Financial position of Deutsche Telekom AG

In addition to shareholders’ equity, our financial position is mainly determined by noncurrent assets and receivables from and payables to Group companies. Loans recognized under financial assets as well as receivables from and payables to subsidiaries primarily resulted from financing relationships between Deutsche Telekom AG and its subsidiaries, whereby financing on the external capital market is generally handled by Deutsche Telekom AG International Finance B.V., Maastricht, and passed on to Deutsche Telekom AG.

The balance sheet total increased by EUR 0.8 billion year-on-year to EUR 122.2 billion.

The development of total assets was primarily attributable to the increase of EUR 0.3 billion in noncurrent assets, of EUR 0.3 billion in receivables, and of EUR 0.5 billion in cash and cash equivalents. By contrast, prepaid expenses and deferred charges decreased by EUR 0.2 billion.

The growth in financial assets of EUR 0.6 billion year-on-year was mainly due to the capital increase at Deutsche Telekom Europe Holding GmbH, Bonn, of EUR 1.8 billion, and to write-ups on interests in subsidiaries of EUR 0.5 billion. Financial assets also increased as a result of the purchase of shares in Hellenic Telecommunications Organization S.A. (OTE), Athens, of EUR 0.3 billion, and due to loans to T-Mobile USA, Inc., Bellevue, and to Telekom Deutschland GmbH, Bonn, of EUR 0.1 billion in each case. The equity repayment by CTA Holding GmbH, Bonn, of EUR 1.3 billion and the intragroup sale of shares in CTA Holding GmbH, Bonn, of EUR 1.0 billion had an offsetting effect.

The decrease of EUR 0.3 billion in property, plant and equipment was primarily due to the depreciation of real estate.

The increase of EUR 0.3 billion in receivables was mainly due to an increase of EUR 0.8 billion in receivables from cash management, offset by a decline of EUR 0.5 billion in financial receivables from subsidiaries.

The decline in prepaid expenses and deferred charges was mainly attributable to a decline of EUR 0.1 billion in deferred personnel costs.

The development of total shareholders’ equity and liabilities was mainly influenced by the increase of EUR 1.1 billion in shareholders’ equity, and of EUR 0.6 billion in accruals for pensions and similar obligations. By contrast, other liabilities decreased by EUR 1.2 billion.

The increase in shareholders’ equity was mainly due to income after taxes for the financial year of EUR 4.2 billion and its effect on unappropriated net income. The EUR 3.1 billion dividend payment for the previous year had an offsetting effect.

The increase in accruals for pensions and similar obligations is mainly attributable to an effect of EUR 0.3 billion due to a lower notional interest rate for the calculation of pension accruals compared with the prior year, and an effect of EUR 0.2 billion due to the refund of plan assets.

Other liabilities declined year-on-year in particular as a result of loan repayments to CTA Holding GmbH, Bonn, of EUR 5.4 billion. Loans of EUR 4.0 billion taken out from Deutsche Telekom International Finance B.V., Maastricht, had an offsetting effect.

Net cash provided by for operating activities increased year-on-year by EUR 1.4 billion, resulting in net cash provided by operating activities of EUR 4.4 billion. This increase was due mainly to the EUR 2.8 billion lower net increase in receivables from cash management compared with the previous year, and a EUR 0.5 billion smaller decrease in liabilities from the early retirement program for civil servants compared with the previous year. The decrease in income after taxes, which was adjusted for non-cash write-downs and write-ups on financial assets, had an offsetting effect.

In contrast to the prior year, when net cash used for investing activities resulted in particular from medium- and long-term investments at subsidiaries of EUR 10.8 billion, net cash provided by investing activities in the reporting year was largely influenced by an equity repayment by CTA Holding GmbH, Bonn, of EUR 1.3 billion, cash inflows from the intragroup sale of shares in CTA Holding GmbH, Bonn, of EUR 1.0 billion, and the repayment of a short-term investment by T-Mobile Netherlands B.V., The Hague, to Deutsche Telekom AG of EUR 0.5 billion. Net cash provided by investing activities also included interest received of EUR 0.9 billion. A capital increase at Deutsche Telekom Europe Holding GmbH, Bonn, of EUR 1.8 billion in connection with the takeover of all shares in UPC Austria GmbH, Vienna, by T-Mobile Austria Holding GmbH, Vienna, in particular had an offsetting effect.

Net cash used for financing activities increased by EUR 15.7 billion year-on-year to EUR 5.8 billion. In contrast to the prior year, when net cash provided by financing activities was impacted by the net issuance of liabilities of EUR 12.5 billion, in the reporting year, it was mainly the result of net repayments of current financial liabilities of EUR 7.4 billion, interest payments of EUR 1.1 billion, and the payment of the dividend for the 2017 financial year of EUR 3.1 billion. The net issuance of medium- and long-term liabilities of EUR 5.8 billion had an offsetting effect.

In all, this resulted in an increase in cash and cash equivalents of EUR 523 million in the reporting year.

Risk management in hedge accounting

We use derivatives to hedge interest rate and currency exposures; i.e., exclusively for hedging purposes, not for speculative gains. In the process, we monitor the effectiveness of the hedges on a regular basis.