we identify key and perspective employees. Through planned training, we develop their potentials, prepare successors, give them priority in the recruitment process for more demanding positions, and strive to keep them employed at the Company. We carried out a new cycle of identifying key and perspective personnel in 2021 for the next two years, and carried out the following activities: • directors held calibration workshops to harmonise lists of proposed candidates; • we conducted structured development interviews with candidates; • an additional assessment was carried out in the development-assessment centre for individuals who demonstrate management potential; • following expert verification, 150 key and 65 perspective employees were confirmed, representing close to 10% of all employees; and • we drew up individual development plans to obtain the necessary expertise and desired competences. Cycle of identifying key and perspective employees Recruiting new employees, professional training of secondary school and university students, and the awarding of scholarships Our aim is to recruit the best secondary school and university students, primarily in strategically important areas, such as multimedia, cloud services, user interfaces, etc. Telekom Slovenije therefore facilitates the practical training of secondary school students and the practical education of university students from technical professions. The best candidates who could be potential employees are identified and entered into a database of employment candidates. Telekom Slovenije provided practical training opportunities to 46 secondary school and university students in 2021. For the fourth year in a row, Telekom Slovenije has also awarded company Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 143 scholarships. We awarded an additional five company scholarships for the 2021/2022 academic year. We employed four scholarship holders in 2021, bringing the total to 24 active scholarship holders. Management of older employees 78 Telekom Slovenije implements measures to strengthen the competences of older employees and to promote intergenerational cooperation. Those measures are linked to values and strategic pillars of the Company. The measures are an important element of the HR management strategy for the period 2021 to 2025, and represent our response to current and future demographic challenges, as the average age of Telekom Slovenije employees is 45.9 years. To that end, we also continuously carry out activities that cover several areas, as follows: the protection of health, ergonomics and the workplace, working hours and the nature of work, career and personal development, training to improve competences and intergenerational cooperation, and awareness. In addition to mentoring and the transfer of knowledge, we also dedicated a great deal of attention in 2021 to awareness about the importance of ensuring our own health, formulating a healthy lifestyle, intergenerational cooperation and the acceptance of diversity. Through internal communication and the organisation of webinars for employees, we shed light on certain aspects of ageing as a natural process. We organised workshops for managers on the importance of accepting diversity and intergenerational cooperation. All retiring Telekom Slovenije Group employees are entitled to severance pay in accordance with valid legislation and the provisions of the collective agreement, where it applies. IPKO pays its employees’ compulsory contributions for pension insurance in accordance with local laws. 79 Research regarding the lifestyle of employees We carried out research amongst employees in 2021 regarding lifestyle to determine how they perceive the activities that we implement in connection with concern for health in the workplace, and how aware they are of the importance of caring for their own mental and physical health. A total of 1,617 employees took part in the research, translating to a participation rate of 74.9%. The results were encouraging, as employees gave a high score to work at the Company during the pandemic and remote work. Awareness is high amongst employees regarding the importance of caring for their own health. They are also aware of the Company’s numerous activities aimed at ensuring health, while they also pointed out certain burdens of the work environment, particularly with regard to workload, burnout and stress. Stress management and the prevention of employee burnout 80 Activities relating to stress management and the prevention of employee burnout are carried out in the scope of the Živijo, stres! (Hello, Stress!) project, through the organisation of webinars with various experts from the fields of psychology, psychiatry, neurology, kinesiology, occupational medicine, nutrition, etc. We also continued to raise employee awareness in the scope of periodic educational workshops and through the promotion of active work breaks, and exercise and sporting activities. Employees may talk with a psychologist via the special Modri telefon (Wise Telephone). Useful information and advice regarding a healthy lifestyle are also available to all employees on a special intranet portal. Motivation of employees Where the nature of their work allowed, we facilitated remote work by employees again in 2021. We therefore dedicated special attention to activities to stay #connected. Through continuous and transparent communication, we created a workplace in which employees are satisfied, motivated and committed, even in extraordinary circumstances. The Telekom Slovenije Group has in place a precisely structured bonus system in the form of monetary and non-monetary bonuses that are awarded in accordance with the collective agreement and other internal acts. The most frequent form of employee remuneration remains material remuneration. 78 GRI GS 404-2 79 GRI GS 201-3 80 GRI GS 403-6 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 144 Collective remuneration is based on pre-defined and expected results. A year-end bonus (13th salary) is paid based on business results, while a Christmas bonus is paid in the amount of 70% of the average wage in the Republic of Slovenia. Certain Group companies pay a lower Christmas bonus depending on operating results, while employees also receive stimulation for performance, and non- monetary and monetary bonuses for outstanding achievements. Individual remuneration depends on an assessment of the achievement of personal objectives (stimulation), and may be paid to employees twice a year. Non-monetary forms of employee remuneration also derive from our activities (VALÚ credit notes, gift certificates for Soline, getaways at Hotel Tisa, etc.). We also offer employees other benefits, such as additional medical examinations, payments to the second pension pillar, preventive treatments and flexible working hours, etc. Full-time and temporary employees enjoy the same benefits, except the payment of voluntary pension insurance premiums, which new employees are entitled to after one year of employment. The premium for employees who have been employed by their respective company for at least one year is paid by Telekom Slovenije (96% of employees), GVO (92% of employees), TSmedia (96% of employees), Avtenta (91% of employees) and TSinpo (95% of employees). 81 A Telekom Slovenije Group employee’s base salary is not based on gender, location or activity, but is defined in their employment contract taking into account their position. The wage of employees at companies in Slovenia is at least as high as the legally prescribed minimum wage in Slovenia, while the lowest wage at the majority of companies is higher than the minimum wage. Employees at IPKO also have a higher wage than the minimum prescribed wage in Kosovo (index of 252). 82 Cooperation with research institutions The Telekom Slovenije Group has well-established cooperation with universities, faculties and secondary schools, where it participates in regular lectures (as guest lecturers) and themed events with faculties. We regularly organise meetings for students in Telekom Slovenije’s premises, where we present work content, best practices and the technologies with which we work. We also work with secondary school and university students via compulsory internships and scholarships, and provide them assistance in the form of mentorship in the drafting of their theses. Through a partnership, Telekom Slovenije supports the multimedia study programme at the University of Ljubljana’s Faculty of Electrical Engineering and Faculty of Computer and Information Science. In the area of employee education and e-training, we work with the Telecommunications Laboratory at the University of Ljubljana’s Faculty of Electrical Engineering (LTFE), and enjoy good cooperation with the School of Economics and Business and the Faculty of Computer and Information Science at the same university, and with the School Centre for Postal Services, Economics and Telecommunications. We work with the University Medical Centre in Ljubljana and the Ljubljana Community Health Centre in the continued development of telemedicine services. TSmedia cooperates with the Mediana and IPSOS market research agencies. IPKO facilitates internships for students from RIT Kosovo (formerly American University), the University of Pristina and the University of Dardania. Organisational vitality We measure organisational vitality, which includes the organisational climate, and employee satisfaction and commitment, every two years. Measurements were carried out at three Group companies in 2021: Telekom Slovenije, Avtenta and IPKO. In addition to typical questions, research also included questions in connection with commitment and proactivity, burnout, criticality, team work and so-called ambassadorship. At Telekom Slovenije, the results of the research, in which more than 88% of employees participated, indicated the following: - employee commitment is high (84.9% of employees are highly or moderately committed); - employees are aware of the strategic policies and objectives of their organisational units; - employees demonstrate a high level of personal satisfaction; - that relationships with direct supervisors, leadership and the feedback employees receive are good; 81 GRI GS 401-2 82 GRI GS 202-1, 405-2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 145 - there is a system of incentive-based remuneration in place; - we have a good education and training system in place, and there are opportunities for personal development; and - employees are proud to work at Telekom Slovenije. Certain challenges were highlighted and will serve as the basis for the drafting of action plans for the future. The ORVI, which includes responsiveness, the work environment, systems, operational management, personal views and commitment, rose at Telekom Slovenije and IPKO, and was down slightly at Avtenta. At 3.78, the aforementioned index improved by 0.03 points relative to 2019. At IPKO that index stood at 3.71, which is 0.02 higher than two years ago. The ORVI was 3.61 at Avtenta and was down by 0.02 points relative to the previous measurement. The directors of organisational units and team leaders presented the results of the research to their employees. They discussed those results and prepared action plans in areas where the results deviated from the average. Employees were also notified of the research results at individual companies via the intranet. Organisational culture Telekom Slovenije is shifting the organisational culture towards a constructive style of employee behaviours and attitudes. A constructive style positively promotes superior quality, development, mutual cooperation and business excellence. Activities are being carried out with an emphasis on cooperation between organisational units and employees, and on the promotion of innovation and creativity. Appraisal-development interviews 83 Telekom Slovenije conducts appraisal interviews twice a year with all employees covered by the collective agreement and with employees under individual contracts who are not first and second level directors. Interviews with the latter are conducted once a year. Appraisal-development interviews are conducted once a year at the majority of subsidiaries. The overall assessment of work performance comprises an assessment of the achievement of objectives and an assessment of competences. A training programme for the upcoming year is drawn up for every employee at the beginning of the year in the scope of appraisal interviews. Annual appraisal-development interviews were conducted with all employees at the majority of companies in Slovenia, and with 90% of employees at GVO and 96% of employees at IPKO. Managing innovation We use the Brihta digital collection box for the collection of ideas and innovative proposals of employees. In place is an established procedure and comprehensive overview of proposals, from submission to potential implementation or feedback. Employees receive practical awards for useful ideas. Ideas that become innovations with higher added value may also be rewarded financially. In 2021, we used the Brihta 3.0 project to link the Company’s strategy, values and a range of interdependent activities that bring a change in the way employees think to make innovation a part of our regular processes. We created the image of ‘Brihta- nauts’, who became our companions on the road to creativity and innovation. The motto of the Brihta- nauts is that every idea counts, which is also reflected in thinking of employees and the number of submitted ideas. In addition, an in-house team of animators runs TIMO, an attractive inter-team programme that focuses on innovation, workshops for managers and brainstorming workshops (workshops where ideas are generated based on the so-called brainwriting method). In 2021, we also organised an all- day BrihtaLive creativity event, where employees searched for new solutions to simplify the lives of users. 83 GRI GS 404-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 146 To facilitate the development of ideas, we developed the BrihtaKit internal tool for addressing challenges, and for seeking out and developing (the right) solutions. That tool is based on the so- called design thinking method. The employees of Avtenta, TSmedia and GVO also have the opportunity to submit proposals for improvements, ideas and innovations in individual areas. IPKO holds a competition to collect proposals, with rewards given for the best. Cooperation with employee representatives 84 In accordance with the Workers’ Participation in Management Act, we cooperate constructively with the works councils of Telekom Slovenije, GVO and TSmedia, and maintain constant social dialogue with trade union representatives (notification, joint consultation, issuing of consent, etc.). Telekom Slovenije’s Works Council met at twelve regular sessions in 2021. Five sessions were held live, while seven were organised via MS Teams. The majority of initiatives and questions put forth by employees and their representatives related to the COVID-19 pandemic, operations, the HR Policy and activities in connection with care for employees. The members of the Management Board and director of HR Management and General Affairs reported to the members of the Works Council accordingly on a regular basis. There are also three employee representatives on Telekom Slovenije’s Supervisory Board, who regularly inform employees and their representatives about activities in accordance with valid legislation. Responsibility for employees and their activities outside the workplace We organise leisure-time activities for employees, with special attention given to the children of employees and to retirees. We organise events with employees, give gifts to employees’ first-graders, employees celebrating work anniversaries and new-borns, organise holiday day care services for employees’ children, and support Telekom Slovenije’s pensioners clubs. Functioning under the auspices of Telekom Slovenije is the TSsport sports club, which facilitates the participation of employees in recreational activities and national Telekom Slovenije Group championships in various sports. The club’s members are all employees, who can sign up for regular notification about activities. The club provides employees affordable offers for different branches of sports and the purchase of equipment. We organised championships in tennis, running, shooting and golf in 2021. We organise recreational activities at locations throughout Slovenia. Those activities were curtailed due to epidemiological measures. We encouraged employees to exercise during working hours by providing video content and via the #vadidoma platform, which we developed in the scope of the NEO platform. Occupational health and safety 85 The year was difficult in the area of occupational safety and health due to the continuation of the COVID-19 pandemic. The Telekom Slovenije Group implemented measures to prevent the spread of infections, taking into account the instructions of professional institutions. We informed employees about preventive activities at home and in the workplace, and established protocols and instructions on what employees should do in the event of infection. Telekom Slovenije audited its declaration of safety with risk assessments accordingly. Where the nature of their work allowed, we facilitated remote work by employees again in 2021 to reduce the possibility of the spread of infections. We regularly provide employees all necessary protective equipment: protective masks, hand disinfectant, disinfectant wipes, disinfectant spray to disinfect work surfaces, protective gloves, etc. If employees become infected or are in contact with high-risk persons, we continuously provide professional responses to questions and protocols, and establish the necessary communication with all stakeholders. We organised COVID-19 testing for employees at professional institutions, and reimbursed employees for the costs of testing for work purposes and provided HAG tests for self-testing in accordance with government ordinances. We also organised vaccination against COVID-19 for employees. 84 GRI GS 103-1, 103-2, 103-3, GS 102-43, 102-44, GS 402-1 85 GRI GS 103-1, 103-2, 103-3, IO3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 147 The management of Occupational health and safety within the Telekom Slovenije Group is in accordance with legal requirements that are defined for all employees and for each sector separately. We implemented all key measures relating to occupational health and safety, and fire protection in 2021. We took regular measurements of environmental conditions and lighting in the work environment for all locations where deemed necessary. The identification of dangers associated with safe work was carried out via regular occupational safety training, regular on-site inspections and various project groups. All training, both theoretical and practical, in the area of occupational health and safety was in line with the requirements of the law. Training was organised in the form of lectures, and took place primarily via e-training in 2021. We organised training in the following areas: workplace injuries, fire safety, work at height and training for those persons responsible for carrying out evacuations. We regularly provided personal protective equipment and supervised its use. Major locations and Telekom Slovenije centres are equipped with semi-automatic defibrillators to provide aid in the event of cardiac arrest. 86 Telekom Slovenije notifies employees about additional preventive medical examinations, vaccinations against various diseases and current health content via the Modro jabolko (Wise Apple) portal. We promote a healthy lifestyle by publishing various articles and information about physical activity and a healthy diet. Via the portal, employees are also provided access to supplementary healthcare services (that are not part of regular occupational medicine examinations). At the beginning of every year, we publish a schedule of additional medical examinations that employees may sign up for. 87 The area of occupational health and safety is comprehensively governed at companies in Slovenia by the Occupational Health and Safety Act (ZVZD-1) and by declarations of safety with risk assessments. This area is governed at IPKO by local legislation and through a health, safety and quality control system that includes all employees. That company carried out measurements of microclimatic conditions, defined potential risks in the workplace, and adopted measures and recommendations in 2021. It also organised training for all employees. 88 Telekom Slovenije employees attending training are encouraged to participate in the development, implementation and evaluation of occupational health and safety. Responsibility is defined by the law and authorisations, while decisions are made by managers at various levels in cooperation with employees. We also encourage employees to report potential dangers whenever they arise. In this way, we prevent or mitigate potential negative effects on health and safety. GVO has an Occupational Safety Committee that is appointed by the Works Council. Every workplace injury is analysed and reported to the competent authorities (form ER-8). IPKO has a Health and Safety Team that comprises representatives of employees from various organisational units, and employs an expert in the aforementioned area. Together, those persons monitor the implementation of the health, safety and quality control programme, and issue recommendations for amendments to that programme. The members of the above-described team are available to employees at all times in the resolution of issues. Three IPKO employees are certified in the area of occupational health and safety. 89 Healthcare 90 Telekom Slovenije organises preventive medical examinations for all employees and for employees at other Slovenian Group companies in accordance with the law. To that end, medical doctors inspect work areas, working conditions and work processes at the Company as necessary. Based on those inspections and specific identified health indicators, they propose measures to improve the situation. Occupational medical services are accessible via preliminary, periodic or control examinations. We organised vaccinations against tick-borne meningoencephalitis for employees working in forests (or 86 GRI GS 403-5 87 GRI GS 403-6 88 GRI GS 403-1, 403-2, 403-8 89 GRI GS 403-4 90 GRI 403-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 148 where so stipulated by the risk assessment). We also organise flu vaccinations for employees in Slovenia. 91 IPKO organises preventive medical examinations for employees in accordance with labour legislation in Kosovo, as well as special training for employees who work in the field. Healthcare and workplace injuries in the Telekom Slovenije Group 92 Occupational health and safety 2021 2020 2019 Index 21/20 Number of injuries 38 34 44 112 Number of working days lost 1,177 1,345 1,536 88 Number of working hours lost 8,935 10,719 11,138 83 Number of medical examinations 1,093 835 998 131 - preliminary examinations 147 114 135 129 - periodic examinations 946 721 863 131 Number of deaths 0 0 0 0 The Telekom Slovenije Group has no employees at high risk to occupational diseases. Slips as the result of wet, muddy, steep and icy surfaces and stairs accounted for the most injuries (12). They were followed by cuts with working tools and collisions with objects. Fire safety We drafted new fire safety rules and revised evacuation and fire plans for buildings where major changes were made. Fire safety training is carried out in the scope of occupational safety training. Fire extinguishers and hydrant networks were inspected and serviced in all buildings, while several evacuation drills were conducted. We regularly maintained and serviced active fire safety systems at buildings throughout Slovenia, and began to implement separate fire sectors for the building located at Cigaletova 15. Telekom Slovenije Group companies did not record any fires in 2021. The Heart Foundation The aim of the Heart Foundation is to help the children of employees of Slovenian Telekom Slovenije Group companies who have lost a parent or who are seriously ill and require extended treatment. A total of 1,190 employees donated to the foundation monthly at the end of 2021. Employees can make monthly donations of EUR 2, EUR 4 or EUR 6 to the Heart Foundation, and can also donate via text messages, in the form of a one-time donation or periodic contribution. We used monthly donations to help 34 children in 2021. We also helped four seriously ill children through one-time donations. Family-Friendly Company certificate 93 We extended the full Family-Friendly Company certificate, which is reflection of our awareness of the Company’s social responsibility and organisational culture. The Family-Friendly Company certificate is an investment that brings positive results to the Company and its employees. Through adopted measures, we ensure the short- and long-term effects of successful HR management, a friendly work environment and a competitive advantage in recruitment. Parental leave 94 The successful balancing of family life and professional life is the foundation of employee satisfaction. Employees are afforded the opportunity to take parental leave. Employees with the right to parental leave exercise that right in full. The use of parental leave is one of the indicators that are included in 91 GRI IO3 92 GRI GS 403-9 93 SDG 8 94 GRI GS 401-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 149 measures relating to the Family-Friendly Company certificate. Fathers also take child care leave in the early child development stage in the form of paternity leave. The majority of employees return to their jobs following the end of parental leave, as adopted measures provide them opportunities that make it easier to find the right work-life balance. Telekom Slovenije Group Telekom Slovenije 2021 2020 2019 2021 2020 2019 Number of employees on parental leave 91 101 132 26 22 45 of which: women 72 82 102 25 22 43 men 19 19 30 1 0 2 Employees who returned to work following parental leave: 76 84 109 25 22 45 proportion in % 83 83 83 96 100 100 - of which: women 56 65 80 24 22 43 proportion in % 78 79 78 96 100 100 men 19 19 29 1 0 2 proportion in % 100 100 97 100 0 100 Socially responsible employer We received the Socially Responsible Employer Certificate in 2021. That certificate covers the following four areas: x organisational governance (social responsibility, sustainable development, efficient energy consumption and the environment); x occupational safety and health (the promotion of the health and safety of employees and projects in the area of occupational safety and health); x intergenerational cooperation (HR strategy, management of older staff, education and training, etc.); and x the balancing of work and family life (measures in the scope of the Family-Friendly Company Certificate, updated with additional/basic measures). The certificate represents our commitment to strive for further improvements and refine our activities in these areas in the future. It also represents a strategic tool and thus the opportunity to address challenges relating to socially responsible behaviour in one place. We include various stakeholders in our activities. We thus enhance our reputation, build the brand and consolidate our competitive advantage on the market. Most respected employer We were recognised again last year as the most respected employer in the telecommunications sector in research organised by MojeDelo.com, and ranked amongst the 10 most respected employers in Slovenia. This is recognition for all Telekom Slovenije employees who are helping create the digital future of Slovenia. The last year brought many changes for all of us. Those changes were an opportunity for us to prove once again that we are fast, agile, effective, creative and focused on supporting the society in which we operate. We demonstrate that we are #connected. In our work environment, we are afforded the opportunity for career and personal development, and together we are creating a culture that is based on mutual cooperation. All of this is also reflected outwards. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 150 Communication with employees The Telekom Slovenije Group communicates proactively with employees throughout the year via various communication channels. The main tool for communicating with employees at Telekom Slovenije is the intranet news portal, where all of the latest information regarding events at the Company is accessible by employees. That portal is accessible by all employees and also facilitates the secure transfer of internal documents, such as manuals, rules, instructions, forms, etc. We also communicate with employees via other channels, such as electronic screens and emails, and through various events, such as virtual meetings with the Management Board and co-workers, workshops with internal and external experts, work meetings and other special events. Every Telekom Slovenije Group company has its own channels for communicating with employees. Since the declaration of the COVID-19 pandemic in 2020, we have dedicated even more attention to communication with employees, with those activities continuing in 2021. Our main objective is to provide information to employees regarding the changing conditions as the result of measures to prevent the spread of infections continuously, clearly and transparently, and thus remain #connected. The Business Recovery Team communicated regularly with employees in this regard, and monitored the situation at the national level and at the Company and adopted the appropriate measures throughout the year. We strengthened trust, reduced uncertainty, improved employees’ sense of affiliation and built connectivity again in 2021 through the appropriate communication. This was also seen in research regarding lifestyles that we conducted amongst employees in June. The majority of employees stated that the Company has adopted the appropriate measures and ensured the health of employees during the pandemic. The high level of employee engagement is also reflected in research regarding organisational vitality. 2.9.6 Quality management systems Through effective quality management, we manage the entire lifecycle of our services, from design and development, the securing of resources, logistics and maintaining the quality of services to the conclusion of the lifecycle. We monitor the lifecycle comprehensively through: x measurements of key performance indicators; x measurements of user and stakeholder satisfaction; x initiatives for improving satisfaction (e.g. CEX – excellence of the customer experience) 95 ; and x the introduction of tools for quality management. In 2021, Telekom Slovenije added to its range of certified quality management systems an information security management system for ICT cloud services, according to the requirements of the ISO/IEC 27018 standard. The business continuity management system passed all required tests again in 2021, when we successfully transitioned to the requirements of the newly issued ISO 22301 standard. We also passed the first verification of the Socially Responsible Employer Certificate. The Group also successfully maintained and certified all previously introduced systems. 95 For more details, see section 1.8.4 Strategic Projects. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 151 Review of compliance certificates for management systems based on ISO, IEC, EN and SIST standards Company – confirmation of conformance Validity Telekom Slovenije SIST EN ISO 22301 Valid until: 11 April 2022 Services and processes of Telekom Slovenije SIST EN ISO/IEC 27001 Valid until: 28 April 2023 Cyber Security Operation Centre, financial services, commercial ICT services, network and service control, and technical support for business solutions SIST EN ISO/IEC 27018 Valid until: 28 April 2023 Public cloud, ICT cloud services SIST EN ISO 50001 Valid until: 31 January 2023 Energy services of Telekom Slovenije for internal needs SIST EN 50518 Valid until: 27 October 2022 Telekom Slovenije’s Security and Control Centre SIST EN ISO 14001 Valid until: 31 January 2023 Environmental management system in real estate management GVO SIST EN ISO 9001 Valid until: 31 December 2023 Design, construction and maintenance of telecommunications and electricity networks. SIST EN ISO 14001 Valid until: 31 December 2023 Design, construction and maintenance of telecommunications and electricity networks. Avtenta SIST EN ISO 9001 Valid until: 30 June 2022 Development and integration of business solutions, service delivery and consulting, system integration, project management and sales. IPKO SIST EN ISO 9001 Valid until: 24 December 2023 Digital cable TV, internet services, and fixed and mobile telephony. SIST EN IEC/ISO 27001 Valid until: 24 December 2023 Digital cable TV, internet services, and fixed and mobile telephony. We successfully passed other assessments to maintain the certificates of manufacturers, such as MS Partner, Cisco, Oracle and HP (for more details, see section 2.7.3 Sales and marketing activities), and for other systems that are based on other recommendations (internal rules, Family-Friendly Company requirements, the ECS-PPT/DARSGo management system, etc.). We verified the performance and functioning of systems through measurements of objective progress indicators, and promoted the increased integration of management systems into the everyday sustainable operations and management of companies. In accordance with the Company’s plans and the Recommendations and Expectations of Slovenian Sovereign Holding, we carried out a self- assessment of the excellence of the parent company’s operations according to the global EFQM 2020 method. Through the application of the GRI GS in the annual report, we fulfil the requirements of the non-financial reporting directive and the Companies Act (ZGD-1). Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 152 Quality management systems at Telekom Slovenije – situation as at 31 December 2021 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 153 2.9.7 Environmental impact 96 The key strategic policies of the Telekom Slovenije Group include sustainable operations, which we understand as the responsible management of the economic-governance, social and environmental impacts of our operations. We consistently comply with environmental legislation when purchasing products and services, and when developing the most advanced ICT services and solutions. We systematically reduce environmental impacts with the help of certified quality management systems, anddeclarations of energy efficiency and the Company’s environmental statement. We are included in professional initiatives aimed at development and the communication of scientific positions regarding the impacts of our sector on the environment and world we live in. With respect to concern for the environment, we encourage the participation of all stakeholders: employees, suppliers, contractors, business partners and local communities. We receive their initiatives and questions, and respond to them constructively. The Telekom Slovenije Group operates in the telecommunications sector. The greatest environmental impact for us is therefore in the area of energy. The subsidiary Soline, which manages the Sečovlje Salina Nature Park, has a significant impact on wetlands and coastal biodiversity. Its activities and impacts are therefore reported on in more detail at the end of this section. We measure our progress using measurable indicators. Key policies in this regard are: x regular monitoring of the use of resources, in particular energy consumption and associated costs; x strategic and operational energy objectives that are in line with our operations and development; x monitoring and compliance with the requirements of Slovenian and European law; and x methodical prevention and reduction of the impacts of the Group’s activities on the environment and the world we live in. Energy report 97 We improve energy efficiency primarily through the achievement of strategic and operational objectives that are in line with business needs and the expectations of our stakeholders. We include employees, suppliers, external contractors and business partners in those objectives. Awareness amongst employees about the importance of this area is spread through training and communication at all levels of the Company’s operations. We encourage our users to take a responsible approach to energy and the environment. Through e- services, they are able to reduce their carbon footprint. We also take into account energy efficiency over the entire lifecycle in the procurement process and in the development of services. We report to regulatory and other government authorities (in Slovenia: MI, ARSO, SURS, FURS and AKOS) in accordance with the law . The total energy costs of the Telekom Slovenije Group amounted to EUR 11.6 million in 2021, an increase of 2% relative to the previous year, primarily due to rising energy prices. Electricity and heating costs account for the majority or EUR 8.2 million of that amount. Telekom Slovenije implemented an energy management system (EMS) back in 2009, and uses that system to successfully reduce total energy consumption. Our energy management system is subject to independent external assessments (according to ISO 50001), and we fulfil the conditions to perform energy audits with our own experts. With more than 170 completed energy audits, we are among the leaders in Slovenia and save around EUR 40 thousand a year. We performed internal energy audits again in 2021 for all buildings for which the validity of the previous audit expired. 96 GRI GS 103-1, 103-2, 103-3, SDG 12.2 97 GRI GS 302-1, 302-4, SDG 7, SASB: TC-TL-130a.1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 154 The figures below illustrate electricity consumption and costs at Telekom Slovenije by year compared with changes in gross energy costs. Costs and consumption of energy sources at Telekom Slovenije Telekom Slovenije 2021 2020 2019 Index 21/20 Electricity costs (in EUR thousand) 7,462 7,728 7,660 97 Consumption of electricity (in GWh) 72.6 73.5 73.8 99 Cost of fuel for vehicle fleet (in EUR thousand) 898 755.4 953.7 119 Cost of fuel for heating (in EUR thousand) 761 633.5 616.1 120 Sources: SAP; except for electricity consumption – energy management system. Electricity Electricity is the prevalent energy source in terms of quantity and costs. Electricity consumption was reduced by 1.16% in 2021 relative to 2020, while electricity costs were down by 3.45%. Energy consumption was up primarily at base stations due to the upgrading of capacities to the latest mobile generations, growth in mobile traffic and the increased use of the devices of other users in our premises. Other users of our real estate account for a fifth of electricity consumption. Production by Telekom Slovenije’s own solar power plants accounted for close to a quarter of a percent of total electricity consumption (around 200 thousand kWh). Telekom Slovenije’s energy management system facilitates effective control over energy consumption, and includes 2,400 metering points, 85 locations with heating devices and more than 12 thousand data entities. We continuously upgrade and supplement the system through the development of the network. IPKO in Kosovo also reduced energy consumption through numerous projects and has generated total energy savings of 534,200 kWh. It has achieved this through the upgrading of algorithms and improving the monitoring of the functioning of generators, through the sharing of base stations and generators with Vala (21 base stations) and by producing its own electricity with a solar power plant on the roof of its warehouse (119 thousand kWh a year). Achievement of energy objectives Our overall energy objective is to reduce total electricity consumption as the largest energy source. That objective is integrated into the personal goals of entire responsible organisational unit, while the energy management system itself is likewise integrated into regular work processes. We also take other environmental objectives into account in our operations (e.g. to improve the energy efficiency of the vehicle fleet, reduce noise and emissions into the atmosphere by modernising technological devices, etc.). Objectives in connection with efficient energy consumption, both strategic and annual, were achieved in 2021. By optimising equipment and premises at functional locations, we succeeded in exceeding the majority of established objectives for reducing energy consumption in the fixed segment of the network, while energy costs were slightly lower in 2021 than in 2020. Energy costs incurred for existing services will be higher in the coming years, despite efforts to reduce consumption. This is primarily due to higher energy prices, and in part due to the accelerated increase in radio network capacities. Telekom Slovenije intends to increase the number of own solar power plants and thus the quantity of energy generated by 2026. We replaced old air conditioning units in several buildings with technologically more advanced and more energy efficient units, and upgraded direct and alternating current systems in buildings in the fixed and mobile network with the aim of ensuring a continuous and back-up power supply. The transition to new generations of ICT equipment and the discontinued use of older generations represent an important element of energy savings. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 155 Electromagnetic radiation (EMR) 98 Telekom Slovenije carried out 323 EMR measurements in 2021 (267 in 2020) due to the expansion of the mobile network and the fifth generation network. A total of 190 measurements were carried out for 5G technology alone. Measurements were carried out by authorised institutions in Slovenia. The level of radiation at base stations upgraded with LTE/4G and NR5G technology has increased slightly, but remains environmentally acceptable and within the limits established by Slovenian law, which in some respects is even stricter than European law. IPKO has not carried out measurements of EMR during the last two years. We have responded transparently to users' concerns about the potential harm of 5G technology. Based on sales results, we believe that the general public opinion is in favour of the 5G network. We received a professional award from the Public Relations Society of Slovenia in 2021 for our successful communication campaign to mark the launch of the 5G network, and for our positive, open and progressive communication to present the opportunities that 5G technology and digitalisation bring to the economy, users and society as a whole. In 2021, we received one request from the competent inspector to provide all documentation regarding electromagnetic radiation for the Strunjan base station. We delivered the requested documentation by the prescribed deadline. The Inspectorate of the Republic of Slovenia for the Environment and Spatial Planning had no comments regarding that documentation. All reports regarding the measurement of EMR are submitted to the Slovenian Environment Agency (ARSO), where the latest data regarding environmental impacts are stored and accessible by all citizens. In cooperation with Forum EMS, the population is informed about radiation and other environmental impacts through brochures at Telekom Slovenije’s points of sale. In the scope of the e-card EMS project, Forum EMS developed a mobile application that allows the general public to access data regarding harmful impacts on the environment due to high-frequency EMR and the effect of exposure due to the use of mobile phones (http://www.inis.si/index.php?id=348&no_cache=1#.WIHhbVzNQvU). Vehicle fleet 99 By increasing the number of electric vehicles, we increase the need for charging stations. It is thus crucial that we establish a network of smart charging stations in Slovenia at private locations, and make the charging of an increased number of electric vehicles affordable for users. The charging of electric vehicles is cheapest if they are connected to charging stations for an extended period of time, while the regulation of production and the consumption of electricity is ensured during charging. Telekom Slovenije currently has eight charging stations, six of which were set up in Koper and Ljubljana in 2021. GVO has seven internal and three public charging stations, while there is also a charging station at the entrance to the Sečovlje Salina Nature Park. We are planning to set up five new charging stations in 2022, while the network will be upgraded in the future in accordance with needs. With its partner ELES, Telekom Slovenije developed the intelligent management of charging stations with advanced software that ensures the remote, multi-level management of charging power. Over the long term, that infrastructure will also be able to support the V2G (vehicle-to-grid) concept, where electric vehicles will function as electricity storage systems, with electricity released into the grid as required. The above-described solutions have been developed for an environmentally friendly future, as they support the introduction of electric vehicles and thus the reduction of CO 2 emissions. The solutions are also in line with the green goals of the European Union for the decarbonisation of society and support Slovenia’s efforts to achieve established environmental objectives. The Telekom Slovenije Group had a total of 1,148 vehicles in 2021, including 13 electric and 10 hybrid vehicles. Telekom Slovenije had 646 vehicles. We consumed a total of 791,053 litres of fuel, comparable with the level recorded in 2020, but 11% lower than prior to the COVID-19 pandemic. Employees in Ljubljana and Maribor are able to share electric vehicles. 98 GRI PA8, GRI GS 102-11, 103-2 99 GRI GS 302-1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 156 Number of vehicles by fuel type and consumption in litres in the Telekom Slovenije Group Telekom Slovenije Diesel, no. of vehicles Diesel, consumption in litres Petrol, no. of vehicles Petrol, consumption in litres Total no. of vehicles Total consumption in litres at Telekom Slovenije Total consumption in litres in the Telekom Slovenije Group 2021 368 529,220 278 261,833 646 791,053 1,441,841 2020 380 519,741 278 268,803 658 788,544 1,352,401 2019 387 556,543 296 326,801 683 883,344 1,431,377 Sources: SAP/BI In accordance with established programmes aimed at the achievement of environmental objectives, GVO purchased seven additional electric vehicles in 2021 to be used at the electric vehicle charging stations currently located at four locations (Ljubljana, Maribor, Celje and Nova Gorica). GVO thus continues to implement its established sustainable development strategy, which it will continue to pursue in the coming years. Carbon footprint 100 In accordance with the Strategic Business Plan, we assessed Telekom Slovenije’s carbon footprint in cooperation with an external consultancy firm. Used for the calculation is a standardised method in accordance with the international standard on the accounting and reporting of greenhouse gas emissions (GHG Protocol Corporate Accounting and Reporting Standard). We included under Scope 1 direct emissions from the consumption of fuels (e.g. heating and company vehicles) and fugitive emissions from electricity and air conditioning systems (HVAC). The estimated value of the aforementioned scope is 2,916 tonnes of CO2 equivalents. We included under Scope 2 indirect emissions from consumed electricity and heat. The estimated value of this scope is 38,138 tonnes of CO2 equivalents 101 , which represents 85% of all greenhouse gas emissions. Consumed electricity accounts for the majority 102 . Scope 3 represents the organisation’s indirect emissions, which are not obligatory under the GHG Protocol. This scope includes the consumption of drinking water and paper, waste management, business travel, the transportation of employees to and from work, and assets leased to others (lessees). The estimated value of the aforementioned scope is 3,688 tonnes of CO2 equivalents. 100 GRI GS 103-1, 103-2, GS 305-1, 305-2, 305-3 101 The emission factors (EFs) of suppliers (market) for the 2021 financial year are not yet known. The last known EFs from 2020 are therefore taken into account. The estimated value may change when the market emission factors for 2020 are published. 102 The calculation includes the electricity consumption of other operators in our premises and the associated equipment (locations and site sharing). Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 157 Overview of the carbon footprint by categories in tonnes of CO2-equates for Telekom Slovenije in 2021 Real estate management In real estate management, we strive for the optimisation and management of the costs of fees, energy, maintenance, insurance, amortisation and depreciation and investments. Technological premises are an important element of ensuring a stable and secure network. Because we have concluded easement or lease agreements for the majority of that real estate, special attention is given to ensuring legal aspects are in order. We also strive for the most appropriate and rational use possible. Our activity impacts people, the local community and the natural environment, but we strive to reduce those impacts through sustainable solutions, while ensuring a high-quality and healthy living environment. Waste management 103 The Telekom Slovenije Group forwarded a total of 5,341 tonnes of waste in 2021. Telekom Slovenije has a certified environment management system (in accordance with ISO 14001), through which we demonstrate our awareness of and responsibility to the environment, and our waste management efforts. The following types of waste are generated by Telekom Slovenije and its subsidiaries: construction waste from the construction of the fibre optic network, municipal and hazardous waste, and other separately collected fractions. 103 GRI GS 103-1, 103-2, 306-1, 306-2, 306-3 CO2 emission categories (t) S1-1: Stationary emissions 0,8% S1-2: Mobile emissions 4,5% S1-4: Fugitive emissions from HVAC and refrigeration systems 1,1% S2-1 and 2: Indirect emission from electricity consumption 79,9% S2-3 and 4: Indirect emission from heat consumption 5,3% S3-1: Purchased goods and services 0,0% S3-5: Waste management 0,5% S3-6: Business travel 0,0% S3-7: Transportation of employees to and from work 3,1% S3-8: Assets under lease 0,0% S3-13: Assets leased to others 4,6% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 158 Telekom Slovenije forwarded a total of 5,213 tonnes of waste in 2021, or around one half of the amount recorded the previous year. Hazardous waste accounted for 10 tonnes of the aforementioned total. The above-described reduction relative to the previous year was the result of a significant decline in construction waste, which amounted to 4,651 tonnes or 89.21% of total waste. The majority of forwarded waste is recycled or reused. Soil from construction waste is reused for agricultural purposes. All waste electrical and electronic equipment is dismantled, resulting in reusable plastic (18%) and metal (78%), while only 3% of the aforementioned waste is incinerated. Remaining waste is also forwarded for material recovery (around 87%), while only 13% is forwarded for energy recovery (incineration). When managing waste, we ensure that forwarded waste is recycled in an environmentally friendly way. Waste for energy recovery is only forwarded to facilities that hold the relevant environmental licences and that comply with the highest environmental standards in accordance with European legislation. We have placed special containers at Telekom centres for the collection of used batteries and ensure the environmentally friendly disposal thereof. Users can also dispose of waste packaging from purchased products and used electronic devices, such as mobile phones, at points of sale. To mark the 30th anniversary of mobile telephony in Slovenia, we invited citizens to bring their old mobile phones to points of sale. From there, we will ensure that they are recycled in an environmentally friendly manner. In this way, we collected 500 kg of used mobile phones from September to December 2021, while the collection campaign will continue into 2022. 104 We have adopted a plan for the management of waste electrical and electronic equipment that is based on the Decree on the Management of Waste Electrical and Electronic Equipment. Telekom Slovenije manages waste electrical and electronic equipment responsibly following the end of a device’s lifecycle. Based on the separate waste collection system, we have forwarded waste to an authorised collector for destruction since 2017. That collector awarded us the ‘Resources SAVED 2020’, certificate, which indicates the quantities of raw materials saved. By operating in this way, we contribute significantly to the achievement of the European Green Deal, which envisages the reduction of greenhouse gas emissions to zero and the establishment of the circular economy by 2050. We forward an average of close to 170 tonnes of waste electrical and electronic equipment a year, while last year we forwarded 190 tonnes. Employees may also hand over equipment at 15 locations throughout Slovenia in accordance with the specific instruction of a particular location at the Company. Quantities of separated waste at Telekom Slovenije in tonnes Type of waste (in tonnes) 2021 2020 2019 Index 21/20 Waste electrical equipment and electronic equipment, batteries and metal 343 302 208 114 Waste packaging 144 150 177 96 Other (mixed municipal waste) 75 100 134 75 Construction waste 4,651 8,347 7,815 55 TOTAL 5,213 8,900 8,333 89 Water management Water does not represent an important environment aspect at Telekom Slovenije, as it is not a major consumer of water and it does not need water to perform its core activity. We monitor data manually due to the scattering of locations owned by the Company throughout Slovenia (only a few of which are in water protection areas) and due to various ordinances on the provision of municipal services. Drinking water is monitored via received calculations, and we cannot currently disclose consumption in terms of quantity. The majority of the locations owned by the Company comprise properties where employees are not always present. Water consumption at those locations is thus low. Water (specifically seawater) is only of material importance to Soline, which manages Sečovlje Salina Nature Park (SSNP). Because tap water is potable, we encourage employees to drink tap water where ever the work process so allows. With respect to environmental protection and concern for the health of employees, 104 SASB: TC-TL-440a.1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 159 we discontinued the use of water coolers in 2021 and thus contributed to the reduction of plastic waste. Paperless operations 105 Through the gradual discontinuation of paper operations, we are helping to create a caring and environmentally friendly society. To that end, we implement numerous initiatives and activities to reduce the number of printed invoices. Through activities implemented in 2021, we succeeded in improving the ratio of electronic invoices to printed invoices relative to the previous year. A total of 48.7% of invoices were thus received in electronic form in 2021, an increase of 2 percentage points relative to 2020. The consumption of office paper was down by 26% compared with 2020, as the result of digitalisation and remote work. Consumption of office paper at Telekom Slovenije in euros 2021 2020 2019 Index 21/20 10,975 14,759 19,533 74 We use a qualified digital certificate for the signing of subscriber-related documents. Users are also able to sign documents using a digital tablet, meaning an increasing proportion of documents retain their original form and remain in electronic form for their entire life cycle. Our field technicians also sign documents electronically in their work. A large proportion of agreements and other documents are sent to users in electronic form after they are signed. We also digitalise incoming documents, so that more than 70% of those documents are already digitalised. Users who gave their consent for direct debit only receive their monthly invoice for services in electronic form. We also encourage users to receive electronic invoices for the purpose of electronic banking. The Company’s archive materials represent an important part of its documentary materials and are of permanent importance for its history, the broader environment, science, culture and legal protection. The management of Telekom Slovenije’s documentary materials is governed by internal acts that together make up internal rules in the aforementioned area. In August 2021, we received a new 5-year certificate in the form of a decision from the Archives of the Republic of Slovenia, which states that Telekom Slovenije’s internal rules are compliant with the law governing the protection of documentary and archive materials. TSmedia also uses e-invoices, as well as electronic forms for procurement and the reservation of company vehicles, while orders are sent to suppliers electronically. The telephone directory, which is accessible on DVD and on the itis.si website, is also issued electronically. 105 GRI TA2, SDG 12, 306-2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 160 Soline: diligent management of the Sečovlje Salina Nature Park Soline manages the state-protected Sečovlje Salina Nature Park (SSNP) under a concession agreement concluded with the Republic of Slovenia. In 2021, the park celebrated its 20th anniversary since the Slovenian government defined the area that makes up the Sečovlje Salina Nature Park. The SSNP was the first managed nature park on the Slovenian coast. Key administrative objectives for the park were set out in the plan for managing the SSNP adopted by the Slovenian government. The most important of those objectives include the preservation of the wetland characteristics of the saltpan ecosystem, its biodiversity and the economic and cultural values of the region. Soline submits an annual plan and a report on the management of the park to the Ministry of the Environment and Spatial Planning for approval. Every activity that exceeds the normal impacts on the environment must be approved by the department responsible for the protection of nature and cultural heritage. 106 The Company is achieving administrative objectives through the following activities: x maintaining the saltpan ecosystem; x preserving traditional salt production processes and centuries-old technological processes; and x continuing the production of salt, which has been the historical driving force behind the economic development of the region. The area of the SSNP, measuring 700 hectares, land and other real estate are owned by the Slovenian government. Of the once numerous saltpans in the Gulf of Trieste, only the Sečovlje and Strunjan saltpans have been preserved, and are therefore of exceptional importance in terms of ethnological, technical, historical, settlement and landscape heritage. The immovable cultural heritage of the Sečovlje saltpans includes salt fields, channels and embankments with stone walls, steps and sluice gates, saltworkers’ houses and the surrounding area, paths, bridges, pumps, etc. The Saltworks Museum in Fontanigge presents how salt was produced in medieval times. In the scope of the climate fund, we renovated around 400 meters of embankments in the Lera salt production area in 2020 and 2021, as well as 15 sluice gates for controlling seawater in the Fontanigge area. 107 Likewise with the assistance of the climate fund, we purchased two electric vehicles in 2021, bringing the total number to seven. The Garia utility vehicle comes in handy for minor maintenance works on the SSNP infrastructure and in clean-up campaigns. The electric Peugeot e-Traveller is intended for the transport of employees, the renters of berths, the elderly and disabled persons in the SSNP. Our objective is to be the first protected area in Slovenia to completely abandon access to the park by motor vehicles, ensure environmentally acceptable visits to the park and thus contribute to the reduction of the carbon footprint. We set up a new, modern bike shed with a charging unit for electric bikes and scooters at the entrance to the SSNP. The Clorofilla charging station is intended for the charging of electric bikes and the accelerated development of eco-tourism. We were the first to independently test the charging station to which we connected our new Silence electric scooter, which is used for nature conservation. The purchase of the electric scooter and the set-up of the bike shed were part of the activities supported by the climate fund. In 2021, we invested EUR 827,000 in the achievement of objectives that contribute significantly to the EU’s environmental objectives to mitigate and adapt to climate change, as follows: - measures to prevent and control the spread of non-native species in the amount of EUR 10,000; - measures to manage the effects of climate change on the saltpan ecosystem in the Sečovlje and Strunjan saltpans and other wetlands in the amount of EUR 705,000; and - EUR 112,220 to ensure sustainable mobility and decarbonisation. 106 GRI GS 103-1, 103-2, 103-3 107 GRI GS 304-1, 304-3 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 161 New bike shed with a charging unit for electric bikes and scooter at the entrance to the SSNP. The saltpan ecosystem is specific to the coastal wetlands. The entire salt production process is based on traditional, 700-year-old processes and components from the local environment, and thus does not produce any environmentally harmful by-products. The aforementioned concession agreement requires us to continue producing salt using traditional processes, as the latter are crucial for maintaining the cultural landscape and biodiversity. The use of the civil works and traffic infrastructure is kept to a minimum. Research confirms that invasive exotic species have not been introduced to the saltpans due to the production process. The presence and number of such species are not yet so high as to have significant consequences for ecosystems or communities. The number of species in the Sečovlje Salina Nature Park has not fallen over the last ten years; on the contrary, we have recorded continuous growth in populations. Additional measures aimed at the state of the hydrological regime have led to an increase in the number of natural habitats for which halophilus plants are characteristic. No major changes in ecological processes were seen in 2021. There are no endangered animal or plant species from the IUCN’s global list of endangered species present in the SSNP. 108 Around 20 bird species are included in the annexes to the Birds Directive, while two species of fish, four amphibious species and one reptilian species are included in the annexes to the EU’s Habitat Directive. At least 45 plants are included on the national list of endangered plant species. The Sečovlje Saltpans are included in the European Natura 2000 network. The region is recognised as one of two that are of national importance to the migration of birds according to the Bird Directive, while the saltpans are defined as a wetland of international importance according to the Ramsar Convention. The saltpans are best known for birds, as they are a large body of water that birds use for food, overnight shelter or wintering during their migration. Certain species nest in the saltpans. We observed new bird species in 2021. With the addition of the ringed teal, there are now 308 bird species registered in the area of the SSNP. The park is also home to characteristic flora and fauna habitats that are limited to various salt fields, saltpan channels and embankments. We observed the ringed teal in the SSNP for the first time in 2021, bringing the number of bird species in the park to 308. 108 GRI GS 304-4 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 162 The inclusion of the local community in the raising of awareness and the preservation of cultural heritage is crucial. The local community is included in the management of the park through its participation in the Sečovlje Salina Nature Park Committee. This cooperation also takes place through the organisation of joint on-site events and presentations. We have recorded a drop in the number of foreign tourists and local visitors to the park in the last two years due to the COVID-19 pandemic. The SSNP received 32,000 visitors in 2021, a decrease of 30% relative to the pre-pandemic period, but an increase of 30% compared with 2020. The sensitive natural environment in which the park is situated dictates that the company continuously improves environmental and energy efficiency. The consumption of electricity was reduced in previous years through changes in the regime for managing cooling and heating devices in visitor buildings. We are gradually replacing company vehicles with electric models. We use web conferencing and mobile telephones to communicate in the area of international cooperation in the scope of park management, through which we reduce work-related travel. There was a sharp decrease in the latter during the last two years due to pandemic-related measures. Soline was not fined for failure to comply with environmental laws and regulations. 109 Consumption of energy and natural resources at Soline 110 2021 2020 2019 Index 21/20 Consumption of natural gas (in m 3 ) 2,497 4,006 4,129 62 Consumption of electricity (in MWh) 403 401.43 392.12 100 Consumption of fuel (in litres) 35,111 25,970 35,295 135 Consumption of sanitary water in m 3 1,820 1,582 6,292 115 Consumption of sea water in m 3 - salt production - Thalasso Spa Lepa Vida 220,050 218,050 2,000 184,050 182,000 2,050 196,210 194,000 2,210 Waste in m 3 137 117 135 117 Paper consumption in t 7 4 9 175 We maintained the consumption of fuel and electricity at a level similar to the previous year, while the consumption of natural gas (which we use for the additional heating of pool water) was down slightly due to the favourable conditions for the operations of the Lepa Vida Thalasso Spa. Sea water is essential to the operations of Soline, as it is required for the production of salt and the functioning of the Lepa Vida Thalasso Spa. Sea water from the production of salt is returned to the sea uncontaminated. We segregate the salt pan area into crystallisation basins, salt water tanks and evaporation basins for salt production. We collect water at high tide and thicken it 21 days, while salt is produced daily. The seawater capture cycle is repeated weekly during the salt production season. Brine is gradually released back into the sea following salt production. Only used sanitary water that is discharged into the public sewerage network is treated as waste water. Due to the rehabilitation of the water supply network within the Lera salt production area, we reduced the consumption of sanitary water by 75% in 2020, while consumption in 2021 was at a comparable level. We used 2,000 litres of sea water for the functioning of the Lepa Vida Thalasso Spa, in particular for the pool and salt-water showers, where the use of soap and shampoo is forbidden. The sea water that is used for showering and the rinsing of salt-pan mud from the body passes through two collectors to separate mud from the water, which is discharged back into the sea. The sea water used in the swimming pool flows to a collection tank during filtering, where it is dechlorinated and passes to a drainage system for its return to the sea. 111 Waste is consistently separated and disposed of by the competent municipal department. 109 GRI GS 307-1 110 GRI GS 302-1, 303-3, 306-3 111 GRI GS 303-1, 303-2 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 163 2.9.8 Supply chain 112 Procurement function Group companies have a coordinated and standard procurement policy that includes the strategic policies and principles of a transparent procurement process. We develop long-term relationships with suppliers through correct and balanced communication, the fulfilment of agreements, the reliability of payments and the inclusion of suppliers in the process. To that end, we respect all legal and ethical principles on the market where we operate. The procurement function is centralised, and thus facilitates the use of funds in an economic, efficient and transparent manner. For easier management, purchases of specific goods and services, for which procedures are carried out by experts from the ordering area, are excluded from central procurement. The procurement of those goods and services is carried out by decentralised procurement units at the Company that are given the necessary authorisations to carry out procurement procedures. We have a standardised procurement procedure in place that facilitates the transparent and equal treatment of potential suppliers. We assess the risks of cooperation with new suppliers, and thus prevent increased costs and the loss of reputation. We regularly review existing strategic suppliers, assess them and define measures for improving cooperation. The selection of the most appropriate supplier is carried out in accordance with an offer assessment methodology. Our supply chain comprises the suppliers of goods and services, operators and agents in the sale of goods and the conclusion of subscriptions. Telekom Slovenije cooperates with 3,000 suppliers from 40 countries. The majority or 97% of suppliers are from the European Union. Total turnover between Telekom Slovenije and its Slovenian subsidiaries and their business partners amounted to more than EUR 677 million in 2021, including VAT. That amount also includes sponsorships and donations. To ensure compliance in procurement procedures, we include anti-corruption clauses in general procurement terms and conditions, and in agreements with suppliers. By signing a statement, we eliminate potential conflicts of interest with those involved in the process, while we also verify potential conflicts of interest on the side of suppliers. In terms of a sustainable supply chain, we expect suppliers to respect the Code of Conduct for the Suppliers of the Telekom Slovenije Group, which defines basic principles of conduct and standards. We dedicate a great deal of attention to environmental protection and energy efficiency. All sectoral legislation is taken into account when ordering electrical and electronic equipment, batteries, accumulators and air conditioning systems. Priority is given to energy efficient services, products and equipment. The Group thus takes into account an assessment of energy efficiency over the entire expected lifecycle of a service, product or equipment. We also require suppliers to provide information regarding their efficient energy and waste management. We obtain information via a questionnaire that serves as the basis for assessing one of the criteria of cooperation with strategic suppliers and is the first step to promoting sustainability in partnerships in the procurement process. We will work even closer with suppliers and contractual partners in the future in the management of material environmental aspects and indicators, and focus our energy on the improved identification of the sustainability dimensions of the supply chain and purchased materials and services. We will also inform key suppliers about sustainability commitments and goals, and thus encourage them to take a step together on the path to sustainability. Conditions on global markets were very unpredictable in 2021, as we encountered a lack of raw materials, and rising prices of commodities, materials and equipment. We communicated constantly with suppliers and regularly monitored the impact on supply to ensure the uninterrupted supply of equipment and the provision of services. We carried out additional procurement procedures to seek 112 GRI GS 102-9, 102-10 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 164 out new, reliable suppliers who will supply us materials of the requisite quality for the best price. We increased inventories of strategic materials and consistently ensured buffer stocks. With the exception of a few minor delays that did not affect operations, we did not encounter any major problems in supply. Sustainable aspects of procurement Financial benefits Relations with suppliers and the Company’s reputation • Liabilities are settled by agreed payment deadlines. We also settle liabilities early in the event of surplus liquidity. • We strive to meet the expectations of suppliers through correct communication, by respecting agreements and through the reliability of payments, and thus enhance the Company’s reputation. • We strive to contribute as much as possible to the competitiveness and profit of the Company through centrally managed procurement processes, a standard policy on the management of partners and suppliers, the exploitation of synergies and the reduction of procurement costs. Environmental benefits Energy and environmental responsibility • We comply with energy efficiency principles and responsible environmental management in procurement processes in accordance with ISO 50001 and ISO 14001. • In those processes we take into account an assessment of energy efficiency over the entire expected lifecycle of a service, product or equipment. • We insist that suppliers are committed to complying with legal requirements and best practices in the areas of energy and environmental management. • The assessment of our strategic suppliers includes sustainability criteria (efficient energy and waste management). • 17% of suppliers have a certified ISO 14001 environmental management system. • 6.3% of suppliers have a certified ISO 50001 energy management system. • 85% of suppliers include environmental management and energy efficiency in their development criteria and use environmentally more acceptable and recycled materials. • We facilitate paperless operations and encourage suppliers to do the same. One of the most important elements of paperless operations are e-invoices, which account for 48.7% of all received invoices. Benefits for society Social responsibility • 0.38% of suppliers are registered as disabled workers’ companies. 0.55% of turnover is generated with those suppliers. Local economy • Our procurement processes support the local economy, as the majority of turnover is generated with Slovenian suppliers. • Procurement outside of Slovenia is carried out for the supply of goods and services that we are unable to secure in Slovenia or that are uncompetitive in terms of price. • 97% of suppliers are from the European Union, while 90% of suppliers are from Slovenia. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 165 Human rights and labour law • As a socially responsible company, we expect suppliers to respect human rights, ensure equal opportunity in the workplace, and implement employment procedures that are fully compliant with the law and regulations. • We expect suppliers to respect the Code of Conduct for the Suppliers of the Telekom Slovenije Group. • We include an anti-corruption clause in agreements with the aim of preventing acts of corruption. • We use control points to prevent cross-interests and conflicts of interest in the procurement process. Logistics We adapt to the dynamics of the market through the optimisation of logistics processes, and by supporting IT and all those involved in the supply chain. We are raising social and environmental awareness by establishing more sustainable and responsible logistics at the Company. Despite the increased scope of work, we are participating in various campaigns and exploiting opportunities for the circular economy. Telekom Slovenije is establishing an EDI system that will facilitate the documentary exchange of data and other information crucial for ensuring the traceability and transparency of operations, document retention and prompt analysis reports. Due to measures in connection with the COVID-19 pandemic, we identified a significant increase in the activities of the Online Store in 2021, and made the necessary adjustments for the delivery of goods to all stakeholders. 2.9.9 Protecting the Company, networks, systems and services Ensuring the secure functioning of the work environment and the comprehensive protection of the Company’s assets remain two of the priority corporate security tasks within the Telekom Slovenije Group. Through the comprehensive management of corporate security, we facilitate a more rapid response to recorded security events and mitigate security risks. By constantly monitoring development in the area of corporate security, implementing innovative solutions to prevent security events and rapidly identifying new threats, we ensure the security and quality of the network and services, which represents an important competitive advantage of the Group. The area of general security encompasses the management and planning of corporate security, where we ensure the protection of people and the Company’s property through physical security measures and the use of various technical/mechanical security systems. The continuous monitoring of development and the inclusion of innovations in the management of the security of the Company’s property are mainstays. To that end, we completed the partial replacement of the locking system in 2021 with a modern system that facilitates improved security (reduces security risks) and more efficient management than the current system. In the area of corporate security, we manage technical security systems through our own Security and Control Centre and cooperate with various contractual partners. The Security and Control Centre functions in accordance with valid regulations in this area and is certified according to the SIST EN 50518 standard. Such functioning ensures continuous control, the prompter adoption of measures and, above all, important information that facilitates the inclusion and planning of new technologies. Activities aimed at adapting and changing the Company’s processes due to the impact of the pandemic continued in 2021. With the help of the BCMS (business continuity management system), we adapted rapidly and effectively to the need to change processes, while we adapted and further strengthened security measures through the ISMS (information security management system). We placed a great deal of emphasis on cyber security, where Telekom Slovenije’s Cyber Security Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 166 Operation Centre plays a key role in the rapid identification of and appropriate response to cyber threats. Systems and the network thus functioned without major disruptions or effects on the availability and provision of services. Through continuous training and the testing of the identification of security threats, primarily in the area of cyber security, we continuously raise standards and ensure that the security culture and employees’ awareness of the importance of information security at Telekom Slovenije are at a high level. An increasing amount of content regarding security threats and the safe use of electronic communications equipment is intended for the users of our services, with the aim of raising their awareness. In the area of security, we also ensure the fulfilment of legal requirements regarding the protection of confidential data, as the Company receives requests from government authorities that are marked with the level of confidentiality, and ensures the secure storage of that data. The Company also fulfils other legal obligations in connection with civil protection, civil defence and the critical infrastructure. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 167 2.10 Content according to GRI Reporting Standards 113 Content according to GRI GS – core option “This report has been prepared in accordance with the GRI Standards: Core option.” GENERAL STANDARD DISCLOSURES GRI standard and disclosure Description Reporting boundaries (within and outside the organisation) Section/page Comments/external assurance 114 GRI 101: Foundation 2016 GRI 102: General disclosures 2016 Presentation of the organisation 102-1 Name of the organisation Telekom Slovenije Group 1.1/1 D 102-2 Brands, products and services Telekom Slovenije Group – brands and products: 1.1/2, – service types: 2.7.3 /98 D There are no limitations on the services marketed by Telekom Slovenije Group companies. 102-3 Location of headquarters Telekom Slovenije Group 1.1/1 D 102-4 Location of operations Telekom Slovenije Group 1.6/16 102-5 Ownership and legal form Telekom Slovenije Group – legal form: 1.1/1 – ownership: 1.11/56 D 102-6 Markets served (geographical and sectoral breakdown and types of customers) Telekom Slovenije Group – geographical breakdown: 1.6/16 , – service segments (Telekom Slovenije, T Smedia, IPKO): 2.7.1 /89, – customer types: 2.7.3 /98 D 102-7 Size of organisation Telekom Slovenije Group - number of employees: 2.9.5/ 136, - sales revenue, debt -to-equity: 2.1 /61 - number of products and services: 2.7.2 /95, 2.7.3 /98 D We do not report on the number of organisational units and the number of products. No employees, with the exception of IPKO, a foreign company, and the parent company GVO. 102-8 Employees by type of employment, type of contract, region and gender Telekom Slovenije Group 2.9.5/137, 138, 138 D We only report on the activities of contracted workers for IPKO. Data regarding employees are collected via a questionnaire completed by all Group companies. 102-9 Description of the organisation’s supply chain Telekom Slovenije 2.9.8/163 We report on types of suppliers and the scope of cooperation with them. 102-10 Significant changes regarding the organisation’s size, structure, ownership and supply chain Telekom Slovenije Group, Telekom Slovenije - size and structure of the organisation: 1.6/ 16 - revenue: 2.1/61 - ownership: 1.11/ 56, - supply chain: 2.9.8/163 D There were no significant changes in the supply chain in 2021. 113 GRI GS 102-47, 102-54, 102-55 114 GRI GS 102-56 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 168 102-11 Clarification whether and how the organisation takes into account the precautionary principle Telekom Slovenije, IPKO, local and wider environment 2.9.7/155 D We take a precautionary approach to electromagnetic radiation, which is taken into account in the expansion of networks. 102-12 External documents, principles and other economic, environmental and social initiatives to which the organisation is a signatory or supports Telekom Slovenije Group 1.7/19, 2.5.1/ 76 D 102-13 Membership in organisations Telekom Slovenije Group 1.7/19 D Strategy and analysis 102-14 Statement of the highest decision - making body on the importance of sustainable development for the organisation and strategy Telekom Slovenije Group 1.3/9 D The Group’s sustainable development objectives are defined in the Strategic Business Plan (SBP) for the period until 2026, which was adopted by Telekom Slovenije’s Management Board. Strategic policies are also accessible on the Company’s website at http://www.telekom.si/o - podjetju/predstavitev/strateske- usmeritve. Ethics and integrity 102-16 Values, principles and standards of behaviour, such as codes of conduct and ethics Telekom Slovenije Group, suppliers, local and wider community – values: 1.8.1/20 – Code of Conduct: 2.5.1/ 76 D Governance 102-18 Governance structure of the organisation, including committees of the highest governance body Telekom Slovenije Group 1.6/16 1.10.3/ 37, 42 D Stakeholder engagement 102-40 List of stakeholder groups engaged by the organisation Telekom Slovenije Group 2.9.2/123 D 102-41 Percentage of employees covered by collective agreements Telekom Slovenije Group 2.9.5/137 D 102-42 Basis for identification and selection of stakeholder groups with whom to engage. Telekom Slovenije Group 2.9.2/123 D The communication strategy with stakeholders is an integral part of Telekom Slovenije, d. d.’s Corporate Governance Policy, which is accessible on the Company’s website. 102-43 Approaches to stakeholder engagement and frequency of engagement by stakeholder group Telekom Slovenije Group Key information: 2.9.2 /123 , additional information in sections: – shareholders: 1.11/ 57, - users: 2.9.4/ 130 – employees: 2.9.5/146 D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 169 102-44 Key topics and concerns that have been raised through stakeholder engagement, and how the organisation has responded to them, including through reporting Telekom Slovenije Group Key information: 2.9.2 /123 , additional information in sections: – users: 2.9.4/ 130 – employees: 2.9.5/ 146 D Report profile 102-45 Entities included in the consolidated financial statements Telekom Slovenije Group Note 5 in the accounting report (composition of the Telekom Slovenije Group), pp. 205–208 D 102-46 Process of defining report content and aspect boundaries Telekom Slovenije Group 2.9.1/117 D 102-47 List of material topics Telekom Slovenije Group 2.9/116, 2.10 /167 Material topics that the Telekom Slovenije Group has identified are stated in the GRI content index. We do not report on immaterial topics. 102-48 Effects of restatements of information provided in previous reports, and the reasons for such restatements Telekom Slovenije Group 2.9.1/117 D 102-49 Significant changes from previous reporting periods in the scope of reporting and aspect boundaries Telekom Slovenije Group 2.9.1/117 D 102-50 Reporting period Telekom Slovenije Group 2.9.1/117 D 102-51 Date of most recent previous report Telekom Slovenije Group 2.9.1/117 D 102-52 Reporting cycle (annual, quarterly) Telekom Slovenije Group 2.9.1/117 D 102-53 Contact point for questions regarding the report Telekom Slovenije Group 1.1/1 D 102-54 Claims of reporting in accordance with GRI Standards 2.10/167 D 102-55 GRI content index 2.10/167 102-56 External assurance of reporting Telekom Slovenije Group 2.10/167 2.11 /179 D We regularly submit the annual report for external assurance since 2009. The scope and basis of external assurance are evident from the sustainability report verification statement. SPECIFIC STANDARD DISCLOSURES Management approaches and disclosures Material topics Reporting boundaries Page Reasons for omission/explanati ons External assuranc e ECONOMIC IMPACTS GRI 201: Economic performance 2016 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 170 103-1 103 -2 103-3 Explanation of the material topic and its boundaries 1.8.3/23 D 201-1 Direct economic value generated and distributed Telekom Slovenije Group, shareholders, local and wider community - revenues, labour costs, payments to shareholders: 1.2/ 4, - revenues: 2.1/61 , 2.7.3/ 99 - donations and other investments in the commu nity: 2.9.3/ 127 We only report on taxes for the Telekom Slovenije Group. D 201-2 Financial implications and other risks and opportunities for the organisation’s activities due to climate change Telekom Slovenije Group, users Due to the exposure of the Telekom Slovenije Group’s telecommunication s equipment, our definition of key risks includes risks associated with the external environment and climate change. Those risks are also present at Soline, and impact salt production and the number of visitors to the Lepa Vida spa. These risks are prevented in investments in new networks through underground construction. We do not report on financial consequences. D 201-3 Defined benefit plan obligations and other retirement plans Telekom Slovenije Group (employees) 2.9.5/143 D GRI 202: Market presence 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries 1.8.3/23 D 202-1 Ratios of standard entry level wage by gender compared to local minimum wage Telekom Slovenije Group 2.9.5/144 We only report on ratios for IPKO. GRI 203: Indirect economic impacts 2016 103-1, 103-2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije Group - 103-1, 103-2: 2.3 /64, - 103-3: 2.8.1/110 D 203-1 Development and impact of significant infrastructure investments and services supported by the organisation Telekom Slovenije Group, users, local and wider community 2.3/64, 2.8.1 /110 D GRI 205: Anti-corruption 2016 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 171 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.5.1/76 D 205-1 Number and percentage of activities assessed for risks related to corruption and the significant risks identified Telekom Slovenije Group 2.5.1/77 D 205-2 Communication and training about anti- corruption policies and procedures Telekom Slovenije Group 2.5.1/78 The number of hours is reported for Telekom Slovenije. D GRI 206: Anti-competitive behaviour 2016 103-1 103 -2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.5.1/76 This area is governed by the Guidelines for ensuring compliance with competition law, which were updated in 2021. D 206-1 Number of legal proceedings for anti- competitive behaviour, anti - trust and monopoly practices and their outcomes Telekom Slovenije 2.5.2/80 D GRI 207: Tax 2019 103-1 103 -2 103 -3 207 -1 Approach to tax Telekom Slovenije Group 2.5.1/79 We do not report on the evaluation of the approach to the management of taxes or on the link between the management of tax liabilities and sustainable development. D 207-2 Tax governance, control and risk management Telekom Slovenije Group 2.5.1/79 D 207-3 Stakeholder engagement Telekom Slovenije Group 2.5.1/79 We include stakeholders and tax -related regulatory bodies in the process of fulfilling tax obligations. D 207-4 Country-by-country reporting Telekom Slovenije Group Note 5 in the accounting report (composition of the Telekom Slovenije Group) , pp. 205–2 08, and Note 13 Corporate income tax, deferred tax assets and liabilities, p. 215. D ENVIRONMENTAL IMPACTS GRI 302: Energy 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije 2.9.7/153 The area of energy is governed in Slovenia by the D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 172 Energy Act. We also have in place a system in accordance with international standards ISO 50001 (energy management system) and ISO 14001 (environmental management system). 302-1 Energy consumption within the organisation Telekom Slovenije 2.9.7/153, 155, 162 We do not report on energy sources consumed (renewable and non -renewable sources). D 302-4 Reduction of energy consumption Telekom Slovenije, IPKO 2.9.7/153 D GRI 303: Waste and effluents 2018 103-1 103 -2 103 -3 303-1 Interactions with water as a shared resource Soline 2.9.7/162 We only report on how water is withdrawn and discharged. D 303-2 Management of water discharge - related impacts Soline 2.9.7/162 We do not report on the methodology/stan dards used to determine the consumption and quality of the discharge of water. D 303-3 Water withdrawal Soline 2.9.7/162 D GRI 304: Biodiversity 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Soline 2.9.7/160 D 304-1 Location and size of land managed in, or adjacent to, protected areas and areas of high biodiversity value outside protected areas Soline, local and wider community 2.9.7/160 We report on the location and size of land managed by the company in protected natural areas. D 304-3 Habitats protected or restored Soline, local and wider community 2.9.7/160 We do not report on the methodologies that were used for that purpose. 304-4 Number of IUCN Red List species and national conservation list species with habitats in areas affected by operations Soline, local and wider community 2.9.7/161 D GRI 305: Emissions 2016 103-1 103 -2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije, local and wider community 2.9.7/156 103-3: We control the evaluation of the approach in accordance with the ISO 14001 standard. D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 173 305-1 Direct (Scope 1) GHG emissions Telekom Slovenije 2.9.7/156 D 305-2 Energy indirect (Scope 2) GHG emissions Telekom Slovenije 2.9.7/156 D 305-3 Other indirect (Scope 3) GHG emissions Telekom Slovenije 2.9.7/156 D GRI 306: Waste 2020 103-1 103 -2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije 2.9.7/157 103-3: We control the evaluation of the approach in accordance with the ISO 14001 standard. D 306-1 Waste generation and significant waste- related impacts Telekom Slovenije 2.9.7/157 306-2 Management of significant waste - related impacts Telekom Slovenije 2.9.7/157, 159 306-3 Waste generated Telekom Slovenije Group Telekom Slovenije 2.9.7/157, 162 Quantitative data regarding disposal methods are partially included for Telekom Slovenije. The data presented are taken from record sheets. D GRI 307: Environmental compliance 2016 103-1 103 -2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije Regular and transparent reporting to the regulatory body and other government authorities (e.g. ARSO, SURS, FURS, AKOS and ETNO) also represent an important element of the Group’s energy and environmental activities. We also ensure compliance with environmental laws in the scope of the ISO 14000 standard. D 307-1 Value of significant fines and non - monetary sanctions for non - compliance with environmental laws and regulations Telekom Slovenije, Soline 2.5.2/80, 2.9.7 /162 No monetary or non -monetary sanctions with respect to the environment were imposed against Telekom Slovenije and its subsidiaries. D SOCIAL IMPACTS GRI 401: Employment 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.9.5/136 D 401-1 Total number and rate of new employee Telekom Slovenije Group 2.9.5/136, 137 Data by gender are not disclosed. D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 174 hires and employee turnover 401-2 Benefits provided to full - time employees that are not provided to temporary or part- time employees Telekom Slovenije, GVO, TSmedia, Avtenta, TSinpo 2.9.5/144 D 401-3 Return to work and retention rates after parental leave, by gender Telekom Slovenije Group, Telekom Slovenije 2.9.5/148 We report on the number and proportion of employees who took advantage of and returned from parental leave by gender. D GRI 402: Labour/management relations 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije 2.9.5/146 D 402-1 Minimum notice period regarding significant operational changes, including whether this is specified in the collective agreement Telekom Slovenije 2.9.5/146 Deadlines for notifying employees are in line with valid legislation and are not included in the collective agreement. D GRI 403: Occupational health and safety 2018 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.9.5/146 D 403-1 Occupational health and safety management system All companies in Slovenia, except Soline. 2.9.5/147 D 403-2 Hazard identification, risk assessment and incident investigation All companies in Slovenia, except Soline. 2.9.5/147 The Health Committee monitors and handles recommendations to improve the safety and health of employees. D 403-3 Occupational health services All companies in Slovenia, except Soline. 2.9.5/147 D 403-4 Worker participation in the development, implementation and evaluation of the occupational health and safety system All companies in Slovenia, except Soline. 2.9.5/147 D 403-5 Training in the area of occupational health and safety All companies in Slovenia, except Soline. 2.9.5/147 D 403-6 Promotion of health All companies in Slovenia, except Soline. 2.9.5/147 D 403-7 Prevention and mitigation of occupational health and safety impacts directly linked to a company’s services and products Telekom Slovenije We define electromagnetic radiation as one of the more significant impacts of our operations. We inform employees about this topic via the D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 175 intranet and users via brochures at points of sale. 403-8 Workers covered by an occupational health and safety management system Telekom Slovenije Group 2.9.5/147 403-9 Number of work- related injuries and rate Telekom Slovenije Group 2.9.5/148 Reporting relates to the number of injuries. D GRI 404: Training and education 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.9.5/139 D 404-1 Average hours of training per employee by gender and by employee category Telekom Slovenije Group, Telekom Slovenije 2.9.5/139, 140 We report the absolute number of hours for the number of training hours by employee category. D 404-2 Programmes for training and lifelong learning Telekom Slovenije 2.9.5/141, 143 D 404-3 Percentage of employees receiving regular performance and career development reviews by gender Telekom Slovenije Group 2.9.5/145 We do not report by employee category. We do not report by gender, as we do not make a distinction in this regard. D GRI 405: Diversity and equal opportunity 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.5.1/76 D 405-1 Composition of governance bodies and the breakdown of employees by employee category (gender, age, minority group membership and other relevant indicators of diversity) Telekom Slovenije Group 1.10.3/15, 42, 2.9.5/ 138 We do not report data regarding employees by age. We also do not report by minorities, as we do not make a distinction in this regard . D 405-2 Ratio of basic salary and remuneration of women to men, by significant locations of operation Telekom Slovenije Group 2.9.5/144 We do not report the ratio for companies in Slovenia. D GRI 406: Non-discrimination 2016 103-1 103 -2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.5.1/76 D 406-1 Total number of incidents of discrimination and corrective actions taken Telekom Slovenije Group 2.9.5/136 D GRI 412: Human rights assessment 2016 103-1 103 -2 103-3 Telekom Slovenije Group 2.5.1/77 D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 176 412-2 Total hours of employee training on policies and procedures concerning aspects of human rights that are relevant to operations, including the percentage of employees trained Telekom Slovenije, GVO, TSmedia, Soline, IPKO 2.5.1/78 Training on human rights focused on the protection of personal data. The Group does not report on the percentage of employees included in training. D GRI 415: Public policy 2016 103-1 103 -2 103 -3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.5.1/76 Telekom Slovenije issued a Corporate Governance Statement on compliance with corporate integrity guidelines and on the prevention of conflicts of interest by members of the Supervisory Board and Management Board (see section 1.10 Corporate Governance Statement). D 415-1 Political contributions Telekom Slovenije Group 2.5.1/77 No political contributions were made. D GRI 417: Marketing and labelling 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije, TSmedia, IPKO, users 2.7.4/109 We do not report on product marking. D 417-3 Total number of incidents of non - compliance with regulations and codes concerning marketing communications, including advertising, promotion and sponsorship, by type of non - compliance and by outcomes Telekom Slovenije, TSmedia, IPKO, users 2.7.4/109 D GRI 418: Customer privacy 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije 2.5.1/77 418-1 Substantiated complaints concerning breaches of customer privacy and losses of customer data Telekom Slovenije 2.5.1/78 GRI 419: Socioeconomic compliance 2016 103-1 103 -2 103-3 Explanation of the material topic and its boundaries Telekom Slovenije Group 2.5.1/76 D 419-1 Monetary value of fines and number of non -monetary sanctions for non - compliance with laws Telekom Slovenije Group 2.5.2/80 Telekom Slovenije Group companies did not receive any fines. D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 177 and regulations in the social and economic area SPECIFIC SECTOR INDICATORS (GRI G4) – MEDIA Accessibility to media content DMA Telekom Slovenije, TSmedia, users, local and wider community 2.9.4/133 D G4-M4 Measures to improve accessibility to media content and the protection of vulnerable audiences Telekom Slovenije, TSmedia, users, local and wider community 2.9.4/133 D SPECIFIC SECTOR INDICATORS (GRI G4) – TELECOMMUNICATIONS Internal operations IO1 Infrastructure investments in the telecommunications network by region Telekom Slovenije Group, users, local and wider community 2.3/64, 2.8.1/ 110 D IO3 Health and safety measures for field personnel Telekom Slovenije 2.9.5/146, 148 D Provision of access to ICT products and services PA1 Policies and practices for providing access to the telecommunications infrastructure, products and services to the population in remote, less populated regions Telekom Slovenije, IPKO, users, local and wider community 2.9.4/135 D PA2 Policies and practices for overcoming obstacles in accessing and using telecommunication products and services relating to the language, culture, illiteracy, deficient education, revenues, special needs and age Telekom Slovenije, users 2.9.4/134 D PA4 Quantitative level of available telecommunication products and services in operating regions Telekom Slovenije, IPKO 2.7.3/98, 2.8.3/ 115, 2.9.4/ 135 D PA6 Programmes for providing and maintaining telecommunication links and services in extraordinary circumstances and in the event of natural disasters Telekom Slovenije 2.8.3/114 We manage emergencies with the business continuity management system. D Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 178 PA8 Policies and practices to publicly communicate on EMR-related issues Telekom Slovenije, users, local and wider community 2.9.7/155 D PA10 Initiatives to ensure the clarity of charges and tariffs Telekom Slovenije, users 2.9.4/129 D Technological applications TA2 Examples of telecommunication products, services and applications that can replace some physical form of use (e.g. online telephone directories and video conferences). Telekom Slovenije, TSmedia, users 2.7.3/105 2.9.8/ 159 D Content according to Sustainability Accounting Standard of the SASB (Sustainability Accounting Standards Board) Topic Description of indicator Section/page Indicator code Environmental footprint of operations Energy consumption 2.9.7/153 TC-TL-130a.1 Competitive behaviour & open internet Total amount of monetary losses as a result of legal proceedings associated with anticompetitive behaviour regulations 2.5.2/80 TC-TL-520a.1 Average actual sustained download speed of owned and commercially-associated content 2.8.3/115 TC-TL-520a.2 Managing technology disruptions System average interruption frequency and customer average interruption duration 2.8.3/115 TC-TL-550a.1 Systems to provide unimpeded service during service interruptions 2.8.3/114 TC-TL-550a.2 Product end- of -life management Materials recovered through take back programmes, percentage of recovered materials that were used, reused, recycled and landfilled 2.9.7/158 TC-TL-440a.1 Data privacy Description of policies and practices relating to behavioural advertising and customer privacy 2.5.1/77 TC-TL-220a.1 Total amount of monetary losses as a result of legal proceedings associated with customer privacy 2.5.1/78 TC-TL-220a.3 Number of law enforcement requests for customer information, number of customers whose information was requested 2.5.1/78 TC-TL-220a.4 Data security Number of personal data breaches 2.5.1/78 TC-TL-230a.1 Description of approach to identifying and addressing data security risks, including use of third-party cybersecurity standards 2.5.1/77 TC-TL-230a.2 Data regarding operations Number of wireless subscribers 2.7.3/98 TC-TL-000.A Number of wireline subscribers 2.7.3/98 TC-TL-000.B Number of broadband subscribers 2.7.3/98 TC-TL-000.C Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 179 2.11 Sustainability report assurance statement 115 115 GRI GS 102-56 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 180 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 181 3 ACCOUNTING REPORT OF THE TELEKOM SLOVENIJE GROUP AND TELEKOM SLOVENIJE, D. D. FOR 2021 3.1 Financial statements of the Telekom Slovenije Group and Telekom Slovenije ...........182 3.2 Notes to the consolidated financial statements of the Telekom Slovenije Group and the separate financial statements of Telekom Slovenije .....................................................190 1. Reporting entity ..................................................................................................................190 2. Basis for preparation .........................................................................................................190 3. Summary of significant accounting policies ...................................................................193 4. Fair value determination ....................................................................................................205 5. Composition of the Telekom Slovenije Group ................................................................205 6. Segment reporting ..............................................................................................................208 7. Sales revenue .....................................................................................................................210 8. Other operating income .....................................................................................................211 9. Cost of goods sold, costs of materials, energy and services .......................................212 10. Labour costs .......................................................................................................................213 11. Other operating expenses .................................................................................................213 12. Finance income and finance expenses ............................................................................214 13. Income tax, deferred tax assets and tax liabilities ..........................................................215 14. Earnings per share .............................................................................................................217 15. Intangible assets ................................................................................................................218 16. Property, plant and equipment..........................................................................................223 17. Right-of-use assets ............................................................................................................227 18. Investments in subsidiaries ..............................................................................................229 19. Other investments ..............................................................................................................230 20. Contract assets ...................................................................................................................231 21. Deferred costs ....................................................................................................................231 22. Investment property ...........................................................................................................232 23. Assets held for sale ............................................................................................................233 24. Inventories...........................................................................................................................233 25. Trade and other receivables ..............................................................................................233 26. Contract assets ...................................................................................................................235 27. Deferred costs ....................................................................................................................235 28. Cash and cash equivalents ...............................................................................................235 29. Equity and reserves ...........................................................................................................236 30. Contract liabilities ..............................................................................................................237 31. Provisions ...........................................................................................................................238 32. Other liabilities ....................................................................................................................242 33. Loans and borrowings .......................................................................................................242 34. Lease liabilities ...................................................................................................................243 35. Other financial liabilities ....................................................................................................244 36. Trade payables ...................................................................................................................245 37. Contract liabilities ..............................................................................................................245 38. Accrued liabilities ...............................................................................................................245 39. Book and fair values ..........................................................................................................246 40. Contingent liabilitiess ........................................................................................................249 41. Related party transactions ................................................................................................250 42. Auditor’s fee ........................................................................................................................256 43. Categories of financial instruments .................................................................................257 44. Financial instruments and financial risk management ..................................................257 45. General authorisation and the right to use radio frequency and numbers ..................264 46. Events after the reporting date .........................................................................................265 3.3 Independent auditor’s report for the Telekom Slovenije Group and Telekom Slovenije ............................................................................................................................................266 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 182 3.1 Financial statements of the Telekom Slovenije Group and Telekom Slovenije The consolidated and separate statement of profit or loss Telekom Slovenije Group The Company Telekom Slovenije in EUR thousand Note I–XII 2021 I–XII 2020 I – XII 2021 I–XII 2020 Sales revenue 7 648,247 647,177 577,630 591,693 Other operating income 8 5,303 7,694 3,421 5,254 Cost of goods sold 9 -93,961 -90,427 -100,989 -98,493 Costs of materials and energy 9 -16,498 -14,546 -10,613 -10,752 Costs of services 9 -204,561 -226,036 -193,544 -217,367 Labour costs 10 -111,271 -111,101 -92,688 -93,320 Depreciation/Amortisation 15, 16, 17, 22 -169,056 -167,279 -142,175 -137,351 Other operating expenses 11 -6,507 -2,879 -7,444 -2,734 Total operating expenses -601,854 -612,268 -547,453 -560,017 Operating profit 51,696 42,603 33,598 36,930 Finance income 12 1,996 2,177 15,225 5,724 Finance expenses 12 -8,617 -10,173 -8,746 -18,501 Profit before tax 45,075 34,607 40,077 24,153 Income tax 13 -4,705 -636 -3,553 0 Deferred taxes 13 -2,482 113 -2,153 21 Net profit from going concern 37,888 34,084 34,371 24,174 Loss from discontinued operations 13 0 -9,219 0 0 Net profit for the period 37,888 24,865 34,371 24,174 Basic and diluted earnings per share - in EUR 14 5.82 3.82 5.28 3.72 The Company Telekom Slovenije’s finance income includes dividends received and interest on loans granted to subsidiaries. The Company Telekom Slovenije’s finance expenses include the effects of impairment of the company TSmedia. More details in Note 12. Notes on pages 190 to 265 are an integral part of these consolidated financial statements. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 183 The consolidated and separate statement of other comprehensive income Telekom Slovenije Group Telekom Slovenije in EUR thousand Note I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Net profit for the period 37,888 24,865 34,371 24,174 Other comprehensive income that may subsequently be reclassified to the statement of profit or loss Translation reserves 29 34 -18 0 0 Change in fair value of hedging financial instruments 29 253 283 254 283 Deferred tax 13 -15 -54 -15 -54 Change in fair value of hedging financial instruments (net) 238 229 239 229 Other comprehensive income that may not be reclassified subsequently to the statement of profit or loss Actuarial gains and losses 29 819 -638 869 - 662 Change in fair value of investments in equity instruments measured at fair value through other comprehensive income 29 278 - 1,716 278 - 1,716 Deferred tax 13 -86 326 -86 326 Change in fair value of investments in equity instruments measured at fair value through other comprehensive income 192 - 1,390 192 - 1,390 Other comprehensive income for the period after tax 1,283 - 1,817 1,300 - 1,823 Total comprehensive income for the period 39,171 23,048 35,671 22,351 Comprehensive income attributable to owners 39,171 23,048 Going concern 39,171 32,267 0 0 Discontinued operations 0 -9,219 0 0 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 184 The consolidated and separate balance sheet Telekom Slovenije Group Telekom Slovenije in EUR thousand Note 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 ASSETS Intangible assets 15 220,116 190,033 180,251 141,451 Property, plant and equipment 16 667,059 664,644 604,711 600,532 Right-of-use assets 17 73,970 77,420 80,667 86,506 Investments in subsidiaries 18 0 0 38,276 37,001 Other investments 19 3,292 3,068 57,235 63,951 Contract assets 20 2,854 2,668 2,469 2,337 Other receivables 25 18,300 17,081 18,294 17,639 Deferred costs 21 1,058 1,438 1,608 1,078 Investment property 22 4,545 1,258 7,641 4,230 Deferred tax assets 13 42,012 44,448 41,761 43,929 Total non-current assets 1,033,206 1,002,058 1,032,913 998,654 Assets held for sale 23 799 214 799 214 Inventories 24 22,478 26,175 19,603 21,811 Trade and other receivables 25 156,152 162,936 148,378 159,360 Contract assets 26 17,263 23,527 17,167 23,263 Deferred costs 27 3,766 4,250 3,150 3,764 Investments 19 740 512 12,177 17,414 Cash and cash equivalents 28 15,935 8,167 3,754 2,086 Total current assets 217,133 225,781 205,028 227,912 Total assets 1,250,339 1,227,839 1,237,941 1,226,566 EQUITY AND LIABILITIES Share capital 29 272,721 272,721 272,721 272,721 Share premium 29 181,489 181,489 180,956 180,956 Profit reserves 29 106,479 106,479 104,978 104,978 Legal reserves 29 51,612 51,612 50,434 50,434 Reserves for treasury shares and interests 29 3,671 3,671 3,671 3,671 Treasury shares and interests 29 -3,671 -3,671 -3,671 -3,671 Statutory reserves 29 54,854 54,854 54,544 54,544 Other profit reserves 29 13 13 0 0 Retained earnings 29 41,938 33,305 55,515 50,359 Retained earnings from previous periods 4,050 8,440 21,144 26,185 Profit or loss for the period 37,888 24,865 34,371 24,174 Fair value reserve 29 -66 -497 -66 -497 Reserves for actuarial gains/losses 29 -2,139 -2,988 -1,863 -2,733 Translation reserves 29 9 -25 0 0 Total equity 600,431 590,484 612,241 605,784 Contract liabilities 30 14,278 14,955 13,752 14,301 Provisions 31 23,063 20,407 19,561 16,184 Other liabilities 32 18,455 38,896 12,281 20,856 Accrued liabilities 891 817 713 673 Loans and borrowings 33 309,023 184,221 309,023 184,221 Lease liabilities 34 57,096 59,092 62,748 67,093 Other financial liabilities 35 88 244 88 244 Deferred tax liabilities 13 1,710 1,563 321 235 Total non-current liabilities 424,604 320,195 418,487 303,807 Trade payables 36 130,955 119,058 116,381 109,755 Income tax payable 13 3,768 90 3,553 0 Loans and borrowings 33 40,015 32,080 41,415 45,095 Lease liabilities 34 9,460 10,180 10,949 11,660 Other financial liabilities 35 2 101,239 0 101,237 Contract liabilities 37 12,318 12,656 8,452 8,707 Accrued liabilities 38 28,786 41,857 26,463 40,521 Total current liabilities 225,304 317,160 207,213 316,975 Total liabilities 649,908 637,355 625,700 620,782 Total equity and liabilities 1,250,339 1,227,839 1,237,941 1,226,566 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 185 Consolidated Statement of changes in equity of the Telekom Slovenije Group in EUR thousand Share capital Share premium Profit reserves Retained earnings Fair value reserve for financial instruments Fair value reserve for hedging instruments in net amount Reserves for actuarial deficits and surpluses Translation reserves Total Legal reserves Treasury shares reserve Treasury shares Statutory reserves Other profit reserves Retained earnings from previous periods Profit or loss for the period Balance as at 1 Jan 2021 272,721 181,489 51,612 3,671 -3,671 54,854 13 8,440 24,865 -219 -278 -2,988 -25 590,484 Net profit or loss for the period 37,888 37,888 Other comprehensive income for the period 192 238 819 34 1,283 Total comprehensive income for the period 0 0 0 0 0 0 0 0 37,888 192 238 819 34 39,171 Dividends paid -29,275 -29,275 Write-downs of unpaid dividends from previous years 61 61 Transactions with owners 0 0 0 0 0 0 0 -29,214 0 0 0 0 0 - 29,214 Transfer of profit or loss from previous period to retained earnings 24,865 -24,865 0 Other movements in equity -29 29 0 Changes in equity 0 0 0 0 0 0 0 24,836 -24,865 0 0 29 0 0 Other -12 1 1 -10 Balance as at 31 Dec 2021 272,721 181,489 51,612 3,671 - 3,671 54,854 13 4,050 37,888 -26 -40 - 2,139 9 600,431 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. More details in Note 29. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 186 Consolidated Statement of changes in equity of the Telekom Slovenije Group in EUR thousand Share capital Share premium Profit reserves Retained earnings Fair value reserve for financial instruments Fair value reserve for hedging instruments in net amount Reserves for actuarial deficits and surpluses Translation reserves Total Legal reserves Treasury shares reserve Treasury shares Statutory reserves Other profit reserves Retained earnings from previous periods Profit or loss for the period Balance as at 1 Jan 2020 272,721 181,488 51,612 3,671 -3,671 54,854 13 30,648 941 1,171 -507 -2,347 -6 590,588 Net profit or loss for the period 24,865 24,865 Other comprehensive income for the period - 1,390 229 - 638 -18 - 1,817 Total comprehensive income for the period 0 0 0 0 0 0 0 0 24,865 - 1,390 229 - 638 -18 23,048 Dividends paid -22,769 -22,769 Write-downs of unpaid dividends from previous years 67 67 Transactions with owners 0 0 0 0 0 0 0 -22,702 0 0 0 0 0 - 22,702 Transfer of profit or loss from previous period to retained earnings 941 - 941 0 Changes in equity 0 0 0 0 0 0 0 941 -941 0 0 0 0 0 Other 1 - 447 -3 -1 - 450 31 Dec 2020 272,721 181,489 51,612 3,671 -3,671 54,854 13 8,440 24,865 -219 -278 -2,988 -25 590,484 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 187 Statement of changes in equity of the Company Telekom Slovenije in EUR thousand Share capital Share premium Profit reserves Retained earnings Fair value reserve for financial instruments Fair value reserve for hedging instruments in net amount Reserves for actuarial deficits and surpluses Total Legal reserves Treasury shares reserve Treasury shares Statutory reserves Other profit reserves Retained earnings from previous periods Profit or loss for the period Balance as at 1 Jan 2021 272,721 180,956 50,434 3,671 -3,671 54,544 0 26,185 24,174 -219 -278 -2,733 605,784 Net profit or loss for the period 34,371 34,371 Other comprehensive income for the period 192 239 869 1,300 Total comprehensive income for the period 0 0 0 0 0 0 0 0 34,371 192 239 869 35,671 Dividends paid - 29,275 - 29,275 Write-downs of unpaid dividends from previous years 60 60 Transactions with owners 0 0 0 0 0 0 0 - 29,215 0 0 0 0 - 29,215 Transfer of profit or loss from previous period to retained earnings 24,174 - 24,174 0 Changes in equity 0 0 0 0 0 0 0 24,174 -24,174 0 0 0 0 Other 1 1 Balance as at 31 Dec 2021 272,721 180,956 50,434 3,671 -3,671 54,544 0 21,144 34,371 -27 -39 -1,863 612,241 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. More details in Note 29. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 188 Statement of changes in equity of the Company Telekom Slovenije in EUR thousand Share capital Share premium Profit reserves Retained earnings Fair value reserve for financial instruments Fair value reserve for hedging instruments in net amount Reserves for actuarial deficits and surpluses Total L egal reserves Treasury shares reserve Treasury shares Statutory reserves Other profit reserves Retained earnings from previous periods Profit or loss for the period Balance as at 1 Jan 2020 272,721 180,956 50,434 3,671 -3,671 54,544 0 48,301 585 1,171 -507 -2,069 606,136 Net profit or loss for the period 24,174 24,174 Other comprehensive income for the period - 1,390 229 - 662 - 1,823 Total comprehensive income for the period 0 0 0 0 0 0 0 0 24,174 - 1,390 229 - 662 22,351 Dividends paid - 22,769 - 22,769 Write-downs of unpaid dividends from previous years 68 68 Transactions with owners 0 0 0 0 0 0 0 - 22,701 0 0 0 0 - 22,701 Transfer of profit or loss from previous period to retained earnings 585 - 585 0 Changes in equity 0 0 0 0 0 0 0 585 - 585 0 0 0 0 Other -2 -2 31 Dec 2020 272,721 180,956 50,434 3,671 -3,671 54,544 0 26,185 24,174 -219 -278 -2,733 605,784 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 189 The consolidated and separate cash flow statement Telekom Slovenije Group Telekom Slovenije in EUR thousand Note I–XII 2021 I– XII 2020 I– XII 2021 I– XII 2020 Cash flows from operating activities Net profit for the period 37,888 24,865 34,371 24,174 Adjustments for: Depreciation/Amortisation 15, 16, 17, 22 169,056 167,279 142,175 137,351 Impairment and write-offs of property, plant and equipment, and intangible assets 686 222 0 59 Gain/loss on disposal of property, plant and equipment -1,245 285 -1,079 369 Adjustment for discontinued operations 0 5,688 0 0 Impairment and write-off of inventories 11 2,192 1,231 2,161 1,000 Net impairment of receivables 11 2,395 2,491 1,952 2,038 Change in provisions and other changes -1,005 -4,344 0 -4,500 Finance income -1,996 -2,177 -15,225 -5,724 Finance expenses 8,617 10,173 8,746 18,501 Income tax expense with deferred taxes 7,187 523 5,706 -21 Cash flows from operating activities prior to changes in working capital and provisions 223,775 206,236 178,807 173,247 Change in inventories 3,556 -5,421 2,099 -4,867 Change in trade and other receivables 2,970 -13,466 8,944 -14,761 Change in accrued and deferred asset items and contract assets 6,942 19,069 5,479 19,818 Change in provisions 3,661 1,538 3,377 1,546 Change in trade and other payables -7,332 6,077 -582 19,592 Change in accrued and deferred liability items and contract liabilities - 14,012 7,565 - 14,823 7,518 Income tax paid -691 -848 0 0 Net cash from operating activities 218,869 220,750 183,301 202,093 Cash flows from investing activities Proceeds from investing activities 6,060 5,569 32,555 17,129 Proceeds from the sale of property, plant and equipment 5,846 322 5,846 322 Dividends received 128 6 11,128 840 Proceeds from interest 7 1 2,155 2,420 Proceeds from investments in subsidiaries 0 5,000 0 5,000 Proceeds from repayment of loans and deposits 79 240 13,426 8,547 Disbursements from investing activities -199,217 -160,279 -185,521 -153,932 Disbursements from property, plant and equipment -94,693 -97,475 -82,148 -89,013 Disbursements from intangible non-current assets -104,274 -62,798 -100,673 -63,464 Investments in subsidiaries and associated companies 0 0 -1,500 0 Disbursements for loans and deposits issued -250 -6 -1,200 -1,455 Net cash used in investing activities -193,157 -154,710 -152,966 -136,803 Cash flows from financing activities Proceeds from financing activities 196,005 1,000 196,000 7,000 Proceeds from other financial liabilities 5 0 0 0 Proceeds from borrowings 170,000 0 170,000 0 Proceeds from current loans 26,000 1,000 26,000 7,000 Disbursements from financing activities -213,990 -72,136 -224,708 -71,401 Disbursements for approval of borrowings and issue of bonds -646 0 -646 0 Maturity of bonds issued -100,000 0 -100,000 0 Repayment of lease liabilities – principal -12,593 -9,819 -11,655 -9,113 Repayment of current borrowings -27,500 0 -39,100 0 Repayment of non-current borrowings -35,495 -30,801 -35,495 -30,769 Disbursements for interest -8,481 -8,747 -8,537 -8,750 Dividends paid -29,275 -22,769 -29,275 -22,769 Net cash used in financing activities -17,985 -71,136 -28,708 -64,401 Net increase/decrease in cash and cash equivalents 7,727 -5,096 1,627 889 Opening balance of cash 8,167 13,219 2,086 1,153 Effect of exchange rate changes on cash and cash equivalents 41 44 41 44 Closing balance of cash 15,935 8,167 3,754 2,086 Notes on pages 190 to 265 are an integral part of these consolidated financial statements. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 190 3.2 Notes to the consolidated financial statements of the Telekom Slovenije Group and the separate financial statements of Telekom Slovenije 1. Reporting entity Telekom Slovenije, d. d., (hereinafter: Telekom Slovenije or Company) and its subsidiaries comprise the Telekom Slovenije Group (hereinafter: Telekom Slovenije Group or Group). A detailed overview of the Group’s composition is given in the business report herein. Telekom Slovenije is a public limited company. The Company's registered address is: Cigaletova 15, 1000 Ljubljana, Slovenia. The controlling company’s shares are listed on the Prime Market of the Ljubljana Stock Exchange. The Company’s ultimate owner is the Republic of Slovenia, which holds a 62.54% share in the Company Telekom Slovenije (Note 29). The Group’s core activity is the provision of telecommunication services and products. These include fixed-line and mobile telephony services, internet and television services, installation and maintenance of telecommunications networks, system integrations of business communications, digital content, and advertising. Telekom Slovenije Group operates in the following countries: Slovenia, Bosnia and Herzegovina, Serbia, Kosovo and North Macedonia. 2. Basis for preparation a. Statement of compliance The consolidated financial statements of the Telekom Slovenije Group and separate financial statements of the Company Telekom Slovenije have been prepared in accordance with International Financial Reporting Standards (IFRS) as adopted by the European Union, and in line with the provisions of the Companies Act (ZGD-1). The Management Board approved the consolidated financial statements of the Telekom Slovenije Group and the separate financial statements of the Company Telekom Slovenije on 18 February 2022. b. Measurement bases The financial statements have been prepared based on historical cost, with the exception of: • financial assets and liabilities measured at fair value or amortised cost, and • assets held for sale measured at the lower of cost or recoverable value. The Group’s and the Company’s financial statements have been prepared based on the going concern assumption. (accounting assumption of going concern). The operations are not of seasonal nature. c. Functional and presentation currency The attached financial statements of the Telekom Slovenije Group and separate financial statements of the Company Telekom Slovenije have been prepared in Euros, which is the functional and presentation currency of the controlling company and the Telekom Slovenije Group. All financial information is presented in Euros and rounded to thousand unless otherwise defined. d. Use of significant estimates and judgements The preparation of the financial statements requires management to make certain estimates, judgements and assumptions that impact the carrying values of assets and liabilities and the disclosure of contingent liabilities on the balance sheet date and the balances of income and expenses for the period then ended. Future events and their effects cannot be determined with certainty. Accordingly, the accounting estimates made require the exercise of judgement, which changes as new events occur, as more experience is acquired, as additional information is obtained and as the business environment changes. The actual values may differ from those estimates. Estimates and underlying assumptions are reviewed on a regular basis. Changes in accounting estimates are recognised for the period in which the estimates change and in any future periods affected. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 191 Estimates and assumptions that have the most significant effect on the amounts recognised in the financial statements include: Determining the useful lives of property, plant and equipment, intangible assets, and right-of-use assets In estimating the useful lives of assets, the Group takes into account the expected physical wear and tear, as well as technical or commercial obsolescence. The adequacy of the useful lives is monitored by a working group, which annually checks the useful lives and the residual value; if expectations differ significantly from earlier estimates of depreciation/amortisation rates, the useful lives and residual values are restated for the current and future periods. For right-of-use assets, the Group and the Company determine the useful life based on the lease contract term if the latter is shorter than the useful life. If the contract is concluded for an indefinite period or is renewed annually, the expected depreciation periods for each category of assets are used. The estimated useful lives of assets are presented in Notes 3.c, 3.d in 3.e. Impairment of assets Property, plant and equipment and intangible assets The Group and the Company check on an annual basis the book values of significant items of property, plant and equipment and intangible assets in order to establish whether there is any need to impair any of the assets. Upon assessing whether indication for impairment exists, it is checked whether significant technological changes, market changes or a significant decrease in interest rates occurred. If this is the case, the asset’s recoverable amount is established. Impairment is carried out if the asset's book value exceeds its estimated recoverable amount. Impairment of goodwill is established at least once a year. For this purpose, the Group obtained a certified business appraiser and carried out a valuation on 30 November 2021 according to which the recoverable amount of goodwill exceeds its book value. Information about other significant assessments of uncertainty taken into consideration by management in the case of asset impairment are described in the following notes: - Intangible assets and goodwill – Note 3.c and Note 15; - Property, plant and equipment – Note 3.d and Note 16. Investments in subsidiaries For impairment of investments in subsidiaries, the Group checks indicators of impairment particularly for companies that reported negative operating results and/or disclosed negative equity, or if there were other indicators of impairment. In such cases, the Company obtains an estimate of the recoverable amount of investments in subsidiaries by a certified business appraiser. Cash generating units (CGU) at Group level are individual group companies. Details of establishing recoverable amounts are described in Note 3.f. Investments in interests and shares of other companies The Group and the Company record investments in shares and interests of other companies under financial assets measured at fair value through other comprehensive income. Loans granted In accordance with the requirements of standards, the Company and the Group assess on the need for impairment for loans granted as well. The method of judgement is described in Note 3.f. Trade receivables To valuate receivables in accordance with IFRS 9, the Group and the Company use a simplified approach with lifetime expected credit losses over the entire useful life. Probability of default represents the key input data used to measure expected credit losses. Probability of default is estimated based on experience from past years and future expectations. The Group’s policies are detailed in Notes 3.f, 25 and 44. Deferred tax assets Deferred tax is calculated using the balance sheet liability method, providing for all temporary differences between the book values and tax bases of assets and liabilities. The amount of deferred tax is determined based on the expected method of payment or settlement of the book value of assets and liabilities using the tax rates expected in future periods. Upon any change in the tax rate the Group and the Company would make corresponding recalculations for deferred tax assets. The Group Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 192 and the Company recognise deferred tax assets if it is probable that sufficient future taxable profit will be available, against which deductible temporary differences can be utilised. Detailed disclosure regarding the formation of deferred tax assets and liabilities is available in Notes 3.q and 13. Provisions for lawsuits Provisions are recognised if a present obligation (legal or constructive) exists as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and if the amount of the obligation can be estimated reliably. Provisions are recognised depending on management’s estimation of the amount and timing of the obligation and the probability of an outflow of resources required to settle the obligation, either legal or constructive. Managements of individual companies within the Group check regularly, i.e. on a monthly basis, whether the circumstances surrounding the formation of the amount of provisions have changed. In the event of a change, the estimate of the amount of provision may change depending on the estimated expected date and the amount of settlement. Formation of individual provisions is detailed in Notes 3.l and 31. Service concession arrangements at Soline, d. o. o. The Group assessed the importance of applying provisions of IFRIC 12 Service Concession Arrangements and SIC-29 Service Concession Arrangements: Disclosures and estimated that items from the financial statements of Soline, d. o. o. as at 31 December 2021 are immaterial and that no adjustment to individual items in the consolidated financial statements of the Telekom Slovenije Group are needed. e. New accounting standards and amendments to existing ones Initial application of new amendments to the existing standards effective for the current reporting period The following new accounting standards, amendments to the existing standards and new interpretations issued by the International Accounting Standards Board (IASB) and adopted by the EU, are effective for the current reporting period: COVID-19-Related Rent Concessions Amendment to IFRS 16 beyond 30 June 2021 and effective for annual periods beginning on or after 1 April 2021. The amendment provides lessees (but not lessors) with relief in the form of an optional exemption from assessing whether a rent concession related to COVID-19 is a lease modification. Lessees can elect to account for rent concessions in the same way they would as if they were not lease modifications. In many cases, this will result in accounting for rent concessions in the form of variable lease payments. The practical expedient only applies to rent concessions occurring as a direct consequence of the COVID-19 pandemic and only if all of the following conditions are met: the change in lease payments results in revised consideration for the lease that is substantially the same as, or less than, the consideration for the lease immediately preceding the change; any reduction in lease payments affects only payments due on or before 30 June 2021; and there is no substantive change to other terms and conditions of the lease. If the lessee chooses to apply the practical expedient, this would mean that the subject practical expedient is consistently applied to all leases with similar characteristics and similar circumstances. The amendment needs to be applied retrospectively in accordance with IAS 8, however, in accordance with paragraph 28 (f) of the IAS 8, the lessees need not amend the data/numbers from previous periods or declare any disclosures. The amendment was expected to be applicable until 30 June 2021, however, as the impact of the Covid-19 pandemic continued, IASB had, on 31 March 2021, extended the period of application of the practical expedient until 30 June 2022. The amendment is applicable for annual periods beginning on or after 1 April 2021. The Group and the Company did not make significant COVID-19-related rent concessions. The Group and the Company have applied certain standards and amendments which apply to annual periods beginning on or after 1 January 2021 (unless otherwise stated) for the first time. The Group has not adopted early any other standard, clarification, or amendment that has been issued but is not yet valid. Interest rate benchmark (IBOR) reform – phase 2 amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (issued on 27 August 2020 and effective for annual periods beginning on or after 1 January 2021). The Phase 2 amendments address issues that arise from the implementation of the reforms, including the replacement of the existing benchmark with an alternative one. The amendments cover the following areas: - Accounting for changes in the basis for determining contractual cash flows as a result of IBOR reform: For instruments to which the amortised cost measurement applies, the amendments Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 193 require entities, as a practical expedient, to account for a change in the basis for determining the contractual cash flows as a result of IBOR reform by updating the effective interest rate using the guidance in paragraph B5.4.5 of IFRS 9. As a result, no immediate gain or loss is recognised. This practical expedient applies only to such a change and only to the extent it is necessary as a direct consequence of the IBOR reform, with the new basis being economically equivalent to the previous basis. Insurers applying the temporary exemption from IFRS 9 are also required to apply the same practical expedient. IFRS 16 was amended in such a way that it requires lessees to use a similar practical expedient when accounting for lease modifications that change the basis for determining future lease payments as a result of the IBOR reform; - End date for Phase 1 relief for non-contractually specified risk components in hedging relationships: Phase 2 amendments require an entity to cease to apply Phase 1 reliefs in the future for the non-contractually specified risk components when changes are made to the non- contractually specified risk component, or when the hedging relationship is discontinued, depending on whichever occurs earlier. No end date was provided in Phase 1 amendments for risk components; - Additional temporary exceptions from applying specific hedge accounting requirements: Phase 2 amendments provide some additional temporary reliefs from applying specific IAS 39 and IFRS 9 hedge accounting requirements to hedging relationships directly affected by the IBOR reform; - Additional IFRS 7 disclosures related to IBOR reform: The amendments require disclosure of: (i) how the entity is managing the transition to alternative benchmark rates, its progress and the risks arising from the transition; (ii) quantitative information on derivatives and non-derivatives that have yet to transition, broken down by significant interest rate benchmark; and (iii) a description of any changes to the risk management strategy as a result of the IBOR reform. The Telekom Slovenije Group and the Company Telekom Slovenije anticipate that the adoption of these new standards and amendments to the existing standards will have no material impact on the financial statements of the Group and the Company in the period of initial application. Amendments to other accounting standards that are not binding for the Group and the Company or that are not relevant for the Company, will not have an impact on the financial statements and are therefore not disclosed. 3. Summary of significant accounting policies a. Basis for consolidation The consolidated financial statements are comprised on the basis of the financial statements of the controlling company Telekom Slovenije and its subsidiaries for the financial year 2021. Financial statements of individual Group companies have been prepared for the same reporting year as the financial statements of the controlling company using consistent accounting policies. In the event of inconsistencies in accounting policies, individual companies make the relevant modifications in their financial statements, which form the basis for the consolidated financial statements. Business combinations Business combinations are accounted for using the acquisition method on/as of the date when the the controlling company obtains control over the subsidiary. The acquired assets and liabilities are recognised in the consolidated financial statements at fair value estimated on the acquisition date. The excess purchase consideration of the net fair value of the acquired assets is disclosed under intangible assets as goodwill. If the excess purchase consideration is negative, it is recognised directly in the statement of profit or loss as finance income. Subsidiaries Subsidiaries are entities controlled, indirectly or directly, by the Company Telekom Slovenije via its own subsidiaries. The Company controls a subsidiary if it is exposed to or has rights to variable returns from its involvement with the company. Control exists when the controlling company Telekom Slovenije has the ability to affect the financial and business decisions of the company in order to benefit from its operations. Financial statements of subsidiaries are included in the consolidated financial statements from the date on which such control begins. Subsidiaries are de-consolidated from the consolidated financial statements from the moment when the control over the subsidiary by the controlling company or another Group company ceases. If control over a subsidiary ceases during the year, the consolidated financial statements include the results of the subsidiary up until the date on which such control over the subsidiary still existed. Upon loss of control, all assets and liabilities of the subsidiary are derecognised and the gain or loss due to the deconsolidation is recognised in the consolidated statement of profit or loss. If the Group retains an interest in the previous subsidiary, this interest is Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 194 measured at fair value as at the date of losing control. Subsequently, this interest is accounted for as investment in an associate (applying the equity method) or as financial investment in equity instruments in accordance with IFRS 9, depending on the level of control in equity. Consolidated financial statements do not include intra-group transactions, assets and liabilities, equity, income and expenses, and cash flows between Group companies. b. Foreign currencies Foreign currency transactions Foreign currency transactions are translated into the functional currency using the exchange rate at the date of the transaction. Cash, receivables and liabilities and other monetary assets are translated into the functional currency on the balance sheet date using the daily exchange rate as at the balance sheet date. Non-monetary assets and liabilities expressed in a foreign currency and measured at historical cost are translated using the exchange rate applicable on the date of transaction. Non- monetary assets and liabilities expressed in a foreign currency and measured at fair value are translated using the exchange rate as at the date on which the fair value was determined. All exchange rate differences are recognised in the statement of profit or loss, except for differences that arise on restatement of investments in equity instruments classified as measured at fair value through other comprehensive income that are recognised directly in other comprehensive income. Companies conducting business operations in foreign currencies On the reporting date, foreign subsidiaries whose functional currency is not Euro translate their assets and liabilities into Euro by using the exchange rate of the European Central Bank (ECB) as at the reporting date, while the average exchange rate of the reporting period is applied for the statement of profit or loss. Until the foreign subsidiary is disposed of, exchange differences that occur in the translation from the functional into the presentation currency are recorded in the statement of other comprehensive income and accumulated within equity as translation reserve; Upon the disposal, these exchange differences are transferred from the other comprehensive income to the statement of profit or loss. c. Intangible assets An item of intangible assets is recognised when it is probable that future economic benefits associated with the item will flow to the the Group or the Company and the cost of the item can be measured reliably. Upon initial recognition, intangible assets with finite useful lives are stated at cost less accumulated amortisation and less any impairment possible losses. For intangible assets with an indefinite useful life, it is ascertained at least once a year whether they need to be impaired in accordance with IAS 36. All intangible assets have finite useful lives, except the item of goodwill. The Group and the Company monitor the useful lives of significant items of intangible assets through administrators of these assets and within a working group, which annually checks the useful lives and residual values. If estimated expectations differ significantly from the applicable estimates of amortisation rates, the impact is restated for the current and future periods. The effect of such a change is described in the notes within the accounting period in which the change in estimate occurred. Compared to the previous year, estimated useful lives have not changed. Amortisation of intangible assets is accounted on a straight-line basis over their estimated useful lives and begins when assets are available for use. Estimated useful lives of groups of intangible assets for the year 2021 Groups of intangible assets Useful lives in years – concessions 15 to 20 – trademarks 10 – licences 1 to 7 – programme rights – TV content 1 to 6 – cost of obtaining contracts with customers 2 to 3.5 – customer list 3 to 5 – computer software 3 to 7 – other property rights, patents, trademarks and licences 3 to 20 The costs of concessions obtained for the use of the radio frequency spectrum are capitalised at cost and amortised on a straight-line basis over the useful life of the concession contract, which is between 3 and 20 years – Note 45. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 195 The costs of obtaining contracts with customers are costs that are directly related to the obtaining of subscribers and represent additional costs the Group and the Company have with obtaining contracts with customers and which would not have been incurred had the Group or the Company not obtained the contract. Sales commissions are recorded as costs of obtaining contracts with customers and are amortised in line with the transfer of the economic benefits to the customer, i.e. within the period of expected contract term. If terminated subscriptions and subsequent accounting of sales commissions exceeded 5% of the annual capitalised commissions, the Group would adequately decrease intangible assets relating to sales commissions. The termination-related estimate is verified on an annual basis. Capitalised costs comprise costs of material, direct labour costs, and other costs that can be directly attributed to bringing the asset to the condition necessary for the intended use. The Group and the Company monitors by project administrators to ensure that only those costs are capitalised that meet the criteria defined. Development costs are recognised under intangible assets if they can be measured reliably, if the product or the process is technically and commercially feasible, if future economic benefits will result from its use, if sufficient resources are available to complete development and if the entity intends to use or sell the asset. An intangible asset is derecognised upon disposal or when no future economic benefit is expected from its use or disposal. Gains or losses arising from the derecognition of an intangible asset and measured as the difference between the net disposal proceeds and the book value of the asset are recognised in the statement of profit or loss upon their derecognition. Through administrators of assets the Company assess annually whether there are any internal or external circumstances which could provide significant indication that any of the intangible assets should be impaired. Upon assessment of whether this indication of impairment of intangible assets exists, it is checked whether significant technological changes, market changes or a significant decrease in interest rates occurred. If such indications exist, the asset’s recoverable amount is determined. Impairment is carried out if the book value of an intangible asset exceeds its recoverable amount. The Group and the Company plan positive results and cash flows for the current and coming years as well as cash flows from economic benefits of intangible assets, therefore, the need for impairment was not established. Goodwill Goodwill arises upon acquiring a subsidiary and is measured at cost less accumulated impairment losses. Impairment of goodwill is established for the cash generating unit (CGU) at least once a year. Determining the present value requires the management to estimate future cash flows from the CGU and set an appropriate discount rate. Impairment is recognised in the statement of profit or loss among other operating expenses under the item 'impairment of intangible assets and property, plant and equipment. d. Property, plant and equipment Upon acquisition, items of property, plant and equipment owned by Group companies are disclosed at their cost. Cost includes all costs that may be directly attributed to getting an item of property, plant and equipment ready for its intended use. Estimated costs of restoring locations for receiving-transmitting stations to their original condition are disclosed as an integral component of the asset's cost and are amortised over the asset's residual useful life. Provisions required to restore the original condition, discounted to present value, are reported under non-current provisions. The cost of an item of property, plant and equipment constructed/made within the Group companies includes the costs of material and direct labour. The costs of construction/making of property, plant and equipment which are included in cost are recognised as cost reduction within profit or loss. When an item of property, plant and equipment comprises major components with different useful lives, these components are accounted for as separate items of property, plant and equipment. Subsequent costs relating to property, plant and equipment increases their cost if it is probable that their future economic benefits will flow to the Group or Company. The progress of projects and investments is monitored by the Group and the Company through project administrators on a monthly basis. If it is established that a certain project will not be finished, a write- off is carried out. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 196 Upon initial recognition, property, plant and equipment are measured at cost and reduced according to value due to depreciation or potential impairment. Residual values and useful lives of significant items of property, plant and equipment are reassessed on an annual basis and if expectations differ significantly from earlier estimates, depreciation rates are adjusted for the current and future periods. The effect of the change in estimate is described by the Group and the Company in the notes on the accounting period in which the change in estimate occurred. Depreciation is recognised in the statement of profit or loss on a straight-line basis over the estimated useful lives of items of property, plant and equipment. Estimated useful lives of groups of property, plant and equipment for the year 2021 Groups of property, plant and equipment Useful lives in years – buildings 50 – electrical and machine installations 15 to 30 – cable lines 33.3 – cable network – air 10 – cable network – land 20 to 25 – exchange switches 5 to 12.5 – other equipment 1 to 15 Compared to the previous year, estimated useful lives have not changed. Items of property, plant and equipment under construction are recognised at their cost formed thus far. Land and items of property, plant and equipment under construction are not depreciated. Depreciation begins when items of property, plant and equipment are made available for use. An item of property, plant and equipment is derecognised upon disposal or when no future economic benefit is expected from its use or disposal. Gains or losses arising from the derecognition of an item of property, plant and equipment, measured as the difference between the net disposal proceeds and the book value of the asset, are recognised in the statement of profit or loss upon their derecognition. Administrators of fixed assets assess annually whether there are any internal or external business circumstances (significant technological changes, market changes, obsolescence or physical condition of an item of property, plant and equipment) that could provide significant indication on the (non- )suitability of the useful life or indication that an item of property, plant and equipment should be impaired. An item of property, plant and equipment is subject to impairment if its book value exceeds its recoverable amount. The recoverable amount equals fair value, less the estimated costs of sale or value in use, whichever is higher. Value in use is assessed as the present value of expected future cash flows, whereby the expected future cash flows are discounted to the present value by means of the discount rate before income taxes. Impairment of property, plant and equipment equipment is recognised in the statement of profit or loss among other operating expenses under the item “impairment of intangible assets and property, plant and equipment. . The Group and the Company plan positive results and cash flows for the current and coming years as well as cash flows from economic benefits of property, plant and equipment, therefore, the need for impairment was not established. e. Leases The Group and the Company as the lessee Upon signing the lease contract, the Group and the Company assesses whether the contract contains a lease in line with IFRS 16. Under this standard, a contract is, or contains, a lease if it conveys the lessee the right to control the use of an identified asset for a period of time in exchange for consideration. The Telekom Slovenije Group and the Company Telekom Slovenije have not used exemptions envisaged by the standard for low-value lease contracts and for leases expiring earlier than 12 months from the initial application. For lease contracts, the standard requires a lessee to recognise a right-of-use asset (lease liability) at the start of the lease. A right-of-use asset is recognised on the day the lease begins, i.e. when the asset is available for use. The initial measurement of an asset includes the amount of the lease liability at its initial recognition (discounted present value of lease payments outstanding as at that date), lease payments made at or before the lease commencement date less any lease incentives received and an estimate of potential costs to be incurred by the lessee in dismantling and removing the underlying asset. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 197 Variable lease payments, which are not subject to inflation or interest rates are not included in the measuring of lease liabilities and the right-of-use assets. The related payments are recognised upon emergence of an event as an operating expense. Right-of-use assets are subsequently measured at cost less any accumulated depreciation and less impairment losses and adjusted for any remeasurement of the lease liability. The asset is depreciated from the beginning of the lease until the end of its useful life or until the end of the lease term, whichever is shorter. If the contract is concluded for an indefinite period or is renewed annually, the expected depreciation periods for each category of assets are used. Right-of-use assets are classified in the groups stated below. In the case of contracts of indefinite duration, the following useful lives are applied: Category or right-of-use assets Useful lives in years Base stations – easement and lease 15 Rental of premises 10 Technological premises – easement and lease 15 Lease of lines 15 Other 5 Compared to the previous year, estimated useful lives have not changed. Indication of impairment is annually checked and in case of their occurrence, their recoverable amount is determined. In the event of impairment, such impairment is recognised in the statement of profit or loss in line with IAS 36. Lease liabilities are recognised on the asset’s lease commencement date at the present value of lease payments that have not been paid yet. Liabilities represent discounted contractually agreed rents, while some contracts also include adjustment of liabilities to amend the cost of living index. The discount rate is determined using the interest rate derived from borrowing costs and based on the interest rate at which the Group and the Company, taking credit rating into account, can obtain a loan for the purchase of property, plant and equipment of a comparable amount (value) and maturity. Upon subsequent measurement of lease liabilities, the latter increase to reflect the interest on the lease liability and decrease by the value of the lease payments, additionally, in the event that the lease terms change, the present value is remeasured based on a reassessment of future lease payments or a change in the lease term (duration or price). After the lease commencement date, the financial liability from lease is remeasured using the new discount rate if the lease term or future lease payment amount has changed. If a lease is terminated or there is a decrease in scope, the gain or loss associated with the partial or full termination of the lease is recognised in the statement of profit or loss. Lease liabilities are recognised under non-current liabilities, except for liabilities that will be settled over the following 12-month period from the balance sheet date and are stated in the balance sheet as current lease liabilities. Leases comprise the lease of lines, business and technological premises, the creation of easement or lease of land or premises for base stations, and functional locations. Inter-operator leases in Slovenia are regulated by published price lists for most services. Non-current leases are subject to conclusion of contracts with a fixed-term period of predominantly 15 years. For business premises, base stations and functional locations, easement compensation or lease payment is set on the basis of agreements, valuations and the lessors’ price lists. Lease contracts are concluded for a definite or indefinite period of time, while easement agreements are entered into for the period of operation of electronic communication network and the pertaining infrastructure, or for a fixed term with the possibility of extension based on new negotiations. Contracts or agreements concluded for an indefinite period of time and for the period of operation can be terminated based on certain conditions. These are as follows: - the lessee or the easement beneficiary may terminate the contract in writing within 3 months if the property in question does not meet the technical requirements or is no longer necessary; - the owner can terminate the contract without a notice period if the lessee destroys the building; - a notice period of 3 to 12 months applies if the lessee breaches provisions of the concluded contract; - the possibility of termination by the owner within 1 year pursuant to provisions of the Code of Obligations and the Office Buildings and Business Premises Act. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 198 The Group and the Company as the lessor The Telekom Slovenije Group and the Company classifies all leases under operating leases, as the lease does not involve transferring all significant risks and benefits connected to the ownership of the asset that is the subject of the lease. Lease payments arising from operating lease are recognised as income in the statement of profit or loss within the lease term period. These refer primarily to co- locations, lease of business premises and base stations. For the purpose of determining possible lease payments, sample contracts are provided for regulated services, while commercial tariffs are applied for unregulated services. The bases for lease payments are prepared under the same terms and conditions as when the Group acts as a lessee. Lease contracts for the use of premises, co- locations and base stations are mostly concluded for an indefinite period of time. The notice periods range from 2 to 12 months. The right to terminate the contract lies with the customer under the terms set out in the subject contract. In case of extraordinary circumstances (default) the contract may also be terminated by the Group. f. Financial instruments Financial assets A financial asset is recognised when the Group or the Company becomes a party to contractual provisions of the financial instrument. When a financial asset is recognised for the first time, the classification will depend on the business model for managing financial assets and on their contractual cash flow characteristics of the acquired financial asset, then the asset will be classified into one of the following categories: – financial assets measured at amortised cost; – financial assets measured at fair value through other comprehensive income. Financial assets measured at amortised cost are financial instruments which the Group and the Company hold within a business model whose objective is to hold financial assets in order to collect contractual cash flows and the financial asset gives rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding. This category includes borrowings, trade and other receivables, deposits, cash and cash equivalents. Borrowings and receivables are recognised on day of the settlement and are initially measured at fair value, plus any direct transaction costs. Upon initial recognition, they are measured at amortised cost using the effective interest rate method, less expected credit losses. Incurred profit and loss is recognised in the statement of profit or loss: – if the financial asset is derecognised; – if the financial asset is reclassified into a category measured at fair value through profit or loss; – as a result of impairment. Financial assets measured at fair value through other comprehensive income This category includes investments in debt and equity financial instruments or shares and interests of other companies. Upon initial recognition of investments in equity instruments not held for trading, the Group irrevocably decides to measure these investments at fair value through other comprehensive income. This decision is made individually for each asset. The fair value of investments that are listed on the stock exchange is measured at the closing stock market price on each reporting date. Investments are recognised/derecognised as at the date of purchase/sale, respectively. Any gains or losses arising from changes in fair value of the financial asset are recognised in other comprehensive income and presented directly in capital within the financial instruments fair value reserve in the net amount. Amounts presented in other comprehensive income may not be subsequently transferred to profit or loss. However, the Group may transfer the cumulative gain or loss within equity’s item. Dividends received on such investments are recognised in profit or loss only: – upon establishment of the company’s right to receive a dividend; – if it is likely that economic benefits arising from the dividend will flow into the company, and – if it is possible to reliably measure the amount of the dividend, except if the dividend clearly represents a recovery of part of the cost of the investment. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 199 Derivative financial instruments are used to hedge a company's exposure to risks arising from financing and investing activities. The method of recognition of gains or losses arising from the change in fair value of these instruments depends on whether hedge accounting has been applied or not. Interest rate swap liabilities are measured at fair value obtained by the Company from the banks participating in the transaction. The Company checks at least on a three-month basis whether interest rate hedging is still adequate and, if so, discloses valuation effects in other comprehensive income. In the event of positive valuation, the fair value is disclosed in the balance sheet under financial assets, and in the event of negative valuation, it is disclosed under financial liabilities. Trade and other receivables Trade receivables are amounts of receivables due from business partners from the sale of goods and services within the ordinary course of business. To measure expected credit losses in accordance with MSRP 9, the Group uses a simplified approach. Impairment of receivables is calculated as the amount equal to the expected credit losses over the entire useful life of a receivable. To measure expected credit losses, receivables were grouped together on the basis of common credit risk characteristics and maturities. Expected loss rates are based on payment data in the last 36 months and past credit losses incurred during the subject period. The effect of future-facing macroeconomic data on expected credit losses was assessed as insignificant. Loss due to impairment of receivables is recognised among operating expenses in the statement of profit or loss and as decrease (impairment of receivables). Impairment of financial assets In line with IFRS 9, the Group and the Company use the expected loss model , and must, in addition to the losses incurred, recognise losses expected to arise in the future. To that end, the Group and the Company assess evidence of impairment of financial assets. On each reporting date, the Group and the Company must recognise expected credit losses for the entire duration, for all financial assets where an increase in credit risk has been noted since initial recognition. In this context, they consider all relevant and provable information, including future-facing information. To estimate impairment, the Group and the Company apply the ECL measurement methodology, which is based on the risk parameters: - Exposure at Default (EAD), - Probability of Default (PD) and - Loss Given Default (LGD). The risk parameter assessments, which they consider in estimating expected credit losses, are based on a combination of own and external (market) data. For the purpose of potential impairment, financial assets are assessed individually. If, on the reporting date, the credit risk for the said financial instrument has not significantly increased since initial recognition, the Group and the Company recognise net impairment losses on financial and contract assets as an amount that is equivalent to expected credit losses over an Income 12-month period. For trade receivables and current contract assets that do not include a significant financing component, a simplified approach is used which requires credit loss to always be measured as an amount that is equivalent to expected credit losses in the entire duration. In 2021, the Group and the Company did not change the valuation technique or significant assumptions in assessing impairment of these financial assets. Derecognition of financial assets A financial asset is derecognised when: - the contractual rights to receive cash flows from the financial asset are transferred, or - contractual rights to receive cash flows are retained, but an obligation to pay those cash flows to one or more recipients (ultimate beneficiaries) is assumed and there is no obligation to pay any amounts unless the relevant amounts from the underlying asset are received. On derecognition of an entire financial asset, the difference between its book value (on the date of Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 200 derecognition) and the consideration received (including any newly acquired asset, minus any newly- undertaken liability) is recognised in profit or loss, with the exception of investments in shares and interests of other companies, for which the Group and the Company irrevocably decided to present subsequent changes in fair value under other comprehensive income. Financial liabilities The Group’s and the Company’s financial liabilities mainly comprise borrowings. Upon initial recognition, borrowings are disclosed at their fair value less possible costs. After initial recognition, borrowings are stated at amortised cost using the effective interest rate method. Under financial liabilities, liabilities arising from profit or loss distribution (dividends) are disclosed as well until they are paid out. Dividends are recognised as a liability in the period in which they are approved at the General Meeting of Shareholders and at the amount at which they are approved. Borrowings are derecognised when all contractual obligations and liabilities are fulfilled, annulled or statute-barred. Trade and other payables Upon initial recognition, trade and other payables are disclosed at fair value. Subsequently, they are stated at amortised cost. Non-current trade payables primarily include programme rights and other payables arising from operating activities. Investments of the Company Telekom Slovenije in subsidiaries Investments in subsidiaries are disclosed in Telekom Slovenije’s separate financial statements at cost, less any impairment losses. Investments in subsidiaries are recognised on the date when risks and benefits are transferred to the controlling company, i.e. when control is obtained. The Group has no investments in associates and joint ventures. Indications for impairment of investments in subsidiaries are assessed primarily under two criteria, namely:  comparing the investment's book value with the proportionate share of the book value of the total equity of the subsidiary on the cut-off date. Indication of impairment exists when the book value of the investment on cut-off date exceeds the subsidiary’s proportionate share of equity by more than 20%;  comparing the key indicators for the financial year with projections of the subsidiary’s operation. g. Investment property Investment property is initially stated at cost. The cost of an investment property comprises its purchase price and costs that may be directly attributed to the acquisition (transaction costs). After initial recognition, investment property is stated at cost less accumulated depreciation and impairment losses. Depreciation is calculated on a straight-line basis over the useful lives of the assets. Land is not depreciated. The useful life of investment property equals the useful lives of property, plant and equipment. Indication of impairment is assessed in the same way as for property, plant and equipment. Investment property is derecognised upon disposal or when it is permanently withdrawn from use and no future economic benefits are expected. Gains or losses arising from the derecognition of an item of property calculated as the difference between the net disposal proceeds and the book value of the asset are recognised in the profit or loss for the period during which the item of property is derecognised. h. Assets held for sale Assets held for sale are assets that are expected to be recovered through sale rather than through continuing use. The sale of these assets must be highly probable and anticipated in the coming 12 months. The sale is highly probable when the Group or the Company receives a buyer’s written commitment for purchasing the assets. Assets are reclassified under assets held for sale at the lower of their book value and fair value, less costs to sell. Assets held for sale are not subject to depreciation. Impairment losses on assets held for sale are recognised in the statement of profit or loss under “other Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 201 operating expenses”, “impairment of intangible assets and property, plant and equipment” (Note 11). The Group and the Company periodically check whether the asset meets the criteria for being classified as held for sale. If the asset no longer meets these criteria, it is reclassified back as an item of property, plant and equipment. This type of assets are measured at the lower of the following values: – book value prior to the asset's classification among assets held for sale, adjusted for possible depreciation that would have been recognised if a property were not classified as property held for sale; – the recoverable amount on the date of the subsequent decision that the asset will not be sold. Adjustments of the book values of assets which are no longer treated as assets held for sale are included in the profit or loss for the period in which the recognition criteria are no longer met. i. Inventories Inventories are initially recognised at cost comprising the purchase price inclusive of discounts granted, import duties and other non-refundable purchase duties, as well as costs directly attributable to the acquisition. Inventories are accounted for using the moving average price method. Slow-moving, obsolete or damaged inventories are impaired to their net realisable value, which is lower than the book value or the estimated sales value in the ordinary course of business, less the estimated costs of completion and costs of selling the quantity unit. j. Deferred costs They mainly represent prepaid costs of leased capacities of the lines not defined under lease according to IFRS 16 and other assets deferred that are transferred on a straight-line basis to costs, with the transfer commencing on the effective date of the contract. In terms of duration, they are classified as non-current (over 12 months) and current assets (up to 12 months). Deferred costs include mostly costs in connection with calculation of international services. k. Cash and cash equivalents Cash and cash equivalents include cash in hand and available bank balances, short-term deposits with original maturity of up to 3 months, where the risk of fair value change is minimal. l. Provisions Provisions are recognised if a present obligation (legal or constructive) exists as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation, and if the amount of the obligation can be estimated reliably. If the effect is material, provisions are determined by discounting the expected future cash flows. Obligations with uncertain timing and amount are treated depending on management’s estimation of the amount and timing of the obligation and the probability of an outflow of resources that will be required to settle the obligation, either legal or constructive. Contingent liabilities are not recognised in financial statements as their exact amount could not be measured reliably or their existence will be confirmed only upon the occurrence or non-occurrence of one or more uncertain future events not wholly within the control of the Group or the Company. The management of each Group company continually assess contingent liabilities to determine whether an outflow of resources embodying economic benefits has become probable. In this case, a provision is recognised in the financial statements of the period in which the change in probability occurs. Provisions are reduced directly by costs or expenses for the covering of which they were created. Provisions for liabilities from legal claims are formed on the basis of the estimate of the litigation outcome made by the relevant departments or external parties. The formation of provisions is assessed individually in view of the amount of the legal claim, its subject matter, the plaintiff's assertions and the course of each individual procedure. Due to uncertainty, actual liabilities may differ from those initially assessed. Management's estimates may change if new information is received. Amendments to these estimates can have a significant impact on the business results. The amount of provisions for liabilities from legal claims is disclosed in Note 31. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 202 Provisions for severance pays upon retirement and jubilee rewards are formed based on statutory requirements, collective agreements and internal rules and regulations, according to which the company is obliged to pay severance pays upon retirement and jubilee rewards. Provisions are formed based on an actuarial calculation prepared by a certified actuary. They are formed in the amount of estimated future payments of severance pays upon retirement and jubilee rewards discounted at the balance sheet date. A calculation is made per individual employee, taking into account the cost of severance pays upon retirement and the cost of all expected jubilee rewards by the time of retirement. At each year-end, the amount of provisions is assessed and either increased or decreased accordingly. This applies mostly for determining the discount rate, the estimate of staff fluctuation and salary growth. The estimate on these liabilities can change in the future due to the complexity of the actuarial calculation and its long-term nature. Assumptions applied are disclosed in Note 31. Provisions for costs of removing base stations refer to the costs of removing receiving-transmitting base stations and restoring leased property to its original condition. Provisions are considered the best estimate for the costs of removal of base stations. They are recorded at the amount of the discounted value for the duration of the concession contract. The applied discount rate is based on the long-term return rate of the risk-free securities. The cost analysis on the removal of base stations, which is usually compiled every three years, is used as basis for the estimate. As at the year-end, the Group and the Company assess whether the amount of formed provisions is sufficient; if not, the value is properly adjusted. Provisions for restructuring the company refer to severance payments to employees upon staff restructuring and are formed when they become part of a strategic business plan and the dynamics of employment-related changes (changed number of staff) is known. m. Non-current trade payables Non-current trade payables primarily include programme rights and other payables arising from operating activities. n. Accrued costs Accrued costs comprise costs of unused annual leave, costs arising from calculation of international services assessed on the basis of turnover made for which invoices have are not yet been received, and other accrued costs. Differences between accrual and actual costs are included in profit or loss upon the receipt of invoices. If no invoice is received for the already accrued costs within three years after recognition, they are derecognised after this period expires. The latter does not apply to costs arising from calculation of international services, whose derecognition is assessed individually. o. Sales revenue Sales revenue is recognised solely on the basis of the contract entered into with the customer. It is recognised when goods and services are transferred to the customer in the amount that reflects the compensation expected in exchange for these sold goods and services. Each promised good or service is treated as a separate performance obligation if it is distinct. It is distinct when the customer can benefit from said good or service. Performance obligation is a promise to provide goods or services to the customer. The Group and the Company have identified the following performance obligations: – service, – goods. In the case of contracts with customers with a term of 12 or 24 months that include several performance obligations (e.g. partially subsidised mobile phone or other communication device, bundled with the service), the price of the whole transaction is allocated to individual performance obligations on the basis of relative stand-alone selling prices of the device and service. Revenue from the sale of goods is recognised immediately, while revenue from services is recognised over the contractual term. In this context, recognised contract assets are those associated with the right to consideration for sold goods or services which were rendered, but not billed, on the reporting date. Payments are due in up to 90 days. The value of the whole transaction is the amount of the compensation expected in exchange for transferring promised goods or services. The value can be fixed or variable. Revenue is recognised when the performance obligation is satisfied, i.e. when control of a good or service is transferred to a customer. Control means that the customer has the ability to direct the use of and obtain substantially all of the main benefits from the asset and the ability to prevent others from directing the use of and obtaining the benefits from the asset. With services where performance Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 203 obligations are met gradually, the Group and the Company recognise revenue on a monthly basis in the amount that directly corresponds to the value of the part of the obligation fulfilled up to that moment. On the basis of services rendered or the transfer of goods to the customer, the Group and the Company recognise revenue in the accounting period in which the services or transfer of goods are performed and in the amount it is entitled to charge. Discounts granted upon contract signing are allocated between all performance obligations and are deferred over the contract term. All discounts granted subsequently are recognised in the period for which they were granted, as a revenue decline. Revenue is recognised in a net amount, exclusive of value added tax, other taxes and any sales-related discounts. Revenue relating to the mobile segment includes revenue from connection fees, subscriptions, conversations, messages, data transfer, roaming out and additional services (e.g. service with added value, M-vrata), and revenue from the sale of mobile phones and accessories. Revenue from the sale of prepaid cards is deferred and recognised in the period when the customer uses prepaid services. Should the customer fail to make use of them, the revenue is recognised when the validity of an individual prepaid account expires. Revenue from the fixed-line segment comprises revenue from connection fees, subscriptions, conversations, and revenue from the sale of merchandise. Fixed-line services comprise revenue from broadband services, classic fixed-line phone services and Centrex, fixed-line data services (services with added value), data communication, IT-services and goods, and revenue from other telecommunications services. Connection fees in the mobile and fixed-line segment are recorded in the period in which the connection of the customer is completed. Subscriptions are charged on a monthly basis. Revenue from services with added value is disclosed on the net basis in the amount of the contractual commission. Revenue from IT services and goods (e.g. system integrations, cloud computing, management of integrated IT solutions) is recorded depending on the contractual relationship with the customer. For providing services and maintenance thereof, the revenue is charged on a monthly basis or deferred in the contract period. Revenue generated from the sale of licences or IT products is recognised in the period when the sale is made. Revenue from new services mainly include the income from electricity and financial services (VALÚ Moneta), eHealth and insurance. In the sale of electricity, the Group and the Company act as the principal, and therefore revenues are recognised on the gross basis. Excise duty, contributions and use of network for electricity are not included in sales revenue. Revenue from wholesale market comprises broad-band access, stream broad-band access, network interconnection, lease of network, national tracking, and foreign inter-operator services. Revenue from network interconnection is recognised based on the estimated value expected in view of the traffic performed in the previous month. Monthly differences between estimated and actual revenue arise mostly as a result of the tolerance allowed with data about traffic, and the price changes. The tolerance allowed differs from one contract to another, amounting to a maximum of 2% of the contractual value. These differences are included in profit or loss when the actual balance of revenue is established. Revenue is recognised on the gross basis, as the Group provides services by means of own network and equipment, based on contractually defined prices. Revenue is recognised in the period in which the services are rendered. Other revenue and other merchandise of the Telekom Slovenije Group include revenue generated through network construction and maintenance by GVO, business IT solutions provided by Avtenta, salt and related products of the company Soline, and multi-media contents of TSmedia. With services where performance obligations are met gradually (e.g. telecommunication network construction and maintenance), the , Group recognises revenue on a monthly basis in the amount that directly corresponds to the value of the part of the company’s obligation fulfilled up to that moment. The Group measures gradual progress towards complete fulfilment of performance obligation by applying the output method. The Group has contracts in place under which the interim situation in terms of the work done is established on a monthly basis. Based on the completed situations confirmed by the customer, a monthly invoice is issued and revenue is recognised. Other revenue and other merchandise of Telekom Slovenije include costs of income from rendering support services for subsidiaries, lease of premises and equipment, tourism, other non- telecommunication services, and income from the sale of material and other merchandise. In all previously mentioned cases, the Group and the Company observe the policy of concurrent Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 204 recognition of revenue and costs in the period when the service is rendered or goods sold, regardless of when the payment is made. Contract assets and contract liabilities A contract asset from contracts with customers is the Group’s and the Company’s right to consideration in exchange for goods or services that the Group or the Company has transferred to a customer, if this right is conditional on something other than the passage of time (e.g. the performance of future obligations). A contract asset arises if goods or services are transferred to a customer before the consideration is paid. In terms of time, assets are classified as non-current and current contract assets. It is checked on the reporting date whether contract assets should be impaired. To determine impairment of contract assets which do not include a significant financing component, a simplified approach is used, which requires impairment loss to always be measured as an amount that is equivalent to expected credit losses in the entire duration. The Group and the Company impair the contract assets for expected losses. Upon terminating a contract, the contract asset is derecognised and expense arising from write-off of contract assets is recognised. Contract liabilities are obligations to transfer goods or services to the customer, for which The Group and the Company have already received consideration from the customer. Contract liabilities, regarding which it is expected that the goods or services will be transferred to the customer in a period longer than 12 months, are recorded as non-current liabilities. Contract liabilities mainly refer to co-locations billed in advance, which are defined as a service under IFRS 15 and are transferred among operating income according to the contractually agreed term of co-location. Contract liabilities involve the estimate of issued credit notes arising from calculation of international services, valued by turnover made, liabilities arising from the sale of prepaid phone cards, and the customer loyalty programme. Co-funded projects refer to cash received from these projects. Upon terminating a contract with customers, which caused the liability to be recognised, the liability is derecognised and income arising from write-of of liabilities from contracts with customers is recognised. Government grants and co-funded projects Government grants from co-funded projects are recognised in the balance sheet depending on the contract and documentation for an individual project, when there is assurance that the Company will receive the grant and fulfil the related conditions. Deferred income refers to cash received from projects, which is not yet income, as the costs which these amounts are meant to cover have not been incurred yet. The Group and the Company reverse the recognition of such accruals and deferrals by calculating eligible costs. Accrued revenue arises when project-related costs have already been incurred but the conditions for issuing the invoice have not been fulfilled yet. In line with IAS 20 - Accounting for Government Grants and Disclosure of Government Assistance, the Company and the Group present income-related grants by applying the method under which they are disclosed under other income items. p. Finance income and finance expenses Finance interest income and expenses are recognised in the statement of profit or loss in the period in which they occurred on the basis of the contractually set interest rate. Income from dividends received is recognised on the day when the Group becomes entitled to the dividend. q. Income tax Income tax for the year comprises current and deferred tax. Income tax is recognised in the statement of profit or loss except to the extent that it relates to items directly recognised in other comprehensive income or equity, In this case it is recognised in other comprehensive income. Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted at the reporting date, and any adjustments to tax payable in respect of previous years. Deferred tax is calculated using the balance sheet liability method, providing for all temporary differences between the book values and tax bases of assets and liabilities. The amount of deferred tax is determined based on the expected method of payment or settlement of the book value of assets and liabilities using the expected tax rates of income taxes in future periods. Deferred tax assets are recognised if it is probable that sufficient taxable profit will be available in the future, against which the Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 205 deductible temporary tax differences can be utilised. Deferred tax assets and deferred tax liabilities are offset if there is a legal right to offset current tax assets and current income tax liabilities and if the deferred tax is related to the same taxable legal entity and the same taxation authority. Deferred tax is charged or credited directly to equity or other comprehensive income if the tax relates to items that are credited or charged in the same or a different period, directly to other comprehensive income. r. Statement of cash flows The statement of cash flows is compiled using the indirect method based on items of the balance sheet as at 31 December 2021 and 31 December 2020, statement or profit or loss for 2021, and additional information necessary to make adjustments of cash inflows and outflows. 4. Fair value determination In view of the accounting policies and breakdown, the fair value of financial and non-financial assets and liabilities is to be determined in certain cases. The Group and the Company apply the following hierarchy in determining fair values: Level 1: determination of fair value directly by referencing the official published price on an active market; Level 2: other models used to determine fair value based on assumptions and material impact on fair value in line with observed current market transactions with the same instruments either directly or indirectly; Level 3: other models used to determine fair value based on assumptions and material impact on fair value that are not in line with observed current market transactions with the same instruments and investments. The fair values of individual groups of assets are defined for the purpose of measurement and reporting using the methods described below. With reference to assumptions for determining fair values, additional clarifications are required and thereby stated in the breakdown to individual items of assets and liabilities. For more details see Note 39. Investment property Due to the disclosure of fair value of investment property, fair value is determined annually with the help of certified property appraisers. The fair value defined as the price that would be received in case of the assets' sale or paid for the transfer in an agreed transaction among the market participants as at the date of measurement is used as the basis for assessing the value. During the value assessment, the suitability of valuation methods used for measuring the values of ownership rights within all three methods is examined: market approach, income approach and cost approach. Investments in equity instruments Fair value of investments in equity instruments that are listed on the stock exchange is defined on the basis of the closing stock exchange rate as at the reporting date. The fair value of investment in ABCITI, Družba za investiranje, d.o.o., is determined based on an appraisal conducted by a certified business appraiser. The impacts of appraisals are described in Note 19. Trade and other receivables Current trade receivables are not discounted due to their short-term nature. Upon initial recognition, their cost is decreased by expected credit losses. Financial liabilities In financial liabilities relating to borrowings, the fair value does not deviate from the amortised cost. 5. Composition of the Telekom Slovenije Group Subsidiaries 116 As at the reporting date, the Telekom Slovenije Group comprises the controlling company Telekom Slovenije and the following subsidiaries: 116 GRI GS 102-45 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 206 SUBSIDIARIES Name Address Country Activity Tax rate Share in equity in % Share in voting rights in % Share in voting rights in % Book value of equity in EUR thousand Profit or loss in EUR thousand 2021 2020 2021 2020 2021 2020 SLOVENIA 1 GVO, gradnja in vzdrževanje telekomunikacijskih omrežij, d.o.o. Cigaletova 10, Ljubljana Slovenia construction, maintenance works and management of telecommunications network 19% 100% 100% 100% 24,629 30,824 4,931 2,915 2 Avtenta, napredne poslovne rešitve, d.o.o. Stegne 19, Ljubljana Slovenia system integrator 19% 100% 100% 100% 3,296 2,915 354 240 3 TSmedia, medijske vsebine in storitve, d.o.o. Cigaletova 15, Ljubljana Slovenia multimedia and internet content 19% 100% 100% 100% 342 - 1,215 31 - 453 4 SOLINE Pridelava soli, d.o.o. Seča 115, Portorož Slovenia production of salt and preservation and management of a landscape park 19% 100% 100% 100% 1,207 1,470 - 265 - 1,012 5 TSinpo, d.o.o. Litostrojska cesta 58 A Slovenia paper and cardboard tubes 19% 100% 100% 100% 57 16 19 19 6 Optic -Tel, d.o.o. Cigaletova 10, Ljubljana Slovenia telecommunication services 19% 100% 100% 100% 5,282 5,137 145 20 7 Infratel, d.o.o. Cigaletova 10, Ljubljana Slovenia telecommunication services 19% 100% 100% 100% 4,995 4,981 14 6 8 USTANOVA SRČNI SKLAD Cigaletova 15, Ljubljana Slovenia humanitarian organisation 19% 100% 100% 100% 17 23 -6 12 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 207 SUBSIDIARIES Name Address Country Activity Tax rate Share in equity in % Share in voting rights in % Share in voting rights in % Book value of equity in EUR thousand Profit or loss in EUR thousand 2021 2020 2021 2020 2021 2020 ABROAD 9 IPKO Telecommunications LLC Lagija Ulpiana, Rruga "Zija Shemsiu", nr 34, Prishtina Kosovo telecommunication services 10% 100% 100% 100% 14,862 2,995 11,867 - 1,601 10 SIOL, d.o.o., Zagreb Margaretska 3, Zagreb Croatia telecommunication services 20% 100% 100% 100% 862 839 18 58 11 SiOL d.o.o., Sarajevo Fra Anđela Zvizdovića 1, Sarajevo Bosnia and Herzegovina telecommunication services 10% 100% 100% 100% 1,746 1,762 -16 -20 12 SIOL, d.o.o., Podgorica Bulevar Svetog Petra Cetinjskog br.106, Podgorica Montenegro telecommunication services 9% 100% 100% 100% 2,776 2,695 81 75 13 SIOL, d.o.o., Skopje Dimitrie Chupovski no. 4-1/14, Skopje North Macedonia telecommunication services 10% 100% 100% 100% 1,443 1,363 75 78 14 SIOL DOO BEOGRAD - PALILULA Dvadesetsedmog Marta 11, Beograd Palilula Serbia telecommunication services 15% 100% 100% 100% 437 424 1 -4 15 GVO Telecommunikation GmbH Daimlerstr. 3, Stadtlohn, Germany building and maintenance works on telecommunication networks 15% 100% 100% 100% 25 27 -1 -1 16 SIOL, d.o.o. Prishtina Pejton, Str. Mujo Ulqinaku 5/1, 10000 Prishtina Kosovo telecommunication services 10% 100% 100% 100% 264 182 83 -27 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 208 Changes in the composition of the Group There were no changes in the Group composition in 2021. In 2021, a decision was made to start the process of closing and closing down GVO Telecommunication GmbH. 6. Segment reporting Segment reporting disclosures are based on an internal reporting system which management uses in decision-making. The criterion for segment reporting is the country of a company's headquarters; hence, the Group records two segments: Slovenia and other countries. Slovenia – this segment encompasses all Group companies with a registered office in Slovenia and activities in the areas of fixed and mobile telephony telecommunication services, the installation and maintenance of telecommunications network, the provision of multimedia and internet services, and digital content and television. This segment includes: Telekom Slovenije, GVO, Avtenta, TSmedia, Soline, TSinpo, OPTIC-TEL, and Infratel as well as Ustanova Srčni sklad, which organises and collects donations, subsidies and other monetary and non-monetary assets to pursue its charity mission. Planet TV, which is disclosed as discontinued operations due to its sale in 2020, is not disclosed in the segments. Other countries – includes all other Group companies, namely IPKO, SiOL Zagreb, SiOL Sarajevo, SiOL Podgorica, SiOL Skopje, SiOL Beograd, SiOL Pristhine and GVO Telekommunikation GmbH. The core activity of this segment is the provision of telecommunication services. Sale transactions between individual segments are effected at market conditions. Intragroup transactions are eliminated in the consolidation procedure and included among eliminations and adjustments. The Group does not disclose finance income and expenses per segments as the Group's financing is centralised and conducted on the level of the controlling company. Disclosures on revenue from external sales by type of product are provided in Note 7. Segments’ accounting policies equal those applied by the Group, as outlined in Section 3. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 209 Segment reporting in EUR thousand Slovenia Other countries Eliminations and adjustments Total 2021 2020 2021 2020 2021 2020 2021 2020 External sales 580,610 592,883 67,637 54,294 648,247 647,177 Inter -segment sales 74,810 79,074 7,165 5,771 - 81,975 - 84,845 0 0 Total segment revenue 655,420 671,957 74,802 60,065 -81,975 -84,845 648,247 647,177 Other income 4,472 7,167 831 527 5,303 7,694 Cost of goods and material sold - 92,090 - 88,488 - 1,871 - 1,939 - 93,961 - 90,427 Costs of materials and energy - 14,600 - 12,709 - 1,898 - 1,837 -16,498 -14,546 Costs of services -185,238 -210,340 -19,323 -15,696 -204,561 -226,036 Labour costs -104,925 -105,340 - 6,346 - 5,761 -111,271 -111,101 Depreciation/Amortisation -143,649 -138,417 -25,407 -28,862 -169,056 -167,279 Other operating expenses - 5,292 - 1,479 - 1,215 - 1,400 -6,507 -2,879 Total operating expenses -545,794 -556,773 -56,060 -55,495 -601,854 -612,268 Operating profit per segment 114,098 122,351 19,573 5,097 - 81,975 - 84,845 51,696 42,603 Finance income 1,996 2,177 Finance expenses - 8,617 - 10,173 Profit before tax 45,075 34,607 Income tax -4,705 -636 Deferred taxes -2,482 113 Net profit for the period 37,888 34,084 Other data by segment 31 December Slovenia Other countries Eliminations and adjustments Total 2021 2020 2021 2020 2021 2020 2021 2020 Segment assets 1,307,526 1,315,843 122,128 132,105 - 179,315 - 220,109 1,250,339 1,227,839 Carrying amount of goodwill 3,718 3,718 0 0 0 0 3,718 3,718 Investments in intangible assets 100,948 61,208 3,326 1,590 0 0 104,274 62,798 Investments in property, plant and equipment 86,884 91,571 10,671 7,945 0 0 97,555 99,516 Segment liabilities 655,461 655,272 99,713 121,819 - 105,266 - 139,736 649,908 637,355 Amounts of mutual relations between companies are excluded from the consolidated financial statements. Segment revenue in EUR thousand Slovenia Other countries Total 2021 2020 2021 2020 2021 2020 Mobile services on end-customer market 210,416 207,521 41,577 31,889 251,993 239,410 Fixed -line telephone services on end- customer market 191,180 207,893 22,521 21,276 213,701 229,169 Additional services 7,090 7,209 0 0 7,090 7,209 Wholesale market 143,002 143,963 3,539 1,128 146,541 145,091 Other revenue and merchandise 28,922 26,297 0 1 28,922 26,298 Total sales revenue 580,610 592,883 67,637 54,294 648,247 647,177 in EUR thousand Slovenia Other countries Total Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 210 2021 2020 2021 2020 2021 2020 Revenue from services rendered 484,884 500,260 66,309 53,216 551,193 553,476 Revenue from the sale of goods 95,726 92,623 1,328 1,078 97,054 93,701 Total sales revenue 580,610 592,883 67,637 54,294 648,247 647,177 7. Sales revenue Breakdown of sales revenue by service groups Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Mobile services on end-customer market 251,992 239,410 210,592 207,727 Fixed-line telephone services on end-customer market 213,701 229,169 192,985 209,839 Additional services 7,090 7,209 7,091 7,209 Wholesale market 146,542 145,091 144,912 144,654 Other revenue and merchandise 28,922 26,298 22,050 22,264 Total sales revenue 648,247 647,177 577,630 591,693 Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Revenue from services rendered 551,193 553,476 476,905 491,855 Revenue from the sale of goods 97,054 93,701 100,725 99,838 Total sales revenue 648,247 647,177 577,630 591,693 Sales revenue represents sales revenue from contracts with customers. The Group and the Company recognise revenue on the basis of a contract with a customer and when goods and services are passed to the customer in the amount that reflects the compensation to which the Group expects to be entitled. In the case of contracts with customers with a term of 12 or 24 months that include several performance obligations (e.g. partially subsidised mobile phone or other communication device, bundled with the service), the price of the whole transaction is allocated to individual performance obligations on the basis of relative stand-alone selling prices of the device and service. Revenue from the sale of goods is recognised immediately, while revenue from services is recognised over the contractual term. In this context, the contract assets are recognised that are associated with the right to consideration for sold goods or services which were rendered, but not billed, on the reporting date. Management expects that 75 % of the transaction price, allocated to unfulfilled obligations as at 31 December 2021, will be recognised as revenue in the amount of EUR 59,952 thousand in the next reporting period. The remaining 25 %, i.e. EUR 19,543 thousand, will be recognised in the 2023 financial year. All other contracts with customers are valid for a period of one year or less, or are charged according to the agreed term. The Group and the Company used the practical expedient provided under IFRS 15.121 and chose not to disclose information about the unsatisfied performance obligations. In 2021, the Group recognised EUR 4,691 thousand in revenue (in 2020: EUR 5,034 thousand), which was included at the start of the period under the balance of liabilities from contracts with customers. Revenue from sales in the Telekom Slovenije Group amounted to EUR 648,2 million in 2021, which is at the 2020 revenue level. As for the mobile services on end-customer market, revenue has increased mostly due to higher revenue from sale of mobile merchandise in Telekom Slovenije and higher revenue in IPKO. Through Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 211 intensive marketing activities, IPKO is gaining new users, and at the same time higher revenue was also due to an increase in expatriates’ visits in 2021. In the fixed-line telephone services on end-customer market, revenue is lower as a result of a decrease in revenue from fixed-line phone services, which is the result of a decline in classical connections and their replacement with IP-telephony, as well as due to lower revenue from the sale of licenses; consequently, the costs of subcontractors decreased. New sources of revenue include revenue from financial services, energy services, eHealth and insurance. In 2021, eHealth recorded an increase. Revenue on the wholesale market was higher than in 2020, primarily because of increased revenue from roaming of foreign users in the Telekom Slovenije and IPKO mobile networks. Other revenue and merchandise increased compared to 2020 due to higher revenue generated by the subsidiaries outside of telecommunications activity. Revenue from leases The Telekom Slovenije Group generated EUR 9,698 thousand of revenue from leases in 2021 and EUR 9,468 thousand in 2020. The Company Telekom Slovenije generated EUR 10,492 thousand of revenue from leases in 2021 and EUR 10,392 thousand in 2020. Lease maturity analysis – non-discounted leases which will be received in the period in EUR thousand Telekom Slovenije Group Telekom Slovenije Maturity 2021 2020 2021 2020 - up to 1 year 11,051 6,377 11,862 7,168 - between 1 and 2 years 6,428 10,790 7,165 11,581 - between 2 and 3 years 6,252 5,964 6,989 6,681 - between 3 and 4 years 6,111 5,814 6,295 6,530 - between 4 and 5 years 5,520 5,723 5,704 5,921 - over 5 years 32,211 34,928 32,577 35,509 8. Other operating income Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I– XII 2020 Government grants and other aids 1,722 2,910 371 1,228 Gains on disposal of property, plant and equipment 2,234 278 2,053 182 Revaluation other income 46 101 8 1 Revenue from write-off of liabilities from contracts with customers 19 22 19 14 Revenue from humanitarian foundation 52 60 0 0 Other income 1,230 4,323 970 3,829 Total other operating income 5,303 7,694 3,421 5,254 Other income relates mainly to received compensations, income from payment reminders, received court-related expenses and other expenses. Government grants and other aids mainly include state aid measures for mitigating the covid-19 epidemic effects. Pursuant to the Act Determining the Intervention Measures to Contain the COVID-19 Epidemic and Mitigate its Consequences for Citizens and the Economy, some of the Telekom Slovenije Group companies used individual state aid measures: Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 212 - reimbursement of compensation for short-term absence from work due to COVID for up to 3 days, at the expense of the employer, was used by the following companies: Telekom Slovenije, GVO, Avtenta, TSinpo and TSmedia, in the total amount of EUR 12 thousand. - reimbursement of salary compensation when an employee did not perform work due to force majeure was used by the following companies: Telekom Slovenije, GVO, Avtenta, TSinpo and Soline, in the total amount of EUR 105 thousand. - reimbursement of compensation for the quarantine period was used by the following companies: Telekom Slovenije and GVO, in the total amount of EUR 26 thousand. - reimbursement of fixed costs was used by the company Soline, in the amount of EUR 178 thousand. - reimbursement of compensation for reduced working hours was used by the company Soline, in the amount of EUR 18 thousand. - Reimbursement of additional crisis allowance was used by the following companies: Telekom Slovenije, GVO, Avtenta, TSmedia and TSinpo, in the total amount of EUR 111 thousand. 9. Cost of goods sold, costs of materials, energy and services Cost of goods sold The cost of goods sold includes the cost of mobile and fixed telephony goods and other goods. Mobile telephony goods include mobile phones, whereas fixed telephony goods comprise TV sets, tablets, lap-tops, IT goods. Other goods consist of household equipment, material and electricity. In 2021, the cost of goods sold of the Telekom Slovenije Group and the company Telekom Slovenije totalled EUR 93,961 thousand (in 2020: EUR 90,427 thousand) and EUR 100,989 thousand (in 2020: EUR 98,493 thousand), respectively. Costs of materials and energy Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I– XII 2020 I– XII 2021 I– XII 2020 Costs of material 4,860 3,092 1,491 1,635 Costs of energy 11,638 11,454 9,122 9,117 Total costs of materials and energy 16,498 14,546 10,613 10,752 The costs of material mainly include material for maintenance of the network, office supplies and computer accessories, sales of promotion material, professional literature and small tools. The bulk of the costs of energy is accounted for by electricity and fuel. Cost of services Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Telecommunications services 106,696 110,722 105,174 109,705 Costs of leased lines, networks and platforms 5,322 5,819 7,978 8,365 Multimedia contents 8,976 16,559 8,944 17,845 Costs of subcontractors 22,393 34,067 18,053 28,409 Maintenance of property, plant and equipment 21,972 21,335 22,183 21,912 Costs of other services 39,202 37,534 31,212 31,131 Total costs of services 204,561 226,036 193,544 217,367 The Group’s costs of services in 2021 are lower by EUR 21,475 thousand compared to 2020. In 2021, income from international call services, and consequently also cost of international call services, was lower, resulting in lower costs of telecommunication services. The costs of leased lines, networks and platforms also declined. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 213 In comparison to 2020, costs of subcontractors decreased by EUR 11.7 million, as a consequence of decreased revenue from the sale of licenses. Costs of other services mainly comprise advertising and sponsorship costs in the amount of EUR 8,559 thousand (in 2020: EUR 7,271 thousand), costs of intellectual and personal services in the amount of EUR 7,583 thousand (in 2020: EUR 7,480 thousand), and insurance premiums in the amount of EUR 3,173 thousand (in 2020: EUR 2,826 thousand), respectively. In 2021, the costs related to variable lease payments of the Telekom Slovenije Group stood at EUR 154 thousand (in 2020: EUR 159 thousand) and of the company Telekom Slovenije at EUR 35 thousand (in 2020: EUR 41 thousand). 10. Labour costs Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Salaries and compensations 95,782 96,077 73,226 74,529 Social security contributions 18,883 18,696 15,016 15,179 - of which pension insurance contributions 12,380 11,996 9,710 9,663 Other labour costs 12,684 12,429 9,249 8,903 Provisions for jubilee rewards 59 82 33 47 Provisions for severance pays 772 734 427 382 - of which provisions for restructuring 268 273 0 0 Capitalised own products and services - 16,909 - 16,917 - 5,263 - 5,720 Total labour costs 111,271 111,101 92,688 93,320 In the Telekom Slovenije Group, of the total capitalised own products and services in the mound of EUR 19,130 thousand (in 2020; EUR 19,037 thousand), EUR 16,909 thousand were disclosed under labour costs (in 2020: EUR 16,917 thousand), respectively. The rest is disclosed under Other operating expenses (Note 11). Services rendered for the needs of the Group are capitalised among intangible assets and property, plant and equipment (Notes 15 and 16). In 2021, the average number of employees by hours worked in the Telekom Slovenije Group was 3,234 (in 2020: 3,176 employees). In the Company Telekom Slovenije, of the total capitalised own products and services in the amount of EUR 6,112 thousand (in 2020: EUR 6,629 thousand), EUR 5,263 thousand were disclosed under labour costs (in 2020: EUR 5,720 thousand), respectively. The rest is disclosed under Other operating expenses (Note 11). Services rendered for the needs of the Group are capitalised among intangible assets and property, plant and equipment (Notes 15 and 16). In 2021, the average number of employees by hours worked in the company Telekom Slovenije was 2,076 (in 2020: 2,103 employees). Employee structure by level of education Telekom Slovenije Group Telekom Slovenije Level/ Number of employees 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Level I–IV 287 312 106 116 Level V 970 1,022 697 722 Level VI 704 706 382 384 Level VII 1,158 1,191 823 829 Level VIII 165 161 111 114 Total 3,284 3,392 2,119 2,165 11. Other operating expenses Telekom Slovenije Group Telekom Slovenije Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 214 in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Provisions -1.005 -4,587 0 -4,500 Loss on disposal of intangible assets and property, plant and equipment 989 564 974 552 Impairment and write-off of inventories 2,192 1,231 2,161 1,000 Impairment and write-off of operating and other receivables 2,395 2,487 1,952 2,038 Adjustment and write-off of contract assets 682 795 677 769 Impairment of intangible assets and property, plant and equipment 686 222 0 59 Impairment of leased (ROU) assets 54 35 55 39 Capitalised own products and services -2,221 -2,120 -849 -909 Other humanitarian expenditure – Srčni sklad 58 63 0 0 Other expenses 2,677 4,189 2,474 3,686 Total other operating expenses 6,507 2,879 7,444 2,734 In 2021, expenditure for provisions in the Group was negative due to the reversal of provisions for performance bonds. In 2021, there was no forming or reversal of provisions in the company Telekom Slovenije. In 2020, expenditure for provisions was negative due to the reversal of provisions for probable liabilities resulting from legal claims, both in the Group and the Company. For more details see Note 31. Other expenses mostly relate to the cost of compensation for the use of land. 12. Finance income and finance expenses Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Dividend income 128 8 11,128 841 Interest income 1,317 1,375 3,569 4,087 Net exchange gains 0 688 1 691 Revenue from write-off of liabilities for right-of-use assets 78 75 77 75 Other finance income 473 31 450 30 Total finance income 1,996 2,177 15,225 5,724 Interest on bonds issued 872 1,992 872 1,992 Interest expenses 4,756 4,825 4,783 4,804 Foreign exchange net losses 549 0 538 1 Impairments and write-offs of investments 1 0 225 8,888 Interest expenses from lease liabilities 2,214 2,348 2,227 2,352 Other finance expenses 225 1,008 101 464 Total finance expenses 8,617 10,173 8,746 18,501 Financial result -6,621 -7,996 6,479 -12,777 The Company Telekom Slovenije’s finance income includes dividends received and interest on loans granted to subsidiaries. In 2021, the company Telekom Slovenije received dividends from its subsidiary GVO in the amount of EUR 11,000 thousand (dividend income). In 2021, the Company impaired the investment in its subsidiary TSmedia and recognised EUR 225 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 215 thousand of expenses. In 2020, the Company sold a 100% interest in its subsidiary Planet TV. The purchase price amounted to EUR 5,000 thousand. From impairments and sale of the investment in Planet TV, the Company recognised EUR 8,888 thousand of expenses (impairments and write-offs of investments). 13. Income tax, deferred tax assets and tax liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Current tax payable -4,705 -636 -3,553 0 Deferred tax assets/ liabilities -2,482 244 -2,153 152 Other taxes not disclosed under other items 0 -131 0 -131 Total tax -7,187 -523 -5,706 21 Other taxes not disclosed under other items include the write-off of the withholding tax paid abroad, which cannot be claimed as the company Telekom Slovenije recorded tax loss in 2020 and had no tax liabilities. Reconciliation of the actual and accounted tax expenses considering the effective tax rate Telekom Slovenije Group Telekom Slovenije in EUR thousand 2021 2020 2021 2020 Profit before tax 45,075 34,607 40,077 24,153 Income tax using the prescribed tax rate -8,393 -6,575 -7,615 -4,589 Tax-free dividends received 124 154 2,011 154 Tax relief used in the current period 959 240 690 0 Reversal of tax relief used in previous periods -1 -1,034 0 -1,034 Expenses not recognised for tax -1,897 -3,356 -1,731 -3,242 Deductible expenses/revenues that were non- deductible in previous years 1,064 13,472 1,022 13,473 Tax loss -356 -6,061 0 -6,061 Unused reliefs -84 1,450 -84 1,450 Other items 1,397 1,187 1 -131 Total tax -7,187 -523 -5,706 21 Effective tax rate 15.9% 1.5% 14.2% 0.0% The tax loss of the Telekom Slovenije Group as at 31 December 2021 stood at EUR 106,367 thousand (31 December 2020: EUR 116,606 thousand), respectively. The tax loss of the company Telekom Slovenije as at 31 December 2021 stood at EUR 91,967 thousand (31 December 2020: EUR 91,967 thousand), respectively. The unused tax reliefs of the Group stand at EUR 70,547 thousand for 2021, and at EUR 66,508 thousand for 2020. The unused tax reliefs of the company Telekom Slovenije as at 31 December 2021 stood at EUR 69,852 thousand (31 December 2020: EUR 65,771 thousand), respectively. Deferred tax assets and liabilities are calculated on the basis of temporary differences under the balance sheet liability method using the corporate income tax rate in the following years. In the period concerned, corporate income was taxed at a 19% tax rate (2020: 19%) in Slovenia. Tax rates in other companies are defined in the table of subsidiaries in Note 5. Deferred tax assets Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 216 Telekom Slovenije Group Telekom Slovenije in EUR thousand 2021 2020 Across statement of profit or loss Across com- prehensive income 2021 2020 Across statement of profit or loss Across com- prehensive income Intangible assets, and property,plant and equipment 20,194 17,000 3,194 20,185 16,990 3,195 Investments 1,217 1,232 -15 1,217 1,232 -15 Receivables 2,605 2,493 112 2,483 2,371 112 Tax loss and unused tax reliefs 17,713 23,156 - 5,443 17,712 23,155 - 5,443 Provisions 283 567 - 284 164 181 -17 Deferred tax assets 42,012 44,448 - 2,421 -15 41,761 43,929 - 2,153 -15 Deferred tax assets from intangible assets and property, plant and equipment arise from the difference between business-related and tax depreciation. As at 31 December 2021, the Group and the Company have EUR 6,300 thousand of deferred tax assets from unused investment incentives. In their tax declarations, the Group and the Company took into account the investment incentives from the previous years and used deferred tax assets in the amount of EUR 5,443 thousand. Deferred tax assets from investment incentives for 2021 were not formed. The use of deferred tax assets from unused tax loss carry-forwards is based on the going concern criterion of use of tax loss and the possibility of reduction of tax base by 50% at most. As at 31 December 2021, the Group and the Company have EUR 11,413 thousand of deferred tax assets from tax loss. The Group and the Company take in consideration two criteria for tax planning: strategic business plan and applicable tax legislation. For the next five years, the Group and the Company have a confirmed strategic business plan stating future taxable profit. In tax planning, the Group and the Company prepared the plan of using tax deductions in the next 5-year period, stating that deferred tax assets from investment incentives of the planned 5-year period will be fully used by 2024, and the deferred tax assets from tax loss, which is not restricted by law, will start being used in 2025, with different dynamics. Deferred tax liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand 2021 2020 Across statement of profit or loss Across com- prehensive income 2021 2020 Across statement of profit or loss Across com- prehensive income Intangible assets, and property,plant and equipment 1,389 1,328 61 0 0 0 0 0 Investments 321 235 0 86 321 235 0 86 Deferred tax liabilities 1,710 1,563 61 86 321 235 0 86 Changes in deferred tax assets in EUR thousand Telekom Slovenije Group Telekom Slovenije Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 217 Balance as at 1 Jan 2020 44,044 43,545 Drawing -5,704 -5,662 Reversal -1,957 -1,806 Formation 8,065 7,852 Balance as at 31 Dec 2020 44,448 43,929 Drawing -7,735 -7,704 Reversal -1,078 -767 Formation 6,377 6,303 Balance as at 31 Dec 2021 42,012 41,761 Changes in deferred tax liabilities in EUR thousand Telekom Slovenije Group Telekom Slovenije Balance as at 1 Jan 2020 1,676 275 Reversal -113 -40 Balance as at 31 Dec 2020 1,563 235 Reversal 23 -38 Formation 124 124 Balance as at 31 December 2021 1,710 321 In Telekom Slovenije, the amount of deductible temporary differences, unused tax losses and unused tax credits for which deferred tax assets were not formed, amounts to: - on 31 December 2020; EUR 35,866 thousand, and deferred tax assets would amount to EUR 6,814 thousand; - on 31 December 2021; EUR 68,591 thousand, and deferred tax assets would amount to EUR 13,032 thousand. In the Telekom Slovenije Group, the amount of deductible temporary differences, unused tax losses and unused tax credits for which deferred tax assets were not formed, amounts to: - on 31 December 2020; EUR 50,655 thousand, and deferred tax assets would amount to EUR 9,624 thousand: - on 31 December 2021; EUR 83,500 thousand, and deferred tax assets would amount to EUR 15,865 thousand. The Group and the company did not form deferred taxes because long-term projections do not show the possibility of use. Income tax payables The current income tax payables for 2021 amount to EUR 3,595 thousand for the Telekom Slovenije Group (EUR 90 thousand in 2020). For Telekom Slovenije, the income tax payables amount to EUR 3,553 thousand; in 2020, the Company had no liabilities. 14. Earnings per share Basic earnings per share are calculated by dividing the net profit or loss for the period attributable to ordinary shareholders by the weighted average number of ordinary shares, excluding ordinary shares owned by the Company or Group. The Group and the Company do not have any dilutive potential ordinary shares, which is why the basic and diluted earnings per share are equal. Weighted average number of ordinary shares Telekom Slovenije Group Telekom Slovenije Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 218 In EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Weighted average number of ordinary shares 6,535,478 6,535,478 6,535,478 6,535,478 Less treasury shares of the Company - 30,000 - 30,000 - 30,000 -30,000 Total 6,505,478 6,505,478 6,505,478 6,505,478 Earnings per share Telekom Slovenije Group Telekom Slovenije In EUR thousand I–XII 2021 I–XII 2020 I–XII 2021 I–XII 2020 Net profit or loss from going concern 37, 888 34,084 34,371 24,174 Weighted average number of ordinary shares for earnings per share 6,505,478 6,505,478 6,505,478 6,505,478 Earnings per share from going concern 5.82 5.24 5.28 3.72 Net profit or loss from discontinued operations 0 -9,219 Profit per share from discontinued operations 0.00 - 1.42 0.00 0.00 15. Intangible assets Concessions refer to the right to use the GSM, UMTS and LTE frequency spectrum on the territory of the Republic of Slovenia, and GSM in Kosovo in the total amount of EUR 109,392 thousand (31 December 2020: EUR 65,910 thousand), respectively. Under concessions and licences, the Group also discloses programme rights and licences for use of computer software. Details on individual concessions are disclosed in Note 45 in the table Concessions for mobile phone services. Goodwill of EUR 3,718 thousand in the Telekom Slovenije Group occurred during the takeover of companies TSinpo (EUR 115 thousand) in 2017 and the takeover and acquisition of the company Debitel in 2015 (EUR 3,603 thousand). The reduction of goodwill is due to the derecognition of the previously impaired goodwill arising from the takeover of companies, which the Group had already disposed of in the past years. At the end of 2021, the Group and the company made an assessment of the recoverable amount of goodwill occurring in the acquisition of the company Debitel. The valuation was conducted by a certified business appraiser. The present value method of expected cash flows was used for the recoverable amount assessment of non-current assets of the Debitel cash generating unit (CGU). It was established that the recoverable value of non-current assets of the Debitel CGU exceeds its carrying amount, thus requiring no impairment of goodwill. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 219 Telekom Slovenije Group Changes in intangible assets of the Telekom Slovenije Group in 2021 in EUR thousand Goodwill Concessions and licences Cost of obtaining contracts with customers Computer software Other intangible assets Intangible assets under construction Total Cost Balance as at 1 Jan 2021 107,654 364,567 20,900 279,791 67,161 15,520 855,593 Additions 0 0 0 8 3 102,332 102,343 Assets generated in the Group 0 0 0 0 0 1,931 1,931 Transfer into use 0 69,595 7,182 29,457 229 - 106,463 0 Disposals - 57,917 - 6,517 - 7,564 - 6,662 -27 -7 -78,694 Other transfers 0 2,697 0 485 0 -518 2,664 Balance as at 31 Dec 2021 49,737 430,342 20,518 303,079 67,366 12,795 883,837 Impairment Balance as at 1 Jan 2021 103,936 255,792 10,454 249,041 46,070 267 665,560 Disposals -57,917 - 3,939 - 7,564 - 6,095 -27 0 -75,542 Other transfers 0 353 0 594 0 0 947 Depreciation/Amortisation 0 39,795 7,198 23,419 2,344 0 72,756 Balance as at 31 Dec 2021 46,019 292,001 10,088 266,959 48,387 267 663,721 Carrying amount Balance as at 1 Jan 2021 3,718 108,775 10,446 30,750 21,091 15,253 190,033 Balance as at 31 Dec 2021 3,718 138,341 10,430 36,120 18,979 12,528 220,116 Changes in intangible assets of the Telekom Slovenije Group in 2020 in EUR thousand Goodwill Concessions and licences Cost of obtaining contracts with customers Computer software Other intangible assets Intangible assets under construction Total Cost Balance as at 1 Jan 2020 107,654 359,630 16,683 265,574 66,740 14,612 830,893 Additions 0 614 0 114 269 59,954 60,951 Assets generated in the Group 0 0 0 193 0 1,654 1,847 Transfer into use 0 36,066 7,775 16,443 244 -60,528 0 Disposals 0 -31,744 -3,558 -4,017 -89 0 -39,408 Other transfers 0 1 0 1,484 -3 -172 1,310 Balance as at 31 Dec 2020 107,654 364,567 20,900 279,791 67,161 15,520 855,593 Impairment Balance as at 1 Jan 2020 103,936 254,855 7,944 228,473 40,473 267 635,948 Disposals 0 -31,562 -3,558 -3,991 -89 0 -39,200 Other transfers 0 -1 -1 1,189 -2 0 1,185 Depreciation/Amortisation 0 32,500 6,069 23,370 5,688 0 67,627 Balance as at 31 Dec 2020 103,936 255,792 10,454 249,041 46,070 267 665,560 Carrying amount Balance as at 1 Jan 2020 3,718 104,775 8,739 37,101 26,267 14,345 194,945 Balance as at 31 Dec 2020 3,718 108,775 10,446 30,750 21,091 15,253 190,033 * Other transfers include transfers between intangible assets and property, plant and equipment, transfers among groups of assets. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 220 Significant additions in intangible assets relate primarily to the allocation of radio frequencies for the provision of public telecommunications services to end users, which were acquired by Telekom Slovenije at a public auction. The radio frequency spectrum in the amount of EUR 52,078 thousand was obtained in the 700 MHz FDD band, 700 MHz SDL band, 1500 MHz band, 2100 MHz band, 3600 MHz band and 26 GHz band. Other additions relate to purchase and development of software. As at 31 December 2021, the Group disclosed contractual commitments for intangible assets in the amount of EUR 8,056 thousand (31 December 2020: EUR 6,057 thousand) which relate to the set-up of computer systems and to software licences. Telekom Slovenije Changes in intangible assets of the company Telekom Slovenije in 2021 in EUR thousand Goodwill Concessions and licences Cost of obtaining contracts with customers Computer software Other intangible assets Intangible assets under construction Total Cost Balance as at 1 Jan 2021 3,602 224,008 20,900 267,480 18,893 14,543 549,426 Additions 0 0 0 0 0 99,109 99,109 Assets generated in the company 0 0 0 0 0 1,564 1,564 Transfer into use 0 67,898 7,182 27,443 207 -102,730 0 Disposals 0 -3,962 -7,564 -6,289 0 -5 -17,820 Other transfers 0 230 0 486 0 -1 714 Balance as at 31 Dec 2021 3,602 288,174 20,518 289,120 19,100 12,480 632,994 Impairment Balance as at 1 Jan 2021 0 147,865 10,454 234,282 15,374 0 407,975 Disposals 0 -3,937 -7,564 -5,722 0 0 -17,223 Other transfers 0 96 0 594 0 0 690 Depreciation/Amortisation 0 31,096 7,198 22,217 790 0 61,301 Balance as at 31 Dec 2021 0 175,120 10,088 251,371 16,164 0 452,743 Carrying amount Balance as at 1 Jan 2021 3,602 76,143 10,446 33,198 3,519 14,543 141,451 Balance as at 31 Dec 2021 3,602 113,054 10,430 37,749 2,936 12,480 180,251 Changes in intangible assets of the company Telekom Slovenije in 2020 in EUR thousand Goodwill Concessions and licences Cost of obtaining contracts with customers Computer software Other intangible assets Intangible assets under construction Total Cost Balance as at 1 Jan 2020 3,602 216,896 16,683 253,812 18,649 14,111 523,753 Additions 0 0 0 0 0 61,858 61,858 Assets generated in the company 0 0 0 0 0 1,606 1,606 Transfer into use 0 38,695 7,775 16,317 244 -63,031 0 Disposals 0 -31,583 -3,558 -3,926 0 0 -39,067 Other transfers 0 0 0 1,277 0 -1 1,276 Balance as at 31 Dec 2020 3,602 224,008 20,900 267,480 18,893 14,543 549,426 Impairment Balance as at 1 Jan 2020 0 156,875 7,944 215,028 11,214 0 391,061 Disposals 0 -31,469 -3,558 -3,926 0 0 -38,953 Other transfers 0 -3 -1 1,187 0 0 1,183 Depreciation/Amortisation 0 22,462 6,069 21,993 4,160 0 54,684 Balance as at 31 Dec 2020 0 147,865 10,454 234,282 15,374 0 407,975 Carrying amount Balance as at 1 Jan 2020 3,602 60,021 8,739 38,784 7,435 14,111 132,692 Balance as at 31 Dec 2020 3,602 76,143 10,446 33,198 3,519 14,543 141,451 * Other transfers include transfers between intangible assets and property, plant and equipment, transfers among groups of assets. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 221 The Group companies have unlimited property rights on intangible assets, which are free of encumbrances. As at 31 December 2021, the company disclosed contractual commitments for intangible assets in the amount of EUR 9,280 thousand (31 December 2020: EUR 6,585 thousand) which relate to the set-up of computer systems and to software licences. As capitalised non-current deferred costs of development, the Group and the company disclose internal and external project development or development activities or activities that meet the criteria for intangible asset recognition. Key to the assessment are professional feasibility of the project, the purpose of completion and the ability to use or sell and thus generate future economic benefits. Development projects are strategic projects that are planned in advance and provided with sufficient technical, financial and human resources that are key for the completion of the project, and the results of these projects are significantly improved products, processes, systems or services before use. Non-current deferred costs of development as at 31 December 2021 amount to EUR 11,056 thousand for the Telekom Slovenije Group and EUR 10,310 thousand for the company Telekom Slovenije, and mostly relate to the development of computer software. The useful lives for non-current deferred costs of development are finite and follow the estimated useful lives of intangible assets with annual amortization on a straight-line basis. The balance of non-current deferred costs of development is a deductible item in the calculation of accumulated profit. Changes in non-current deferred costs of development of the Telekom Slovenije Group in 2021 in EUR thousand Computer software Own work - development Other intangible non - current assets Own work - development Computer software External - development Other intangible non-current assets External - development Ongoing investments Total Cost Balance as at 1 Jan 2021 10,477 4 34,694 318 3,488 48,981 Additions - external development 0 0 0 0 1,445 1,445 Increases - own development 0 0 0 0 368 368 Transfer from assets under construction 469 0 4,054 0 - 4,523 0 Disposals -845 0 -380 0 -5 -1,230 Balance as at 31 Dec 2021 10,101 4 38,368 318 773 49,564 Impairment Balance as at 1 Jan 2021 8,807 3 24,066 80 0 32,956 Disposals -682 0 -246 0 0 -928 Depreciation/Amortisation 1,021 1 5,442 16 0 6,480 Balance as at 31 Dec 2021 9,146 4 29,262 96 0 38,508 Carrying amount Balance as at 1 Jan 2021 1,670 1 10,628 238 3,488 16,025 Balance as at 31 Dec 2021 955 0 9,106 222 773 11,056 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 222 Changes in non-current deferred costs of development of the Telekom Slovenije Group in 2020 in EUR thousand Computer software Own work - development Other intangible non-current assets Own work - development Computer software External - development Other intangible non - current assets External - development Ongoing investments Total Cost Balance as at 1 Jan 2020 10,100 4 31,456 318 3,670 45,548 Additions - external development 0 0 0 0 3,212 3,212 Increases - own development 0 0 0 0 307 307 Transfer from assets under construction 440 0 3,261 0 -3,701 0 Disposals -63 0 -23 0 0 -86 Balance as at 31 Dec 2020 10,477 4 34,694 318 3,488 48,981 Impairment Balance as at 1 Jan 2020 7,491 2 18,411 64 0 25,968 Disposals -22 0 -22 0 0 -44 Depreciation/Amortisation 1,338 1 5,677 16 0 7,032 Balance as at 31 Dec 2020 8,807 3 24,066 80 0 32,956 Carrying amount Balance as at 1 Jan 2020 2,609 2 13,045 254 3,670 19,580 Balance as at 31 Dec 2020 1,670 1 10,628 238 3,488 16,025 Changes in non-current deferred costs of development of the company Telekom Slovenije in 2021 in EUR thousand Computer software Own work - development Other intangible non - current assets Own work - development Computer software External - development Other intangible non-current assets External - development Ongoing investments Total Cost Balance as at 1 Jan 2021 8,639 4 33,055 318 3,190 45,206 Additions - external development 0 0 0 0 1,340 1,340 Additions - own development 0 0 0 0 136 136 Transfer from assets under construction 198 0 3,950 0 -4,148 0 Disposals -845 0 -380 0 -5 -1,230 Balance as at 31 Dec 2021 7,992 4 36,625 318 513 45,452 Impairment Balance as at 1 Jan 2021 7,121 3 22,625 80 0 29,829 Disposals -681 0 -246 0 0 -927 Depreciation/Amortisation 927 1 5,296 16 0 6,240 Balance as at 31 Dec 2021 7,367 4 27,675 96 0 35,142 Carrying amount Balance as at 1 Jan 2021 1,518 1 10,430 238 3,190 15,377 Balance as at 31 Dec 2021 625 0 8,950 222 513 10,310 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 223 Changes in non-current deferred costs of development of the company Telekom Slovenije in 2020 in EUR thousand Computer software Own work - development Other intangible non-current assets Own work - development Computer software External - development Other intangible non - current assets External - development Ongoing investments Total Cost Balance as at 1 Jan 2020 8,264 4 29,904 318 3,404 41,894 Additions - external development 0 0 0 0 3,105 3,105 Additions - own development 0 0 0 0 259 259 Transfer from assets under construction 424 0 3,154 0 -3,578 0 Disposals -49 0 -3 0 0 -52 Balance as at 31 Dec 2020 8,639 4 33,055 318 3,190 45,206 Impairment Balance as at 1 Jan 2020 5,984 2 17,122 64 0 23,172 Disposals -7 0 -2 0 0 -9 Depreciation/Amortisation 1,144 1 5,505 16 0 6,666 Balance as at 31 Dec 2020 7,121 3 22,625 80 0 29,829 Carrying amount Balance as at 1 Jan 2020 2,280 2 12,782 254 3,404 18,722 Balance as at 31 Dec 2020 1,518 1 10,430 238 3,190 15,377 16. Property, plant and equipment Significant additions in property, plant and equipment in use refer in 2021 mostly to the construction and upgrade of cable network and obtainment of cable lines, telecommunications and other equipment. The item of other equipment comprises modems, set-up boxes, other equipment at clients, furniture, cars and other equipment. Fixed assets generated in the Group and the Company relate to services rendered for the Group and the Company and mostly refer to the set-up of base stations, air-conditioners, electrical power devices and terminal equipment at clients. Borrowing costs that may be directly attributed to the acquisition, construction, or production of a qualifying asset are included in the cost of that asset. Borrowing costs related to the acquisition and construction of the assets are capitalised if they are related to the acquisition of a material asset, the construction of which would require more than 12 months. In 2021, more than 90% of investments were completed within less than 12 months, also in the cable network construction segment, as these were mainly upgrades to existing networks. In 2021, the Group utilised a purpose-specific loan for the acquisition or construction of optic network assets. In 2021, the Group classified the costs of taking out non-purpose loans as costs for the period; the same applies to the costs of taking out a special- purpose loan for the construction of the optical network being that the amount of interest from the drawing of the loan is immaterial. Telekom Slovenije Group Contractual commitments for property, plant and equipment as at 31 December 2021 amounted to EUR 5,159 thousand (31 Dec 2020: EUR 5,273 thousand) and mostly refer to the set-up of telecommunications network. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 224 Changes in property, plant and equipment of the Telekom Slovenije Group in 2021 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Other Total Cost Balance as at 1 Jan 2021 479,628 1,166,201 105,528 326,580 382,369 36,402 111 2,496,819 Difference from the translation to the presentation currency 0 5 0 0 11 0 0 16 Additions 128 329 0 0 1,516 79,536 157 81,666 Fixed assets generated in the Group 0 0 0 0 0 15,889 0 15,889 Transfer into use 20,166 25,132 1,835 11,674 32,219 -91,026 0 0 Disposals - 9,844 - 1,375 - 17,620 - 22,907 - 30,779 - 495 0 - 83,020 Other transfers 4 0 -911 138 54 517 0 -198 Balance as at 31 Dec 2021 490,082 1,190,292 88,832 315,485 385,390 40,823 268 2,511,172 Impairment Balance as at 1 Jan 2021 206,279 930,137 97,239 275,918 311,212 11,390 0 1,832,175 Difference from the translation to the presentation currency 0 2 0 0 2 0 0 4 Additions 3 0 0 0 6 0 0 9 Disposals - 2,369 - 1,360 - 17,603 - 22,783 - 26,957 0 0 - 71,072 Depreciation/Amortisation 12,833 22,581 3,694 13,690 30,889 0 0 83,687 Other transfers 1 0 -717 0 26 0 0 -690 Balance as at 31 Dec 2021 216,747 951,360 82,613 266,825 315,178 11,390 0 1,844,113 Carrying amount Balance as at 1 Jan 2021 273,349 236,064 8,289 50,662 71,157 25,012 111 664,644 Balance as at 31 Dec 2021 273,335 238,932 6,219 48,660 70,212 29,433 268 667,059 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 225 Changes in property, plant and equipment of the Telekom Slovenije Group in 2020 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Other Total Cost Balance as at 1 Jan 2020 466,622 1,130,374 111,950 506,633 407,157 34,727 23 2,657,486 Difference from the translation to the presentation currency 0 -7 0 0 -3 -23 0 -33 Additions 20 3,066 4 1,377 4,138 74,916 0 83,521 Fixed assets generated in the Group 0 47 0 39 0 15,909 0 15,995 Transfer into use 12,912 33,471 1,649 9,462 29,114 - 86,607 0 1 Disposals - 327 - 4,432 - 8,075 - 186,735 - 57,997 -26 0 -257,592 Other transfers 401 3,682 0 -4,196 -40 -2,494 88 -2,559 Balance as at 31 Dec 2020 479,628 1,166,201 105,528 326,580 382,369 36,402 111 2,496,819 Impairment Balance as at 1 Jan 2020 193,284 911,852 101,077 447,344 336,156 11,390 0 2,001,103 Difference from the translation to the presentation currency 0 -22 0 4 - 728 0 0 - 746 Additions 0 0 0 20 16 0 0 36 Disposals - 275 - 4,347 - 8,057 - 186,611 - 54,521 0 0 -253,811 Depreciation/Amortisation 12,950 22,634 4,219 16,922 30,380 0 0 87,105 Other transfers 320 20 0 -1,761 -91 0 0 -1,512 Balance as at 31 Dec 2020 206,279 930,137 97,239 275,918 311,212 11,390 0 1,832,175 Carrying amount Balance as at 1 Jan 2020 273,338 218,522 10,873 59,289 71,001 23,337 23 656,383 Balance as at 31 Dec 2020 273,349 236,064 8,289 50,662 71,157 25,012 111 664,644 * Other transfers include transfers between intangible assets and property, plant and equipment, transfers among groups of assets. Of total assets, the Telekom Slovenije Group let assets in the (carrying) amount: In 2021 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Other Total Assets let out under operating lease 8,483 0 0 0 217 0 0 8,701 In 2020 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Other Total Assets let out under operating lease 4,491 301 0 0 321 0 0 5,113 Telekom Slovenije As at 31 December 2021, the Company disclosed contractual commitments for property, plant and equipment in the amount of EUR 16,526 thousand (31 Dec 2020: EUR 22,862 thousand), which relate to network construction, purchase of telecommunications equipment, acquisition and construction of real estate, and purchase of hardware and other equipment. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 226 Changes in property, plant and equipment of the company Telekom Slovenije in 2021 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Total Cost Balance as at 1 Jan 2021 450,523 1,092,744 104,352 213,758 363,176 40,956 2,265,509 Additions 0 0 0 0 0 79,549 79,549 Fixed assets generated in the Company 0 0 0 0 0 4,547 4,547 Transfer into use 19,779 22,422 1,835 8,183 28,729 -80,948 0 Disposals -9,844 0 -17,620 -17,124 -27,037 -24 -71,649 Other transfers 4 0 -911 138 54 0 -715 Balance as at 31 Dec 2021 460,462 1,115,166 87,656 204,955 364,922 44,080 2,277,241 Impairment Balance as at 1 Jan 2021 198,208 886,373 96,024 185,733 298,639 0 1,664,977 Additions 3 0 0 0 0 0 3 Disposals -2,369 0 -17,603 -17,065 -24,231 0 -61,268 Depreciation/Amortisation 12,281 18,230 3,692 8,473 26,830 0 69,506 Other transfers 1 0 -716 0 27 0 -688 Balance as at 31 Dec 2021 208,124 904,603 81,397 177,141 301,265 0 1,672,530 Carrying amount Balance as at 1 Jan 2021 252,315 206,371 8,328 28,025 64,537 40,956 600,532 Balance as at 31 Dec 2021 252,338 210,563 6,259 27,814 63,657 44,080 604,711 Changes in property, plant and equipment of the company Telekom Slovenije in 2020 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Total Cost Balance as at 1 Jan 2020 438,151 1,059,317 110,774 391,394 385,997 37,112 2,422,745 Additions 0 0 4 0 2,049 83,990 86,043 Fixed assets generated in the Company 0 0 0 0 0 5,024 5,024 Transfer into use 12,882 33,471 1,649 9,461 27,685 -85,148 0 Disposals -276 -42 -8,075 -185,840 -52,514 -22 -246,769 Other transfers -234 -2 0 -1,257 -41 0 -1,534 Balance as at 31 Dec 2020 450,523 1,092,744 104,352 213,758 363,176 40,956 2,265,509 Impairment Balance as at 1 Jan 2020 186,304 868,180 99,863 363,312 320,969 0 1,838,628 Additions 0 0 0 20 14 0 34 Disposals -236 -39 -8,057 -185,775 -49,344 0 -243,451 Depreciation/Amortisation 12,393 18,232 4,218 9,352 27,014 0 71,209 Other transfers -253 0 0 -1,176 -14 0 -1,443 Balance as at 31 Dec 2020 198,208 886,373 96,024 185,733 298,639 0 1,664,977 Carrying amount Balance as at 1 Jan 2020 251,847 191,137 10,911 28,082 65,028 37,112 584,117 Balance as at 31 Dec 2020 252,315 206,371 8,328 28,025 64,537 40,956 600,532 * Other transfers include transfers between intangible assets and property, plant and equipment, transfers among groups of assets. The Company and the Group have unlimited property rights on property, plant and equipment, which are free of encumbrances. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 227 Of total assets the company Telekom Slovenije let assets in the (carrying) amount: In 2021 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Other Total Assets let out under operating lease 12,448 0 0 0 70 0 0 12,518 In 2020 in EUR thousand Land, buildings, and cable lines Cable networks Telephone exchanges Mobile network equipment Other equipment Assets under construction Other Total Assets let out under operating lease 10,041 404 0 0 36 0 0 10,482 17. Right-of-use assets The Group and the Company have concluded lease contracts for various assets, such as base stations, premises, lines, vehicles and other. Typically, the term of lease contracts is 10–15 years. Changes in right-of-use assets of the Telekom Slovenije Group in 2021 in EUR thousand Base stations - easement and lease Technological premises - easement and lease Lease of business premises and land Vehicles Lease of lines Other Total Cost Balance as at 1 Jan 2021 60,304 8,421 8,877 2,587 18,826 2,354 101,369 Difference from the translation to the presentation currency 0 0 9 0 0 0 9 Contract modifications 1,193 84 439 -1 -8 671 2,378 Transfer to use - new contracts 4,307 383 16 173 1,807 143 6,829 Disposals - 185 - 315 -94 - 502 -68 -9 - 1,173 Other transfers 0 -66 -4 0 0 687 617 Balance as at 31 Dec 2021 65,619 8,507 9,243 2,257 20,557 3,846 110,029 Impairment Balance as at 1 Jan 2021 14,272 1,765 3,123 1,185 3,053 551 23,949 Disposals -89 -84 -48 - 478 -3 0 - 702 Depreciation/Amortisation 7,318 881 1,568 603 1,689 491 12,550 Other transfers 0 -29 -2 0 0 293 262 Balance as at 31 Dec 2021 21,501 2,533 4,641 1,310 4,739 1,335 36,059 Carrying amount Balance as at 1 Jan 2021 46,032 6,656 5,754 1,402 15,773 1,803 77,420 Balance as at 31 Dec 2021 44,118 5,974 4,602 947 15,818 2,511 73,970 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 228 Changes in right-of-use assets of the Telekom Slovenije Group in 2020 in EUR thousand Base stations - easement and lease Technological premises - easement and lease Lease of business premises and land Vehicles Lease of lines Other Total Cost Balance as at 1 Jan 2020 52,656 7,493 8,236 2,541 18,492 2,401 91,819 Contract modifications 1,583 445 403 -167 -40 97 2,321 Transfer to use - new contracts 6,282 690 614 755 1,022 253 9,616 Disposals -217 -207 -376 -585 -648 -464 -2,497 Other transfers 0 0 0 43 0 67 110 Balance as at 31 Dec 2020 60,304 8,421 8,877 2,587 18,826 2,354 101,369 Impairment Balance as at 1 Jan 2020 6,999 863 1,592 925 1,568 572 12,519 Contract modifications 0 0 16 -68 0 -297 -349 Disposals -83 -35 -58 -535 -121 -464 -1,296 Depreciation/Amortisation 7,356 937 1,587 846 1,592 520 12,838 Other transfers 0 0 -14 17 14 220 237 Balance as at 31 Dec 2020 14,272 1,765 3,123 1,185 3,053 551 23,949 Carrying amount Balance as at 1 Jan 2020 45,657 6,630 6,644 1,616 16,924 1,829 79,300 Balance as at 31 Dec 2020 46,032 6,656 5,754 1,402 15,773 1,803 77,420 Changes in right-of-use assets of Telekom Slovenije in 2021 in EUR thousand Base stations - easement and lease Technological premises - easement and lease Lease of business premises and land Vehicles Lease of lines Other Total Cost Balance as at 1 Jan 2021 54,081 7,824 3,884 2,352 39,285 661 108,088 Contract modifications 368 22 -10 -5 - 861 -16 - 502 Transfer to use - new contracts 4,307 99 0 173 1,807 0 6,385 Disposals -116 - 267 -89 - 466 -68 0 - 1,006 Balance as at 31 Dec 2021 58,640 7,678 3,785 2,054 40,163 645 112,965 Impairment Balance as at 1 Jan 2021 11,208 1,491 1,128 1,055 6,543 156 21,581 Disposals -37 -43 -44 - 442 -3 0 - 569 Depreciation/Amortisation 5,762 740 554 550 3,514 165 11,286 Balance as at 31 Dec 2021 16,933 2,188 1,638 1,163 10,054 321 32,298 Carrying amount Balance as at 1 Jan 2021 42,872 6,333 2,756 1,298 32,742 505 86,506 Balance as at 31 Dec 2021 41,706 5,490 2,147 891 30,109 324 80,667 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 229 Changes in right-of-use assets of Telekom Slovenije in 2020 in EUR thousand Base stations - easement and lease Technological premises - easement and lease Lease of business premises and land Vehicles Lease of lines Other Total Cost Balance as at 1 Jan 2020 46,491 6,900 3,250 2,080 38,335 333 97,389 Contract modifications 1,501 694 273 -17 159 446 3,056 Transfer to use - new contracts 6,282 401 614 724 1,022 90 9,134 Disposals -193 -171 -253 -435 -230 -209 -1,491 Balance as at 31 Dec 2020 54,081 7,824 3,884 2,352 39,285 661 108,088 Impairment Balance as at 1 Jan 2020 5,474 728 576 767 3,226 217 10,987 Disposals -71 -21 -28 -423 -79 -209 -830 Depreciation/Amortisation 5,805 784 580 711 3,396 148 11,424 Balance as at 31 Dec 2020 11,208 1,491 1,128 1,055 6,543 156 21,581 Carrying amount Balance as at 1 Jan 2020 41,017 6,172 2,674 1,314 35,108 117 86,402 Balance as at 31 Dec 2020 42,872 6,333 2,756 1,298 32,742 505 86,506 The amounts recognised in the statement of profit or loss in EUR thousand Telekom Slovenije Group Telekom Slovenije 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Depreciation costs of the right-of-use assets 12,550 12,838 11,286 11,424 Interest expenses from lease liabilities 2,214 2,348 2,227 2,352 Expenses related to variable lease payments not included in the measuring of lease liabilities 154 159 35 41 Total 14,918 15,345 13,548 13,817 18. Investments in subsidiaries Telekom Slovenije holds a 100% interest in the following subsidiaries, the value of which, as at 31 December 2021, amounts to: in EUR thousand 31 Dec 2020 Additions Impairment 31 Dec 2021 GVO 5,758 0 0 5,758 Avtenta 1,323 0 0 1,323 TSmedia 2,485 1,500 -225 3,760 IPKO 20,730 0 0 20,730 Soline 147 0 0 147 SIOL Zagreb 501 0 0 501 SIOL Podgorica 2,620 0 0 2,620 SIOL Sarajevo 1,710 0 0 1,710 SIOL Skopje 1,005 0 0 1,005 SIOL Beograd 100 0 0 100 TSinpo 419 0 0 419 Institution Ustanova Srčni sklad 3 0 0 3 SIOL Prishtina 200 0 0 200 Investments in subsidiaries 37,001 1,500 -225 38,276 Telekom Slovenije verified the existence of indicators of impairment and assessed the fair value of the Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 230 companies TSmedia and TSinpo, d.o.o. TSmedia The recoverable amount of the 100% share capital in TSmedia for the purpose of financial reporting equals EUR 3,760 thousand. During the value assessment, the present value method of expected free cash flows for a five-year period was used, excluding indebtedness. The discount rate applied in the projection was 9.6% and the assessed long-term growth rate was 2.00%. Based on the valuation, the Company impaired the investment in TSmedia in the amount of EUR 225 thousand (Note 12). The appraisal of TSinpo showed no need for impairment of the investment, as the recoverable amount exceeded the book value. 19. Other investments Non-current investments Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Investments in other shares and interests 3,241 2,965 3,241 2,963 Loans to companies 0 0 53,950 60,885 - of which to companies in the Group 0 0 53,950 60,885 Loans to employees 44 103 44 103 Other non-current financial assets 7 0 0 0 Total non-current investments 3,292 3,068 57,235 63,951 Other investments in shares and interests are classified as investments measured at fair value through other comprehensive income. Of the total value of investments, EUR 2,305 thousand (31 Dec 2020: EUR 1,854 thousand) relates to investments which are listed on the stock exchange. Investments are not pledged as collateral and are free of encumbrances. At the end of 2021, the Group checked for indications of impairment of a more significant investment, namely the 11.94% share capital in the company ABCITI, Družba za investiranje, d.o.o. A certified business value appraiser carried out a valuation of the companies. On the basis of the obtained valuation, the Group impaired the investment in the amount of EUR 173 thousand. The effects of impairments are disclosed in the statement of other comprehensive income as fair value reserve for financial instruments (note 29). Current investments Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Current loans granted to companies 0 0 12,139 17,353 * of which to companies in the Group 0 0 12,139 17,353 Loans to employees 38 61 38 61 Bank deposits 702 451 0 0 Total current investments 740 512 12,177 17,414 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 231 Loans granted Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Non-current loans granted 44 103 53,994 60,988 Loans granted 0 0 53,950 60,885 Loans to employees 44 103 44 103 Current loans granted 38 61 12,177 17,414 Non-current loan portion falling due in 12 months - loans granted 0 0 10,985 15,270 Non-current loan portion falling due in 12 months - loans to employees 38 61 38 61 Current loans granted and interest 0 0 1,154 2,083 Closing balance – loans granted 82 164 66,171 78,402 The maturity of current and non-current loans as well as other data are disclosed in Note 44. The interest rate for loans granted to employees ranges between 4.08% and 6.23%. At Telekom Slovenije, non-current loans refer entirely to loans to subsidiaries. The interest rate for loans granted to subsidiaries ranges between 0.513% and 3.032%. For more details see Note 44. 20. Contract assets Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Contract assets 2,854 2,668 2,469 2,337 Total contract assets 2,854 2,668 2,469 2,337 Non-current contract assets arise if a group performs a transfer of goods or services to a customer before the consideration is paid. Buyers of telecommunication goods and services may commit to a certain subscription period (e.g. 24 months) in order to become eligible for discounts on goods and/or services. Due to the reclassification of revenue based on the relative standalone price, the revenues from the sale of goods are recognised sooner, giving rise to contract assets. Non-current contract assets are impaired in the event that the buyer terminates the contract before expiry. In this case, the contract assets are de-recognised, and impairment is recognised. In 2021, the Group impaired contract assets in the amount of EUR 682 thousand (in 2020: EUR 795 thousand), and the company Telekom Slovenije EUR 677 thousand (in 2020: EUR 769 thousand). 21. Deferred costs Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Prepaid leases 38 194 38 194 Other non-current assets 1,021 1,244 1,571 885 Total deferred costs 1,058 1,438 1,608 1,078 Other non-current assets represent the balance of non-current deferred costs of license maintenance and similar costs. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 232 22. Investment property Telekom Slovenije Group Telekom Slovenije in EUR thousand Land Buildings Total Land Buildings Total Cost Balance as at 1 Jan 2021 1,924 2,149 4,073 4,896 2,149 7,045 Additions 62 4,156 4,218 62 4,282 4,344 Balance as at 31 Dec 2021 1,986 6,305 8,291 4,958 6,431 11,389 Impairment Balance as at 1 Jan 2021 1,689 1,126 2,815 1,689 1,126 2,815 Additions 0 850 850 0 850 850 Depreciation/Amortisation 0 81 81 0 83 83 Balance as at 31 Dec 2021 1,689 2,057 3,746 1,689 2,059 3,748 Carrying amount Balance as at 1 Jan 2021 235 1,023 1,258 3,207 1,023 4,230 Balance as at 31 Dec 2021 297 4,248 4,545 3,269 4,372 7,641 Telekom Slovenije Group Telekom Slovenije in EUR thousand Land Buildings Total Land Buildings Total Cost Balance as at 1 Jan 2020 1,893 1,914 3,807 4,865 1,914 6,779 Additions 31 235 266 31 235 266 Balance as at 31 Dec 2020 1,924 2,149 4,073 4,896 2,149 7,045 Impairment Balance as at 1 Jan 2020 1,689 1,088 2,777 1,689 1,088 2,777 Additions 0 2 2 0 2 2 Depreciation/Amortisation 0 36 36 0 36 36 Balance as at 31 Dec 2020 1,689 1,126 2,815 1,689 1,126 2,815 Carrying amount Balance as at 1 Jan 2020 204 826 1,030 3,176 826 4,002 Balance as at 31 Dec 2020 235 1,023 1,258 3,207 1,023 4,230 The Group and the Company carry investment property at cost less accumulated depreciation and impairment losses. Fair value of investment property is presented in Note 39. As at 31 December 2021, Telekom Slovenije Group disclosed land, landscaping and the Tisa Hotel building on Pohorje in the amount of EUR 980 thousand (EUR 1,016 thousand in 2020) among its investment property, as well as land and the building Rakovnik in the amount of EUR 219 thousand (EUR 242 thousand in 2020). In 2021, the Group added land and a building on Vilharjeva ulica in Ljubljana to its investment property, its total investment property thus amounting to EUR 3,346 thousand. Among its investment property, Telekom Slovenije additionally discloses land and a building at the Sečovlje saltpans amounting to EUR 3,096 thousand and, as at 31 December 2021, holds investment property in the total amount of EUR 7,641 thousand. Revenue generated on investment property in 2021 is recognised in the Group’s profit or loss in the amount of EUR 360 thousand (2020: EUR 283 thousand). The Group does not have any limited title to investment property, nor are investments subject to encumbrance. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 233 23. Assets held for sale As at 31 December 2019, assets held for sale include the value of land and buildings that the Group companies will no longer use for business purposes and which the companies’ managements decided to sell within the next 12 months. Telekom Slovenije Group Telekom Slovenije in EUR thousand Assets held for sale Assets held for sale Balance as at 1 Jan 2020 500 500 Additions 12 12 Sale -12 -12 Transfer to property, plant and equipment -286 -286 Balance as at 31 Dec 2020 214 214 Additions 4,071 4,071 Sale -3,486 -3,486 Balance as at 31 Dec 2021 799 799 In 2021, the Group transferred a part of the land and the building on Vilharjeva ulica in Ljubljana from “property, plant and equipment” to assets held for sale, and also sold them. The Group thus generated EUR 1,877 thousand in gains on sale, which were recognised in the statement of profit or loss under Gains on disposal of property, plant and equipment (Note 8). 24. Inventories Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Material 11,664 13,663 10,044 11,362 Products 527 764 0 0 Merchandise 10,287 11,748 9,559 10,449 Total inventories 22,478 26,175 19,603 21,811 In 2021, the Telekom Slovenije Group impaired and wrote off EUR 2,192 thousand of inventories (in 2020: EUR 1,231 thousand). In 2021, Telekom Slovenije wrote off or impaired EUR 2,161 thousand worth of inventories (in 2020: EUR 1,000 thousand). 25. Trade and other receivables Under non-current trade receivables, the Group and the Company disclose receivables from the sale of goods with maturity of over one year. Impairments of receivables refer to expected credit losses. Maturity analysis of receivables is presented in Note 44. Telekom Slovenije Group 31 Dec 2021 31 Dec 2020 in EUR thousand Gross amount Impairment Net amount Net amount Non-current trade receivables 18,387 -87 18,300 17,081 Total trade and other receivables 18,387 -87 18,300 17,081 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 234 Current trade receivables 31 Dec 2021 31 Dec 2020 in EUR thousand Gross amount Impairment Net amount Net amount Trade receivables 136,135 -11,651 124,484 121,195 Trade receivables due from foreign operators 13,771 -1,751 12,020 16,925 Trade receivables due from domestic operators 15,440 -3,447 11,993 18,651 Total trade receivables 165,346 -16,849 148,497 156,771 Paid advances 824 0 824 646 VAT and other tax receivables 5,536 0 5,536 4,232 Income tax receivables 205 0 207 94 Other receivables 1,095 -8 1,087 1,193 Total other receivables 7,663 -8 7,655 6,165 Total trade and other receivables 173,009 - 16,857 156,152 162,936 Trade receivables do not bear interest. Changes in impairment of receivables in EUR thousand 2021 2020 Balance as at 1 Jan -15,968 -18,344 Changes in Group 0 91 Impairments -5,373 -6,520 Reversal of impairments 3,346 4,502 Write-offs 1,051 4,303 Balance as at 31 Dec -16,944 -15,968 Telekom Slovenije 31 Dec 2021 31 Dec 2020 in EUR thousand Gross amount Impairment Net amount Net amount Non-current trade receivables 18,381 -87 18,294 17,639 Total trade and other receivables 18,381 -87 18,294 17,639 Current trade receivables 31 Dec 2021 31 Dec 2020 in EUR thousand Gross amount Impairment Net amount Net amount Trade receivables 124,325 -7,817 116,508 114,865 Receivables due from foreign operators 13,873 -1,752 12,121 17,680 Receivables due from domestic operators 16,918 -3,455 13,463 21,143 Total trade receivables 155,116 -13,024 142,092 153,688 Paid advances and warranties 645 0 645 460 VAT and other tax receivables 4,739 0 4,739 4,391 Income tax receivables 116 0 116 0 Other receivables 786 0 786 821 Total other receivables 6,286 0 6,286 5,672 Total trade and other receivables 161,402 -13,024 148,378 159,360 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 235 Changes in impairment of receivables in EUR thousand 2021 2020 Balance as at 1 Jan -12,532 -11,985 Impairments -5,244 -6,090 Reversal of impairments 3,220 3,975 Write-offs 1,445 1,568 Balance as at 31 Dec -13,111 -12,532 Further information on the structure of receivables according to their maturity is disclosed in Note 44. 26. Contract assets Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Contract assets from mobile and fixed-line segment 6,867 8,312 6,868 8,312 Other contract assets 10,396 15,215 10,299 14,951 Total contract assets 17,263 23,527 17,167 23,263 Current contract assets arise mainly from the sale of telecommunication services and goods, where customer contracts comprise the subscription fee and a subsidised service or goods and where customers commit to a 12-month contract period, and accrued revenue - roaming. 27. Deferred costs Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Deferred costs 3,766 4,250 3,150 3,764 Total deferred costs 3,766 4,250 3,150 3,764 Current deferred costs include mostly deferred costs in connection with calculation of international services. 28. Cash and cash equivalents Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Cash on hand and bank balances 15,935 8,167 3,754 2,086 Total cash and cash equivalents 15,935 8,167 3,754 2,086 To balance short-term liquidity, the Group and the Company have credit lines or revolving loans with banks in the total amount of EUR 100 million and a transaction account overdraft in the amount of EUR 5 million. Credit lines are outlined by the Group in Note 33. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 236 29. Equity and reserves Authorised, issued and fully paid-up share capital amounts to EUR 272,721 thousand and is divided into 6,535,478 ordinary registered no-par value shares. Each ordinary no-par value share has the same share and attributable amount in the share capital. Ownership structure 31 Dec 2021 31 Dec 2020 Shareholder Number of shares Interest in % Number of shares Interest in % Republic of Slovenia 4,087,569 62.54% 4,087,569 62.54% Individual shareholders (domestic and foreign) 896,517 13.72% 897,734 13.74% Foreign legal entities 422,864 6.47% 417,069 6.38% Kapitalska družba d.d. 365,175 5.59% 365,175 5.59% Slovenian Sovereign Holding (Slovenski državni holding d.d.) (SSH – SDH) 277,839 4.25% 277,839 4.25% Domestic legal entities 255,688 3.91% 254,874 3.90% Domestic financial companies and funds 199,826 3.06% 205,218 3.14% Treasury shares 30,000 0.46% 30,000 0.46% Total 6,535,478 100.00% 6,535,478 100.00% The balances and changes in equity items are presented in the statement of changes in equity. There were no changes in the number of issued shares in 2021. The share premium may be used under the conditions and for the purpose set by the law. As at 31 December 2021, Telekom Slovenije's share premium amounted to EUR 180,954 thousand, of which EUR 126,135 thousand of share premium arises from the company’s ownership transformation process. Share premium in the amount of EUR 54.821 thousand in substance represent revaluation surpluses. Share premium did not change in 2021. Legal reserves are formed in such amount that the sum of legal reserves and the share premium equals 20% of share capital. In accordance with the Companies Act, the share premium and legal reserves can in their excess amount be used to increase share capital from a company's assets and to cover losses brought forward, if profit reserves are not simultaneously used for pay-out of profits to shareholders. As at 31 December 2021, Telekom Slovenije had 30,000 treasury shares, representing 0.46% of all shares. The number of treasury shares has not changed since their acquisition in 2003. The value of treasury shares in the amount of EUR 3,671 thousand is disclosed as equity’s deductible item and is disclosed at the cost value of the purchased treasury shares. Reserves for treasury shares are formed in the same amount in compliance with legal requirements. The Group may acquire treasury shares for the purposes defined in the provisions of Article 247 of the Companies Act (ZGD-1). Statutory reserves are used for forming the treasury share reserve, for covering losses, for share capital increases, and for covering diverse trade and other risks. These reserves can be used in accordance with the Articles of Association, namely for the share capital increase, for the coverage of current and brought forward loss if this loss cannot be settled by means of any other sources, and for creating treasury shares if no other funds are available. When compiling the Annual Report, the Group can form other profit reserves up to 50% of net profit Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 237 for the year, less amounts used for statutory or legal reserves. Other profit reserves can be used for any purpose in accordance with the law, the Articles of Association, business policy and resolutions adopted by the General Meeting of Shareholders. Retained earnings Retained earnings include brought-forward retained net earnings from previous years and net earnings for the current year. Based on the resolution adopted by the General Meeting of Shareholders on 18 June 2021, the accumulated profit for 2020 in the amount of EUR 34,981 thousand was used for dividend pay-out in the amount of EUR 29,275 thousand, i.e., EUR 4.50 gross per share (in 2020, dividends for the year 2019 were paid out in the amount of EUR 22,769 thousand or EUR 3.50 per share). The remaining part of the accumulated profit in the amount of EUR 5,706 thousand was not allocated and increases the retained net earnings of previous years. Dividends were paid to the shareholders registered in the share register on the cut-off date of 2 August 2021 as stockholders with the right to dividends, and to other parties entitled to dividends. Determination of accumulated profit of Telekom Slovenije for 2021 in EUR thousand Net profit/loss for 2021 34,370,988.72 Retained net profit/loss 21,144,258.24 Decrease in non-current deferred development costs -10,310,292.67 Total 45,204,954.29 Recommended dividend pay-out for 2021 in EUR Dividends per ordinary share 3.50 Fair value reserve for financial instruments Fair value reserve for financial instruments includes the change in fair value of investments in equity instruments, measured at fair value through other comprehensive income, and the change in fair value of hedging financial instruments. Fair value reserve for financial instruments is shown in the statement of other comprehensive income. At the end of 2021, the Group checked for indications of impairment of investments in ABCITI, Družba za investiranje, d.o.o. The effects of valuations and impairments are disclosed in Note 19. Reserves for actuarial deficits and surpluses Reserve for actuarial deficits and surpluses includes changes in the present value of payables to employees due to changed actuarial assumptions and on the basis of experience-based adjustments. The changes in actuarial deficits and surpluses are shown in the statement of changes in equity. 30. Contract liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Non-current contract liabilities 278 451 191 318 Contract liabilities - leases 13,480 13,887 13,480 13,886 Contract liabilities - other 520 617 81 97 Total contract liabilities 14,278 14,955 13,752 14,301 Non-current contract liabilities represent the Group’s obligation to either transfer the goods or services to the customer in the future or to refund the consideration received. In both cases, the obligation is measured as the amount of the consideration received from the customer. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 238 31. Provisions Changes in provisions of the Telekom Slovenije Group in 2021 in EUR thousand 31 Dec 2020 Transfer from current portion Utilisated Reversal Formation Changes in discount rates 31 Dec 2021 Provisions for probable liabilities resulting from legal claims 251 0 0 -1 0 0 250 Provisions for jubilee rewards 2,351 0 -167 -5 65 -87 2,157 Provisions for severance pays upon retirement 12,052 0 -63 - 964 651 55 11,731 Provisions for estimated costs of the removal of receiving -transmitting stations 4,232 0 -24 -15 74 -311 3,956 Other provisions 1,248 3,988 -528 - 638 631 0 4,701 Provisions for restructuring 273 0 -273 0 268 0 268 Total provisions 20,407 3,988 - 1,055 - 1,626 1,689 -343 23,063 Changes in provisions of the Telekom Slovenije Group in 2020 in EUR thousand 31 Dec 2019 Increase in business combinations Drawing Reversal Formation Changes in discount rates 31 Dec 2020 Provisions for probable liabilities resulting from legal claims 4,666 0 0 - 4,536 119 3 251 Provisions for severance pays upon retirement 10,920 -66 -14 -182 1,283 111 12,052 Provisions for jubilee rewards 2,298 -22 -140 -1 90 126 2,351 Provisions for estimated costs of the removal of receiving - transmitting stations 3,868 0 -13 -5 119 263 4,232 Other provisions 1,438 0 -649 -47 505 0 1,248 Provisions for restructuring 103 0 -103 0 273 0 273 Total provisions 23,293 -88 -919 - 4,771 2,389 502 20,407 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 239 Changes in provisions of Telekom Slovenije in 2021 in EUR thousand 31 Dec 2020 Transfer from/to current portion Drawing Reversal Formation Changes in discount rates 31 Dec 2021 Provisions for jubilee rewards 1,897 0 -139 0 33 -72 1,719 Provisions for severance pays upon retirement 10,050 0 -45 -869 426 46 9,608 Provisions for estimated costs of the removal of receiving - transmitting stations 4,232 0 -24 -15 74 -311 3,956 Other provisions 5 4,274 -28 0 27 0 4,278 Total provisions 16,184 4,274 -236 -884 560 -337 19,561 Changes in provisions of Telekom Slovenije in 2020 in EUR thousand 31 Dec 2019 Drawing Reversal Formation Changes in discount rates 31 Dec 2020 Provisions for probable liabilities resulting from legal claims 4,500 0 - 4,500 0 0 0 Provisions for severance pays upon retirement 8,916 0 0 1,044 90 10,050 Provisions for jubilee rewards 1,847 -104 0 47 107 1,897 Provisions for estimated costs of the removal of receiving - transmitting stations 3,868 -13 -5 119 263 4,232 Other provisions 7 -14 0 12 0 5 Provisions for restructuring 0 0 0 0 0 0 Total provisions 19,138 -131 - 4,505 1,222 460 16,184 Provisions for probable liabilities resulting from legal claims Provisions for liabilities from probable legal claims are formed on the basis of the estimated outcome of actions, conducted with a high level of prudence. Maturity date of the liability cannot be determined. Legal claims in relation to which provisions were formed are at various stages. The Telekom Slovenije Group was primarily successful in cases definitively concluded up to this date, which it also publishes promptly in accordance with the rules of the Stock Exchange. In 2021 and 2020, the Telekom Slovenije Group and Telekom Slovenije did not draw or establish significant provisions for probable liabilities resulting from legal claims. In 2020, Telekom Slovenije eliminated the provisions established in 2019. In 2021, no new provisions were established. Total damages claimed in pending legal claims brought against the Telekom Slovenije Group companies amount to EUR 128,158 thousand (2020: EUR 43,136 thousand). Total damages claimed in pending legal claims brought against Telekom Slovenije amount to EUR 125,326 thousand (2020: EUR 40,691 thousand). More details in Note 40. Provisions for severance pays and jubilee rewards Provisions for severance pays and jubilee rewards are based on actuarial calculations. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 240 Telekom Slovenije Group Telekom Slovenije in EUR thousand Provisions for jubilee rewards Provisions for severance pays Total Provisions for jubilee rewards Provisions for severance pays Total Provisions as at 1 Jan 2020 2,298 10,920 13,218 1,847 8,916 10,763 Interest cost 25 112 137 19 90 109 Current service cost 154 477 631 114 382 496 Past service cost -2 -15 -17 0 0 0 Actuarial gains (+) and losses (-) 38 638 676 21 662 683 Changes in Group -22 -66 -88 0 0 0 Payments during the year -141 -13 -154 -104 0 -104 Provisions as at 31 Dec 2020 2,350 12,053 14,403 1,897 10,050 11,947 Interest cost 11 56 67 9 46 54 Current service cost 159 524 682 118 426 544 Turnover (termination of employment) -3 -29 -32 0 0 0 Actuarial gains (+) and losses (-) -198 -819 -1,016 -166 -869 -1,035 - due to changes in financial assumptions -101 -602 -702 -80 -618 -698 - due to experience-based adjustments -97 -217 -314 -85 -251 -336 Payments during the year -163 -52 -215 -139 -45 -184 Provisions as at 31 Dec 2021 2,156 11,732 13,888 1,719 9,608 11,327 The company Telekom Slovenije and the Telekom Slovenije Group are exposed to the risks arising from long-term employee benefits, primarily on the basis of: - changes to legislation governing employment, retirement, contributions, and taxes, - changes to collective agreements, business agreements and other internal acts that affect the type and level of benefits, - significant changes in the amounts to which the benefits relate: average salaries in the Republic of Slovenia, employees’ salaries, fixed amounts of rewards and tax-free amounts of rewards, - changes in the economic environment, e.g., severance pay upon termination of employment. Present values of long-term employee benefits are exposed to the following risks: - all risks to which long-term employee benefits are exposed, - difference between actual experience and actuarial assumption (mortality, employee turnover, early or late retirement, salary growth rate and tax-free reward amounts), - changes in discount rates used in measuring, according to the different balance sheet dates. The following actuarial assumptions were taken into account in the calculation of provisions for jubilee rewards and post-employment benefits: - demographic assumptions: • expected mortality is determined on the basis of life tables of the population in the Republic of Slovenia (published for 2007), • fluctuation indicating the leaving of the company by one's own decision is determined as linearly decreasing according to the age of the employee and averages 2.4% for the company Telekom Slovenije, d.d. for 2021, and 2.8% for the Telekom Slovenije Group for 2021, weighted by the number of employees in each company, while the estimated retirement date is determined as the day when the first condition for retirement is met, taking into account the legislation of the Republic of Slovenia. - financial assumptions: • expected growth of average salaries in the Republic of Slovenia takes into account the projections of the Institute of Macroeconomic Analysis and Development: Autumn forecast of economic trends 2021 and is determined as a 2.5% long-term annual growth, • expected increase in the salaries of employees in the Telekom Slovenije Group takes into account the growth due to inflation, promotion and length of service allowance and amounts to: Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 241 Long-term salary growth in the Company since 2022 Telekom Slovenije 0.76% GVO 2.74% Avtenta 1.00% TSmedia 0.85% Soline 2.00% TSinpo 0.72% - the applied interest rate equals 0.95 p.a., which corresponds to the 2021 year-end yield on 10-year corporate bonds from Euro area issuers, for Telekom Slovenije, Soline, GVO and TSinpo, and 1.17% p.a., which corresponds to the 2021 year-end yield on 15-year corporate bonds from Euro area issuers, for Avtenta and TSmedia. Sensitivity analysis of changes in actuarial assumptions in the Telekom Slovenije Group Assumption Deviation Description Total Severance pays Jubilee rewards Central scenario 0.00% balance 13,888 11,732 2,156 Discount interest rate -0.50% balance 14,715 12,465 2,250 (difference) 827 733 94 0.50% balance 13,130 11,060 2,070 (difference) -759 -671 -88 Salary growth -0.50% balance 13,131 11,060 2,071 (difference) -758 -671 -87 0.50% balance 14,706 12,457 2,249 (difference) 817 725 92 Sensitivity analysis of changes in actuarial assumptions in Telekom Slovenije Assumption Deviation Description Total Severance pays Jubilee rewards Central scenario 0.00% balance 11,327 9,608 1,719 Discount interest rate -0.50% balance 11,999 10,207 1,792 (difference) 672 599 73 0.50% balance 10,709 9,058 1,651 (difference) -618 -550 -68 Salary growth -0.50% balance 10,709 9,057 1,652 (difference) -618 -550 -68 0.50% balance 11,992 10,201 1,791 (difference) 665 593 72 Provisions for estimated costs of the removal of receiving-transmitting stations Provisions were formed in the amount of the estimated cost of removal discounted at the discount rate of 0.95% p.a. (2020: 0.72% p.a.), which corresponds to the 10-year yield on corporate bonds from Euro area issuers as at the end of December 2020. Other reservations Among other provisions, the Group and the company disclose liabilities from concluded contracts, which have a current liability with an uncertain maturity and they were transferred from short-term to Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 242 long-term provisions. Provisions for restructuring In 2021, the Group drew provisions for restructuring in the amount of EUR 273 thousand, which were created in the previous reporting period, and formed new ones in the amount of EUR 268 thousand. Telekom Slovenije did not establish any new provisions for restructuring. 32. Other liabilities Other trade payables of the Telekom Slovenije Group include the frequency fee in Kosovo. Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Trade payables for programme rights 11,834 31,074 11,834 20,302 Other 6,621 7,822 447 554 Total trade payables 18,455 38,896 12,281 20,856 33. Loans and borrowings This note provides information about the contractual terms of borrowings. For more information relating to exposure to interest rate risk and foreign currency risk, please refer to Note 44. Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Borrowings Borrowings from banks 349,032 214,801 349,001 214,801 - current portion of non-current borrowings -40,009 -30,580 -39,978 -30,580 - non-current portion of borrowings 309,023 184,221 309,023 184,221 Total non-current portion 309,023 184,221 309,023 184,221 Current borrowings Borrowings from banks - revolving loan 0 1,500 0 1,500 Borrowings from companies in the Group 0 0 1,400 13,000 current portion of non-current borrowings from banks 40,009 30,580 39,978 30,580 Interests and other expenses from borrowings 6 0 37 15 Total current portion 40,015 32,080 41,415 45,095 Non-current financial liabilities of the Telekom Slovenije Group relate to borrowings from banks by the Telekom Slovenije Group. The first non-current loan is a syndicated loan comprising three tranches, two of which have respective maturity in 2023 and 2025. The loan is linked to a variable interest rate with mark-ups for individual tranches ranging from 1.35% to 1.65% and is collateralised by blank bills of exchange. The second non-current loan is also a syndicated loan comprising three tranches, all with maturity in 2028. The loan is linked to a variable interest rate with mark-ups for individual tranches ranging from 0.75% to 1.00% and is collateralised by blank bills of exchange. The third non-current loan was received from the European Investment Bank (EIB). It has been partly drawn and matures in 2031. The remaining part of the loan can be drawn by the end of 2023. The drawn loan tranche is subject to a fixed interest rate equalling 1,571%. This loan is also collateralised by blank bills of exchange. The Group and the Company also have current credit lines and undrawn revolving loans at the end of the year. Current revolving lines are collateralised by blank bills of exchange. Current revolving Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 243 loans mature in 2022 and are subject to fixed or variable interest rates and a mark-up ranging from 0.05% to 2.50%. A transaction account overdraft contract has also been signed with one of the banks, with a 2.65% interest rate. Banks which have approved the loans require that the Telekom Slovenije Group’s value of financial covenants specified in loan agreements be maintained: the net financial debt/EBIDTA ratio, equity-to- total assets ratio and equity as well as the EBIDTA/finance expenses ratio. Failure to achieve the prescribed ratios may result in a demand for early repayment of the loans. As at 31 December 2021, all financial covenants on the Group level were fulfilled. In addition to the above, Telekom Slovenije also has financial liabilities to Group companies in the form of a current revolving loan with maturity in 2022, subject to an interest rate between 0.495% and 0,557%. Changes in borrowings Telekom Slovenije Group Telekom Slovenije in EUR thousand 2021 2020 2021 2020 Balance as at 1 Jan 216,301 245,840 229,316 252,810 Drawing 196,000 1,000 196,000 7,000 Returns -62,995 -30,801 -74,595 -30,769 Other -268 262 -283 275 Balance as at 31 Dec 349,038 216,301 350,438 229,316 Other changes relate to non-monetary items, namely, to transfers of prepaid expenses related to the granting of a loan to financial expenses, expenses from borrowings, and transfers between individual categories. 34. Lease liabilities Current financial liabilities from lease represent liabilities for right-of-use assets that are expected to be settled in the next 12 months. Lease liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Non-current liabilities arising from right-of-use assets 57,096 59,092 62,748 67,093 Current liabilities arising from right-of-use assets 9,460 10,180 10,949 11,660 Total liabilities arising from right-of-use assets 66,556 69,272 73,697 78,753 Changes in lease liabilities in EUR thousand Telekom Slovenije Group Telekom Slovenije Balance as at 31 Dec 2020 69,054 76,382 Additions 10,037 11,484 Interest 2,348 2,352 Lease payments -12,167 -11,465 Balance as at 31 Dec 2020 69,272 78,753 Additions 9,877 6,599 Interest 2,214 2,227 Lease payments -14,807 -13,882 Balance as at 31 Dec 2020 66,556 73,697 Balance as at 31 Dec 2020 Telekom Slovenije Group Telekom Slovenije Current lease liabilities 10,180 11,660 Non-current lease liabilities 59,092 67,093 Total lease liabilities 69,272 78,753 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 244 Balance as at 31 Dec 2020 Telekom Slovenije Group Telekom Slovenije Current lease liabilities 9,460 10,949 Non-current lease liabilities 57,096 62,748 Total lease liabilities 66,556 73,697 The total cash flow from leases amounts to EUR 14,806 thousand for the Telekom Slovenije Group and EUR 13,882 thousand for the company Telekom Slovenije, and is disclosed as a cash flow arising from financing activities. Repayment of lease liabilities – principal, provided in the statement of cash flows, comprises only the payments on the lease principal, and the interest payments are included in the “interest paid” line. 35. Other financial liabilities Non-current financial liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Liabilities for interest rate swap 88 244 88 244 Total other non-current financial liabilities 88 244 88 244 Current financial liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Liabilities under bonds issued 0 101,078 0 101,078 Liabilities for interest rate swap 0 98 0 98 Other financial liabilities 2 63 0 61 Total other current financial liabilities 2 101,239 0 101,237 Upon their maturity in June 2021, Telekom Slovenije repaid the bonds in the amount of EUR 100 million, and the repayment source was a new non-current syndicated loan. In February 2017, an interest rate swap was concluded with the purpose of interest rate hedging, the fair value of which as at 31 December 2021 equalled EUR 88 thousand (31 December 2020: EUR 342 thousand). Due to the immateriality of the amount of the interest rate swap, the Group did not prepare any additional disclosures related to risk management. Changes in other financial liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand Bonds Other Bonds Other Balance as at 1 Jan 2020 101,036 829 100,036 753 Interest paid -1,950 -444 -1,950 -444 Other 1,992 20 1,992 94 Balance as at 31 Dec 2020 101,078 405 101,078 403 Interest paid + repayment of bonds -101,950 -247 -101,950 -247 Other 872 -68 872 -68 Balance as at 31 Dec 2021 0 90 0 88 Other changes relate to non-monetary items, namely accrued interest, transfers of prepaid expenses related to bonds issued to financial expenses, dividend write-downs and change in fair value of non- derivative financial instruments. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 245 36. Trade payables Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Trade payables 79,928 64,003 65,612 52,939 Liabilities to domestic operators 1,724 1,887 7,297 7,489 Liabilities to foreign operators 8,034 11,161 8,540 11,335 VAT and other tax liabilities 6,596 7,745 4,944 7,105 Liabilities to employees 8,698 8,329 7,007 6,655 Liabilities for advances and warranties 2,293 2,861 377 430 Other liabilities 23,682 23,072 22,604 23,802 Total trade payables 130,955 119,058 116,381 109,755 Trade payables are non-interest bearing and are generally settled in the agreed period of 8 to 120 days. The same applies for liabilities to operators which are also non-interest bearing and are generally settled in an agreed-upon term between 10 and 90 days from the date of the invoice issue. Other liabilities in the company and the Group mostly include liabilities from cession and assignment in the amount of EUR 1,788 thousand (in 2020: EUR 3,030 thousand), programme rights for TV content in the amount of EUR 18,241 thousand (in 2020: EUR 9,968 thousand), and other non-current liabilities. 37. Contract liabilities Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Contract liabilities - leases 1,833 1,714 1,833 2,043 Other current contract liabilities 10,485 10,942 6,619 6,664 Total contract liabilities 12,318 12,656 8,452 8,707 Other current contract liabilities relate mostly to contract liabilities from customer loyalty programme and mobile services prepayments. 38. Accrued liabilities Among accrued liabilities, the Group and the company disclose current deferred revenue and current accrued costs, as follows: Current deferred revenue Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Current portion of government grant for property, plant and equipment 56 65 54 64 Other current deferred revenue - co- funding of European projects 768 478 267 97 Total current deferred revenue 824 543 321 161 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 246 Current accrued costs Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Accrued costs and expenses for services rendered and goods supplied (invoices not issued yet) 7,985 19,087 6,991 18,286 Accrued costs and deferred revenue – calculation of international services 11,511 13,927 11,520 14,715 Accrued salaries, bonuses and severance pays 3,856 3,823 3,715 3,636 Accrued costs for unused annual leave 3,932 4,477 3,243 3,723 Other 678 0 673 0 Total accrued costs and expenses 27,962 41,314 26,142 40,360 Total accrued liabilities 28,786 41,854 26,463 40,521 39. Book and fair values The table contains data on the classification in terms of fair value hierarchy solely for assets and financial liabilities which are measured at fair value and for which fair value is disclosed. Book and fair values of financial instruments of the Telekom Slovenije Group as at 31 December 2021 in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Non-current financial assets Investments in shares and interests listed on the stock exchange, measured at fair value through other comprehensive income 2,305 2,305 2,305 Investments in shares and interests not listed on the stock exchange, measured at fair value through other comprehensive income 936 936 936 Loans granted 44 44 44 Other non-current financial assets 7 7 7 Trade receivables 18,300 18,300 18,300 Current financial assets Loans granted 38 38 38 Other current financial assets 702 702 702 Trade and other receivables 156,152 156,152 156,152 Cash and cash equivalents 15,935 15,935 15,935 Non-current financial liabilities Borrowings 309,023 309,023 309,023 Liabilities for interest rate swap 88 88 88 Other liabilities 18,455 18,455 18,455 Current financial liabilities Borrowings 40,015 40,015 40,015 Other financial liabilities 2 2 2 Trade payables 130,955 130,955 130,955 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 247 Book and fair values of financial instruments of the Telekom Slovenije Group as at 31 December 2020 in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Non-current financial assets Investments in shares and interests listed on the stock exchange, measured at fair value through other comprehensive income 1,854 1,854 1,854 Investments in shares and interests not listed on the stock exchange, measured at fair value through other comprehensive income 1,111 1,111 1,111 Loans granted 103 103 103 Trade receivables 17,081 17,081 17,081 Current financial assets Loans granted 61 61 61 Other current financial assets 451 451 451 Trade and other receivables 162,936 162,936 162,936 Cash and cash equivalents 8,167 8,167 8,167 Non-current financial liabilities Borrowings 184,221 184,221 184,221 Liabilities for interest rate swap 244 244 244 Trade payables 38,896 38,896 38,896 Current financial liabilities Bonds 101,078 100,500 100,500 Borrowings 32,080 32,080 32,080 Liabilities for interest rate swap 98 98 98 Other financial liabilities 63 63 63 Trade payables 119,058 119,058 119,058 Book and fair values of financial instruments of the company Telekom Slovenije as at 31 December 2021 in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Non-current financial assets Investments in shares and interests listed on the stock exchange, measured at fair value through other comprehensive income 2,305 2,305 2,305 Investments in shares and interests not listed on the stock exchange, measured at fair value through other comprehensive income 936 936 936 Loans granted 53,994 53,994 53,994 Trade receivables 18,294 18,294 18,294 Current financial assets Loans granted 12,177 12,177 12,177 Trade and other receivables 148,378 148,378 148,378 Cash and cash equivalents 3,754 3,754 3,754 Non-current financial liabilities Borrowings 309,023 309,023 309,023 Liabilities for interest rate swap 88 88 88 Trade payables 12,281 12,281 12,281 Current financial liabilities Borrowings 41,415 41,415 41,415 Trade payables 116,381 116,381 116,381 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 248 Book and fair values of financial instruments of the company Telekom Slovenije as at 31 December 2020 in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Non-current financial assets Investments in shares and interests listed on the stock exchange, measured at fair value through other comprehensive income 1,854 1,854 1,854 Investments in shares and interests not listed on the stock exchange, measured at fair value through other comprehensive income 1,109 1,109 1,109 Loans granted 60,988 60,988 60,988 Trade receivables 17,081 17,081 17,081 Current financial assets Loans granted 17,385 17,385 17,385 Trade and other receivables 158,367 158,367 158,367 Cash and cash equivalents 2,086 2,086 2,086 Non-current financial liabilities Borrowings 184,221 184,221 184,221 Liabilities for interest rate swap 244 244 244 Trade payables 20,856 20,856 20,856 Current financial liabilities Bonds 101,078 100,500 100,500 Borrowings 45,083 45,083 45,083 Liabilities for interest rate swap 98 98 98 Other financial liabilities 61 61 61 Trade payables 109,755 109,755 109,755 Fair values at levels 2 and 3 of the hierarchy were estimated using the discounted cash flow valuation technique. The Group and the Company did not record any transfers between fair value levels in 2020 or 2021. Assets that are not measured at fair value in the balance sheet, but of which the fair value is disclosed The Group and the Company keep investment property in their books at cost value and only disclose fair value. The valuation of investment property was prepared by a certified property appraiser as at 30 November 2021. The market comparison approach was used in the assessment of fair value, decreased by the cost of use. Book and fair values as at 31 December 2021 Telekom Slovenije Group in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Investment property 4,545 5,162 5,162 Telekom Slovenije in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Investment property 7,641 8,831 8,831 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 249 Book and fair values as at 31 December 2020 Telekom Slovenije Group in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Investment property 1,258 1,704 1,704 Telekom Slovenije in EUR thousand Book value Fair value Level 1 Level 2 Level 3 Investment property 4,230 4,849 4,849 40. Contingent liabilitiess Amounts claimed in litigation Telekom Slovenije Group in EUR thousand 2021 2020 Amounts claimed in litigation 127,766 43,136 As at the balance sheet date, the Group recorded 99 legal claims (31 Dec 2020: 91 legal claims). Based on the obtained legal opinions and the estimate of the management, provisions were formed for legal claims in the amount of EUR 250 thousand (Note 31). Telekom Slovenije in EUR thousand 2021 2020 Amounts claimed in litigation 125,326 40,691 As at the reporting date, the Group recorded 57 legal claims (31 December 2020: 51 legal claims). The relevant legal claims are at various stages as follows: On 2 March 2021, Telekom Slovenije received a legal claim of the Ljubljana District Court from the plaintiff T-2, d.o.o., for the payment of ordinary damages, repayment of lost profits and non- existence of claims in the amount of EUR 49,735 thousand. The claim supposedly represents the damages suffered by the plaintiff between 1 September 2018 and 31 July 2020. Telekom Slovenije assesses that the amount of the legal claim will be fully rejected. On 2 August 2021, Telekom Slovenije also received a legal claim of the Ljubljana District Court from the plaintiff Telemach d.o.o. for the payment of damages in the amount of EUR 28,796 thousand with statutory interest from 1 June 2021 until payment. Telemach d.o.o. justifies the claim with allegations of a breach of regulatory provisions, issued by the Agency for Communication Networks and Services of the Republic of Slovenia, and with allegations of abuse of a dominant position. Telekom Slovenije assesses that the amount of the legal claim will be fully rejected. Based on the obtained legal opinions and the estimate of the management, the Group has provisions formed for legal claims in the amount of EUR 250 thousand (in 2021: EUR 251 thousand). The company has no provisions formed for legal claims. Given the progress of the proceedings, it is difficult to provide an estimate of the completion of individual cases with a sufficient degree of certainty. Supporting letter given to a subsidiary The parent company Telekom Slovenije, as the sole shareholder of SIOL Sarajevo, issued a supporting letter to SIOL Sarajevo, in which it declares to continue providing financial support to the company for going concern and that this support will not be revoked within twelve months of signing the supporting letter. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 250 Guarantees issued The Group and the Company provide the following guarantees: Telekom Slovenije Group Telekom Slovenije in EUR thousand 2021 2020 2021 2020 Performance bonds and warranty bonds 11,028 9,292 7,892 7,587 Contract performance bonds 0 0 435 431 Other guarantees 353 405 133 162 Total guarantees issued 11,381 9,697 8,460 8,180 Bonds issued between Group companies amount to EUR 435 thousand. They refer to collateralisation of contractual obligations and represent guarantees of Telekom Slovenije issued to banks for securing subsidiary companies’ liabilities. None of the stated liabilities meet the terms for recognition among balance sheet items. Thus, no related material consequences are expected for the Group. 41. Related party transactions Related entities are individuals or companies related to the Telekom Slovenije Group. Transactions with individuals As at 31 December 2019, related individuals (Chairman and members of the Supervisory Board as well as Deputy Chairman of the Supervisory Board and members of the Supervisory Board) hold a total of 974 shares in the Company, representing a share capital of 0.01490%. No loans were granted to related individuals in 2021. Data on groups of persons in 2021 Borrowings in EUR thousand Total gross proceeds received Receipts as profit pay-outs based on the resolution of the General Meeting of Shareholders Unpaid portion as at 31 December 2021 Repayments in 2021 Total Board members 893 - - - Members of the Supervisory Board 262 - - - Members of the Supervisory Board Committees 23 - - - Other managerial staff employed under contracts not subject to the tariff part of the collective agreement 4,803 - 1 5 Data on groups of persons in 2020 Borrowings in EUR thousand Total gross proceeds received Receipts as profit pay- outs based on the resolution of the General Meeting of Shareholders Unpaid portion as at 31 December 2020 Repayments in 2020 Total Board members 934 - - - Members of the Supervisory Board 262 - - - Members of the Supervisory Board Committees 20 - - Other managerial staff employed under contracts not subject to the tariff part of the collective agreement 4,621 - 7 6 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 251 Other managers and employees in the Group under contracts that are not subject to the tariff part of the collective agreement were granted loans with an interest rate of 4.24% p.a. with the repayment period of up to 20 years. The Group has not granted any advances or guarantees to the respective groups of persons and has no liabilities to these persons, nor did the Group record any write-offs or waived amounts for these groups. Remuneration of the members of the Management Board in 2021 - breakdown in EUR Salary Variable remuner ation Other remuner ation Reimburs ement of costs Annu al leave pay Insura nce premi ums Bene fits Voluntary suppleme ntary pension insuranc e Total gross* Total net Cvetko Sršen (10 Mar – 31 Dec) 130,223 0 0 1,470 1,216 0 7,734 2,349 142,992 61,201 Tomaž Jontes (1 Jan – 31 Dec) 152,840 6,160 0 1,285 1,621 1,005 9,588 2,819 175,318 76,183 Mitja Štular (10 Mar – 31 Dec) 117,717 0 689 1,088 1,312 59 2,551 2,278 125,694 66,263 Barbara Galičič Drakslar (31 Mar – 31 Dec) 109,970 0 0 1,379 1,197 366 5,010 2,114 120,036 53,552 Špela Fortin (1 Jan – 31 Dec) 133,707 8,284 0 1,316 1,621 1,005 7,783 2,819 156,535 68,148 Tomaž Seljak (1 Jan – 10 Mar) 30,987 53,655 0 282 314 639 1,670 552 88,099 36,922 Vida Žurga (1 Jan – 10 Mar) 0 30,787 0 0 314 639 2,558 552 34,850 14,535 Matjaž Beričič (1 Jan – 10 Mar) 30,521 11,700 0 275 314 639 1,067 552 45,068 20,940 Ranko Jelača (for 2020) 0 4,786 0 0 0 0 0 0 4,786 3,072 Total 705,965 115,372 689 7,095 7,909 4,352 37,96 1 14,035 893,378 400,816 * Variable remuneration refers to the part of the performance bonus for 2018, 2019 and 2020. ** The total gross amount is the sum of all types of labour costs, including net receipts (reimbursement of costs), insurance premiums, the benefits and voluntary supplementary pension insurance. *** The total net amount comprises the sum of net receipts of Management Board members, inclusive of insurance premiums and benefits, which actually reduce net receipts of Management Board members, and exclusive of th e benefits and voluntary supplementary pension insurance, which is remitted to the pension company and not to the members personally. Members of the Management Board did not receive any profit pay-outs, options, commissions or other receipts. Remuneration of the members of the Management Board in 2020 - breakdown in EUR Salary Variable remunera tion Other remune ration Reimbu rsement of costs Annual leave pay Insuran ce premiu ms Benefit s Volunta ry supple mentar y pensio n insuran ce Total gross Total net Tomaž Seljak (1 Jan – 31 Dec) 157,783 28,715 0 1,433 1,481 795 9,213 2,819 202,239 87,185 Vida Žurga (1 Jan – 31 Dec) 130,615 11,195 0 1,394 1,481 795 14,381 2,819 162,680 62,568 Matjaž Beričič (1 Jan – 31 Dec 155,995 780 0 1,383 1,481 795 5,906 2,819 169,159 79,336 Tomaž Jontes (22 Jun – 31 Dec) 82,134 0 0 734 0 218 4,622 1,484 89,192 37,078 Špela Fortin (1 Jan – 31 Dec 110,456 2,594 0 1,322 1,481 795 7,431 2,819 126,898 57,084 Ranko Jelača (1 Jan – 14 Mar) 31,908 58,703 77,999 166 247 461 1,074 470 171,028 72,313 Rudolf Skobe (for 2019) 0 6,949 0 0 0 0 0 0 6,949 3,962 Dean Žigon (for 2019) 0 5,891 0 0 0 0 0 0 5,891 2,843 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 252 Members of the Management Board did not receive any profit pay-outs, options, commissions or other receipts. Remuneration of the Supervisory Board members in 2021 – breakdown in EUR Meetings Basic salary Committees Travel expenses Liability insurance Total gross* Total net Representatives of capital Iztok Černoša (22 Jan – 31 Dec) 5,500 23,328 2,420 0 689 31,937 22,727 Klara Pinter (18 Jun – 31 Dec) 2,420 10,094 660 28 0 13,202 9,601 Radovan Cerjak (22 Jan – 31 Dec) 5,280 19,626 1,980 0 689 27,575 19,554 Aleksander Igličar (22 Jan – 31 Dec) 5,500 19,626 4,004 28 689 29,847 21,207 Marko Kerin (22 Jan – 31 Dec) 4,675 19,626 4,950 124 689 30,064 21,365 Jurij Toplak (18 Jun – 31 Dec) 2,420 9,343 660 383 0 12,806 9,314 Štefan Belingar (1 Jan – 21 Jan) 275 1,482 220 0 0 1,977 1,438 Barbara Gorjup (1 Jan – 27 Apr) 2,805 7,394 1,672 0 689 12,560 8,634 Boštjan Koler (1 Jan – 21 Jan) 275 1,778 220 0 0 2,273 1,653 Barbara Kürner Čad (1 Jan – 27 Apr) 2,805 8,318 1,540 0 689 13,352 9,209 Dimitrij Marjanović (1 Jan – 21 Jan) 275 1,185 0 0 0 1,460 1,062 Igor Rozman (1 Jan – 21 Jan) 275 1,185 0 0 0 1,460 1,062 Employee representatives Drago Kijevčanin (1 Jan – 31 Dec) 5,396 22,400 5,104 0 689 33,589 23,928 Dušan Pišek (1 Jan – 31 Dec) 5,775 18,813 660 0 689 25,937 18,363 Jana Žižek Kuhar (1 Jan – 31 Dec) 5,500 17,500 660 0 689 24,349 17,208 Total 49,176 181,698 24,750 563 6,201 262,388 186,325 * The total gross amount includes the sum of all attendance fees, basic salaries for performing the function and payments for participating in committees, including net receipts (travel expenses) and liability insurance. The total net amount includes the sum of all net receipts, together with travel expenses. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 253 Remuneration of the Supervisory Board members in 2020 – breakdown in EUR Meetings Basic salary Committees Travel expenses Liability insuranc e Total gross* Total net Representatives of capital Boštjan Koler (3 Nov – 31 Dec) 1,045 4,539 660 0 0 6,244 4,541 Barbara Kürner Čad (1 Jan – 31 Dec) 4,950 22,463 5,302 0 409 33,124 23,794 Bernarda Babič (1 Jan – 3 Nov) 3,658 16,766 814 264 409 21,911 15,638 Štefan Belingar (3 Nov – 31 Dec) 1,045 4,195 440 0 0 5,680 4,131 Barbara Cerovšek Zupančič (1 Jan – 3 Nov) 3,905 18,163 4,448 0 409 26,925 19,285 Barbara Gorjup (1 Jan – 31 Dec) 4,950 21,514 5,328 0 409 32,201 23,122 Dimitrij Marjanović (1 Jan – 13 May; 3 Nov – 31 Dec) 2,008 9,828 1,236 0 409 13,481 9,507 Igor Rozman (1 Jan – 31 Dec) 4,950 20,394 2,838 0 409 28,591 20,497 Aleš Šabeder (5 Jun – 3 Nov) 1,925 11,200 660 0 0 13,785 10,026 Employee representatives Drago Kijevčanin (1 Jan – 31 Dec) 4,950 21,432 5,328 0 409 32,119 23,063 Dušan Pišek (1 Jan – 31 Dec) 4,675 17,695 2,002 0 409 24,781 17,726 Jana Žižek Kuhar (1 Jan – 31 Dec) 4,675 16,742 880 0 409 22,706 16,217 Total 42,736 184,931 29,936 264 3,681 261,548 187,547 * The total gross amount includes the sum of all attendance fees, basic salaries for performing the function and payments for participating in committees, including net receipts (travel expenses) and liability insurance. ** The total net amount represents the sum of Supervisory Board members’ net receipts, inclusive of liability insurance, which in fact reduce net receipts, together with travel expenses. In 2021, the members of the company's Supervisory Board received the following payments for performing the function of the Audit Committee in Soline In EUR Meetings Basic salary Travel expenses Total gross Total net Aleksander Igličar (24 May - 31.Dec) 220 0 0 220 160 Barbara Gorjup (24 May – 31 Dec) 220 0 0 220 160 Marko Hočevar (24 May – 31 Dec) 220 0 0 220 160 Marko Kerin (24 May - 31 Dec) 220 0 0 220 160 Drago Kijevčanin (24 May – 31 Dec) 220 0 0 220 160 Total 0 0 0 1,100 800 * The total gross amount includes the sum of all attendance fees, basic salaries for performing the function and payments for participating in committees, including net receipts (travel expenses) and liability insurance. ** The total net amount represents the sum of Supervisory Board members’ net receipts, together with travel expenses. The members of the Supervisory Board received no other remunerations. In 2021, the members of the Supervisory Board were trained in various areas of supervisory board activities. The total cost of training and education amounted to EUR 1,139.12 (in 2020 EUR 1,139.12). The members of the Supervisory Board received no other remuneration. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 254 Barbara Nose (1 Jan – 11 Feb) 220 1,219 0 1,439 1,046 Gregor Rajšp (1 Jan – 6 Apr) 660 1,867 0 2,527 1,838 Alenka Stanič (1 Jan – 6 Apr) 660 1,867 0 2,527 1,838 Total 6,996 16,237 0 23,233 16,897 * The total gross amount includes the sum of the basic salary for performing the function and payments for participating in committees. ** The total net amount refers to net receipts of the members of the Supervisory Board committee. Remuneration of the Supervisory Board members in 2020 – breakdown In EUR Meetings Basic salary Travel expenses Total gross Total net** External Committee Members Barbara Nose (1 Jan – 31 Dec) 4,096 9,713 0 13,809 10,043 Melita Malgaj (9 Dec – 31 Dec) 440 216 0 656 477 Gregor Rajšp (12 Feb – 1 Apr; 9 Dec – 31 Dec) 1,056 1,021 0 2,077 1,511 Alenka Stanič (12 Feb – 1 Apr; 9 Dec – 31 Dec) 1,056 1,021 0 2,077 1,511 Boštjan Koler (12 Feb – 1 Apr) 616 805 0 1,421 1,033 Total 7,264 12,776 0 20,040 14,575 * The total gross amount includes the sum of the basic salary for performing the function and payments for participating in committees. ** The total net amount refers to net receipts of the members of the Supervisory Board Committee. Members of the Management Board and the Supervisory Board of Telekom Slovenije are members of supervisory or management boards of other companies or owners of other companies with which the company Telekom Slovenije conducts business. All related party transactions are carried out under market conditions. Telekom Slovenije Group Liabilities to Related Parties The Telekom Slovenije Group records liabilities to related parties arising from receipts that have not yet been paid out, in amounts as follows: in EUR thousand Total amount of total liabilities as at 31 Dec 2021 Total amount of total liabilities as at 31 Dec 2020 Total Management Board members 197 285 Other managerial staff employed under contracts not subject to the tariff part of the collective agreement 392 429 Transactions with companies in the Group All transactions with companies in the Group are performed under market conditions applicable for transactions with unrelated parties. Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 Receivables due from companies in the Group Subsidiaries – gross amount 2,584 3,872 Subsidiaries – impairment -8 -22 Subsidiaries – net amount 2,576 3,850 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 255 Borrowings to Group companies Subsidiaries – gross amount 66,089 78,238 Subsidiaries – net amount 66,089 78,238 Liabilities to companies in the Group Subsidiaries 26,041 41,810 in EUR thousand I–XII 2021 I–XII 2020 Revenue from sales in the Group 13,408 14,551 Subsidiaries 13,408 14,551 Material purchase and services in the Group 18,477 18,361 Subsidiaries 18,477 18,361 The Company generates revenue by selling material to the company GVO, by leasing business premises and property, plant and equipment, by rendering telecommunication services and by implementing the services of business support. Telekom Slovenije settles the company GVO's costs of investment construction, maintenance and elimination of defects. TSmedia pays the company Telekom Slovenije for the provision of telecommunications services and call centre services, for maintenance, development and purchase of multimedia platforms and contents, for business support services and for the lease of outdoor digital screens and business premises. To the controlling company, it charges the sale and management of multimedia services and contents, the use of the BiziPro business application, services related to the universal directory enquiry service, service 1977, as well as management and sale of advertising space. Additionally, it receives revenue arising from the telephone directory, the Bizi.si business directory and call centre services, which Telekom Slovenije charges to end users through a joint invoice. The Company charges the lease of business premises, communications services at location, support activities services to its subsidiary Avtenta, while paying the subsidiary the costs of ICT services. Telekom Slovenije charges international IP services, roaming services of its users, traffic transiting services and system lease services to its subsidiary IPKO. The subsidiary charges the lease of lines and international telecommunications services as well as services related to user roaming to the controlling company. Inter-company prices are formed on the same basis as for other users. As at the reporting date, the amount of contract performance bonds issued by Telekom Slovenije to its subsidiaries equalled EUR 434 thousand (31 December 2020: EUR 431 thousand), respectively. The company did not form an impairment for loans granted in 2021, as the estimated expected credit losses are insignificant. Loans granted to subsidiaries in EUR thousand 31 Dec 2021 31 Dec 2020 TSmedia, d.o.o. 400 1,556 IPKO d.o.o. 55,650 65,650 SOLINE d.o.o. 1,627 1,998 SIOL d.o.o., Zagreb 504 151 SiOL d.o.o. Sarajevo 4,715 5,317 Siol BEOGRAD 20 241 SIOL Prishtina 3,173 3,325 Total granted to subsidiaries 66,089 78,238 Transactions with owners and their related companies The largest owner of Telekom Slovenije is the Republic of Slovenia, which, together with the Slovenian Sovereign Holding – SSH (Slovenski državni holding – SDH), holds a 66.79% share capital in Telekom Slovenije. Companies related to the owners are those in which the Republic of Slovenia and SSH together hold a share capital of at least 20%. The list of these companies is published on SSH’s website Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 256 (http://www.sdh.si/sl-si/upravljanje-nalozb/seznam-nalozb). The total value of transactions is outlined in the table below. Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Outstanding trade receivables 4,717 3,480 4,247 3,336 Outstanding trade payables 4,867 2,156 4,830 2,060 VAT liabilities 3,791 5,845 3,695 6,026 Income tax payables 3,654 75 3,437 0 in EUR thousand I - XII 2021 I - XII 2020 I - XII 2021 I - XII 2020 Sales revenue 17,580 19,346 15,839 16,860 Purchase costs of material and services 10,026 9,300 9,267 8,363 in EUR thousand I - XII 2021 I - XII 2020 I - XII 2021 I - XII 2020 VAT payment 58,908 55,249 58,402 55,278 CIT payment 679 794 0 0 Dividends paid 19,687 15,312 19,687 15,312 All related party transactions are carried out under market conditions. 42. Auditor’s fee Telekom Slovenije Group Telekom Slovenije in EUR thousand 2021 2020 2021 2020 Audit services 185 225 122 181 Other assurance engagements 8 13 8 13 Other non-audit services 13 14 0 0 Total auditor’s fees 206 252 130 194 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 257 43. Categories of financial instruments The Group classified financial instruments into groups as shown in the table below. Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Financial assets measured at amortised cost Cash and cash equivalents 15,935 8,167 3,754 2,086 Bank deposits 702 451 0 0 Loans granted 82 164 66,171 78,402 Trade and other receivables 174,452 180,017 166,672 176,999 Financial assets measured at fair value through other comprehensive income Investments in shares and interests of companies 3,241 2,965 3,241 2,963 Financial liabilities at fair value through other comprehensive income Liabilities for interest rate swap 88 244 88 244 Financial liabilities measured at amortised cost Trade payables 149,410 157,954 128,662 130,611 Borrowings 349,038 216,301 350,438 229,316 Liabilities under bonds issued 0 101,078 0 101,078 Other financial liabilities 2 63 0 61 The Group and the Company did not reclassify these instruments to other groups during the year. 44. Financial instruments and financial risk management Financial risks that the Telekom Slovenije Group and the company Telekom Slovenije, d.d. are the most exposed to in the course of their operations, are credit risk, liquidity risk and interest rate risk. The exposure to individual types of financial risk is regularly assessed. On the basis of potential negative effect assessment on financial stability and performance, adequate management measures are implemented. Credit risk Credit risk is the risk of financial loss in case a client or a contracting party does not settle their liabilities in full or at all.  The maximum exposure to credit risk equals the book value of financial assets. Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Loans granted 82 164 66,171 78,402 Deposits 702 451 0 0 Trade and other receivables 174,452 180,017 166,672 176,999 - of which trade receivables 166,196 173,852 159,790 170,769 Cash and cash equivalents 15,935 8,167 3,754 2,086 TOTAL 191,171 188,799 236,597 257,487 Key credit risk of the Group and the company Telekom Slovenije arises mainly from non-payment of Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 258 liabilities by customers (retail) and by operators (wholesale). Trade receivables represent the maximum exposure to credit risk. As at 31 December 2021, these amounted to EUR 166,196 thousand, having decreased by EUR 7,656 thousand compared to the end of 2020. Most of the Group’s trade and other receivables refer to Telekom Slovenije. Most receivables are unsecured. The Group records receivables due form a large number of natural persons and legal entities. The Group's largest customers are operators, whose turnover is usually two-way, reducing net credit exposure. We estimate that there is no significant credit risk concentration in relation to an individual client or sector. The Group companies have introduced procedures for managing receivables, which includes monitoring business partners’ credit rating, collateralisation of receivables, monitoring high turnover of subscribers and recovery. The recovery procedure is conducted according to a pre-defined timeline (reminders and disconnection) and through specialised outsourced operators. Telekom Slovenije requires prior authorisation for concluding and changing a subscription relationship and for purchasing goods with deferred payment. As an additional measure for managing credit risk, the larger Group companies implemented systems to prevent frauds i.e. Fraud Management System (FMS). Telekom Slovenije, which has the most post- paid customers, additionally has in place the Credit Management System (CMS). As a result of introduced procedures for managing receivables, credit risk is assessed as manageable. Maturity analysis of receivables of the Telekom Slovenija Group as at the reporting date in EUR thousand 31 Dec 2021 31 Dec 2020 Gross amount Expected % of credit losses Impairment Net amount Gross amount Expected % of credit losses Impairment Net amount Total trade receivables 183,132 -16,936 166,196 189,812 -15,960 173,852 Trade receivables not past due 149,508 0.5% -795 148,713 156,592 0.5% - 783 155,809 Past due -up to and including 30 days 11,159 3% - 341 10,818 11,726 3% - 341 11,385 - from including 31 days to and including 60 days 3,591 7% - 269 3,322 3,492 8% - 293 3,199 - from and including 61 days to and including 90 days 780 12% -90 690 607 9% -56 551 - from including 91 days to and including 180 days 1,448 44% - 633 815 1,433 51% - 735 698 - from including 181 days to and including 365 days 2,010 53% - 1,065 945 2,546 54% - 1,378 1,168 - from and including 366 days up to two years 5,427 85% - 4,604 823 4,387 79% - 3,461 926 - over two years 5,438 99% - 5,368 70 4,894 98% - 4,786 108 - trade receivables in insolvency proceedings 3,771 100% - 3,771 0 4,135 100% - 4,127 8 Total trade receivables past due 33,624 -16,141 17,483 33,220 -15,177 18,043 Other trade receivables 8, 264 -8 8,256 6,173 -8 6,165 Total receivables 191,396 -16,944 174,452 195,985 0 -15,968 180,017 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 259 Maturity analysis of receivables of Telekom Slovenija as at the reporting date 31 Dec 2021 31 Dec 2020 in EUR thousand Gross amount Expected % of credit losses Impairment Net amount Gross amount Expected % of credit losses Impairment Net amount Total trade receivables 172,901 -13,111 159,790 183,301 -12,532 170,769 Trade receivables not past due 148,256 0.5% -799 147,457 157,096 0.5% -798 156,298 Past due -up to and including 30 days 6,995 5% -338 6,657 8,512 4% -340 8,172 - from including 31 days to and including 60 days 2,765 9% - 262 2,503 3,276 9% - 295 2,981 - from and including 61 days to and including 90 days 988 10% -94 894 647 9% -58 589 - from including 91 days to and including 180 days 1,093 49% - 540 553 1,284 49% - 629 655 - from including 181 days to and including 365 days 1,686 49% - 834 852 2,279 49% - 1,117 1,162 - from and including 366 days up to two years 2,744 70% - 1,926 818 2,047 60% - 1,228 819 - over two years 5,242 99% -5,184 58 4,617 98% -4,524 93 - trade receivables in insolvency proceedings 3,132 100% - 3,134 -2 3,543 100% - 3,543 0 Total trade receivables past due 24,645 -12,312 12,333 26,205 -11,734 14,471 Other trade receivables 6,882 0 6,882 6,230 0 6,230 Total receivables 179,783 - 13,111 166,672 189,531 - 12,532 176,999 Expected credit losses arising from trade receivables not past due are estimated at 0.50% (same as in 2020). The Telekom Slovenije Group and the Company also monitor credit risks in other segments of business operations. Bank balances are allocated according to the principles of risk minimization and tracking proper bank diversification, which is why the concentration risk is low. The risk is low, as, due to the stability of the banking system and high liquidity of banks, there is no major risk in terms of bank balances. The expected credit losses for cash and cash equivalents are therefore not recorded, as they are assessed as insignificant also in terms of their cash diversification among banks. The Group is also exposed to risk in relation to receivables from loans to employees and to investments in short-term deposits. The lending risk is low, as these loan repayments are mostly settled through payroll, whereas risk in deposits is managed through tracking the individual banks’ credit rating. Expected credit losses are not recorded for these investments, as they are assessed as insignificant given the amount of assets. Telekom Slovenije is exposed to credit risk arising from receivables from loans granted to subsidiaries. For the loans granted, the company estimated that there was no significant increase in credit risk, therefore impairments for credit losses are measured on the basis of expected credit losses over a 12- month period (Phase 1). In this respect, the company did not form an impairment in 2021, as the estimated expected credit losses are insignificant. The Company regularly monitors and supervises the operations of its subsidiaries and their ability to repay loans, thus additionally mitigating the related credit risk. It additionally manages the risk of diverse insurance instruments in loan contracts and regularly monitors whether the investment is covered by insurance. Loans granted are disclosed in more detail in Chapter 19. Other investments Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 260 Maturity of loans granted Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Past due 0 6 0 6 Not past due: 82 158 66,171 78,396 - in less than 3 months 15 15 2,604 323 - between 3 and 12 months 23 40 9,573 17,085 - between 1 and 2 years 19 40 9,336 9,582 - between 2 and 5 years 23 53 39,366 44,358 - over 5 years 2 10 5,292 7,048 Total 82 164 66,171 78,402 Maturity analysis of loans granted as at 31 Dec 2021 Telekom Slovenije Group Past due in EUR thousand Not past due: Less than 3 months between 3 and 12 months between 1 and 2 years between 2 and 5 years over 5 years Total Loans granted 82 0 0 0 0 0 82 Telekom Slovenije, d.d. Past due in EUR thousand Not past due: Less than 3 months between 3 and 12 months between 1 and 2 years between 2 and 5 years over 5 years Total Loans granted 66,171 0 0 0 0 0 66,171 Maturity analysis of loans granted as at 31 Dec 2020 Telekom Slovenije Group Past due in EUR thousand Not past due: Less than 3 months between 3 and 12 months between 1 and 2 years between 2 and 5 years over 5 years Total Loans granted 158 6 0 0 0 0 164 Telekom Slovenije Past due in EUR thousand Not past due: Less than 3 months between 3 and 12 months between 1 and 2 years between 2 and 5 years over 5 years Total Loans granted 78,396 6 0 0 0 0 78,402 Liquidity risk The Telekom Slovenije Group regularly settles its liabilities. The Group's liquidity is the result of active planning and managing of cash flows, provision of appropriate maturity and financial debt diversification, financing within the Group, and the optimisation of working capital and cash. The liquidity risk on the Group level is managed by the controlling company, which plans and monitors the cash requirements of subsidiaries and provides them with the necessary funds. Indebtedness at the Group and the Company level is relatively low. The majority of the Group’s financial liabilities are accounted for by two non-current syndicated loans in the total amount of EUR Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 261 309.9 million, non-current loan from the European Investment Bank in the amount of EUR 40 million and liabilities from lease in the amount of EUR 66.6 million and EUR 73.7 million at the Group and Company level, respectively. The Group and the Company are regularly repaying their financing obligations. Upon their maturity in June 2021, Telekom Slovenije repaid the issued 5-year bonds in the amount of EUR 100 million, and the repayment source was a new non-current syndicated loan from domestic banks in the amount of EUR 130 million. The remaining part of the loan was drawn in December for the purpose of investment funding in order to further pursue the set strategy of non-current loan obligations In addition to repaying the bonds, the company also repaid EUR 35.5 million of non-current loan obligations. In order to ensure a high level of liquidity with banks, the Group has open current credit lines, which are renewed according to anticipated needs. The total liquidity reserve in the form of granted, undrawn current revolving credit lines with banks amounted to EUR 74 million at the end of 2021. In addition, Telekom Slovenije has revolving credit lines open with subsidiaries in the amount of EUR 8.5 million, so that at the end of the year its liquidity reserve in the form of unused credit lines amounted to EUR 81.1 million. Furthermore, part of the European Investment Bank's non-current loan in the amount of EUR 60 million has not yet been drawn; the company has the option of drawing it until the end of 2023. Maturity of liabilities of the Telekom Slovenije Group as at 31 Dec 2021 and 31 Dec 2020 based on contractual, undiscounted payments in EUR thousand Up to 3 months between 3 and 12 months between 1 and 2 years between 2 and 5 years Over 5 years Total Book value of liabilities 31 Dec 2021 Loans and borrowings 12 44,772 136,416 79,863 103,976 365,039 349,927 Other financial liabilities 0 2 88 0 0 90 90 Trade and other payables 101,285 29,670 9,874 2,216 6,365 149,410 149,410 Financial liabilities from lease 4,714 6,710 9,125 20,196 39,238 79,983 66,556 Total 106,011 81,154 155,503 102,275 149,579 594,522 565,983 31 Dec 2020 Loans and borrowings 17 35,471 33,494 156,602 0 225,584 216,885 Other financial liabilities 159 103,047 244 0 0 103,450 101,500 Trade and other payables 108,839 10,220 9,313 18,988 10,594 157,954 157,954 Financial liabilities from lease 5,783 6,401 8,633 22,105 40,229 83,151 69,272 Total 114,798 155,139 51,684 197,695 50,823 570,139 545,611 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 262 Maturity of liabilities of Telekom Slovenije as at 31 Dec 2021 and 31 Dec 2020 based on contractual, undiscounted payments in EUR thousand Up to 3 months between 3 and 12 months between 1 and 2 years between 2 and 5 years Over 5 years Total Book value of liabilities 31 Dec 2021 Loans and borrowings 12 46,172 136,416 79,863 103,977 366,440 351,327 Other financial liabilities 0 0 88 0 0 88 88 Trade and other payables 98,012 18,369 9,874 2,215 192 128,662 128,662 Financial liabilities from lease 5,098 7,917 10,862 25,951 37,934 87,762 73,697 Total 103,122 72,458 157,240 108,029 142,103 582,952 567,839 31 Dec 2020 Loans and borrowings 28 48,522 33,494 156,602 0 238,646 229,887 Other financial liabilities 159 103,045 244 0 0 103,448 101,498 Trade and other payables 99,769 9,986 10,551 10,045 260 130,611 130,611 Financial liabilities from lease 6,072 7,772 10,762 27,065 40,997 92,668 78,753 Total 106,028 169,325 55,051 193,712 41,257 553,373 540,749 Interest rate risk Interest rate risk is the risk of a negative impact of changes in market interest rates on the Group’s operations. As at 31 December 2021, the Group's interest rate exposure arises from the possible increase in the Euribor reference interest rate, relating to interest-sensitive liabilities. In the structure of the Group's financial liabilities 117 as at 31 December 2021, the liabilities relating to borrowings, which bear interest at variable interest rates linked to 6-month Euribor, account for a 74,4% share (72.9% at the Company level). The remaining liabilities arise from the non-current loan tranche and the lease with a fixed interest rate. In order to partially hedge against interest exposure arising from the non-current syndicated loan, the repayment deadline of which is 31 December 2025, the Group and the Company have in place an interest rate swap in the amount of 50% of one out of three tranches of the loan. As at 31 December 2021, the amount of hedged principal added up to to EUR 11.5 million. By hedging the interest rate exposure through the use of an interest rate swap (IRS swap), the Group and the company is partially hedging future cash flows against the risk of an increase in the interest rate. The principal is hedged for the growth of the reference interest rate, should the latter be greater than or equal to zero. At the Group level, it has a fixed or hedged interest rate of 28.4% of financial debt, and 29.8% at the Company level. The Group and the Company use hedge accounting for concluded interest rate swaps. Hedged items and hedging instruments form an effective hedging ratio (hedging performance ranges between 80% and 125%), which is why valuation effects are disclosed in other comprehensive income. 117 Considered loan principals and finance lease Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 263 Exposure to interest rate risk Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Financial instruments with variable interest rate Financial liabilities 298,352 147,654 298,352 147,654 Net financial liabilities 298,352 147,654 298,352 147,654 The table is exclusive of non-interest-bearing financial instruments and instruments bearing a fixed interest rate, as they are not exposed to interest rate risk. It also does not include financial liabilities with hedged interest rate for Euribor growth. Sensitivity analysis The following table illustrates the sensitivity analysis of the changed interest rate on the Group’s and the Company’s profit as at the reporting date, whereby all other variables are constant. Interest rate risk table 2021 Interest rate increase/decrease Effect on profit before tax in EUR thousand Telekom Slovenije Group Telekom Slovenije, d.d. EURO +100 bt -1,282 -1,282 EURO -100 bt -115 -115 2020 Interest rate increase/decrease Effect on profit before tax in EUR thousand Telekom Slovenije Group Telekom Slovenije, d.d. EURO +100 bt -202 -202 EURO -100 bt -692 -692 EURIBOR interest rate values EURIBOR Value as at 31 Dec 2021 Value as at 31 Dec 2020 Change in % 6-month -0.544 -0.523 -4.02 Capital management The key objectives of the Group’s and the Company’s capital management are capital adequacy and, consequently, long-term liquidity as well as financial stability, which ensures the best possible credit rating for further financing of the Group's and the Company’s operations and development and thereby maximising shareholder value. The Group and the Company monitor changes in equity by using a debt-to-equity ratio and equity-to- total assets ratio indicators. The Group’s net financial liabilities include borrowings and other financial liabilities less current investments and cash with cash equivalents. When adopting decisions relating to capital management, the Group also follows the financial covenants under loan contracts. Telekom Slovenije Group Telekom Slovenije in EUR thousand 31 Dec 2021 31 Dec 2020 31 Dec 2021 31 Dec 2020 Borrowings and other financial liabilities 415,684 387,056 424,223 409,550 Less current investments, cash and cash equivalents - 16,675 - 8,679 - 15,931 - 19,500 Net financial liabilities 399,009 378,377 408,292 390,050 Equity 600,431 590,484 612,241 605,784 Total assets 1,250,339 1,227,839 1,237,941 1,226,566 Debt/equity ratio 66.5% 64.1% 66.7% 64.4% Equity/total assets ratio 48.0% 48.1% 49.5% 49.4% Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 264 45. General authorisation and the right to use radio frequency and numbers Fixed-line and mobile phone services The Group and the Company hold a general authorisation for providing the electronic communications network or electronic communication services. Prior to the commencement of the provision of public communication network services, a written notification must be provided to the Communications Networks and Services Agency of the Republic of Slovenia (hereinafter: the Agency). Before the commencement of the service stemming from the notification, no explicit decision or administrative act by a local administrative authority is required. The Group paid an annual consideration for the following major electronic communications services:  radio frequency consideration for 2021;  consideration for the use of numbering resources for 2021;  consideration based on a decision of 2013, valid until 2021;  consideration based on the notice on the provision of services and networks The amount of the consideration is determined by law and the tariff by the General Act of the Agency. On an annual basis, the Group companies pay right-of-use fees for radio frequencies, telephony numbering space, and other rights for rendering fixed-line and mobile phone services. Telekom Slovenije Group’s total amount of fees in 2021 equalled EUR 3,357 thousand (in 2020 EUR 3,434 thousand), and of Telekom Slovenije EUR 1,727 thousand (in 2020 EUR 2,034 thousand), respectively. The Group Telekom Slovenije's concessions for mobile phone services Date of authorization Period Consideration in EUR thousand Concession contract for the use of the radio frequency spectrum for the provision of services UMTS/IMT-2000 27: Nov 2001 until 21 September 2021 91,870 Decision on the allocation of radio frequencies for LTE 800 MHz, UMTS 210 MHz 26 May 2014 from 31 May 2014 to 31 May 2029 26,769 Decision on the allocation of radio frequencies for GSM 900 in 1800 MHz, LTE 2600 MHz 26 May 2014 from 4 Jan 2016 to 04 Jan 2031 37,705 Decision on the allocation of radio frequencies at the 700 MHz, 1500 MHz, 3600 Mhz and 26 Ghz belt 15 June 2021 until 15 June 2036 28,524 Decision on the allocation of radio frequencies at the 2100 Mhz band 22 Sep 2021 until 22 Sep 2036 19,239 Decision on the allocation of radio frequencies at the 2100 Mhz band 9 April 2023 until 9 April 2036 4,315 Concession contract for the installation, maintenance of and operation of the second generation GSM in the mobile network in the territory of Kosovo 6 March 2007 until 5 March 2022 75,000 Renewal of permit for the frequency 900 MHz, 1800 MHz in Kosovo 30 July 2019 until 30 July 2039 11,734 Granting of 2x5MHz (1730–1735 MHz & 1825 –1830MHz) license at the 1800 Mhz frequency band 7 January 21 until 7 Jan 2039 1,355 Concessions shown in the table which refer to Slovenia are held by Telekom Slovenije, whereas concessions in Kosovo are held by IPKO. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 265 46. Events after the reporting date • Top Employers Institute, an international professional standard bearer in recognising excellency in human resource practices, awarded Telekom Slovenije the Top Employer 2022 recognition. Companies that receive the Top Employer title are listed among the most desirable employers and demonstrate a dedication to constantly improving their work environment through excellent human resource practices and employee development programmes. • Telekom Slovenije has concluded a contract with Ilirika borzno posredniška hiša d. d., Ljubljana, a member of the Ljubljana Stock Exchange for market making services for shares of Telekom Slovenije, d.d. (TLSG shares). The provision of services will begin on 1 February 2022, and complements other Telekom Slovenije's activities in the field of investor relations. The contract for market making services for shares of Telekom Slovenije concluded with Interkapital vrijednosni papiri d.o.o., a member of the Ljubljana Stock Exchange, will expire as of 1 February 2022. • The operations of Telekom Slovenije Group are not directly tied to the Russian or Ukrainian market, and therefore it is our assessment that the conflict between these two countries should not have a significant direct impact on cash flows and financial resources of the Group; however, we will experience indirect impacts, such as higher prices of fuels and electricity. The group is also exposed to individual risks in the supply chain, as there might be a scarcity of certain materials, required for manufacturing devices and other technical products, and consequently also delays in supply or higher prices. We are carefully monitoring the situation, and will continue to, and adjust our activities, if needed. The changed global conditions increase the cybersecurity risks, and consequentially our activities are focused on ensuring the highest levels of security, reliability, confidentiality and risk management in this area. Telekom Slovenije’s Cyber Security Operations Centre monitors security incidents 24/7/365, analyses and assesses the information that we receive from different sources regarding potential threats. At the global level we collaborate with different organisations and adopt additional measures for increasing security both of our services, as well as the services we provide to our subscribers, with our full cyber response team at high alert. As a socially responsible company Telekom Slovenije uses its financial and other resources to responsibly respond to humanitarian, healthcare and other circumstances where we can help those in need. We donated €20,000 to the Ljubljana – Kiev Culture Association to help Ukrainians, and also gifted the Association SIM cards with credit for those who have come to Slovenia from Ukraine and are now living with relatives and friends. On 25 February we began providing free calls from its mobile and fixed networks to mobile and fixed networks in Ukraine, and we provided our call centre for collecting funds during the Together for Ukraine charity concert, which took place on 8 March. Our employees also participate in humanitarian activities, and this time they are collecting food, toiletries and other necessities. • In line with the treasury shares buyback programme from 4 Nov 2021, Telekom Slovenije acquired 6,836 treasury shares from 1 January 2022 and including 18 March 2022. At the end of this period, Telekom Slovenije owned 36,836 treasury shares, which amounts to 0.56 % of all shares. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 266 3.3 Independent auditor’s report for the Telekom Slovenije Group and Telekom Slovenije Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 267 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 268 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 269 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 270 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 271 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 272 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 273 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 274 4 APPENDIX 4.1 Telekom Slovenije Group companies Telekom Slovenije, d. d. is the parent company of the Telekom Slovenije Group. Company: Telekom Slovenije, d. d. Registered office: Ljubljana Address: Cigaletova ulica 15, 1000 Ljubljana Registration number: 5014018000 VAT ID number: SI98511734 Entry in the companies register: 1/24624/00, Ljubljana District Court Number of shares: 6,535,478 Ticker symbol of no-par-value shares: TLSG Telephone: +386 1 234 10 00 Fax: +386 1 231 47 36 Website: http://www.telekom.si/en Email: info@telekom.si LinkedIn: https://www.linkedin.com/company/telekom-slovenije Facebook: https://sl-si.facebook.com/TelekomSlovenije Twitter: @TelekomSlo Instagram: Telekom_Slovenije YouTube: TelekomSlovenije Subsidiaries in the Group Companies in Slovenia Company: GVO, gradnja in vzdrževanje telekomunikacijskih omrežij, d. o. o. Registered office: Ljubljana Address: Cigaletova ulica 10, 1000 Ljubljana Telephone: +386 1 234 1950 Website: www.gvo.si/en/ Email: gvo@telekom.si Company: GVO Telekommunikation GmbH Registered office: DE 48683 Ahaus, Germany Address: Schorlemer Straße 48 Company: OPTIC-TEL telekomunikacije, d. o. o Registered office: Ljubljana Address: Cigaletova 10, Ljubljana Company: Infratel, telekomunikacijska infrastruktura, d. o. o. Registered office: Ljubljana Address: Cigaletova 10, Ljubljana Company: Avtenta, napredne poslovne rešitve, d. o. o. Registered office: Ljubljana Address: Stegne 19, 1000 Ljubljana Telephone: +386 1 583 68 00 Website: www.avtenta.si/en Email: prodaja@avtenta.si, marketing@avtenta.si Company: TSmedia, medijske vsebine in storitve, d. o. o. Registered office: Ljubljana Address: Cigaletova 15, 1000 Ljubljana Telephone: +386 1 473 00 10 Website: https://www.tsmedia.si/home/ Email: info@tsmedia.si Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 275 Company: Soline Pridelava soli, d. o. o. Registered office: Seča Address: Seča 115, 6320 Portorož/Portorose Telephone: +386 5 672 13 43 Website: www.soline.si/en Email: info@soline.si Company: TSinpo, storitveno in invalidsko podjetje, d. o. o. Registered office: Ljubljana Address: Litostrojska cesta 58A, 1000 Ljubljana Telephone: +386 1 500 60 60 Website: www.tsinpo.si Email: info@tsinpo.si Companies abroad Company: IPKO Telecommunications LLC Registered office: Prishtina, Kosovo Address: Lagija Ulpiana Rruga Zija Shemsiu Nr. 34, Prishtina Telephone: +381 38 700 700 Website: www.ipko.com Email: info@ipko.com Company: SIOL, d. o. o. Registered office: Zagreb, Croatia Address: Margaretska 3 Website: http://www.siol.com/ Company: SiOL, d. o. o., Sarajevo Registered office: Sarajevo, Bosnia and Herzegovina Address: Fra Anđela Zvizdovića 1 Company: SIOL, d. o. o., Podgorica Registered office: Podgorica, Montenegro Address: Džordža Vašingtona 108/36A, The Capital Plaza Company: SIOL DOOEL Skopje Registered office: Skopje, North Macedonia Address: Dimitrie Chupovski 22A-1/13 Company: SIOL, d. o. o., Belgrade-Palilula Registered office: Belgrade, Serbia Address: 27. marta 11 Company: SIOL Prishtina L.L.C. Registered office: Prishtina, Kosovo Address: Pejton, Str. Mujo Ulqinaku 5/1 Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 276 4.2 Abbreviations of technical terms Abbreviation English term Slovene translation 2G (GSM) Global System for Mobile Communication Globalni sistem mobilnih komunikacij 3G (UMTS) Universal Mobile Telecommunications System Univerzalni mobilni telekomunikacijski sistem/protokol 3G 4G (LTE) Long -Term Evolution LTE/4G, post LTE/4G, po 3 GPP mobilnem standardu 4G (LTE - A) Long -Term Evolution Advanced LTE/4G z višjo prenosno hitrostjo podatkov (več kot 300 Mb/s) 5G 5th generation mobile network Mobilno omrežje pete generacije AKOS Agency for Communication Networks and Services of the Republic of Slovenia Agencija za komunikacijska omrežja in storitve RS APM Alternative Performance Measures alternativna merila uspešnosti poslovanja ARKEP Regulatory Authority of Electronic and Postal Communications of Kosovo Agencija za elektronske in poštne komunikacije Kosova ARPU Average Revenue Per User Povprečni prihodek na uporabnika ARSO Slovenian Environment agency Agencija republike Slovenije za okolje AVK Slovenian Competition Protection Agency Javna agencija Republike Slovenije za varstvo konkurence BCaaS Business Connect as a Service Sodobna rešitev za upravljanje z dokumentarnim gradivom kot storitev GDP/BDP Gross Domestic Product Bruto domači proizvod BSS Business Support System Sistem za podporo poslovanju BSS/OSS Business/Operational Support System Sistem za podporo poslovnega procesa / sistemi za operativni podporni proces Cloud services Storitve v oblaku Cross -sales Navzkrižna prodaja CAGR Compound Annual Growth Rate Povprečni letni prirast CAPEX Capital Expenditure Vrednost investicij COSO ERM Committee of Sponsoring Organizations of the Treadway Commission, Enterprise risk management Integrated Framework Odbor sponzorskih organizacij Treadwayeve komisije, Upravljanje tveganj v organizaciji v povezavi s strategijo in delovanjem organizacije CRM Customer Relationship Management Sistemi za upravljanje z uporabniki CSI Customer Satisfaction Index Indeks zadovoljstva uporabnikov DDOS Distributed Denial of Services Porazdeljena zavrnitev storitve DTV Digital television Digitalna TV DWDM Dense Wavelength Division Multiplex Gosti valovni multipleks EBIT Earnings before interest and taxes Dobiček iz poslovanja pred obrestmi in davki EBITDA Earnings before interest, taxes, depreciation and amortisation Dobiček iz poslovanja pred obrestmi, davki in amortizacijo EFQM European Foundation for Quality Management Evropska nagrada za poslovno odličnost Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 277 Abbreviation English term Slovene translation ERP Enterprise Resource Planning poslovni informacijski sistem ESMA European Securities and Markets Authority Evropski nadzorni organ za vrednostne papirje in trge EU European Union Evropska unija FTTH Fibre To The Home Optično vlakno do doma FTTx Fibre To The Exchange Optika do X FURS Financial Administration of the Republic of Slovenia Finančna uprava RS GDPR General Data Protection Regulation Splošna uredba o varstvu osebnih podatkov COBN/GOŠO Construction of open broadband network Gradnja odprtega širokopasovnega omrežja (bele lise – subvencionirano s sredstvi EU) GPON Gigabit Passive Optical Network Gigabitno pasivno optično omrežje GRI Global Reporting Initiative Pobuda za globalno poročanje IFRS/MSRP International Financial Reporting Standards Mednarodni standardi računovodskega poročanja ICT/IKT Information and Communication Technologies Informacijsko komunikacijske tehnologije IMF WEO International Monetary Fund World Economic Outlook Mednarodni denarni sklad INA Intelligent Automotive Network Applications Inteligentne avtomobilske omrežne aplikacije IoT Internet of Things Internet stvari IP TV / IPTV IP television Televizija prek internetnega protokola ISO International Organization for Standardization Mednarodna organizacija za standardizacijo IT Information technology Informacijska tehnologija ITSM Remedy Incident Management System Remedy Sistem za upravljanje napak KFI Key Financial Indicators Ključni finančni indikatorji poslovanja KDD Central Securities Clearing Corporation Centralna klirinško depotna družba KPI Key Performance Indicators Ključni kazalniki poslovanja SSNP/KPSS Sečovlje Salina Nature Park Krajinski park Sečoveljske soline LTE Long -Term Evolution LTE/4G, post LTE/4G, po 3 GPP mobilnem standardu LTE -A Long -Term Evolution Advanced LTE/4G z višjo prenosno hitrostjo podatkov (več kot 300 Mb/s) LTE -M Long Term Evolution Machine Type Communication LTE/4G s strojno komunikacijo MEC Multi -Access Edge Computing Sodostopno računalništvo na robu MOSS Slovenian ranking reach of websites Merjenje obiskanosti spletnih strani MPLS Multiprotocol Label Switching Tehnologija za posredovanje, usmerjanje in preklapljanje prometnih tokov skozi omrežje Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 278 Abbreviation English term Slovene translation MVNO Mobile Virtual Network Operator Mobilni operater navideznega omrežja NB -IoT Narrowband Internet of Things Ozkopasovni internet stvari NEO Smart life platform that connects the best home and entertainment solutions in one place. Platforma za pametno življenje na enem mestu povezuje najboljše rešitve za dom in zabavo. NPS Net Promotor Score Kazalnik lojalnosti naših uporabnikov IA/NR Internal Audit Notranja revizija NSA Non Stand -Alone 5G nesamostojna arhitektura CSOC/OCKV Cyber Security Operation Centre Operativni center kibernetske varnosti OPEX Operational Expenditure Stroški poslovanja brez amortizacije OSS Operational support system Sistem za podporo delovanja OTT Over -the-top content Storitve, ki delujejo neodvisno od omrežja - distribucija video- in avdiovsebin prek interneta PaaS Platform as a Service Platforma kot storitev PCTO Punktum Vrednost spora PP Appertaining amounts (principle, accrued costs and interest) Pripadki (glavnica, nastali stroški in obresti) PPDR Public Protection and Disaster Relief Storitve javne varnosti ROA Return on Assets Dobičkonosnost sredstev ROADM Reconfigurable Optical Add-Drop Multiplexer Nastavljiv optični multipleksor za dodajanje in odvzemanje ROE Return on Equity Dobičkonosnost kapitala RON Regional Optical Network Regionalno optično omrežje Small cell Mala celica SA Stand -Alone 5G samostojna arhitektura SAP Systems Applications and Products Programska oprema za posel SAPaaS SAP as a service SAP aplikacija SASB Sustainability Accounting Standards Board Odbor za trajnostne računovodske standarde GH/SB General Hospital splošna bolnišnica SDG/ESG Sustainable Development Goals Cilji trajnostnega razvoja SDH Synchronous Digital Hierarchy Sinhrona digitalna hierarhija SLA Service Level Agreement Sporazum o ravni zagotavljanja storitve SME/SOHO Small and Medium Enterprises / Small Office Home Office Mala in srednja podjetja SMS Short Message Service Storitev kratkih sporočil Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 279 Abbreviation English term Slovene translation SPLA Service Provider Licence Agreement Licenčni sporazum za ponudnika storitev BCMS/SUNP Business continuity management system Sistem upravljanja neprekinjenega poslovanja SURS Statistical Office of the Republic of Slovenia Statistični urad Republike Slovenije ISMS/SVVI Information Security Management System Sistem vodenja varovanja informacij TDM Time Division Multiplex Časovni multipleks, sistem s porazdeljevanjem časa TOM Telephone Phone for children and adolescents Telefon za otroke in mladostnike TSLO - CERT Telekom Slovenije Computer Emergency Response Team Odzivni center za kibernetsko varnost Telekoma Slovenije Up -sale Nadgradnja storitev UMC/UKC University Medical Centre Univerzitetni klinični center COPO Capitalised own production overheads Usredstvena lastna režija UMAR Institute of Macroeconomic Analysis and Development Urad za makroekonomske analize in razvoj UMTS/HSPA Universal Mobile Telecommunications System/High Speed Packet Access univerzalni mobilni telekomunikacijski sistem/protokol 3G, ki pomeni nadgradnjo omrežja UMTS in omogoča večje prenosne hitrosti VALÚ Advanced financial service that facilitates payments with a mobile phone at numerous payment points with the VALÚ mark. Napredna finančna storitev, ki omogoča plačevanje z mobilnim telefonom na številnih plačilnih mestih z oznako VALU. VDSL Very High - Speed Digital Subscriber Line Digitalni naročniški vod z zelo visokimi hitrostmi VFN Virtual Network Function Funkcija navideznega omrežja VoIP Voice over IP Govor prek IP -protokola Wi -Fi Wireless Fidelity Brezžično omrežje po standardih IEEE 802.11 XGS -PON Technology that can deliver upstream and downstream (symmetrical) speeds Tehnologija, ki omogoča prenašanje podatkov od in k uporabniku v enakih hitrostih ZGD Companies Act Zakon o gospodarskih družbah ZPPOGD Act Governing the Remuneration of Managers of Companies with Majority Ownership held by the Republic of Slovenia or Self - Governing Local Communities Zakon o prejemkih poslovodnih oseb v gospodarskih družbah v večinski lasti Republike Slovenije in samoupravnih lokalnih skupnostih Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 280 4.3 Alternative performance measures The Telekom Slovenije Group also uses the Alternative Performance Measures (APMs) defined by the ESMA to present its operating results. The Telekom Slovenije Group also uses APMs to plan the operations of organisational units, subsidiaries and the Group, in reporting for the internal needs of monitoring the implementation of plans, and for setting of the objectives of organisational units and individuals for the needs of the remuneration system. Items are expressed in values rounded to the nearest one thousand, except where it is stated that a measure is given in euros. The number of employees based on hours worked is not calculated for the Telekom Slovenije Group. The average number of employees is thus calculated based on the balance at the beginning and end of the period. All proportions are expressed in percentages, generally rounded to one decimal place, or as the ratio between two categories. Alternative performance measures are disclosed between key operating highlights and are as follows: Alternative performance measure Calculation methodology Selection of measure EBIT (earnings before interest and taxes) Operating revenues – operating expenses One of the key indicators of the performance of a company, and an indicator of the profitability that a company achieves in the performance of its core activity. Adjusted EBIT (operating profit) Operating revenues – operating expenses taking into account one-off events that are not part of ordinary operations, such as one - time impairments of assets, adjustments for IFRS 16, etc.; stated under the calculation table. We eliminate the effects of one- off events for the sake of consistency and the comparability of operations with the previous year. EBITDA (earnings before interest, taxes, depreciation and amortisation) EBIT + depreciation and amortisation Operating profit or loss before write - downs. Indicator of the performance of a company in its core activity and a good approximation of cash flows from operating activities. Adjusted EBITDA EBIT + depreciation and amortisation taking into account adjustments for one - off events that are not part of ordinary operations, such as one - time impairments of assets, adjustments for IFRS 16, etc.; stated under the calculation table. We eliminate the effects of one- off events for the sake of consistency and the comparability of operations with the previous year. EBITDA margin as a proportion of sales revenue (%) EBITDA / sales revenue x 100 Measure of commercial success and profitability. EBITDA margin as a % of operating revenues EBITDA / operating revenues x 100 Measure of commercial success and profitability. The measure is used by SDH to measure the performance of companies with capital assets of the state. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 281 Alternative performance measure Calculation methodology Selection of measure Adjusted net profit or loss Net profit or loss after taxes taking into account adjustments for one - off events that are not part of ordinary operations, such as one - time impairments of assets, adjustments for IFRS 16, etc.; stated under the calculation table. We eliminate the effects of one- off events for the sake of consistency and the comparability of operations with the previous year. EBITDA – CAPEX EBITDA – value of investments in the acquisition of property, plant and equipment and intangible assets Indicator of free cash flow. Ratio of (EBITDA – CAPEX) to EBITDA (cash margin) (EBITDA – value of investments in the acquisition of property, plant and equipment and intangible assets) / EBITDA Leverage ratio Equity ratio Equity financing ratio Distributed economic value Operating costs + labour costs + dividends + corporate income tax Scope of generated assets divided amongst stakeholders. Value added Labour costs + finance costs + pre-tax profit Operating results that are allocated to: employees in the form of wages and reimbursements; to lenders and creditors in the form of interest and other fees; to owners in the form of dividends and other types of compensation; to a company through the creation of reserves and retained earnings, and to the state in the form of taxes. Value added per employee (in EUR) ((Value added / (number of employees at the beginning of the period + the number of employees at the end of the period) / 2)) x 1,000 Productivity ratio that indicates how much value, on average, relates to a single employee in a given period. Gross added value per employee ((Gross operating profit – costs of goods, materials and services – other operating expenses) / ((number of employees at the beginning of the period + the number of employees at the end of the period) / 2)) x 1,000 Basic economic indicator and basic measure of economic activity and success. Represents the newly generated value of a company in a given period. The measure is also used by SDH to measure the performance of companies with capital assets of the state. Return on sales EBIT / sales revenues Indicator of a company’s pricing policy and ability to control costs. NFD (net financial debt) Non-current financial liabilities + current financial liabilities – cash and cash equivalents – current financial assets Current and non-current financial liabilities, less liquid assets that can be used to repay those liabilities. Annual report of the Telekom Slovenije Group and Telekom Slovenije, d. d. for 2021 282 Alternative performance measure Calculation methodology Selection of measure Net financial debt to EBITDA ratio NFD / EBITDA Ratio that indicates how many years would be required to repay financial debt from existing liquid assets and cash flows from operating activities, assuming the same level of operations and profitability ROA (net return on assets) in % Net profit or loss / (value of assets on first day of period + value of assets on last day of period) / 2) x 100 Indicator of a company’s efficiency in the management of assets available to generate a profit. ROE (net return on equity) in % Net profit or loss / (value of equity on first day of period + value of equity on last day of period) / 2) x 100 Indicator of a company’s efficiency in the generation of profit from sources provided by owners and/or shareholders. The measure is also used by SDH to measure t he performance of companies with capital assets of the state. CAPEX as a proportion of operating revenues (Gross) outflows for the acquisition of property, plant and equipment and intangible assets / operating revenues. The measure is also used by SDH to measure the performance of companies with capital assets of the state. Sponsorships and donations as a pr oportion of net sales revenue Sponsorships and donations / net sales revenue Indicator of the value of a company’s investments in the social environment. The measure is also used by SDH to measure the performance of companies with capital assets of the state.