35 Notes to the consolidated statement of cash flows

Net cash from operating activities

Net cash from operating activities increased by EUR 0.7 billion year-on-year to EUR 23.7 billion. This was attributable to the sustained positive performance of the operating segments, in particular in the United States including Sprint. Negative effects on net cash from operating activities related in part to the repayment of a Deutsche Bundespost treasury note (zero-coupon bond) issued by Deutsche Telekom AG in 1990 with a nominal amount of EUR 0.2 billion, which fell due on December 31, 2019 and was repaid on that date by a bank using its own funds. The payment by Deutsche Telekom AG to this bank was made on the following bank working day of January 2, 2020. The interest portion amounted to EUR 1.2 billion. In addition, the repayment of EUR 0.4 billion in the reporting period for another zero-coupon bond also had a negative impact. The interest portion amounted to EUR 0.4 billion. Net cash from operating activities was also negatively impacted in the amount of EUR 2.2 billion in the reporting period as a result of the premature termination of forward-payer swaps for borrowings raised at T‑Mobile US. Excluding these effects, higher (net) interest payments, which were up by EUR 2.1 billion, had a negative impact on net cash from operating activities, mainly due to the financial liabilities recognized and the restructuring begun in connection with the acquisition of Sprint and the related increase in financing, including the handling charges incurred for a briefly utilized bridge loan facility. Income tax payments decreased by EUR 0.1 billion compared with the prior year. Factoring agreements of EUR 0.8 billion had a negative impact on net cash from operating activities in the reporting period, mainly as a result of the contractual termination of a revolving factoring agreement in the Germany operating segment. In the prior year, factoring agreements had had negative effects of EUR 0.3 billion.

Deutsche Telekom’s working capital measures are focused on improvements in the area of liabilities as well as in the management of receivables and inventories. However, they are not used for active liquidity management. The negative effect on the change in assets carried as working capital is mainly attributable to the acquisition of mobile devices in connection with the terminal equipment lease model JUMP! On Demand and the increased stockpiling of new mobile devices in the United States operating segment. In addition, higher receivables from wholesale partners and higher receivables under the Equipment Installment Plan – primarily as a result of the market launch of higher-priced devices in the fourth quarter of 2020 in the United States – had a negative effect on the change in assets carried as working capital. The negative effect on the change in liabilities carried as working capital mainly resulted from the reduction in liabilities to terminal equipment vendors and other telecommunications companies in the United States operating segment.

For further information on individual assets carried as working capital, please refer to Note 2 “Trade receivables” and Note 4 “Inventories.”

For further information, please refer to Note 14 “Trade and other payables.”

Cash capex increased by EUR 4.3 billion to EUR 18.7 billion. In the 2020 financial year, mobile spectrum licenses were acquired for total cash of EUR 1.7 billion. EUR 1.1 billion of this related to the United States operating segment and was primarily attributable to the purchase of FCC licenses in an auction that ended in March 2020. Another EUR 0.4 billion resulted from spectrum acquisition in the Europe operating segment and EUR 0.2 billion in the Group Development operating segment. The prior-year figure had included EUR 1.2 billion for the acquisition of mobile spectrum licenses, predominantly for the United States operating segment. In the Germany operating segment, cash outflows in connection with the acquisition of 5G mobile spectrum licenses were shown in cash capex in the 2019 financial year; since 2020, they have been presented in net cash from/used in financing activities on account of the payment plan agreed with the Federal Republic of Germany. Adjusted for investments in mobile spectrum licenses, cash capex was up by EUR 3.9 billion, largely on account of the inclusion of Sprint and the ongoing 5G network build-out in the United States. Cash capex (before spectrum investment) in the Germany operating segment decreased slightly. Capital expenditure in the Germany operating segment totaled around EUR 4.2 billion in 2020, in particular for the build-out of the 5G and fiber-optic networks. In the Europe operating segment, cash capex (before spectrum investment) stood at EUR 1.8 billion, which was slightly up on the prior year. Here, we also continue to invest in the provision of broadband and fiber-optic technology and in 5G as part of our integrated network strategy.

The contractually promised government grants from publicly funded projects for the broadband build-out in Germany were recognized in full as receivables as of the start of the second half of 2019. They reduce the cost of the relevant property, plant and equipment. The grants received and payments made for the build-out continue to be recognized in net cash used in investing activities, however, they are not part of cash capex, because the payments made do not result in additions to property, plant and equipment. Since the payments are not made at the same point in time as the proceeds are received, the net amounts can be positive or negative in the individual periods.

Interest payments (including capitalized interest) of EUR 7.6 billion (2019: EUR 4.3 billion; 2018: EUR 3.6 billion) were made in the reporting period. Capitalized interest of EUR 0.3 billion (2019: EUR 0.3 billion, 2018: EUR 0.3 billion) was reported within cash capex in net cash used in investing activities, together with the associated assets.

Non-cash transactions in the consolidated statement of cash flows

In the 2020 financial year, Deutsche Telekom chose financing options totaling EUR 0.2 billion under which the payments for trade payables from operating and investing activities primarily become due at a later point in time by involving banks in the process (2019: EUR 0.7 billion). These are shown under financial liabilities in the statement of financial position. As soon as the payments have been made, they are disclosed under net cash from/used in financing activities.

In the 2020 financial year, Deutsche Telekom leased assets of EUR 14.3 billion, mainly network equipment, and land and buildings (2019: EUR 5.5 billion). These assets are now recognized in the statement of financial position under right-of-use assets and the related liabilities under lease liabilities. Future repayments of the liabilities will be recognized in net cash from/used in financing activities. The year-on-year increase is mainly attributable to the United States operating segment and relates to the inclusion of Sprint as well as to a modified agreement with American Tower concerning the lease of 20,729 cell towers, which increased the carrying amounts of the right-of-use assets and the lease liabilities by EUR 9.4 billion each.

Consideration for the acquisition of broadcasting rights is paid by Deutsche Telekom depending on the terms of the contract on the date of its conclusion or spread over the term of the contract. Financial liabilities of EUR 0.4 billion were recognized in the 2020 financial year for future consideration for acquired broadcasting rights (2019: EUR 0.3 billion). The payment of the consideration will be recognized in net cash from/used in financing activities.

In the United States operating segment, EUR 2.5 billion was recognized for mobile handsets under property, plant and equipment in the 2020 financial year (2019: EUR 0.9 billion). These relate to the equipment lease model at T‑Mobile US, under which customers do not purchase the devices but lease them. The payments are presented under net cash from operating activities. The increase is mainly due to the inclusion of Sprint, whose business model had a strong focus on terminal equipment leases.

The business combination of T‑Mobile US and Sprint in the United States operating segment as of April 1, 2020 was executed by means of a share exchange without a cash component (all-stock transaction). Non-current assets and disposal groups held for sale of EUR 1.6 billion and liabilities associated with assets and disposal groups held for sale of EUR 0.5 billion were divested in connection with the sale of Sprint’s prepaid business to DISH.

For further information, please refer to the section “Changes in the composition of the Group and other transactions.”

The carrying amounts of the financial liabilities associated with net cash from/used in financing activities, divided into carrying amount changes having and not having an effect on cash flows, developed as follows in the reporting year:

Total carrying amount changes having an effect on cash flows of EUR 9.3 billion reported in net cash from/used in financing activities deviate from net cash from/used in financing activities due in particular to the dividend entitlements of Deutsche Telekom AG’s shareholders having an effect on cash flows, the changes in non-controlling interests having an effect on cash flows, and the interest paid in connection with financial liabilities reported in cash generated from operations. The other carrying amount changes in lease liabilities not having an effect on cash flows are mainly attributable to additions in connection with the recognition of right-of-use assets. The changes in the carrying amounts of financial liabilities due to changes in the composition of the Group relate, in particular, to the acquisition of Sprint. The other carrying amount changes in financial liabilities not having an effect on cash flows include additions of EUR 0.2 billion for selected financing options under which the payments become due at a later point in time by involving banks in the process, as well as additions of EUR 0.4 billion for the acquisition of broadcasting rights.

In the 2020 financial year, Deutsche Telekom made total interest payments of EUR 7.6 billion to service interest obligations. This figure includes interest payments for derivative and non-derivative financial liabilities, interest payments for lease liabilities, and interest payments recognized under intangible assets and property, plant and equipment. The above reconciliation only shows the carrying amounts of the financial liabilities, lease liabilities, and derivative financial assets allocated to net cash from/used in financing activities.

For further information, please refer to the previous section “Non-cash transactions in the consolidated statement of cash flows.”

The carrying amounts of the financial liabilities disclosed in net cash from/used in financing activities, divided into carrying amount changes having and not having an effect on cash flows, developed as follows in 2019: