The assessment basis for paying the dividend are not the consolidated financial statements of Deutsche Telekom, but the single-entity financial statements under German GAAP of the parent company, Deutsche Telekom AG.
According to the single-entity financial statements, we achieved net earnings of EUR six billion in 2010 – the overall figure for our dividend payments to shareholders is approximately EUR three billion.
Of course, the dividend has to be earned by the overall Group. The crucial parameters to assess what dividend can be paid are therefore the Group’s net profit and, above all, the free cash flow. Both free cash flow, which in the 2010 financial year was EUR 6.5 billion, well above the original expectation of EUR 6.2 billion, and the Group’s net profit demonstrate that as a company we can well afford to pay a dividend of around EUR 3 billion.
What is free cash flow?
Quite simple: It is the money that remains in the coffers when all current payments, such as those for operating activities, interest, taxes and investments, are subtracted. Free cash flow is the central measurement for our providers of debt and equity capital. It is not only the yardstick for what dividend can be paid, but also for the ability to pay back liabilities. But it also shows the potential for the company’s further development.