12 Financial liabilities

Current and non-current financial liabilities increased by EUR 4.7 billion to EUR 62.3 billion compared with the prior year.

T-Mobile US placed fixed-interest U.S. dollar bonds with a volume of USD 2.5 billion (EUR 2.0 billion) with institutional investors: an 8-year bond with a volume of USD 1.0 billion and a 10-year bond with a volume of USD 1.5 billion. In addition, Deutsche Telekom International Finance B.V. issued euro bonds with a total volume of EUR 3.4 billion, U.S. dollar bonds with a total volume of USD 1.75 billion (EUR 1.5 billion), and pound sterling bonds with a total volume of GBP 0.3 billion (EUR 0.3 billion). Further, OTE PLC issued a 4-year fixed-interest euro bond with a volume of EUR 0.4 billion.

A contrary effect in the reporting year was generated by T-Mobile US’ premature repayment of senior notes in the amount of USD 1.0 billion (EUR 0.8 billion) with an interest rate of 6.125 percent, in the amount of USD 1.75 billion (EUR 1.4 billion) with an interest rate of 6.625 percent, and in the amount of USD 0.6 billion (EUR 0.5 billion) with an interest rate of 6.836 percent.

Further, euro bonds totaling EUR 1.1 billion and U.S. dollar bonds totaling USD 0.85 billion (EUR 0.7 billion) were repaid at Group level in the reporting year. The net change of EUR 0.6 billion in commercial paper also decreased the carrying amount of the financial liabilities.

The increase of EUR 0.7 billion in liabilities to banks compared with the end of 2017 was mainly due to the positive net change of EUR 0.6 billion in the balance of short-term borrowings in the reporting year and to the loan issued by the European Investment Bank in January 2018, with a volume of EUR 0.2 billion and a term of 7 years.

The settlement agreed in the Toll Collect arbitration proceedings increased financial liabilities by EUR 0.6 billion. Payment of the first tranche of EUR 0.2 billion in the reporting year reduced financial liabilities.

For further information, please refer to the section “Changes in the composition of the Group and other transactions”.

A year-on-year increase in the carrying amount of the financial liabilities of around EUR 0.6 billion relates to exchange rate effects in the United States operating segment.

The initial recognition and measurement of forward-payer swaps with a total volume of USD 9.6 million in the United States operating segment gave rise to a remeasurement loss recognized directly in equity of EUR 0.4 billion.

Deutsche Telekom has established ongoing liquidity management. To ensure the Group’s and Deutsche Telekom AG’s solvency and financial flexibility at all times, Deutsche Telekom maintains a liquidity reserve in the form of credit lines and cash. This liquidity reserve is to cover the capital market maturities of the next 24 months at any time.

In addition to the reported liabilities to banks, Deutsche Telekom had standardized bilateral credit agreements with 22 banks for a total of EUR 12.9 billion as of December 31, 2018. As of December 31, 2018, EUR 0.6 billion of these credit lines had been utilized. In the prior year, EUR 0.2 billion of these credit lines had been utilized. Pursuant to the credit agreements, the terms and conditions depend on Deutsche Telekom’s rating. The bilateral credit agreements have an original maturity of 36 months and can, after each period of twelve months, be extended by a further twelve months to renew the maturity of 36 months. From today’s perspective, access to the international debt capital markets is not jeopardized.

The following tables show Deutsche Telekom’s contractually agreed (undiscounted) interest payments and repayments of the non-derivative financial liabilities and the derivatives with positive and negative fair values:

All instruments held at December 31, 2018 and for which payments were already contractually agreed were included. Planning data for future, new liabilities were not included. Amounts in foreign currency were each translated at the closing rate at the reporting date. The variable interest payments arising from the financial instruments were calculated using the last interest rates fixed before December 31, 2018. Financial liabilities that can be repaid at any time are always assigned to the earliest possible time period. In accordance with § 2 (4) of the German Act on the Transformation of the Deutsche Bundespost Enterprises into the Legal Structure of Stock Corporation (Stock Corporation Transformation Act – Postumwandlungsgesetz), the Federal Republic is guarantor of all Deutsche Telekom AG’s liabilities that were already outstanding as at January 1, 1995. At December 31, 2018, this figure was a nominal EUR 1.8 billion (December 31, 2017: EUR 1.7 billion).