Financial position of the Group

Total assets amounted to EUR 164.2 billion as of June 30, 2019, up by EUR 18.8 billion against December 31, 2018. The recognition of right-of-use assets and current and non-current lease liabilities resulting from the mandatory first-time application of the IFRS 16 “Leases” accounting standard had a significant impact.

The total carrying amounts of intangible assets and property, plant and equipment were EUR 0.2 billion lower year-on-year. Capital expenditures in the amount of EUR 8.0 billion had an increasing effect. In our United States operating segment, investments in intangible assets related primarily to the acquisition of FCC mobile spectrum licenses totaling EUR 0.9 billion. In the Europe operating segment, 5G licenses acquired in Austria increased the carrying amount by EUR 0.1 billion. Investments primarily to upgrade and build out the network in our United States operating segment and in connection with the broadband/fiber-optic rollout, the IP transformation, and mobile infrastructure in the Germany and Europe operating segments increased the carrying amount of property, plant and equipment. Effects of changes in the composition of the Group totaling EUR 1.0 billion, mainly due to the acquisition of Tele2 Netherlands in the Group Development operating segment, and positive exchange rate effects totaling EUR 0.4 billion, particularly from the translation of U.S. dollars into euros, also increased the carrying amount. Depreciation of property, plant and equipment and amortization of intangible assets reduced the carrying amount by EUR 6.8 billion and disposals by EUR 0.2 billion. Rights to use lease assets were recognized in the amount of EUR 17.5 billion as of June 30, 2019; until December 31, 2018, these had been reported in the amount of EUR 2.5 billion under property, plant and equipment as assets from finance leases. Trade and other receivables decreased slightly from the 2018 year-end level by EUR 0.1 billion. Other assets increased primarily on the back of the rise in current and non-current other financial assets, which was mainly due to positive measurement effects from the remeasurement of embedded derivatives at T-Mobile US. Cash and cash equivalents also increased.

On the liabilities side, current and non-current financial liabilities increased by EUR 1.9 billion compared with the end of 2018. This was largely attributable to the euro bonds issued by Deutsche Telekom in the first half of 2019 with a total volume of EUR 1.8 billion and pound sterling bonds with a total volume of GBP 0.4 billion (EUR 0.5 billion). In addition, a loan of EUR 0.5 billion was taken out with the European Investment Bank in addition to a promissory note in the amount of EUR 0.3 billion. This was offset by changes in short-term borrowing amounting to EUR 0.6 billion (net) and in commercial paper amounting to EUR 0.5 billion (net), as well as the scheduled repayment of promissory notes in the amount of EUR 0.2 billion. The transition to IFRS 16 resulted in finance lease liabilities being reclassified from financial liabilities to lease liabilities. Based on the carrying amounts as of December 31, 2018, this reclassification reduced financial liabilities by EUR 2.5 billion. The current and non-current lease liabilities to be recognized since the first-time application of IFRS 16 amounted to EUR 19.3 billion as of June 30, 2019. Trade and other payables decreased by EUR 1.1 billion due to the reduction in the level of liabilities, mainly in the Europe, Germany, and United States operating segments. Provisions for pensions and other employee benefits increased by EUR 1.1 billion compared with December 31, 2018 due, in part, to interest rate adjustments and the decline in the value of the BT shares transferred to plan assets. Other liabilities were reduced in particular by liabilities of EUR 2.2 billion from straight-line leases, mainly for cell sites, in the United States operating segment that were no longer required to be reported under IFRS 16. In addition, current and non-current other provisions decreased by EUR 0.5 billion, mainly due to the performance-related compensation components for the prior year paid to employees in the first half of 2019.

Shareholders’ equity decreased by EUR 0.7 billion as of December 31, 2018 to EUR 42.7 billion, mainly due to the dividend payments for the 2018 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.3 billion and to non-controlling interests in the amount of EUR 0.2 billion. The carrying amount was also reduced by EUR 0.8 billion (after taxes) due to the remeasurement of defined benefit plans and by a total of EUR 0.7 billion due to losses from hedging instruments, mainly in connection with forward-payer swaps concluded for highly probable future borrowings at T-Mobile US. By contrast, the profit of EUR 2.7 billion increased shareholders’ equity as did the transition to IFRS 16. The cumulative effect of this was an increase of EUR 0.3 billion in retained earnings (including shares attributable to non-controlling interests) recognized directly in equity as of January 1, 2019. Currency translation effects recognized directly in equity and capital increases from share-based payments each increased shareholders’ equity by EUR 0.2 billion. The acquisition of Tele2 Netherlands in the Group Development operating segment resulted in transactions with owners which increased shareholders’ equity by EUR 0.5 billion, and effects of EUR 0.2 billion from changes in the composition of the Group.

For further information on the statement of financial position, please refer to the interim consolidated financial statements.

Changes in net debt

millions of €

Other effects of EUR 1.3 billion include, among other factors, effects from the measurement of financial instruments, financing options under which the payments for trade payables become due at a later point in time by involving banks in the process, and the recognition of liabilities for the acquisition of broadcasting rights. For more information on net debt, please refer to the disclosures on the reconciliation of alternative performance measures in the section “Additional information.”

Free cash flow AL. Free cash flow AL in the Group before dividend payments and spectrum investment increased by EUR 0.3 billion year-on-year to EUR 3.1 billion.

Net cash from operating activities increased by EUR 2.9 billion year-on-year to EUR 11.6 billion. Due to the first-time application of the IFRS 16 accounting standard, the principal repayment portion of lease payments is presented in net cash used in/from financing activities. These payments totaling EUR 1.6 billion were taken into account in the calculation of free cash flow AL. The strong performance of our operating segments, in particular the United States, significantly increased net cash from operating activities. As in the prior-year period, factoring agreements – especially in the Systems Solutions operating segment – resulted in positive effects of EUR 0.3 billion on net cash from operating activities. In addition, in the prior-year period, dividends received in the amount of EUR 0.2 billion had had an increasing effect. Net cash from operating activities was also reduced by a EUR 0.1 billion increase in net interest payments and a EUR 0.1 billion increase in tax payments.

Of the EUR 0.9 billion year-on-year increase in cash capex (before spectrum investment), EUR 0.7 billion is attributable to the United States operating segment, mainly due to the accelerated infrastructure build-out for the 600 MHz spectrum, laying the groundwork for 5G. Other capital expenditures were focused primarily on the Germany and Europe operating segments and went toward the build-out and upgrade of our networks.

For further information on the statement of cash flows, please refer to the interim consolidated financial statements.