Board of Management position on the counter-motions.
2009 shareholders' meeting
Board of Management position on the counter-motions:
Item 2 on the agenda: Resolution on the appropriation of net income.
We are pursuing an attractive and shareholder-friendly dividend policy. When determining the dividend proposal for the shareholders' meeting, we base our considerations on the development of the Group, measured against parameters such as:
- the free cash flow generated within the Group;
- the Group's sound balance sheet ratios and
- a positive net profit excluding special factors.
Based on the Group's sound balance sheet ratios and another high free cash flow generated in 2008, together with the amounts achieved for the remaining KPIs, the management is submitting a dividend proposal of EUR 0.78 per share to the shareholders' meeting that fulfills this objective of pursuing an attractive dividend policy. We have kept dividend payment at a continual level. As such we are in line with our direct competitors in terms of our dividend policy.
For the eventuality that the Federal Administrative Court (Bundesverwaltungsgericht - BVerwG) considers the discontinuation of the year-end bonus for active civil servants to be incompatible with German Basic Law and shareholders conclude from this that the dividend is to be reduced, we continue to expect discontinuation of the year-end bonus to be declared constitutional. We have referred this legal issue to the Federal Constitutional Court (Bundesverfassungsgericht – BVerfG) for ruling. Dividend reduction is also unlikely in light of the labor law ruling of the Higher Labor Court in Cologne (LAG Köln). The service company employees’ claims pertaining to salary reductions due to operational transfers are unjustified. It is true that the LAG Köln upheld these claims. However, it did not take into account the unique situation of Deutsche Telekom. Nonetheless, the LAG Köln recognized the fundamental significance of the ruling and permitted appeals to be filed with the German Federal Labor Court (Bundesarbeitsgericht). The companies affected will file an appeal after reasons are given for the decision. Even if the reasons for decision are not yet available in written form, we believe the chances are good that the German Federal Labor Court(Bundesarbeitsgericht) will concur with our view and agree to the unique validity of the collective agreements of the service companies.
Items 3 and 5 on the agenda: Resolutions on the approval of the actions of the members of the Board of Management and of the actions of the Supervisory Board for the 2008 financial year.
Telephone marketing and telephone sales are only carried out by Deutsche Telekom with customer consent. All telephone sales are confirmed in writing, with reference to the right to withdraw from a contract in accordance with the Law on Remote Sales (Fernabsatzgesetz).
All external sales partners in the call center environment were required to complete a certification process (in accordance with our Code of Conduct) at the beginning of 2008 and undergo ongoing quality monitoring. Resources were significantly increased in 2008 and 2009 through measures such as quality calls following a sales call, evaluation of customer calls by independent third parties, immediate sanctions for inappropriate behavior and even termination of contracts with service providers. The 40 percent fall in the number of complaints in 2008 compared to the previous year shows that we have been successful with these measures.
Item 7 on the agenda: Resolution on the authorization to acquire treasury shares and use them.
The authorization to acquire and use treasury shares in the requested amount (10% of capital stock) is in line with the common standard for many issuers. This authorization is to create the necessary flexibility for the Board of Management and, not least, can also serve to neutralize possible dilution by any capital increases.
Item 11 on the agenda: Creation of new authorized capital 2009/I
The requested new authorized capital 2009/I of EUR 850 million in registered no par value shares will continue to provide the company with the flexibility it requires for business combinations and acquisitions. There are currently no specific plans to pay for acquisitions in shares. However, it is commercially prudent to make provisions for any future developments, especially as authorized capital 2004 runs out on May 17, 2009.
Item 12 on the agenda: Creation of new authorized capital 2009/II
Authorization for the granting of shares to employees serves to retain qualified staff and can therefore make a significant contribution to corporate success. Issuing employee shares is in keeping with the intent of the law, and is facilitated in many ways.
The requested new authorized capital 2009/II will provide the opportunity for optimized use of the new taxation framework arising from the introduction of the Employee Share Ownership Act (Mitarbeiterkapitalbeteiligungsgesetz). This would not be adequately guaranteed on the basis of authorized capital 2006. In addition, authorized capital 2009/II will also create longer-term planning security for the creation of employee share programs.
Authorized capital 2006 for the granting of shares to employees has not yet been used. Due to the introduction of the new Employee Share Ownership Act, the requirements and options for development of an employee share ownership plan have changed. New authorized capital 2009/II takes into account these changes without increasing the amount of authorized capital for the granting of shares to employees. With an assumed participation of 110,000 employees per year, for example, the proposed scope allows, over three years, approximately 45 employee shares to be transferred to each participating employee.
The Board of Management stands by its motions for resolution on the agenda.
Bonn, April 2009
Deutsche Telekom AG
Board of Management