Selected notes to the consolidated income statement

Net revenue

Net revenue breaks down into the following revenue categories:

millions of €

 

Q1–Q3 2018

Q1–Q3 2017

a

Revenue from the sale of goods and merchandise includes interest income of EUR 0.2 billion in the reporting period, calculated using the effective interest method. This income is primarily attributable to accrued interest on receivables in connection with terminal equipment sold under installment plans in the United States operating segment.

Revenue from the rendering of services

46,070

46,854

Germany

13,188

13,746

United States

20,614

20,525

Europe

7,349

7,414

Systems Solutions

3,932

4,023

Group Development

942

1,052

Group Headquarters & Group Services

44

94

Revenue from the sale of goods and merchandisea

8,373

7,829

Germany

1,529

1,177

United States

5,441

5,505

Europe

1,104

868

Systems Solutions

83

61

Group Development

215

200

Group Headquarters & Group Services

0

17

Revenue from the use of entity assets by others

952

1,105

Germany

359

320

United States

448

653

Europe

36

34

Systems Solutions

17

(15)

Group Development

Group Headquarters & Group Services

92

113

NET REVENUE

55,395

55,787

For details of 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 2018

Q1–Q3 2017

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

8

1,662

Of which: IFRS 5

2

Income from the disposal of non-current assets

202

150

Income from reimbursements

124

149

Income from insurance compensation

313

46

Income from ancillary services

21

24

Miscellaneous other operating income

409

1,300

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

774

 

1,077

3,331

Income from the disposal of non-current assets was primarily attributable to the disposal of real estate previously recognized as non-current assets and disposal groups held for sale. Income from insurance compensation mainly comprised compensation payments received by T-Mobile US in the first three quarters of 2018 for damage caused by hurricanes in 2017. Miscellaneous other operating income decreased by EUR 0.9 billion year-on-year. The main items posted in the comparable period last year were income of EUR 0.5 billion from the divestiture of Strato AG, income of EUR 0.2 billion from a payment received in connection with the settlement agreement concluded with BT in July 2017, and income of EUR 0.2 billion from the sale of the remaining shares in Scout24 AG, which had been accounted for using the equity method.

Other operating Expenses

millions of €

 

Q1–Q3 2018

Q1–Q3 2017

a

Due to the transition to IFRS 9, changes were made both to the method of measuring impairment losses on receivables and to their disclosure in the financial statements. A comparison with the prior period is possible to a limited extent only.

Impairment losses on financial assetsa

(307)

n. a.

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

(45)

n. a.

Other

(1,767)

(2,443)

Legal and audit fees

(217)

(167)

Losses from asset disposals

(117)

(133)

Income (losses) from the measurement of factoring receivables

(92)

(89)

Income (losses) from the measurement of receivablesa

n. a.

(449)

Other taxes

(364)

(334)

Cash and guarantee transaction costs

(247)

(242)

Insurance expenses

(69)

(66)

Miscellaneous other operating expenses

(661)

(963)

 

(2,119)

(2,443)

Miscellaneous other operating expenses include a large number of individual items accounting for marginal amounts.

Depreciation, amortization and impairment losses

At EUR 9.6 billion, depreciation, amortization and impairment losses were EUR 0.9 billion lower than in the prior-year period. This decrease was attributable in particular to the impairment of goodwill in the amount of EUR 1.2 billion that was recognized in the Systems Solutions operating segment in the prior-year period. By contrast, amortization of intangible assets and depreciation of property, plant and equipment were actually EUR 0.3 billion higher in the first three quarters of 2018 than in the prior-year period, an increase primarily related to the build-out of the 4G/LTE network in the United States operating segment and to capital expenditures in the Germany operating segment.

Profit/loss from financial activities

In the first three quarters of 2018, the loss from financial activities decreased by EUR 1.6 billion year-on-year to EUR 2.1 billion. This was attributable in particular to the decrease of EUR 1.8 billion in other financial expense to EUR 0.2 billion. The figure for the prior-year period was mainly impacted by the EUR 1.3 billion impairment of the financial stake in BT recognized in profit or loss. In March 2018, the financial stake in BT was transferred to Deutsche Telekom Trust e.V., where it will be used as plan assets to cover existing pension obligations. As a consequence of the transition to IFRS 9 as of January 1, 2018, changes in the value of the financial stake prior to the transfer date were no longer recognized in the income statement as profit/loss from financial activities, but in other comprehensive income. For more information, please refer to the disclosures on financial instruments. In the first three quarters of 2018, negative effects from the exercise and remeasurement of embedded derivatives at T-Mobile US increased the loss from financial activities by EUR 0.2 billion. In the prior-year period, this negative effect on the loss from financial activities totaled EUR 0.5 billion.

Finance costs of EUR 1.4 billion, which were EUR 0.3 billion lower than a year earlier, also had a positive effect on the loss from financial activities. This was essentially due to the fact that T-Mobile US has increasingly been financed internally since 2017. The Consent Fee of EUR 0.1 billion paid (or still payable) to lending banks in connection with the probable increase in the admissible amount of collateralized financing instruments at T-Mobile US as a consequence of the agreed business combination with Sprint had an increasing effect on finance costs.

The share of profit/loss of associates and joint ventures accounted for using the equity method decreased to EUR -0.5 billion. This was mainly attributable to the settlement agreement reached to end the Toll Collect arbitration proceedings, which had a negative effect of EUR 0.6 billion. The associated payments to the Federal Republic of Germany will be made on behalf of Toll Collect GbR in three tranches over the period until 2020. For further information, please refer to the section “Changes in the composition of the Group, transactions with owners, and other transactions.” By contrast, the profit distribution resolved in March 2018 by the shareholders of the Toll Collect GmbH joint venture – EUR 0.1 billion of which is attributable to Deutsche Telekom – had a positive effect.

Income taxes

In the first nine months of 2018, a tax expense of EUR 1.4 billion was recognized. The effective tax rate of 28.8 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 1.9 billion was recognized on marginally higher pre-tax income. The higher effective tax rate was attributable in particular to two non-tax-deductible items: the impairment of goodwill in the Systems Solutions operating segment and the impairment of the financial stake in BT recognized in profit and loss. The recognition of deferred tax assets of EUR 0.2 billion on federal loss carryforwards in the United States and tax reductions for a comparable amount for previous years in Germany had a contrary effect on the effective tax rate.