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Five questions and answers on the shareholder remuneration policy

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What are the distinguishing features of Deutsche Telekom’s shareholder remuneration policy?
At the beginning of 2010, Deutsche Telekom was the first German DAX company to announce a medium-term shareholder remuneration policy with detailed figures for the planned dividends. The plan is to pay a dividend of at least EUR 0.70 per share in each financial year from 2010 to 2012. Shares are also to be bought back to support the positive development of the share price.
This planning provides shareholders with a clear line over a three-year period and they can use it as a basis for planning their own capital investment. The final decision on shareholder remuneration is then taken at the shareholders’ meeting on May 12, 2011. All Deutsche Telekom shareholders can take part in the shareholders’ meeting.

How does Telekom’s dividend payment compare with other DAX companies?
A current dividend of 6.5 percent makes the Deutsche Telekom share an interesting investment. In the DAX comparison, this puts Telekom in third place. Only RWE and E.on are generating an even higher return. However, Deutsche Telekom's planned dividend is tax-free for domestic shareholders, which is not the case with the other companies. In comparison to other intangible assets, the dividend looks good as well. For example, the dividend yield is much higher than what can be obtained currently from a ten-year German government bond, which only pays around 3.3 percent at the moment (as of April 28, 2011).

Is the dividend jeopardized by the sale of T-Mobile USA?
No. The planned shareholder remuneration policy until 2012 of around EUR 3.4 billion a year will remain unaffected by the sale of T-Mobile USA. Here, two different topics are involved. When the sale of T-Mobile USA has been completed, we plan to use about EUR five billion of the proceeds to buy back shares. This share buy-back operation is also intended to apply in addition to our shareholder remuneration policy for the period 2010-2012.

Why do buy-backs have a positive effect on the share price?
When Deutsche Telekom buys shares back, the profit and the free cashflow are distributed across fewer shares. It follows that the results and the free cash surplus will both increase in relation to each share. Since this program stretches over several years, the investors are also given planning security for years to come.

What does it mean that the dividend is tax-free?
The dividend for the 2010 financial year will be paid out of the tax contribution account, meaning it is tax-free for the recipient in Germany and will be paid without deduction of capital gains tax or solidarity supplement. For shareholders in Germany the dividend of EUR 0.70 per share is not subject to taxation under the income tax assessment, either. In all probability, the dividend will continue to be tax-free at least for the remaining period of our shareholder remuneration policy, i.e., for the 2011 and 2012 financial years as well.

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