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Financial position of the Group

Condensed consolidated statement of financial position

millions of €

 

 

 

 

 

 

Sept. 30, 2022

%

Dec. 31, 2021

Change

Sept. 30, 2021

Assets

 

 

 

 

 

Cash and cash equivalents

8,497

2.6

7,617

880

6,337

Trade receivables

17,087

5.3

15,299

1,788

14,110

Intangible assets

151,944

47.3

132,647

19,297

130,709

Property, plant and equipment

66,902

20.8

61,770

5,132

60,072

Right-of-use assets

37,767

11.8

30,777

6,990

30,807

Current and non-current financial assets

11,205

3.5

8,888

2,317

8,357

Deferred tax assets

9,300

2.9

7,906

1,394

7,514

Non-current assets and disposal groups held for sale

4,584

1.4

4,856

(272)

4,559

Other assets

14,071

4.4

11,867

2,204

10,890

Total assets

321,357

100.0

281,627

39,730

273,355

Liabilities and shareholders’ equity

 

 

 

 

 

Current and non-current financial liabilities

122,387

38.1

111,466

10,921

108,921

Current and non-current lease liabilities

42,833

13.3

33,133

9,700

32,806

Trade and other payables

11,545

3.6

10,452

1,093

8,235

Provisions for pensions and other employee benefits

4,250

1.3

6,134

(1,884)

6,445

Current and non-current other provisions

7,895

2.5

9,463

(1,568)

8,777

Deferred tax liabilities

24,751

7.7

19,809

4,942

18,908

Liabilities directly associated with non-current assets and disposal groups held for sale

3,409

1.1

1,365

2,044

1,274

Other liabilities

9,812

3.1

8,336

1,476

9,128

Shareholders’ equity

94,475

29.4

81,469

13,006

78,861

Total liabilities and shareholders’ equity

321,357

100.0

281,627

39,730

273,355

Total assets amounted to EUR 321.4 billion as of September 30, 2022, up by EUR 39.7 billion against December 31, 2021. Exchange rate effects in particular, primarily from the translation of U.S. dollars into euros, had an increasing effect. This increase is also due to the sustained high level of investing activities including, among other investments, spectrum acquisitions in the United States operating segment. The agreement signed between T‑Mobile US and Crown Castle on the modification of existing arrangements concerning the lease of cell sites also increased total assets. Total assets were reduced due to the sale of T‑Mobile Netherlands.

On the assets side, trade receivables amounted to EUR 17.1 billion, up by EUR 1.8 billion against the 2021 year-end. In the United States operating segment, the increase in receivables was mainly due to exchange rate effects. The increase in receivables there was also attributable to the Equipment Installment Plan and to customer additions. By contrast, wholesale receivables in the United States declined.

Intangible assets increased by EUR 19.3 billion to EUR 151.9 billion, due in particular to exchange rate effects of EUR 18.1 billion, primarily from the translation of U.S. dollars into euros. The carrying amount was further increased by additions of EUR 6.9 billion, EUR 3.1 billion of which related to the acquisition of mobile spectrum and resulted almost entirely from the licenses acquired at the FCC’s Auctions 110 and 108 in the United States. Positive effects from changes in the composition of the Group also contributed EUR 0.1 billion to the increase in the carrying amount. Depreciation, amortization and impairment losses of EUR 5.1 billion, as well as the reclassification of assets worth EUR 0.6 billion to non-current assets and disposal groups held for sale reduced the carrying amount. These relate to the agreements on the sale of the Group’s cell tower business in Germany and Austria (GD tower companies) and of the wireline business in the United States. Disposals decreased the carrying amount by EUR 0.1 billion.

Property, plant and equipment increased by EUR 5.1 billion to EUR 66.9 billion compared to December 31, 2021. Additions of EUR 13.3 billion for the upgrade and build-out of the network and in connection with the broadband/fiber-optic build-out and mobile infrastructure build-out increased the carrying amount. The modification of the arrangements between T‑Mobile US and Crown Castle for existing cell sites increased the carrying amount by EUR 0.8 billion. Exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 4.5 billion. Reclassifications of lease assets upon expiry of the contractual lease term to property, plant and equipment, in the United States operating segment in particular, increased the carrying amount by EUR 0.3 billion, while depreciation and impairment losses of EUR 10.4 billion had an offsetting effect. This includes impairment losses of EUR 0.5 billion, mainly relating to the impairment test of the former Sprint’s fiber-optic-based wireline assets, which was carried out in the second quarter of 2022, and the corresponding sale agreed in the third quarter of 2022. The reclassification of assets worth EUR 1.6 billion to non-current assets and disposal groups held for sale reduced the carrying amount. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. Disposals of EUR 0.9 billion also reduced the carrying amount.

Compared with December 31, 2021, right-of-use assets increased by EUR 7.0 billion to EUR 37.8 billion. The increase of the carrying amount was driven by additions of EUR 9.9 billion, primarily as a result of the agreement signed between T‑Mobile US and Crown Castle on the modification of existing arrangements, mainly concerning the lease of Crown Castle’s cell sites. As a result of the modification of the arrangements, right-of-use assets increased by EUR 6.6 billion. In addition, the agreement on the sale of 51.0 % of the shares in the GD tower companies triggered a remeasurement of the lease liabilities, which resulted in an increase in the right-of-use assets and the lease liabilities of EUR 0.5 billion in each case. Exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 5.0 billion. Depreciation and impairment losses of EUR 5.8 billion reduced the carrying amount. This included a EUR 1.4 billion increase in depreciation due to a reduction in the useful life of leased network technology for cell sites in the United States operating segment following the business combination of T‑Mobile US and Sprint. This also includes impairment losses of EUR 0.3 billion, mainly relating to the impairment test of the former Sprint’s fiber-optic-based wireline assets, which was carried out in the second quarter of 2022, and the corresponding sale agreed in the third quarter of 2022. The reclassification of assets worth EUR 1.5 billion to non-current assets and disposal groups held for sale reduced the carrying amount. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. Reclassifications of lease assets upon expiry of the contractual lease term to property, plant and equipment, in the United States operating segment in particular, also reduced the carrying amount by EUR 0.3 billion. Disposals of EUR 0.2 billion also reduced the carrying amount.

Current and non-current financial assets increased by EUR 2.3 billion to EUR 11.2 billion. Originated loans and receivables increased by EUR 0.9 billion to EUR 4.3 billion, with the carrying amount of cash collateral deposited increasing by EUR 0.6 billion. In connection with receivables from grants still to be received from funding projects for the broadband build-out in Germany, the carrying amount of other receivables increased by EUR 0.2 billion. The carrying amount of debt instruments measured at fair value through profit or loss increased by EUR 0.4 billion in connection with the sale of a 50 % stake in GlasfaserPlus and the recognition of a contingent consideration receivable. The carrying amount of derivatives with a hedging relationship remained unchanged against the level at December 31, 3021 due to offsetting measurement effects in relation to interest rate swaps in fair value hedges on the one hand and interest rate and currency derivatives in cash flow hedges on the other. The carrying amount of derivatives without a hedging relationship increased by EUR 0.7 billion to EUR 1.9 billion. This was due to an increase of EUR 0.8 billion in the carrying amount of interest rate and currency derivatives due to exchange rate effects (primarily from the strengthening of the U.S. dollar against the euro). In connection with the stock options received from SoftBank to purchase shares in T‑Mobile US, the carrying amount of the stock options recorded a net increase of EUR 0.2 billion against December 31, 2021, due on the one hand to the positive development of the T‑Mobile US share price and the amortization in full of the initial measurement of the stock options at fair value, and on the other, to the derecognition of the exercised options in April 2022. At the time of exercising the stock options, they had a fair value of EUR 0.5 billion. In connection with negative measurement effects from derivatives embedded in bonds issued by T‑Mobile US, the carrying amount of derivatives without a hedging relationship decreased by EUR 0.4 billion.

Non-current assets and disposal groups held for sale decreased by a net EUR 0.3 billion compared with December 31, 2021 to EUR 4.6 billion. The sale of T‑Mobile Netherlands as of March 31, 2022 reduced the carrying amount by EUR 4.7 billion, and the sale of the 50 % stake in GlasfaserPlus on February 28, 2022 by EUR 0.1 billion. By contrast, the reclassification of the assets of the GD tower companies increased the carrying amount by EUR 4.1 billion, and those of the wireline business in the United States operating segment by EUR 0.4 billion. The assets were classified as held for sale as of September 30, 2022 on account of the sales agreements concluded.

For further information on these corporate transactions and others, please refer to the section “Group organization, strategy, and management.”

Other assets increased by EUR 2.2 billion to EUR 14.1 billion, EUR 0.9 billion of which was due to the increase in the carrying amount of investments accounted for using the equity method, essentially as a result of the sale of the 50 % stake in GlasfaserPlus. Following the loss of control from an accounting perspective as a result of the transaction, GlasfaserPlus was deconsolidated as of February 28, 2022. Since this date, the remaining 50 % of the shares in the joint venture have been included in the consolidated financial statements as an investment accounted for using the equity method. The carrying amount of the investment amounted to EUR 1.0 billion as of September 30, 2022. In addition, DIV II was deconsolidated on August 2, 2022 as a result of the admission of new investors and the associated loss of control over the entity. Since then, the stake retained by the Group of 41.25 % has been included in the consolidated financial statements as an associate using the equity method. The carrying amount of the investment amounted to EUR 0.3 billion as of September 30, 2022. It was reduced by the disposal of 37.65 % of the shares in Cellnex Netherlands in the amount of EUR 0.4 billion as a result of the deconsolidation of DIV II. Capitalized contract costs and other assets increased by EUR 0.6 billion and EUR 0.4 billion, respectively, due in part to exchange rate effects. Inventories increased by EUR 0.3 billion, mainly due to higher inventories of high-priced mobile terminal equipment in the Germany operating segment, partly as a preventive measure in connection with the prevailing supply chain uncertainty. Exchange rate effects, mainly from the translation from U.S. dollars into euros, also increased the carrying amount. Reduced inventories of high-priced terminal equipment in the United States operating segment due to marketing campaigns as well as to the now largely completed migration of Sprint customers to the T-Mobile US network had an offsetting effect.

On the liabilities and shareholders’ equity side, current and non-current financial liabilities increased by EUR 10.9 billion compared with the end of 2021 to a total of EUR 122.4 billion. The carrying amount of bonds and other securitized liabilities increased by EUR 7.3 billion. Exchange rate effects, especially from the translation of U.S. dollars into euros, increased the carrying amount of bonds and other securitized liabilities by EUR 11.0 billion. The carrying amount was also increased by the senior notes issued in the reporting period by T‑Mobile US with a total value of USD 3.0 billion (EUR 3.0 billion). Repayments by T‑Mobile US of a bond with a volume of USD 0.5 billion (EUR 0.5 billion) and in the Group of EUR bonds with a volume of EUR 1.7 billion and a GBP bond with a volume of GBP 0.7 billion (EUR 0.8 billion) reduced the carrying amount. In addition, the carrying amount of bonds and other securitized liabilities decreased by EUR 3.4 billion in connection with measurement effects from derivatives with a hedging relationship, the offsetting entry for which is posted under bonds and other securitized liabilities. The carrying amount of other interest-bearing liabilities increased by EUR 0.9 billion compared with December 31, 2021 to EUR 8.7 billion. The modification of the arrangements between T‑Mobile US and Crown Castle regarding cell sites increased the carrying amount by EUR 0.8 billion. In addition, liabilities recognized by T‑Mobile US for future payments for IP transit services in connection with the agreement on the sale of the wireline business increased the carrying amount by EUR 0.6 billion. In connection with cash collateral received for derivative financial instruments, the carrying amount of other interest-bearing liabilities decreased by EUR 0.6 billion. Negative measurement effects of derivatives with a hedging relationship increased the carrying amount, mainly due to the increase in negative fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The carrying amount was reduced by positive measurement effects from a forward transaction to hedge the price of acquiring T‑Mobile US shares in the future.

Current and non-current lease liabilities increased by EUR 9.7 billion to EUR 42.8 billion compared with December 31, 2021. This increase primarily relates to the modification of the arrangements between T‑Mobile US and Crown Castle, which resulted in an increase in the carrying amounts of lease liabilities of EUR 6.6 billion. In addition, the agreement on the sale of 51.0 % of the shares in the GD tower companies triggered a remeasurement of the lease liabilities, which increased by EUR 0.5 billion accordingly. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised lease liabilities by EUR 5.6 billion. The reclassification of lease liabilities to liabilities directly associated with non-current assets and disposal groups held for sale reduced the carrying amount by EUR 2.3 billion. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. The carrying amount was further reduced, in part in connection with the decommissioning of former Sprint cell sites and the closure of some former Sprint shops in the United States operating segment.

Trade and other payables increased by EUR 1.1 billion to EUR 11.5 billion, due in particular to higher liabilities in the United States, Systems Solutions, and Germany operating segments. In the United States operating segment, the increase was mainly attributable to exchange rate effects. Liabilities in the segment also increased in connection with the acquisition of property, plant and equipment and tangible assets. In the Europe operating segment, liabilities declined slightly. The reclassification to liabilities directly associated with non-current assets and disposal groups held for sale also reduced the carrying amount. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States.

Provisions for pensions and other employee benefits decreased by EUR 1.9 billion compared with December 31, 2021 to EUR 4.3 billion, mainly due to interest rate adjustments. The development of the fair values of plan assets had an offsetting effect. Overall, the remeasurement of defined benefit plans resulted in an actuarial gain of EUR 1.8 billion.

Current and non-current other provisions decreased by EUR 1.6 billion compared with the end of 2021 to EUR 7.9 billion. Other provisions for personnel costs decreased by EUR 0.9 billion, mainly in connection with the performance-based remuneration components for the prior year paid out to employees in the reporting year and a decline in the provision recognized for the Civil Health Insurance Fund (Postbeamtenkrankenkasse – PBeaKK). This is due to a significant increase in the interest rate level. The provisions for restoration obligations decreased by EUR 1.0 billion in connection with reclassifications to liabilities directly associated with non-current assets and disposal groups held for sale, in particular in connection with the agreement on the sale of the GD tower companies. Furthermore, this resulted from the increase in the interest rate level. By contrast, the provisions for litigation risks increased by a net amount of EUR 0.2 billion, mainly in connection with the proceedings pending in consequence of the cyberattack on T‑Mobile US. Exchange rate effects, in particular from the translation of U.S. dollars into euros, also contributed to the increase.

Liabilities directly associated with non-current assets and disposal groups held for sale increased by EUR 2.0 billion against December 31, 2021 to EUR 3.4 billion. The sale of T‑Mobile Netherlands as of March 31, 2022 reduced the carrying amount by EUR 1.4 billion. The reclassification of the liabilities of the GD tower companies (EUR 3.0 billion) and of the wireline business in the United States operating segment (EUR 0.4 billion) had an increasing effect on the carrying amount.

Other liabilities increased by EUR 1.5 billion compared to December 31, 2021 to EUR 9.8 billion, mainly due to an increase in other liabilities of EUR 0.8 billion, driven by an increase in liabilities from other taxes of EUR 0.7 billion. In addition, income tax liabilities and contract liabilities each increased by EUR 0.3 billion.

Shareholders’ equity increased from EUR 81.5 billion as of December 31, 2021 to EUR 94.5 billion. Profit of EUR 7.7 billion, other comprehensive income of EUR 12.4 billion, and capital increases from share-based payments of EUR 0.5 billion contributed to this increase. Shareholders’ equity was reduced in connection with dividend payments for the 2021 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.2 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion. Transactions with owners also reduced the carrying amount by EUR 3.6 billion, mainly due to the acquisition of additional T‑Mobile US shares to increase the stake and due to the share buy-back program underway at T‑Mobile US. Changes in the composition of the Group resulting from the sale of T‑Mobile Netherlands in the Group Development operating segment reduced the carrying amount of shareholders’ equity by EUR 0.6 billion.

For further information on the statement of financial position, please refer to the section “Selected notes to the consolidated statement of financial position” in the interim consolidated financial statements.

Calculation of net debt

millions of €

 

 

 

 

 

 

Sept. 30, 2022a

Dec. 31,
2021b

Change

Change
%

Sept. 30, 2021b

Bonds and other securitized liabilities

101,181

93,857

7,324

7.8

91,645

Liabilities to banks

3,989

4,003

(14)

(0.3)

3,896

Other financial liabilities

17,216

13,730

3,486

25.4

13,380

Lease liabilities

45,111

33,767

11,344

33.6

33,458

Financial liabilities and lease liabilities

167,497

145,357

22,140

15.2

142,379

Accrued interest

(1,250)

(1,012)

(238)

(23.5)

(1,159)

Other

(972)

(855)

(117)

(13.7)

(798)

Gross debt

165,275

143,490

21,785

15.2

140,422

Cash and cash equivalents

8,497

7,617

880

11.6

6,337

Derivative financial assets

3,460

2,762

698

25.3

2,823

Other financial assets

1,611

969

642

66.3

887

Net debt

151,707

132,142

19,565

14.8

130,375

a

Including the net debt of the discontinued operation GD Towers and of the wireline business at T‑Mobile US included under liabilities directly associated with non-current assets and disposal groups held for sale as of September 30, 2022.

b

Including the net debt of T‑Mobile Netherlands included under liabilities directly associated with non-current assets and disposal groups held for sale in 2021.

Changes in net debt

millions of €

Changes in net debt (bar chart)

The modification of the arrangements between T‑Mobile US and Crown Castle resulted in an overall increase in net debt of EUR 7.4 billion, due to an increase in right-of-use assets and in lease liabilities of EUR 6.6 billion each and an increase in property, plant and equipment and in other financial liabilities of EUR 0.8 billion each. Additions to lease liabilities and to right-of-use assets increased by EUR 0.5 billion in each case in connection with the agreement on the sale of 51.0 % of the shares in the GD tower companies and an associated remeasurement of the lease liabilities.

Calculation of free cash flow AL

millions of €

 

 

 

 

 

 

 

 

 

 

Q1-Q3 2022

Q1-Q3 2021

Change
%

Q1 2022

Q2 2022

Q3 2022

Q3 2021

Change
%

FY
2021

Net cash from operating activities

27,302

25,620

6.6

9,358

8,621

9,323

9,233

1.0

32,171

Cash outflows for investments in intangible assets

(6,204)

(11,519)

46.1

(3,551)

(1,128)

(1,525)

(1,431)

(6.6)

(12,749)

Cash outflows for investments in property, plant and equipment

(12,004)

(9,740)

(23.2)

(3,621)

(3,958)

(4,425)

(3,236)

(36.7)

(13,616)

Cash capex

(18,208)

(21,260)

14.4

(7,173)

(5,086)

(5,949)

(4,666)

(27.5)

(26,366)

Spectrum investment

2,984

8,328

(64.2)

2,514

102

367

304

20.7

8,388

Cash capex (before spectrum investment)

(15,224)

(12,932)

(17.7)

(4,658)

(4,984)

(5,582)

(4,362)

(28.0)

(17,978)

Proceeds from the disposal of intangible assets (excluding goodwill) and property, plant and equipment

243

130

86.9

50

34

158

25

n.a.

139

Free cash flow
(before dividend payments and spectrum investment)

12,320

12,818

(3.9)

4,750

3,671

3,899

4,895

(20.3)

14,332

Principal portion of repayment of lease liabilitiesa

(2,876)

(4,528)

36.5

(969)

(912)

(995)

(1,955)

49.1

(5,521)

Free cash flow AL
(before dividend payments and spectrum investment)

9,444

8,290

13.9

3,781

2,759

2,904

2,940

(1.2)

8,810

a

Excluding finance leases at T‑Mobile US.

Free cash flow AL (before dividend payments and spectrum investment) increased from EUR 8.3 billion in the prior-year period to EUR 9.4 billion. The following effects impacted on this development:

Net cash from operating activities increased by EUR 1.7 billion to EUR 27.3 billion on the back of the good business performance. Higher cash outflows in connection with the integration of Sprint in the United States and an increase of EUR 0.2 billion in net interest payments in particular had a decreasing effect.

Cash capex (before spectrum investment) increased from EUR 12.9 billion to EUR 15.2 billion. Cash capex in the United States operating segment increased by EUR 2.2 billion to EUR 10.0 billion, mainly as a result of the ongoing build-out of the 5G network and exchange rate effects. In the Germany operating segment, capital expenditure totaled around EUR 2.9 billion in the first nine months of 2022, EUR 0.2 billion more than in the prior-year period, with much of this figure going towards the build-out of our fiber-optic and 5G networks. In the Europe operating segment, our investments remained stable at EUR 1.2 billion. 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. Cash capex in the Group Development operating segment totaled EUR 0.2 billion and was down EUR 0.2 billion year-on-year. The reduction is mainly due to the sale of T‑Mobile Netherlands and lower build-out investments made by GD Towers compared with the prior-year period. Capital expenditure in the Systems Solutions operating segment increased from EUR 0.1 billion to EUR 0.2 billion. This increase was driven by the backlog of investments from the prior year owing to hardware supply shortages in 2021 and by investments to expand our sovereign cloud landscape.

Lower cash outflows for the decrease in the principal portion of repayment of lease liabilities were due in particular to leases in the United States operating segment.

For further information on the statement of cash flows, please refer to the section “Notes to the consolidated statement of cash flows” in the interim consolidated financial statements.

5G
New communications standard (launched from 2020), which offers data rates in the gigabit range, converges fixed-network and mobile communications, and supports the Internet of Things.
Glossary
IP – Internet Protocol
Non-proprietary transport protocol in Layer 3 of the OSI reference model for inter-network communications.
Glossary
Wholesale
Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing.
Glossary