TELEFONICA DEUTSCHLAND HOLDING AG INTERIM

Risk Management

Risk Management our Controlling department ensures extensive monitoring. This makes it possible to take appropriate steps in good time to avoid During the reporting period, we identified potential negative any divergence from the defined targets. We classify this risk as influences arising from the COVID-19 pandemic as a new reportable moderate. risk. We have not identified any other significant risks beyond those described in the Combined Management Report for the 2019 Opportunity Management financial year. COVID-19 pandemic The opportunities for focusing on our business activities and growth COVID-19, a lung disease caused by the novel coronavirus, has strategy improved in the first half of 2020. been classified as a pandemic by the WHO and has already had an appreciable impact on our business operations. We will continue to The contractually agreed sale of major parts of the business activities face restrictions that could affect our business activities, especially as of rooftop sites to Telxius has significantly increased the Telefónica another wave of infection may occur. Deutschland Group‘s financial flexibility, giving it much greater freedom in its business activities. Going forward, the Telefónica Deliveries, for example from regions that are particularly hard hit, Deutschland Group will lease areas of the transferred passive could be delayed or even cancelled. It is also possible that we may infrastructure from Telxius for the installation and operation of its not be able to use our distribution channels to the usual extent, due active radio technology. As part of this arrangement, it was also agreed to fresh restrictions. Our employees could also be absent due to that Telxius will develop 2,400 further sites within the next four years illness, which could affect our operations. and lease space there to the Telefónica Deutschland Group for the installation of active radio technology. The overall transaction In general, an economic downturn can be expected for 2020 as a was approved by the competent authorities by 27 July 2020 whole. This may result in companies being unable to make up for the (>Note 2 SIGNIFICANT EVENTS AND TRANSACTIONS DURING THE REPORTING PERIOD). consequences of the pandemic. Any resulting payment difficulties or changes in demand on the part of our customers could impair our In addition to the risks mentioned above, the COVID-1