Selected notes to the consolidated income statement

Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. As a result of the change in the composition of the Group during the course of the year, the remeasured assets and liabilities were recognized as of this date, and all income and expenses generated from the date of first-time consolidation are included in Deutsche Telekom’s consolidated income statement. This affects the comparability of the figures for the current period with the prior-year figures.

For further information on the business combination of T‑Mobile US and Sprint, please refer to the section “Changes in the composition of the Group.”

Net revenue

Net revenue breaks down into the following revenue categories:

millions of €

 

 

 

Q1-Q3 2020

Q1-Q3 2019

Revenue from the rendering of services

59,016

48,645

Germany

14,903

14,722

United States

33,559

23,179

Europe

7,023

7,165

Systems Solutions

2,320

2,416

Group Development

1,156

1,112

Group Headquarters & Group Services

55

51

Revenue from the sale of goods and merchandise

10,669

9,001

Germany

1,447

1,582

United States

7,875

6,039

Europe

1,019

1,042

Systems Solutions

54

74

Group Development

275

264

Group Headquarters & Group Services

0

0

Revenue from the use of entity assets by others

3,691

1,524

Germany

610

614

United States

2,589

410

Europe

160

165

Systems Solutions

42

35

Group Development

202

206

Group Headquarters & Group Services

89

93

NET REVENUE

73,377

59,169

For further information on changes in net revenue, please refer to the section “Development of business in the Group” in the interim Group management report.

Other operating income

millions of €

 

 

 

Q1-Q3 2020

Q1-Q3 2019

Income from the reversal of impairment losses on non-current assets

52

6

Income from the disposal of non-current assets

105

46

Income from reimbursements

105

106

Income from insurance compensation

52

73

Income from ancillary services

16

18

Miscellaneous other operating income

744

596

Of which: income from divestitures and from the sale of stakes accounted for using the equity method

9

143

 

1,073

846

Income from the reversal of impairment losses on non-current assets included a reversal of EUR 50 million on property, plant and equipment in the Europe operating segment. This arose in connection with the sale of the Romanian fixed-network business, which has been planned since October 2020. Miscellaneous other operating income includes a structuring fee from SoftBank of EUR 0.3 billion, which T‑Mobile US received in return for support in the immediate sale by SoftBank of T‑Mobile US shares. The prior-year period included income from the divestitures of shares accounted for using the equity method as a result of the transfer on August 14, 2019 of the 11.34 percent stake in Ströer SE & Co. KGaA to Deutsche Telekom Trust e.V. as plan assets. In addition, miscellaneous other operating income includes a large number of individual items accounting for marginal amounts.

For further information on the ad hoc reversal of impairment losses, please refer to the section “Selected notes to the consolidated statement of financial position.”

Other operating expenses

millions of €

 

 

 

Q1-Q3 2020

Q1-Q3 2019

Impairment losses on financial assets

(671)

(268)

Gains (losses) from the write-off of financial assets measured at amortized cost

(137)

(39)

Other

(2,578)

(1,975)

Legal and audit fees

(417)

(224)

Losses from asset disposals

(354)

(128)

Income (losses) from the measurement of factoring receivables

(5)

(109)

Other taxes

(388)

(342)

Cash and guarantee transaction costs

(359)

(259)

Insurance expenses

(88)

(73)

Miscellaneous other operating expenses

(968)

(840)

 

(3,386)

(2,282)

The increase in impairment losses on financial assets is mainly attributable to impairment losses on customer receivables due to lowered credit ratings as a consequence of the coronavirus pandemic in the United States operating segment. Expenses for legal and audit fees increased, mainly in connection with the business combination of T‑Mobile US and Sprint. Losses from asset disposals of EUR 0.2 billion resulted from the derecognition of billing software for customers in the United States, which was still in development. Due to the migration of Sprint contract customers to the T‑Mobile US billing software, it was decided that this software was not suitable for the joint customer base and would not be put into operation. Miscellaneous other operating expenses include a large number of individual items accounting for marginal amounts.

Depreciation, amortization and impairment losses

At EUR 18.9 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 6.1 billion higher overall in the first three quarters of 2020 than in the prior-year period. Depreciation of property, plant and equipment increased by EUR 3.2 billion and amortization of intangible assets by EUR 1.2 billion. Depreciation of right-of-use assets increased by EUR 1.0 billion. These increases are all largely due to Sprint, which has been included since April 1, 2020. In the United States operating segment, a reduction in the useful life of leased network technology for cell sites following the business combination of T‑Mobile US and Sprint increased depreciation of the corresponding right-of-use assets by EUR 0.1 billion. Impairment losses increased by EUR 0.1 billion year-on-year to EUR 0.7 billion. EUR 0.5 billion of this increase resulted from an ad hoc impairment test of assets assigned to the Systems Solutions cash-generating unit and relate to intangible assets and property, plant and equipment in the Systems Solutions operating segment and in the Group Headquarters & Group Services segment. EUR 0.2 billion of this resulted from another ad hoc impairment test of the assets assigned to the Romania cash-generating unit. This also relates to intangible assets and property, plant and equipment.

For further information on the ad hoc impairment testing, please refer to the section “Selected notes to the consolidated statement of financial position.”

Profit/loss from financial activities

In the first three quarters of 2020, the loss from financial activities increased by EUR 1.7 billion year-on-year to EUR 3.2 billion. This increase is primarily due to a EUR 1.3 billion increase in finance costs to EUR 3.1 billion, 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. Other financial income decreased by EUR 0.3 billion year-on-year to an expense of EUR 0.1 billion, due, among other factors, to an increase of EUR 0.2 billion in interest expense from the measurement of provisions and liabilities. Gains/losses from financial instruments also decreased year-on-year by EUR 0.1 billion, partly due to measurement effects in connection with derivatives. Overall, the share of profit/loss of associates and joint ventures accounted for using the equity method was down EUR 0.1 billion on the prior-year period.

For further information on embedded derivatives at T‑Mobile US, please refer to the section “Disclosures on financial instruments.”

Income taxes

In the first three quarters of 2020, a tax expense of EUR 1.5 billion was recorded. The effective tax rate of 27 percent essentially reflects the shares of the different countries in profit before income taxes and their respective national tax rates. In the prior-year period, a tax expense of EUR 1.7 billion was recorded. The higher tax expense was attributable to a higher profit before income taxes.

Postpaid
Customers who pay for communication services after receiving them (usually on a monthly basis).