Deutsche Telekom AG · XETR:DTE

Deutsche Telekom — Pensions @ DT Webinar (September 2014)

23 slides from Deutsche Telekom's conference presentation, Sep 1, 2014

  1. Slide 1: Webinar pensions @ DT

    webinar pensions @ DT 1st of September 2014

  2. Slide 2: Disclaimer

    DISCLAIMER This presentation contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward- looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, de

  3. Slide 3: Table of content

    table of CONTENT 1. General remarks on pension schemes 2. DTAG Pension schemes I. Defined contribution and defined benefit II. Arrangement for the German civil servants as an example of a defined contribution plan III. Defined benefit plans 3. Funding of DBO via plan assets 4. Accounting treatment 5

  4. Slide 4: 1. General remarks on pension schemes

    1. GENERAL REMARKs ON PENSION SCHEMES Difference in legal frameworks (D vs UK vs US) Union agreements Reasons Motives Legacy Framework Compensation benefit 4

  5. Slide 5: 2. DT uses defined benefit and defined contribution plans

    2. DT uses defined benefit And defined contribution Plans DEFINED CONTRIBUTION PLANS DEFINED BENEFIT PLANS  German civil servant pensions, US 401k plans, most Eastern Applied for  All other plans (e.g. Germany, Switzerland, Greece, partly UK) EU countries  Obligation limited to the amount of fixe

  6. Slide 6: 2. Defined contribution example: German civil servant pension plan

    2. defined contribution example: german Civil servant pension plan GERMAN CIVIL SERVANTS CASH OUTFLOW FOR GERMAN CIVIL SERVANTS  Civil servants included 2013: app. 42.000 FTE € million  Annual contribution of 33% of the gross annual salary to the civil servants pension fund (Postbeamtenkasse) -29%

  7. Slide 7: 2. Majority of defined benefit plans come from Germany

    2. majority of defined benefit plans come from germany PENSION PROVISION IN BALANCE SHEET: € 7 BN NPV OF ALL DEFINED BENEFIT RELATED ITEMS: APP. € 9 BN € billion Equity: 32 € billion 7 Assets: 118 Liabilities: 79 2 Pension Prov.:7 Pension provision Plan assets  Present value of future payment oblig

  8. Slide 8: 2. Fixed contribution system in Germany limits risks

    2. fixed contribution system in germany limits risks GERMAN EMPLOYEES EXAMPLE OF AN ANNUAL EMPLOYEE BENEFIT  Employees included: 95.000 active and 40.000 retirees  Annual salary-linked fixed contributions: Contribution factor Employee A: 50 years of age, annual salary of 50,000 € of 2.5%  Guarant

  9. Slide 9: 3. Funding of DBO via plan assets

    3. Funding of dbo via plan assets

  10. Slide 10: 3. Control and protect funding ratio is key

    3. Control and protect funding ratio IS KEY investment objective Telekom Strategic Asset Allocation 2013 CTA/Pensions  Sovereigns 1-10y Comply with ESG Criteria  Sovereigns 10y+ BOnDS  Corporate Bonds Structuring of portfolio & Investment- (75%) Asset-Liability-Analysis  High Yield Global RISK O

  11. Slide 11: 3. DT targets funding ratio of 50%

    3. dt targets funding ratio of 50% FUNDING RATIO IN % RETURN ON PLAN ASSETS IN % Target: 50 % 120 115 110 105 100 95 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Dez. 11 Jun. 12 Dez. 12 Jun. 13 Dez. 13 Return on plan assets  Funding of plan assets in Germany is entirely voluntary  Nevert

  12. Slide 12: 4. Accounting treatment

    4. Accounting treatment

  13. Slide 13: 4. Almost even balance between pension costs and cash outflows

    4. almost even balance between pension costs and cash outflows DEVELOPMENT OF DEFINED BENEFIT OBLIGATION IN 2013 € million Pension costs Payments to pensioners Other Comprehensive EBITDA Fin. Result FCF Income 282 -366 8,973 160 -42 8,965 -33 -6 -3 DBO Service costs Interest Cash Payments from Remea

  14. Slide 14: 4. Funding is major driver of plan assets

    4. funding is major driver of plan assets DEVELOPMENT OF PLAN ASSETS IN 2013 FROM DBO TO PROVISION IN BALANCE SHEET € million € million 8,965 -42 1,973 -1 269 -1,973 1,680 67 7,006 14 Plan assets Actual return on DT funding Payments from Other Plan assets DBO 2013 Plan assets Other Pension 2012 plan

  15. Slide 15: 5. Sensitivity analysis

    5. sensitivity analysis

  16. Slide 16: 5. Discount rate is strongest sensitivity factor

    5. discount rate is strongest sensitivity factor ASSUMPTIONS FOR THE MEASUREMENT OF DEFINED BENEFIT OBLIGATIONS FOR GERMANY1) % 2013 2012 2011 2010 Discount rate 3,29 3,26 5,31 5,16 Salary increase rate (pay-scale employees) 2,75 2,75 2,75 3,25 Pension increase rate (general) 1,50 1,50 1,50 1,50 SEN

  17. Slide 17: 6. Outlook

    6. outlook

  18. Slide 18: 6. DT with decreasing pension cash outflows

    6. DT with decreasing Pension cash outflows HISTORIC AND EXPECTED CASH OUTFLOWS FOR PENSIONS IN GERMANY € million CAGR -1.9% Benefits paid incl. payments from plan assets 848 839 820 Payments for civil servants 769 792 770 281 297 349 394 376 368 567 542 471 393 398 402 2013 FC 2014 FC 2015 FC 2016

  19. Slide 19: 7. Wrap up

    7. wrap up

  20. Slide 20: 7. Key takeaways

    7. Key takeaways Defined Contribution plans  Defined contribution plans schemes do not constitute a liability  Different to international standards no funding required by law – unlike BT German Defined benefit Plans  Introduction of fixed contribution model in Germany limits volatility of the DBO

  21. Slide 21: Q&A

    q&a

  22. Slide 22: Further questions please contact the IR department

    FURTHER QUESTIONS PLEASE CONTACT THE IR DEPARTMENT Investor Relations Phone +49 228 181 - 8 88 80 E-Mail [email protected] For further information please visit www.telekom.com/investors IR webpage: IR twitter account: IR youtube playlist: 22

  23. Slide 23: Thank you!

    THANK YOU!

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