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.

The balance sheet total increased by EUR 2.0 billion year-on-year to EUR 124.1 billion.

The development of total assets was attributable in particular to the increase of EUR 16.6 billion in noncurrent assets and the increase of EUR 1.4 billion in cash and cash equivalents. By contrast, receivables decreased by EUR 15.6 billion and other assets by EUR 0.3 billion.

The growth in financial assets of EUR 16.6 billion year-on-year resulted in particular from long-term loans granted to Telekom Deutschland GmbH, Bonn, in the amount of EUR 12.0 billion, and to DFMG Holding GmbH, Bonn, in the amount of EUR 5.7 billion, as part of an intragroup restructuring of receivables from cash management to noncurrent loan receivables. Financial assets also increased as a result of the write-ups on the stake in Hellenic Telecommunications Organization S.A. (OTE), Athens, and in Ströer SE & Co. KGaA, Cologne, totaling EUR 1.0 billion, as well as through capital increases at subsidiaries in the amount of EUR 0.1 billion. Repayments of loans to subsidiaries (including interest) had a total offsetting effect of EUR 2.5 billion on financial assets; these mainly related to Telekom Deutschland GmbH, Bonn, in the amount of EUR 1.6 billion, T‑Mobile USA, Inc., Bellevue, in the amount of EUR 0.5 billion, and Magyar Telekom Telecommunications Public Limited Company, Budapest, in the amount of EUR 0.3 billion.

The decrease in receivables of EUR 15.6 billion year-on-year was primarily due to the EUR 15.8 billion decrease in receivables from cash management, mainly resulting from the intragroup restructuring of receivables to noncurrent loans.

The EUR 0.3 billion decrease in other assets was largely due to lower receivables from collateral, attributable in particular to regular fluctuation in market values resulting from changes in exchange rates, interest rates, and maturities of derivative financial instruments.

The development of total shareholders’ equity and liabilities was mainly influenced by the increase of EUR 4.2 billion in debt. By contrast, shareholders’ equity decreased by EUR 1.6 billion and other liabilities by EUR 1.1 billion.

The EUR 1.6 billion decline in shareholders’ equity was primarily attributable to the dividend payment of EUR 3.3 billion for the previous year. Income after taxes for the 2019 financial year of EUR 1.7 billion had an offsetting effect on shareholders’ equity.

Debt increased by EUR 4.2 billion, primarily as a result of the issue of new bonds with a volume of EUR 5.1 billion. In particular, the repayment of commercial paper had an offsetting effect.

Other liabilities decreased year-on-year, due mainly to loan repayments to Deutsche Telekom International Finance B.V., Maastricht, in the amount of EUR 2.1 billion and the payment of EUR 0.2 billion in the reporting year of the second tranche from the settlement of the Toll Collect arbitration proceedings. By contrast, liabilities from collateral increased by EUR 0.9 billion and liabilities from cash management to subsidiaries rose by EUR 0.6 billion. The increase in liabilities from collateral is attributable to regular fluctuation in market values resulting from changes in exchange rates, interest rates, and maturities of derivative financial instruments.

Net cash provided by operating activities increased year-on-year by EUR 13.4 billion to EUR 17.8 billion. The increase was mainly due to a EUR 16.6 billion higher reduction in receivables from cash management compared with the previous year, mainly due to the intragroup restructuring of receivables to noncurrent loan receivables. The decrease in income after taxes, which was adjusted for non-cash write-ups on financial assets, had an offsetting effect.

Net cash used for/provided by investing activities in the reporting year was mainly impacted by medium- and long-term investments at subsidiaries of EUR 17.9 billion, largely due to the restructuring of receivables from cash management – from Telekom Deutschland GmbH, Bonn, and from DFMG Holding GmbH, Bonn – to noncurrent loans. Primarily repayments of medium- and long-term investments by subsidiaries in the amount of EUR 1.8 billion, mainly by Telekom Deutschland GmbH, Bonn, and T‑Mobile USA, Inc., Bellevue, had an offsetting effect. Net cash used for/provided by investing activities also included interest received of EUR 1.5 billion. In the previous year, net cash provided by investing activities amounting to EUR 1.9 billion was mainly the result of a capital repayment of EUR 1.3 billion, cash inflows from intragroup disposals in the amount of EUR 1.0 billion, the repayment of a current intragroup investment of EUR 0.5 billion, and interest received of EUR 0.9 billion. The main offsetting effect was from a capital increase at a subsidiary in the amount of EUR 1.8 billion.

Net cash used for financing activities decreased by EUR 4.0 billion year-on-year to EUR 1.8 billion. Net cash used for financing activities in the reporting year resulted primarily from net repayments of current financial liabilities of EUR 3.2 billion, the payment of the dividend for the 2018 financial year of EUR 3.3 billion, and interest paid of EUR 1.2 billion. The net issuance of medium- and long-term financial liabilities of EUR 5.9 billion had an offsetting effect. The year-on-year increase is attributable in particular to net repayments of current financial liabilities, which decreased by EUR 4.2 billion.

In all, this resulted in an increase in cash and cash equivalents of EUR 1,396 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.