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Deutsche Telekom AG Annual Report 2011
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Annual Report
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Management's report on the Annual Report
The Board of Management certifies that, to the best of their knowledge:
- the financial statements give a true and fair view, in all material respects, of the assets, the liabilities, the financial position and profit and loss of DTIF;
- the annual report gives a true and fair view, in all material respects, of DTIF. as per December 31, 2011 and the state of affairs during 2011; and
- the annual report describes the material risks that DTIF is facing.
Best regards,
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Annual report
for the year ended December 31, 2011
Deutsche Telekom International Finance B.V.
Amsterdam
Annual report
Section 2000 Annual Report
Section 2001 Annual Report
Section 2002 Annual Report
Table of contents
Annual report of the directors
Annual report of the directors 3
Financial statements
Statement of comprehensive income 6
Statement of financial position 7
Statement of changes in equity 8
Statement of cash flows 9
Notes to the financial statements 10
Other information
Profit appropriation according to the Articles of Association 37
Proposed appropriation of profit 37
Post statement of financial position events 37
Auditor's report 38
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Annual Report of the directors
Directors’ report
The Board of Management is pleased to present the annual report and financial statements of Deutsche Telekom International Finance B.V. (the Company) for the financial year ended December 31, 2011.
Business activities
During 2011 the Company has not issued any bonds or Medium Term Notes (MTNs) under its Debt Issuance Programme (DIP).
On April 11, 2011 the Company issued a bond of nominal USD 1,250,000,000. On the same date the Company granted a new loan to DTAG for the same nominal amount.
On November 26, 2010 the Company entered into a finance contract with the European Investment Bank (EIB) for a credit of an amount equivalent to up to EUR 150,000,000. On January 31, 2011, the last tranche of this credit amounting to HUF 14,022,500,000 (equal to EUR 50,000,000) was disbursed.
On April 13, 2011 the Company redeemed an MTN with a nominal amount of EUR 750,000,000.
On March 23, 2011 the Company repaid a bond with a nominal amount of USD 500,000,000 and on July 11, 2011 the Company repaid a bond amounting to EUR 3,500,000,000. On the same date, two loans to DTAG were assumed by another group company for the total amount of EUR 73,000,000.
On January 31, 2011 the Company paid the third contractual annual instalment of HUF 9,486,320,000 of its HUF 47,431,600,000 loan from the European Investment Bank (EIB).
The Company achieved a net profit of EUR 125,277,293 versus a net profit of EUR 25,662,117 in 2010.
On November 3, 2011 Dr. Igor Soczynski was relieved from his function as one of the Managing Directors and was replaced by Dirk Wehrse on the same date. The proxy of Jakob Poggensee was repealed on November 3, 2011 and conferred to Dr. Igor Soczynski.
Future business developments and financing
Headcount is expected to be reduced by 2 persons in 2012 and the Company expects to move away from Amsterdam to the Maastricht-area in the course of 2013.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
The management does not anticipate any major changes of its financing activities during the current financial year. Since derivatives are carried at fair value and the non-derivative instruments at amortised costs, the result of the Company under IFRS is volatile. However, we expect net positive cash flows for the year ending December 31, 2012 as well as in each of the following years.
Events after the statement of financial position date
On January 20, 2012 the Company issued an MTN amounting to EUR 80,000,000. On the same date the Company granted a new loan to DTAG for the same nominal amount.
On January 31, 2012 the Company paid the fourth contractual annual instalment of HUF 9,486,320,000 of its HUF 47,431,600,000 loan from the EIB.
Amsterdam, February 22, 2012
The Managing Directors,
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Financial statements
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Statement of comprehensive income
| thousands of € | Note | 2011 | 2010 |
|---|---|---|---|
| Finance income (expense) | 1 | ||
| Interest income | 1.668.160 | 1.892.652 | |
| Interest expense | (1.757.717) | (1.990.370) | |
| Other financial income (expense) | 2 | 257.291 | 129.565 |
| Profit (loss) from financial activities | 167.734 | 31.847 | |
| General and administrative expenses | 3 | (731) | (667) |
| Other operating income | 21 | 36 | |
| Other operating expenses | (1) | (0) | |
| Profit (loss) from operations | (711) | (631) | |
| Profit (loss) before income taxes | 167.023 | 31.216 | |
| Income taxes | 4 | (41.746) | (5.554) |
| Profit (loss) after income taxes | 125.277 | 25.662 | |
| Other comprehensive income | - | - | |
| Profit attributable to owners: | 125.277 | 25.662 | |
| Total comprehensive income attributable to the owners: | 125.277 | 25.662 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Statement of financial position
| thousands of € | Note | Dec. 31, 2011 | Dec. 31, 2010 |
|---|---|---|---|
| Assets | |||
| Current assets | 4,284,527 | 5,459,733 | |
| Financial assets | 5 | 4,284,358 | 5,459,562 |
| Income tax receivable | 4 | 169 | 171 |
| Non-current assets | 25,677,449 | 27,518,958 | |
| Property, plant and equipment | 43 | 44 | |
| Financial assets | 5 | 25,677,374 | 27,518,902 |
| Other assets | 32 | 12 | |
| Total Assets | 29,961,976 | 32,978,691 | |
| Liabilities and shareholder's equity | |||
| Current liabilities | 4,360,266 | 5,548,717 | |
| Financial liabilities | 6 | 4,360,004 | 5,548,484 |
| Other provisions | 143 | - | |
| Other liabilities | 119 | 233 | |
| Non-current liabilities | 25,115,144 | 27,062,469 | |
| Financial liabilities | 6 | 24,955,492 | 26,942,691 |
| Other provisions | 15 | 15 | |
| Deferred tax liability | 4 | 159,637 | 119,763 |
| Liabilities | 29,475,410 | 32,611,186 | |
| Shareholder's equity | 7 | 486,566 | 367,505 |
| Issued Capital | 454 | 454 | |
| Other reserves | 407,691 | 407,691 | |
| Retained earnings | (46,856) | (66,302) | |
| Net profit (loss) | 125,277 | 25,662 | |
| Total Liabilities and shareholder's equity | 29,961,976 | 32,978,691 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Statement of changes in equity
| thousands of € | Note | Issued share capital | Other reserves | Retained earnings | Result for the year | Total |
|---|---|---|---|---|---|---|
| 7 | ||||||
| Balance as at January 1, 2011 | 454 | 407.691 | (66.302) | 25.662 | 367.505 | |
| Result current year | 125.277 | 125.277 | ||||
| Unappropriated net profit (loss) carried forward | 25.662 | (25.662) | - | |||
| Dividends paid | (6.216) | (6.216) | ||||
| Balance as at December 31, 2011 | 454 | 407.691 | (46.302) | 125.277 | 488.555 | |
| thousands of € | Note | Issued share capital | Other reserves | Retained earnings | Result for the year | Total |
| --- | --- | --- | --- | --- | --- | --- |
| 7 | ||||||
| Balance as at January 1, 2010 | 454 | 407.691 | (77.811) | 18.042 | 348.378 | |
| Result current year | 25.662 | 25.662 | ||||
| Unappropriated net profit (loss) carried forward | 18.042 | (18.042) | - | |||
| Dividends paid | (8.533) | (8.533) | ||||
| Balance as at December 31, 2010 | 454 | 407.691 | (46.302) | 25.662 | 357.505 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Statement of cash flows
| thousands of € | Note | Dec. 31, 2011 | Dec. 31, 2010 |
|---|---|---|---|
| 8 | |||
| Interest received | 1,802,412 | 1,898,654 | |
| Interest paid | (1,872,125) | (1,994,619) | |
| Net interest received (paid) from derivatives | 96,006 | 121,898 | |
| Guarantee fees paid | (17,354) | (16,183) | |
| Net income tax paid | (1,866) | (666) | |
| Others | (599) | (728) | |
| Net cash from operating activities | 6,474 | 6,356 | |
| Cash outflows for investments in | |||
| - Loans | (913,055) | (2,827,830) | |
| Proceeds from disposal of | |||
| - Loans | 4,606,397 | 4,879,488 | |
| Net cash inflow from investments and disposals of derivatives | 31,658 | 80,836 | |
| Net cash used in investing activities | 3,725,000 | 2,132,494 | |
| Repayment of financial liabilities | (4,638,056) | (4,960,323) | |
| Proceeds from issue of financial liabilities | 913,055 | 2,827,829 | |
| Dividend payments | (6,216) | (6,533) | |
| Net cash from financing activities | (3,731,217) | (2,130,027) | |
| Net increase (decrease) in cash and cash equivalents | 257 | 1,822 | |
| Cash and cash equivalents, at the beginning of the year | 3,424 | 1,601 | |
| Cash and cash equivalents, at the end of the year | 3,681 | 3,424 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Notes to the financial statements
General information
Deutsche Telekom International Finance B.V. (hereafter "the Company") is the financing company of Deutsche Telekom AG, Bonn, Germany (hereafter "DTAG"). Its principal activity consists of the issuance of debt instruments and funding of the Deutsche Telekom Group. The Company with its statutory seat at Herengracht 124-128, 1015 BT Amsterdam, the Netherlands, is a 100% subsidiary of DTAG, which is also the ultimate parent of the Company. The Company's financial statements are included in the consolidated financial statements of DTAG. The financial statements of the Company for the 2011 financial year were authorised for issue by the Board of Management on February 22, 2012.
Basis of preparation
The financial statements have been prepared in accordance with International Financial Reporting Standards (hereafter "IFRS") as adopted by the EU and with Book 2, Title 9 of the Dutch Civil Code. All IFRSs issued by the International Accounting Standards Board (hereafter "IASB"), effective at the time of preparation these financial statements and applied by the Company have been adopted by the European Commission for use in the EU. The financial statements of the Company comply with IFRS as issued by the IASB and therefore the term IFRS is used in the following. The financial year corresponds to the calendar year. Both the functional and presentation currency of the Company is Euro. All values are rounded to the nearest thousand except when otherwise indicated.
Initial application of standards, interpretations and amendments to standards and interpretations in the financial year
In the financial year, the Company applied the following IASB pronouncements and/or amendments to such pronouncements for the first time:
| Pronouncement | Date of issue by the IASB | Title |
|---|---|---|
| IAS 32 | October 8, 2009 | Financial Instruments: Presentation |
| IAS 24 | November 4, 2009 | Related Party Disclosure |
| IFRIC 14 | November 26, 2009 | Prepayments of a Minimum Funding Requirement |
| IFRIC 19 | November 26, 2009 | Extinguishing Financial Liabilities with Equity Instruments |
| Annual Improvement Project | May 6, 2010 | Improvements to IFRSs 2010 |
The pronouncements and/or amendments did not have an impact on the presentation of the Company's results of operations, financial position or cash flows.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Standards, interpretations and amendments issued, but not yet adopted
In November 2009, the IASB issued IFRS 9 "Financial Instruments." The European Union has not yet endorsed the amendments. The standard is the result of the first of three phases of the project to replace IAS 39 "Financial Instruments: Recognition and Measurement" with IFRS 9. IFRS 9 governs the classification and measurement of financial assets. The rules for impairment of financial instruments and hedge accounting are currently being revised by the IASB. IFRS 9 requires financial assets to be assigned to one of the following two measurement categories: "at amortized cost" or "at fair value." IFRS 9 also grants a fair value option which allows financial assets that would normally be assigned to the "at amortized cost" category to be designated as "at fair value" if the fair value designation would eliminate or significantly reduce measurement or recognition inconsistency. It is mandatory to assign equity instruments to the "at fair value" category. If, however, the equity instrument is not held for trading, the standard allows an irrevocable option to be made at initial recognition to designate it as "at fair value" through other comprehensive income. Dividend income resulting from the equity instrument is recognized in profit or loss. IFRS 9 is effective for financial years beginning on or after January 1, 2015. Prior periods do not have to be adjusted for first-time adoption, but there is a requirement to disclose the effects of first-time adoption. The Company is analyzing the resulting effects on the presentation of results of operations, financial position or cash flows.
In October 2010, the IASB issued the pronouncement "Disclosures – Transfers of Financial Assets" as an amendment to IFRS 7 "Financial Instruments: Disclosures." The amendment requires quantitative and qualitative disclosures to be made for transfers of financial assets where the transferred assets are derecognized in their entirety or the transferor retains continuing involvement. The amendment is intended to provide greater transparency around such transactions (e.g., securitizations) and help users understand the possible effects of any risks that may remain with the entity that transferred the assets. The amendment also requires supplementary information to be disclosed if a substantial proportion of the total amount of transfer activity takes place in the closing days of a reporting period. The amendments are applicable for financial years beginning on or after July 1, 2011. The European Union endorsed this pronouncement in November 2011. The pronouncement is not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
Also in October 2010, the IASB issued requirements on accounting for financial liabilities. These are integrated into IFRS 9 "Financial Instruments" and replace the existing provisions on this subject in IAS 39 "Financial Instruments: Recognition and Measurement." In the new pronouncement, the requirements relating to recognition and derecognition as well as most of the requirements for classification and measurement are carried forward unchanged from IAS 39. The new IFRS 9 modifies the requirements relating to fair value option for financial liabilities to address the issue of an entity's own credit risk. The
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
prohibition of fair value measurement of derivative liabilities that are linked to an unquoted equity instrument and must be settled by delivery of an unquoted equity instrument, has been eliminated. The pronouncement is effective for financial years beginning on or after January 1, 2015. Prior periods do not have to be adjusted for first-time adoption, but there is a requirement to disclose the effects of first-time adoption. The European Union has not yet endorsed this pronouncement. The pronouncement is not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
In December 2010, the IASB issued the pronouncements "Deferred Tax: Recovery of Underlying Assets - Amendments to IAS 12." The amendment sets presumptions for the recovery of certain assets. This is relevant in those cases where different tax consequences can arise depending on how the carrying amounts are recovered. The pronouncement introduces a rebuttable presumption that the carrying amount of an investment property that is measured using the fair value model in IAS 40 "Investment Property" will be recovered through sale. In any case, there is also a non-rebuttable presumption that the carrying amount of a non-depreciable asset that is measured using the fair value model in IAS 16 "Property, Plant and Equipment" will be recovered through sale. Interpretation SIC-21 "Income Taxes - Recovery of Revalued Non-Depreciable Assets" was replaced by the new pronouncement. The pronouncement is effective for financial years beginning on or after January 1, 2012 and has not yet been endorsed by the European Union. The pronouncements are not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
In May 2011, the IASB published three new IFRSs (IFRS 10, IFRS 11, IFRS 12) and two revised standards (IAS 27, IAS 28) that govern the accounting for investments in subsidiaries, joint arrangements and associates. The provisions have not yet been endorsed by the European Union and are effective for financial years beginning on or after January 1, 2013. The adoption of the new and amended IFRSs will not have an impact on the presentation of the Company's results of operations, financial position or cash flows. The IASB is introducing a harmonized consolidation model by issuing IFRS 10 "Consolidated Financial Statements." This new standard does away with the distinction between "traditional" subsidiaries (IAS 27) and special-purpose entities (SIC-12). Control only exists if an investor has the power, is exposed to variable returns, and is able to use power to affect its amount of variable returns. Upon its entry into force, IFRS 10 will replace SIC-12 "Consolidation - Special Purpose Entities" as well as the requirements relevant to consolidated financial statements in IAS 27 "Consolidated and Separate Financial Statements." IFRS 11 "Joint Arrangements" will replace IAS 31 "Interests in Joint Ventures" and SIC-13 "Jointly Controlled Entities - Non-Monetary Contributions by Venturers." It governs the accounting for joint ventures and joint operations. Proportionate consolidation for joint ventures will no longer be permissible as a result of the discontinuation of IAS 31. The amended IAS 28 "Interests in Associates and Joint Ventures" governs the application of the equity method when accounting for investments in both associates and joint ventures.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
In case of a joint operation, the share of assets, liabilities, expenses and revenues is directly recognized in the consolidated financial statements and annual financial statements of a joint operator. IFRS 12 "Disclosure of Interests in Other Entities" combines all disclosures required in the consolidated financial statements regarding subsidiaries, joint arrangements and associates, as well as unconsolidated structured entities. The amended IAS 27 "Separate Financial Statements" exclusively governs the accounting for subsidiaries, joint ventures and associates in the annual financial statements and the corresponding notes. The amended IAS 28 "Investments in Associates and Joint Ventures" governs the accounting of investments in associates and joint ventures using the equity method.
In May 2011, the IASB also published IFRS 13 "Fair Value Measurement." With this standard, the IASB has created a uniform, comprehensive standard for fair value measurement. IFRS 13 is effective for financial years beginning on or after January 1, 2013. IFRS 13 provides guidance on how to measure at fair value when other IFRSs require fair value measurement (or disclosure). A new definition of fair value applies which characterizes fair value as the selling price of an actual or hypothetical transaction between any independent market participants under normal market conditions on the reporting date. The standard is almost universally applicable, with the only exemptions being IAS 2 "Inventories," IAS 17 "Leases," and IFRS 2 "Share-based Payment." While the guidance remains virtually unchanged for financial instruments, the guidance for other items (e.g., investment property, intangible assets and property, plant and equipment) is now more comprehensively and/or precisely defined. The established three-level fair-value hierarchy has to be applied across the board. The adoption of IFRS 13 is likely to result in additional disclosures in the Company's financial statements. The European Union has not yet endorsed the new IFRS standard.
In June 2011, the IASB issued amendments to IAS 1 "Presentation of Financial Statements." The amendments require that the items listed under other comprehensive income be split into two categories, according to whether or not they will be recognized in the income statement in future periods (recycling). The amendments to IAS 1 are effective for financial years beginning on or after July 1, 2012 and have not yet been endorsed by the European Union. The amendments are not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
In June 2011, the IASB also issued amendments to IAS 19 "Employee Benefits." These amendments mean the discontinuation of existing options for the recognition of actuarial gains and losses. As the corridor method, as it is known, will no longer be permissible, with immediate effect actuarial gains and losses have to be recognized in full and exclusively directly in equity. Other amendments concern the recognition of past service costs and of the net interest income/expense resulting from defined benefit plans as well as the differentiation between termination benefits and other employee benefits. One significant consequence of these amendments is that top-up payments made as part of partial retirement programs may no longer be
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
13
recognized as termination benefits and therefore have to be accrued over their vesting period. Disclosure requirements are also being extended, e. g., for characteristics of defined benefit plans and the risks arising from those plans. The amendments to IAS 19 are effective retrospectively for financial years beginning on or after January 1, 2013 and have not yet been endorsed by the European Union. The amendments are not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
In December 2011, the IASB published amendments to IAS 32 "Financial Instruments: Presentation" specifying the requirements for offsetting financial instruments. To meet the new offsetting requirements in IAS 32, an entity's right to set off must not be contingent on a future event and must be enforceable both in the normal course of business and in the event of default or insolvency of the entity and all counterparties. It is further specified that a gross settlement system also complies with the offsetting requirements according to IAS 32, provided no major credit liquidity risks remain, receivables and payables are processed in a single settlement step, making it equivalent to a net settlement. The new requirements must be applied retrospectively for financial years beginning on or after January 1, 2014 and have not yet been endorsed by the European Union. The amendments are not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
In December 2011, the IASB also issued extended disclosure requirements regarding offsetting rights in IFRS 7 "Financial Instruments: Disclosures." In addition to extended disclosures on offsetting activities actually carried out pursuant to IAS 32, disclosure requirements on existing rights to set off are introduced regardless of whether the offsetting under IAS 32 is actually carried out. The new requirements must be applied retrospectively for financial years beginning on or after January 1, 2013 and have not yet been endorsed by the European Union. The new requirements are not expected to have an impact on the presentation of the Company's results of operations, financial position or cash flows.
Accounting policies
The accounting policies set out below have been applied consistently in all periods presented in these financial statements.
A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.
Financial assets include, in particular, loans, receivables and derivative financial assets held for trading. Financial liabilities generally substantiate claims for repayment in cash or another financial asset. In particular, this includes bonds, medium term notes, liabilities to banks, trade payables and derivative financial liabilities. Financial instruments are generally recognized as soon as the Company becomes a
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
party to the contractual regulations of the financial instrument. However, in the case of regular way purchase or sale (purchase or sale of a financial asset under a contract whose terms require delivery of the assets within the timeframe established generally by regulation or convention in the market place concerned), the settlement date is relevant for the initial recognition and derecognition.
Financial assets are measured at fair value on initial recognition. For all financial assets not subsequently measured at fair value through profit or loss, the transaction costs directly attributable to the acquisition are taken into account. The fair values recognized in the statement of financial position generally correspond to the market prices of the financial assets. If these are not immediately available, they must be calculated using standard valuation models on the basis of current market parameters. For this calculation, the cash flows already fixed or determined by way of forward rates using the current yield curve taking into account maturity adjusted spreads are discounted at the measurement date using the discount factors calculated from the yield curve applicable at the reporting date. Middle rates are used.
The Company assesses whether the embedded derivatives are required to be separated from host contracts when the Company first becomes party to the contract. Reassessment only occurs if there is a change in the terms of the contract that significantly modifies the cash flows that would otherwise be required.
The Company determines the classification of its financial assets on initial recognition and, where allowed and appropriate, re-evaluates the designation at each financial year end.
The Company has not made use of the option of designating financial assets upon initial recognition as financial assets at fair value through profit or loss.
The carrying amounts of the financial assets that are not measured at fair value through profit and loss are tested at each reporting date to determine whether there is objective material evidence of impairment. Any impairment losses caused by the future cash flows discounted by the original effective interest rate being lower than the carrying amount are recognized in profit or loss.
A financial asset (or, where applicable, a part of a financial asset or part of a group of similar financial assets) is derecognized when:
- The rights to receive cash flows from the asset have expired;
- The Company retains the right to receive cash flows from the asset but has assumed an obligation to pay them in full without material delay to a third party under a pass through arrangement; or
- The Company has transferred its rights to receive cash flows from the asset and either (a) has transferred substantially all the risks and rewards of the asset, or (b) has neither transferred nor retained substantially all the risks and rewards of the asset but has transferred control of the asset.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Loans and receivables are measured subsequently at amortised cost. This is computed using the effective interest method less any allowance for impairment. The calculation takes into account any premium or discount on acquisition and includes transaction costs and fees that are an integral part of the effective interest rate. On each statement of financial position date, the Company tests whether there are any indications of loans being subject to impairment. If any such indications (e.g. a debtor defaults in payments) are present, the recoverable amount of the asset is determined.
The Company uses derivative financial instruments to hedge the interest rate and currency risk resulting from its activities. The Company does not hold derivatives for speculative nor trading purposes. The Company does not apply hedge accounting as defined under IAS 39. Derivatives that are not part of an effective hedging relationship as set out in IAS 39 must be classified as held for trading and reported at fair value through profit or loss. If the fair values are negative, the derivatives are recognized as financial liabilities. Derivatives are recognized initially at fair value. Subsequent to initial recognition derivatives are measured at fair value and changes in the fair value of derivatives are recognized immediately in other financial income (expense) in profit or loss. In the case that no market value is available, the fair value must be calculated using standard financial valuation models. The fair value of derivatives is the value that the Company would receive or have to pay if the financial instrument was discontinued at the reporting date. This is calculated on the basis of the contracting parties' relevant exchange rates, interest rates and credit ratings at the reporting date. Calculations are made using mid rates. In the case of interest-bearing derivatives, a distinction is made between the "clean price" and the "dirty price".
In contrast to the clean price the dirty price also includes the interest accrued. The fair values carried correspond to the full fair value or the dirty price.
Other assets are measured at the amount the item is initially recognized less any impairment losses using the effective interest method, if applicable.
Property, plant and equipment is carried at cost less straight-line depreciation and impairment losses. The depreciation period is based on the expected useful life. Items of property, plant and equipment are depreciated pro rata in the year of acquisition. The residual values, useful lives and the depreciation method of the assets are reviewed at least at each financial year-end and, if expectations differ from previous estimates, the changes are accounted for as changes in accounting estimates in accordance with IAS 8 and adjusted if appropriate at the end of each financial year end. An item of property, plant and equipment is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in profit or loss in the year the asset is derecognized. Impairment of property, plant and equipment is identified by comparing the carrying amount with the recoverable amounts. At each reporting dated, the Company assesses whether there is
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
any indication that an asset may be impaired. If any such indication exists, the recoverable amounts of the asset must be determined. Impairment losses are reversed if the reasons of recognizing the original impairment loss no longer apply.
Financial liabilities are measured at fair value on initial recognition. For all financial liabilities not subsequently measured at fair value through profit or loss, the transaction costs directly attributable to the acquisition are also recognized.
Trade payables and other non-derivative financial liabilities are generally measured at amortized cost using the effective interest method. The Company has not yet made use of the option to designate financial liabilities upon initial recognition as financial liabilities at fair value through profit or loss. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the amortisation process. Financial liabilities are derecognized when the obligation under the liability is discharged, cancelled or expires.
Other liabilities are generally measured at amortized cost using the effective interest method.
Dividend distribution to the Company's shareholder is recognized as a liability in the financial statement in the period in which the dividends are approved by the Company's shareholders.
Provisions are recognized when the company has a present obligation as a result of a past event, it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation.
Interest income (expense) is recognized as it accrues, using the effective interest method.
Other financial income (expense) includes gains (losses) from derivative financial instruments and from foreign exchange. Foreign-currency transactions are translated into the functional currency at the exchange rate at the date of transaction. At statement of financial position dates, monetary items are translated at the closing rate, and non-monetary items are translated at the exchange rate at the date of transaction. Exchange rate differences are recognized in other financial income (expense) in profit or loss.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
The exchange rates of significant currencies changed as follows:
| in € | Average rate | Rate at balance sheet date | ||
|---|---|---|---|---|
| 2011 | 2010 | Dec. 31, 2011 | Dec. 31, 2010 | |
| 1 Pound sterling (GBP) | 1.15203 | 1.16553 | 1.19583 | 1.15979 |
| 1000 Hungarian forints (HUF) | 3.58103 | 3.63022 | 3.18883 | 3.59999 |
| 1 U.S. dollar (USD) | 0.71801 | 0.75398 | 0.77246 | 0.74698 |
Current income tax assets and liabilities for the current and prior periods are measured at the amount expected to be recovered from or paid to the tax authorities. The tax rates and tax laws used to compute the amounts are those that are enacted by the statement of financial position date.
Deferred taxes are recognized for temporary differences between the carrying amounts in the statement of financial position and the tax base. Currently enacted tax laws and tax laws that have been substantively enacted as of the statement of financial position date are used as the basis for measuring deferred taxes. Deferred tax assets are only recognized to the extent that it is probable that future tax profits will be available.
Judgements and estimates
The Company exercises judgement in measuring and recognizing provisions. Judgement is necessary in assessing the likelihood that a liability will arise and to quantify the possible range of the final settlement. These estimates are subject to change as new information becomes available.
Regarding assumptions made for the calculation of fair values we refer to the section under accounting policies (derivative financial instruments).
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Notes to the statement of comprehensive income
1. Finance income (expense)
The following table provides a breakdown of finance income (expense):
| thousands of € | 2011 | 2010 |
|---|---|---|
| Interest income | 1,668,160 | 1,892,652 |
| Interest expense | (1,757,717) | (1,990,370) |
| (89,557) | (97,748) |
Interest income of thousands of euro (hereafter "TEUR") 1,668,098 has been earned from contracts with Deutsche Telekom group companies in 2011 (2010: TEUR 1,892,629). All interest expense in 2011 and 2010 respectively has been derived from group external debt.
2. Other financial income (expense)
The item breaks down as follows:
| thousands of € | 2011 | 2010 |
|---|---|---|
| Gain (loss) from financial instruments | 171,712 | (84,045) |
| Gain (loss) from foreign exchange differences | 85,579 | 213,610 |
| 257,261 | 128,565 |
The Company does not apply hedge accounting under IFRS. Therefore, all movements in fair value of financial instruments and related income and expenses, are included in 'Other financial income (expenses)'.
All gains and losses from financial instruments in 2011 (and 2010) are earned from derivative contracts with DTAG.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
3. General and administrative expenses
The following table provides a breakdown of total general and administrative expenses:
| thousands of € | 2011 | 2010 |
|---|---|---|
| Personnel costs | ||
| Remuneration Management Board | 141 | 138 |
| Other salaries | 149 | 171 |
| Restructuring | 143 | - |
| Other social security costs | 14 | 17 |
| Total personnel costs | 447 | 324 |
| Other general and administrative expenses | ||
| Office rent | 48 | 47 |
| Service fees | 119 | 119 |
| Audit and tax consultancy fees | 59 | 100 |
| Telephone | 33 | 34 |
| Computer lease | 6 | 7 |
| Depreciation | 6 | 6 |
| Other | 13 | 30 |
| Total other general and administrative expenses | 284 | 343 |
| Total general and administrative expenses | 731 | 667 |
The remuneration of the Board of Management consists of short-term employee benefits. The remuneration of the Supervisory Board in 2011 was nil (2010: nil).
Total expenses recognized for defined contribution plans (state pension plan) in 2011 were TEUR 24 (2010: TEUR 23).
As at December 31, 2011 the Company employed 4 persons (2010: 4).
Service fees of TEUR 119 have been paid in 2011 for services of DTAG (2010: TEUR 119).
Furthermore, computer leasing fees of TEUR 6 have been paid in 2011 to DTAG (2010: TEUR 7).
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
4. Income tax
Income taxes in the statement of comprehensive income:
The following table provides a breakdown of income taxes in the statement of comprehensive income:
| thousands of € | 2011 | 2010 |
|---|---|---|
| Current income taxes | 1,871 | 2,113 |
| Deferred tax expense (income) | 39,875 | 3,441 |
| 41,746 | 5,554 |
The following table shows the reconciliation of the effective tax rate:
| thousands of € | 2011 | 2010 |
|---|---|---|
| Profit before income taxes | 167,023 | 31,216 |
| Expected income tax expense* | 41,746 | 7,794 |
| Effect from the change in income tax as of 1.1.2011 on deferred taxes in prior years** | - | (2,281) |
| Effect from the change in income tax as of 1.1.2011 on deferred taxes in the current year** | - | (114) |
| Income tax expense (benefit) according to income statement | 41,746 | 5,554 |
| Effective income tax rate (%) | 24.99% | 17.79% |
- Applicable income tax rates in the Netherlands ranged from 20% to 25.0% in 2011 (2010: 20% to 25.5%).
For the Company the average income tax rate was 25.0% in 2011 (2010: 17.3%).
** Top corporate income tax rate changed from 25.5% to 25% as of 1.1.2011. This corporate income tax rate change in the Netherlands was substantively enacted as of December 31, 2010.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Income taxes in the statement of financial position:
Current income taxes in the statement of financial position refer to recoverable income taxes amounting to TEUR 169 as of December 31, 2011 (December 31, 2010: TEUR 171). All income taxes are payable in the Netherlands.
Deferred taxes relate to the following key statement of financial position items:
| thousands of € | Dec. 31, 2011 | Dec. 31, 2010 | ||
|---|---|---|---|---|
| Deferred tax assets | Deferred tax liabilities | Deferred tax assets | Deferred tax liabilities | |
| Current assets | 57,481 | (8,344) | 151,305 | (100,120) |
| Financial assets | 57,481 | (8,344) | 151,305 | (100,120) |
| Non-current assets | 67,435 | (344,093) | 106,382 | (253,196) |
| Financial assets | 34,465 | (344,093) | 67,125 | (253,196) |
| Prepaid expenses* | 32,970 | - | 39,257 | - |
| Current liabilities | 586 | (94,172) | 6,139 | (104,465) |
| Financial liabilities | 586 | (34,757) | 6,139 | (40,429) |
| Other deferred income* | - | (59,415) | - | (64,036) |
| Non-current liabilities | 182,747 | (21,277) | 99,784 | (25,592) |
| Financial liabilities | 182,747 | (21,277) | 99,784 | (25,592) |
| Total | 308,249 | (467,886) | 363,610 | (483,373) |
| Of which: non-current | 250,182 | (365,370) | 206,166 | (278,788) |
| Netting: | (308,249) | 308,249 | (363,610) | 363,610 |
| Recognition: | - | (159,637) | - | (119,763) |
- refers to tax balance sheet item
All deferred taxes relate to temporary differences and changes in deferred taxes are recognized in Income taxes in the statement of comprehensive income. There are no deferred taxes that relate to loss carryforwards.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Notes to the statement of financial position
5. Financial assets
The following table provides a breakdown of the financial assets:
| thousands of € | Dec. 31, 2011 | Dec. 31, 2010 | ||
|---|---|---|---|---|
| Total | Of which: current | Total | Of which: current | |
| Loans to group companies | 27,861,116 | 3,560,113 | 31,092,487 | 4,586,369 |
| Derivative financial | 1,421,535 | 45,164 | 1,072,318 | 59,534 |
| Interest receivables | 675,400 | 675,400 | 810,235 | 810,235 |
| Cash Pooling | 3,681 | 3,681 | 3,424 | 3,424 |
| 29,961,732 | 4,284,358 | 32,978,464 | 5,459,562 |
Under long-term two loans are included which will be partly paid back in 2012 with USD 5,256,574 (EUR 4,060,478) and HUF 9,486,320,000 (EUR 30,250,262).
As of December 31, 2010, two loans are included in long-term loans which were partly paid back in 2011 as scheduled with USD 4,966,211 (EUR 3,709,668) and HUF 9,486,320,000 (EUR 34,150,657).
The following table provides a breakdown of loans to group companies of DTAG:
| thousands of € | Dec. 31, 2011 | Dec. 31, 2010 | ||
|---|---|---|---|---|
| Total | Of which: current | Total | Of which: current | |
| Germany* | 14,145,495 | 2,435,406 | 16,638,564 | 3,500,393 |
| USA | 11,637,061 | 497,154 | 11,682,949 | 373,333 |
| Hungary | 871,740 | 127,553 | 1,067,689 | 212,643 |
| The Netherlands | 800,000 | 500,000 | 1,300,000 | 500,000 |
| Other countries | 406,820 | - | 403,285 | - |
| 27,861,116 | 3,560,113 | 31,092,487 | 4,586,369 |
- of which loans to shareholder: TEUR 12,187,313 (2010: TEUR 13,035,766)
The Board of Management has concluded that no impairment is required on any of the Company's loans and receivables due to the following reasons:
With regard to all loans and receivables, none of those are impaired or past due. There are no indications as of the reporting date that the debtors will not meet their payment obligations.
DTAG, having a credit-rating of Baa1 at Moody's and BBB+ at S&P and Fitch, has also entered into a guarantee agreement with the Company on November 30, 2004, which has been renewed on January 20, 2010. Under this agreement DTAG guarantees for all repayments of loans to affiliated companies, except
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
for the own risk the Company bears with a maximum of EUR 2 million.
The loans have stated coupon interest rates as per December 31, 2011 of 1.95% to 9.33% (2010: 1.53% to 9.33%) and mature in 1 to 22 years.
The Company uses derivatives entered into before 2009 to hedge the interest rate and currency risks resulting from its financing activities. It does not hold derivatives for speculative nor trading purposes. All derivatives have been contracted with the parent company, DTAG. The Company does not make use of hedge accounting as defined under IAS 39.
Since derivatives are carried at fair value and the non-derivative instruments at amortised costs, the result under IFRS of the Company is volatile. As can be seen from the liquidity analysis under note 6 however, the Company always has net positive cash flows in every year until the last contract expires.
All interest receivables as of December 31, 2011 (and December 31, 2010 respectively) refer to accrued interest from companies of Deutsche Telekom Group, of which TEUR 397,493 relate to DTAG (2010: TEUR 478,440).
The receivable from cash pooling as of December 31, 2011 (and December 31, 2010 respectively) refers to the balance of the inter-company clearing account with DTAG. This item is also the only component of cash and cash equivalent in the statement of cash flows. We refer to note 8.
6. Financial liabilities
The following table provides a breakdown of financial liabilities and its maturities:
| thousands of € | Dec. 31, 2011 | |||
|---|---|---|---|---|
| Total | due within 1 year | due > 1 year < 5 years | due > 5 years | |
| Bonds and other securitized liabilities | ||||
| Nonconvertible bonds | 18,469,276 | 1,996,779 | 8,487,234 | 7,985,263 |
| Medium term notes | 9,001,079 | 1,595,959 | 2,935,405 | 4,469,715 |
| Liabilities to banks | 356,120 | - | 356,120 | - |
| Guarantee fees | 83,800 | 8,544 | 17,464 | 57,792 |
| Interest liabilities | 756,379 | 756,379 | - | - |
| Derivative financial instruments | 648,842 | 2,343 | 42,800 | 603,699 |
| 29,315,496 | 4,360,004 | 11,839,023 | 13,116,469 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
| thousands of € | Dec. 31, 2010 | |||
|---|---|---|---|---|
| Total | due within 1 year | due > 1 year < 5 years | due > 5 years | |
| Bonds and other securitized liabilities | ||||
| Nonconvertible bonds | 21,117,603 | 3,876,360 | 8,673,888 | 8,567,355 |
| Medium term notes | 9,661,471 | 749,607 | 3,991,642 | 4,920,222 |
| Liabilities to banks | 385,700 | - | 283,932 | 101,768 |
| Guarantee fees | 90,707 | 9,733 | 17,058 | 63,916 |
| Interest liabilities | 892,022 | 892,022 | - | - |
| Derivative financial instruments | 343,672 | 20,762 | 64,080 | 258,830 |
| 32,401,175 | 5,846,486 | 13,030,800 | 13,412,081 |
In the long-term liabilities to banks due within five years one loan is included that will be repaid in tranches of HUF 9,486,320,000 (EUR 30,250,262) in each of the following two years. As per 31 December, 2010 three tranches of HUF 9,486,320,000 (EUR 34,150,657) each remained.
Guarantee fee liabilities to be paid to DTAG are paid over the term of the external financial instruments. DTAG provides a full and irrevocable guarantee for all liabilities issued by the Company. Payment dates mainly relate to the interest payment dates of the external financial liabilities.
In 2011 and 2010 respectively, all interest liabilities refer to external debt.
Liquidity analysis
The following tables show the contractually agreed (undiscounted) interest and guarantee payments and repayments of the non-derivative financial instruments and the derivatives with positive and negative values as of December 31, 2011 and as of December 31, 2010 respectively. All instruments held at December 31, 2011 (December 31, 2010 respectively) and for which payments were already contractually agreed are included. Planning data for future, new liabilities were not included. Each amount in foreign currency was translated at the closing rate prevailing on reporting date. The variable interest payments arising from the financial instruments were calculated using the last interest rates fixed before December 31, 2011 (December 31, 2010 respectively). Based on this liquidity analysis the Company expects net positive cash flows in all years presented herein.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
The following tables show the liquidity analysis as of December 31, 2011:
| thousands of € 2012 | 2013 | |||||
|---|---|---|---|---|---|---|
| Interest (including guarantee fees) Fix | Floating | Repayments | Interest (including guarantee fees) Fix | Floating | Repayments | |
| Liabilities (cash payments) | ||||||
| Bonds | (1,121,129) | - | (2,000,000) | (980,837) | - | (2,967,670) |
| MTNs | (467,625) | (9,019) | (1,597,915) | (421,952) | (2,129) | (298,958) |
| Banks Loans | (21,362) | (4,324) | (30,250) | (21,362) | (567) | (30,250) |
| Guarantee Fees | (13,564) | - | - | (11,627) | - | - |
| Cross currency swaps | (5,784) | (88,581) | (624,707) | (6,784) | (80,540) | (79,721) |
| Interest rate swaps | (185,402) | (210,496) | - | (185,402) | (181,037) | - |
| Assets (cash receivables) | ||||||
| Loans to aff. Comp. | 1,448,686 | 100,071 | 3,598,203 | 1,273,878 | 83,369 | 3,279,960 |
| Cross currency swaps | - | 116,345 | 658,730 | - | 95,088 | 100,937 |
| Interest rate swaps | 370,057 | 97,751 | - | 357,049 | 87,247 | - |
| Total | 3,977 | 9,747 | 4,001 | 3,963 | 1,451 | 4,288 |
| Total cash flow for the year | 9,805 | 9,832 | ||||
| thousands of € 2014-2016 | 2017-2021 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Interest (including guarantee fees) Fix | Floating | Repayments | Interest (including guarantee fees) Fix | Floating | Repayments | |
| Liabilities (cash payments) | ||||||
| Bonds | (2,182,764) | - | (5,567,374) | (2,076,795) | - | (3,235,933) |
| MTNs | (996,884) | (2,673) | (2,648,958) | (1,168,836) | - | (1,798,958) |
| Banks Loans | (50,826) | - | (296,646) | - | - | - |
| Guarantee Fees | (25,582) | - | - | (20,475) | - | - |
| Cross currency swaps | - | (85,887) | (2,705,546) | - | - | - |
| Interest rate swaps | (406,355) | (289,478) | - | (516,328) | (187,554) | - |
| Assets (cash receivables) | ||||||
| Loans to aff. Comp. | 2,961,548 | 88,720 | 8,482,984 | 3,145,217 | - | 5,065,207 |
| Cross currency swaps | - | 117,714 | 2,750,000 | - | - | - |
| Interest rate swaps | 705,096 | 174,747 | - | 626,534 | 192,522 | - |
| Total | 4,213 | 9,143 | 14,400 | (10,803) | 4,900 | 30,316 |
| Total cash flow for the years | 21,016 | 24,801 | ||||
| thousands of € 2022-2033 | ||||||
| --- | --- | --- | --- | |||
| Interest (including guarantee fees) Fix | Floating | Repayments | ||||
| Liabilities (cash payments) | ||||||
| Bonds | (2,589,464) | - | (4,598,581) | |||
| MTNs | (909,523) | - | (2,736,039) | |||
| Banks Loans | - | - | - | |||
| Guarantee Fees | (24,921) | - | - | |||
| Cross currency swaps | - | - | - | |||
| Interest rate swaps | (695,371) | (208,011) | - | |||
| Assets (cash receivables) | ||||||
| Loans to aff. Comp. | 3,338,086 | - | 7,510,732 | |||
| Cross currency swaps | - | - | - | |||
| Interest rate swaps | 912,741 | 216,456 | - | |||
| Total | (60,452) | 8,445 | 76,112 | |||
| Total cash flow for the years | 16,106 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
The following tables show the liquidity analysis as of December 31, 2010:
| thousands of € 2011 | 2012 | |||||
|---|---|---|---|---|---|---|
| Interest | ||||||
| (Including | ||||||
| guarantee fees) | ||||||
| Fix | Floating | Repayments | Interest | |||
| (Including | ||||||
| guarantee fees) | ||||||
| Fix | Floating | Repayments | ||||
| Liabilities (cash payments) | ||||||
| Bonds | (1,332,914) | - | (3,873,491) | (1,073,501) | - | (2,000,000) |
| MTNs | (492,291) | (15,692) | (750,000) | (458,876) | (7,070) | (1,579,895) |
| Banks Loans | (23,702) | (4,540) | (34,151) | (24,116) | (2,585) | (34,151) |
| Guarantee Fees | (15,421) | - | - | (12,833) | - | - |
| Cross currency swaps | (20,185) | (96,376) | (360,216) | (6,530) | (78,932) | (624,757) |
| Interest rate swaps | (204,812) | (203,441) | - | (179,812) | (177,250) | - |
| Assets (cash receivables) | ||||||
| Loans to aff. Comp. | 1,689,500 | 110,466 | 4,824,704 | 1,394,712 | 87,224 | 3,583,999 |
| Cross currency swaps | 684 | 108,575 | 386,864 | - | 95,461 | 658,730 |
| Interest rate swaps | 403,258 | 103,477 | - | 364,191 | 84,853 | - |
| Total | 4,117 | 2,470 | 3,740 | 3,220 | 1,701 | 3,923 |
| Total cash flow for the year | 18,297 | 6,852 | ||||
| thousands of € 2013-2015 | 2016-2020 | |||||
| --- | --- | --- | --- | --- | --- | --- |
| Interest | ||||||
| (Including | ||||||
| guarantee fees) | ||||||
| Fix | Floating | Repayments | Interest | |||
| (Including | ||||||
| guarantee fees) | ||||||
| Fix | Floating | Repayments | ||||
| Liabilities (cash payments) | ||||||
| Bonds | (2,416,600) | - | (6,729,502) | (2,239,356) | - | (3,942,153) |
| MTNs | (1,111,233) | (4,006) | (2,429,895) | (1,259,747) | - | (1,939,948) |
| Banks Loans | (72,349) | (519) | (216,260) | (9,147) | - | (152,785) |
| Guarantee Fees | (29,329) | - | - | (23,479) | - | - |
| Cross currency swaps | (6,530) | (145,698) | (2,706,315) | - | - | - |
| Interest rate swaps | (441,761) | (365,891) | - | (551,174) | (183,962) | - |
| Assets (cash receivables) | ||||||
| Loans to aff. Comp. | 3,188,200 | 150,514 | 9,244,247 | 3,426,795 | - | 6,062,584 |
| Cross currency swaps | - | 195,192 | 2,880,937 | - | - | - |
| Interest rate swaps | 894,045 | 173,886 | - | 649,207 | 188,769 | - |
| Total | 6,422 | 3,479 | 15,212 | (6,901) | 4,907 | 27,690 |
| Total cash flow for the years | 22,316 | 28,661 | ||||
| thousands of € 2021-2033 | ||||||
| --- | --- | --- | --- | |||
| Interest | ||||||
| (Including | ||||||
| guarantee fees) | ||||||
| Fix | Floating | Repayments | ||||
| Liabilities (cash payments) | ||||||
| Bonds | (2,946,147) | - | (4,585,865) | |||
| MTNs | (1,084,796) | - | (3,051,801) | |||
| Banks Loans | - | - | - | |||
| Guarantee Fees | (28,142) | - | - | |||
| Cross currency swaps | - | - | - | |||
| Interest rate swaps | (751,547) | (182,043) | - | |||
| Assets (cash receivables) | ||||||
| Loans to aff. Comp. | 3,753,946 | - | 7,717,816 | |||
| Cross currency swaps | - | - | - | |||
| Interest rate swaps | 986,478 | 191,170 | - | |||
| Total | (70,209) | 9,127 | 60,150 | |||
| Total cash flow for the years | 19,058 |
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Additional disclosures on financial instruments
The following table provides carrying amounts, amounts recognized and fair values by measurement categories:
| thousands of € | Category in accordance to IAS 39 | Carrying amount Dec. 31, 2011 | Amounts recognized in statement of financial position according to IAS 39 | Fair Value Dec. 31, 2011 | |
|---|---|---|---|---|---|
| Amortized costs | Fair value recognized in profit or loss | ||||
| Assets | |||||
| Loans | LaR | 27,861,116 | 27,861,116 | - | 31,294,432 |
| Other financial assets | LaR | 679,081 | 679,081 | - | 679,081 |
| Derivative financial assets | FAHIT | 1,421,535 | - | 1,421,535 | 1,421,535 |
| Liabilities | |||||
| Nonconvertible bonds | FLAC | 18,469,276 | 18,469,276 | - | 21,069,746 |
| Medium term notes | FLAC | 9,001,079 | 9,001,079 | - | 10,218,035 |
| Liabilities to banks | FLAC | 356,120 | 356,120 | - | 342,515 |
| Other financial liabilities | FLAC | 840,179 | 840,179 | - | 840,179 |
| Derivative financial liabilities | FLHIT | 648,842 | - | 648,842 | 648,842 |
| Thereof aggregated according to IAS 39 categories | |||||
| Loans and Receivables | LaR | 28,540,197 | 28,540,197 | - | 31,973,513 |
| Financial Assets Held for Trading | FAHIT | 1,421,535 | - | 1,421,535 | 1,421,535 |
| Financial Liabilities at Amortized Cost | FLAC | 28,666,654 | 28,666,654 | - | 32,470,475 |
| Financial Liabilities Held for Trading | FLHIT | 648,842 | - | 648,842 | 648,842 |
| thousands of € | Category in accordance to IAS 39 | Carrying amount Dec. 31, 2010 | Amounts recognized in statement of financial position according to IAS 39 | Fair Value Dec. 31, 2010 | |
| --- | --- | --- | --- | --- | --- |
| Amortized costs | Fair value recognized in profit or loss | ||||
| Assets | |||||
| Loans | LaR | 31,092,487 | 31,092,487 | - | 34,230,399 |
| Other financial assets | LaR | 813,659 | 813,659 | - | 813,659 |
| Derivative financial assets | FAHIT | 1,072,318 | - | 1,072,318 | 1,072,318 |
| Liabilities | |||||
| Nonconvertible bonds | FLAC | 21,117,603 | 21,117,603 | - | 23,529,587 |
| Medium term notes | FLAC | 9,661,471 | 9,661,471 | - | 10,658,776 |
| Liabilities to banks | FLAC | 385,700 | 385,700 | - | 382,118 |
| Other financial liabilities | FLAC | 982,729 | 982,729 | - | 982,729 |
| Derivative financial liabilities | FLHIT | 343,672 | - | 343,672 | 343,672 |
| Thereof aggregated according to IAS 39 categories | |||||
| Loans and Receivables | LaR | 31,906,146 | 31,906,146 | - | 35,044,058 |
| Financial Assets Held for Trading | FAHIT | 1,072,318 | - | 1,072,318 | 1,072,318 |
| Financial Liabilities at Amortized Cost | FLAC | 32,147,504 | 32,147,504 | - | 35,553,210 |
| Financial Liabilities Held for Trading | FLHIT | 343,672 | - | 343,672 | 343,672 |
Only derivative financial instruments are measured at fair value in the statement of financial position of the Company. IFRS 7 requires that the classification of financial instruments at fair value is determined by reference to the source of input used to derive the fair value. The classification uses the following three-level hierarchy: Level 1 uses quoted prices in active markets for identical assets or liabilities as input for the determination of the fair value, level 2 uses inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (i.e., as prices) or indirectly (i.e., derived from prices) and
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
level 3 uses inputs for the asset or liability that are not based on observable market data (unobservable inputs). The derivatives of the Company are exclusively categorised under level 2 in the fair value hierarchy of IFRS 7. There have been no transfers between level 1 and level 2 in 2011 and 2010 respectively.
The fair values of the quoted bonds equal the nominal amounts multiplied by the price quotations at the reporting date. The fair values of liabilities to banks, medium term notes and other financial liabilities are calculated as present values of the payments associated with the debts, based on the applicable yield curve and DTAG's credit spread curve for specific currencies. The fair values of the Company's assets are determined similarly.
The following table provides net gains and losses from interests by measurement categories:
| thousands of € | From interest | From subsequent measurement | From derecognition | Net gain (loss) | |
|---|---|---|---|---|---|
| At fair value | Currency translation | 2011 | |||
| Loans and receivables (LaR) | 1,668,160 | - | 461,392 | - | 2,129,552 |
| Financial instruments held for trading (FAHfT and FLHfT) | - | 171,712 | - | - | 171,712 |
| Financial liabilities measured at amortized cost (FLAC) | (1,757,717) | - | (375,803) | - | (2,133,520) |
| thousands of € | From interest | From subsequent measurement | From derecognition | Net gain (loss) | |
| --- | --- | --- | --- | --- | --- |
| At fair value | Currency translation | 2010 | |||
| Loans and receivables (LaR) | 1,892,652 | - | 1,235,073 | - | 3,127,725 |
| Financial instruments held for trading (FAHfT and FLHfT) | - | (84,045) | - | - | (84,045) |
| Financial liabilities measured at amortized cost (FLAC) | (1,990,370) | - | (1,021,477) | - | (3,011,847) |
Interest from financial instruments is recognized in finance income (costs) and other financial income (please refer to note 1 and 2).
The net result from the subsequent measurement for financial instruments held for trading also includes interest and currency translation effects.
Finance expense from financial liabilities measured at amortized cost primarily consists of interest expense on bonds and other financial liabilities.
Finance income from loans and receivables primarily consists of interest income on loans to group companies.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
7. Equity
The authorized share capital of the company as at December 31, 2011 amounts to EUR 2,268,901 and consists of 5,000 shares of common stock at a par value of EUR 453.78. The issued share capital amounts to EUR 453,780 and consists of 1,000 shares of common stock at a par of EUR 453.78. The remaining 4,000 shares are un-issued. There were no movements in the number of shares in 2011 or 2010. All shares are held by DTAG.
In 2011, the Company paid a dividend of 6,216.78 EUR per share (2010: 6,532.14 EUR).
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Other disclosures
8. Notes to the statement of cash flows
The statement of cash flows has been prepared using the direct method.
Net cash from operating activities is mainly a result of the net margin earned by the Company.
Net cash used in investing activities mainly comprises cash outflows for loans granted to companies of the Deutsche Telekom Group and cash inflows for loans that have been repaid. Furthermore, the item includes cash in- and outflows for expired derivatives that were used for hedging purposes.
Net cash from financing activities mainly includes cash inflows from the issuance of bonds, medium term notes and bank loans and cash outflows from the repayment of these instruments.
The cash in- and outflows for loan and cross currency interest rate swap repayments and for new loans granted to companies of Deutsche Telekom Group match the cash in- and outflows from issues and/or repayments of bonds, medium term loans and bank loans.
The net amount from the cash pooling with DTAG, is the only component of cash and cash equivalents, and it is measured at cost. This amount is included in financial assets on the statement of financial position. We refer to note 5. The Company has credit facilities with three banks of € 600 million each. The bilateral credit agreements have an original maturity of 36 months and can, after each period of 12 months, be extended by a further 12 months to renew the maturity of 36 months. One bank did not extend its facility in 2010 and therefore this agreement expires in 2012. The other two banks did expand their credit lines in 2011.
The Company did not draw on the credit lines in 2011 or 2010. All liabilities from earlier credit line draw downs have been paid back.
9. Segment reporting
The primary activity of the Company is to finance its parent company and affiliated companies. Therefore segment information other than geographic information and information per major customer is not separately reported. There is only one reportable segment.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Geographic information
Interest income mainly from group companies according to their country of operations:
| thousands of € | Dec. 31, 2011 | Dec. 31, 2010 |
|---|---|---|
| Germany | 953,949 | 1,182,053 |
| USA | 598,802 | 548,367 |
| Other countries | 115,409 | 162,232 |
| 1,688,160 | 1,892,652 |
In 2011, more than 10 % of the total interest income has been earned from loans with DTAG (TEUR 734,516 or 44.03%), T-Mobile USA Inc., Bellevue (TEUR 598,802 or 35.9%) and Telekom Deutschland GmbH, Bonn (TEUR 213,659 or 12.81%).
In 2010, more than 10 % of the total interest income has been earned from loans with DTAG (TEUR 901,312 or 47.62%), T-Mobile USA Inc., Bellevue (TEUR 548,367 or 28.97%) and Telekom Deutschland GmbH, Bonn (TEUR 271,989 or 14.37%).
For non-current loan receivables, we refer to note 5.
10. Risk management, financial derivatives and other disclosures on capital management
Principles of risk management
The Company's principal financial liabilities, other than derivatives, mainly comprise bank loans, bonds and medium term notes. These financial liabilities are the result of the Company's main purpose, i.e. to raise funds for group companies of DTAG. The company's financial assets, other than derivatives, mainly comprise loans to group companies. Before 2009, the Company has entered into derivative transactions, primarily interest rate swaps and cross currency interest rate swaps, to manage the interest rate risk and currency risk arising from the group's operations and its sources of funding. It is the Company's policy that derivatives are exclusively used as hedging instruments, i.e. neither for trading nor other speculative purposes. In 2011 and 2010, the Company has not closed any new derivative contracts because it was not necessary in order to manage an interest rate or currency risk.
The main risks arising from the company's financial instruments are interest rate risk, liquidity risk, currency risk and credit risk. Management of these risks is performed in accordance with DTAG's financial risk management policy. The Board of Directors regards effective management of the interest rate risk and foreign currency risk as one of its main tasks.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
33
Currency risk
Currency risk as defined by IFRS 7 arises on account of financial instruments being denominated in a currency that is not the functional currency and being of a monetary nature.
The Company's currency risk mainly relates to positions in GBP, USD and HUF. The currency risk is either hedged by means of raising the funds in the same currency as the financing provided to the borrowers or by a swap agreement.
For the presentation of market risks, IFRS 7 requires sensitivity analyses that show the effects of hypothetical changes of the relevant risk variables on profit or loss and shareholder's equity. In addition to currency risks the Company is exposed to interest rate risks according to the definition of IFRS 7. The periodic effects are determined by relating the hypothetical changes in the risk variables to the balance of financial instruments at the reporting date. It is assumed that the balance at the reporting date is representative for the year as a whole.
The currency sensitivity analysis is based on the following assumptions:
Major non-derivative monetary financial instruments (loans and other financial assets and interest-bearing and non-interest bearing liabilities) are either directly denominated in the functional currency or have been transferred to the functional currency by means of derivatives closed before 2009.
Whereas derivatives are valued at fair value, non-derivative financial instruments are carried at amortized cost; therefore a change in exchange rates has an impact on the result of the Company.
Interest income and interest expense from financial instruments are recorded directly in the functional currency or transferred to the functional currency by means of derivatives closed before 2009. The Company does not hedge the future net margins. This has an impact on the net profit margin of the Company.
If the euro had gained (lost) 10 percent against all currencies at December 31, 2011, other financial income would have been EUR 18,9 million lower (higher) (December 31, 2010: EUR 6.4 million lower (higher)). The hypothetical effect on profit or loss before income taxes of EUR -18.9 million mainly results from the currency sensitivities EUR/USD: EUR -19.3 million (2010: EUR -6.8 million); EUR/HUF: EUR 0.5 million (2010: EUR 0.4 million); EUR/GBP: EUR 0.1 million (2010: EUR 0 million).
Interest rate risk
The Company is exposed to interest rate risk on the interest-bearing receivables and interest-bearing liabilities. However, the interest rates on the Company's funding do in principle match with the interest rates on the corresponding loans provided by the Company. Any interest rate exposure that does nevertheless arise at the level of the Company is hedged by means of derivatives entered into before 2009 so there will effectively be no interest rate risk with respect to cash flows at the level of the Company. However, as the
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
derivatives are valued at fair value a change in interest rates has an impact on the result of the company of the respective year.
Interest rate risks are presented by way of sensitivity analyses in accordance with IFRS 7. These show the effects of changes in market interest rates on interest payments, interest income and expense, other income components and, if appropriate, shareholder's equity. The interest rate sensitivity analyses are based on the following assumptions:
- Changes in the market interest rates of non-derivative financial fixed instruments do not affect income because they are not measured at fair value but at amortized cost.
- Changes in the market interest rates of non-derivative financial variable instruments do not affect income because they are not measured at fair value but at amortized costs and because variable interest income or expense is hedged by means of a corresponding derivative.
- Changes in the market interest rate of interest rate swaps and cross-currency swaps do affect other financial income or expense since they are measured at fair value and are not part of a hedging relationship as set out in IAS 39. They are therefore taken into consideration in the income-related sensitivity calculations.
If the market interest rates had been 100 basis points higher (lower) at December 31, 2011, the profit or loss before income taxes would have been EUR 112.8 million lower (higher) (December 31, 2010: EUR 131.5 million lower (higher)).
Some loan contracts of the Company include a step-clause. If the rating of DTAG changes and triggers the step-clause of the contracts, the interest rate of those contracts is adjusted. If the rating of DTAG had been upgraded to A3/A- as of December 31, 2011, the profit or loss before income taxes would have been EUR 9.1 million lower (December 31, 2010: EUR 9.5 million lower). If the rating of DTAG had been downgraded as of December 31, 2011, the profit or loss before income taxes would not have materially changed.
Credit risk
Loans are granted to group companies only. The maximum exposure to credit risk is generally represented by the carrying amounts of the financial assets that are carried in the statement of financial position, including derivatives with positive market values. However, DTAG has issued a letter of comfort for all repayments of loans to affiliated companies, above a maximum of EUR 2 million which the Company must bear.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Liquidity risk
Please refer to Note 6.
Capital management
The overriding aim of the company's capital management is to match the assets and liabilities in order to ensure its capability to repay the debt. The Company's objectives when managing capital are to safeguard the Company's ability to continue as a going concern in order to provide returns for the shareholder.
11. Related parties
No other related party transactions have occurred other than those already disclosed in notes 1, 2, 3, 5, 6, 7 and 9. Related party transactions were on terms equivalent to at arm's length transactions.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Amsterdam, February 22, 2012
The Board of Management:
The Supervisory Board:
Deutsche Telekom International Finance B.V.
Herengracht 124-128
1015 BT Amsterdam
The Netherlands
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
Other information
Profit appropriation according to the Articles of Association
According to article 19.1 of the Articles of Association the profit for the year is at the free disposal of the General Meeting of Shareholders for distributions, reservations or other options within the objects of the Company.
Proposed appropriation of profit
Following the proposed profit appropriation of the Board of Management, and pursuant to article 19 of the Articles of Association, an amount of EUR 5,653,747.18 will be distributed to the shareholder, awaiting approval of the General Meeting of Shareholders and the Supervisory Board. The related amount per share is EUR 5,653.75.
Post statement of financial position events
No other events occurred since December 31, 2011, which would make the present financial position substantially different from that shown in the statement of financial position as that date, or which would require adjustment to or disclosure in the financial statement.
Deutsche Telekom International Finance B.V., Amsterdam - Annual report for the year ended December 31, 2011
pwc
Independent auditor's report
To: the General Meeting of Shareholders of Deutsche Telekom International Finance B.V.
Report on the financial statements
We have audited the accompanying financial statements 2011 as set out on pages 6 to 36 of Deutsche Telekom International Finance B.V., Amsterdam, which comprise the statement of financial position as at 31 December 2011, the statement of comprehensive income, changes in equity and cash flows for the year then ended and the notes, comprising a summary of accounting policies and other explanatory information.
Management's responsibility
Management is responsible for the preparation and fair presentation of these financial statements and for the preparation of the directors' report, both in accordance with International Financial Reporting Standards as adopted by the European Union and with Party of Book 2 of the Dutch Civil Code. Furthermore, management is responsible for such internal control as it determines is necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error.
Auditor's responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Dutch law, including the Dutch Standards on Auditing. This requires that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the company's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
PricewaterhouseCoopers Accountants N.V., Thomas R. Malthusstraat 5, 1066 JR Amsterdam, P.O. Box 90357, 1006 BJ Amsterdam, The Netherlands
T: +31 (0) 88 792 00 20, F: +31 (0) 88 792 96 40, www.pwc.nl
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pwc
Opinion
In our opinion, the financial statements give a true and fair view of the financial position of Deutsche Telekom International Finance B.V. as at 31 December 2011, and of its result and its cash flows for the year then ended in accordance with International Financial Reporting Standards as adopted by the European Union and with Part 9 of Book 2 of the Dutch Civil Code.
Report on other legal and regulatory requirements
Pursuant to the legal requirement under Section 2: 393 sub 5 at e and f of the Dutch Civil Code, we have no deficiencies to report as a result of our examination whether the directors’ report, to the extent we can assess, has been prepared in accordance with Part 9 of Book 2 of this Code, and whether the information as required under Section 2: 392 sub 1 at b-h has been annexed. Further we report that the directors’ report, to the extent we can assess, is consistent with the financial statements as required by Section 2: 391 sub 4 of the Dutch Civil Code.
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