35 Notes to the consolidated statement of cash flows

Net cash from operating activities

Net cash from operating activities increased by EUR 5.1 billion year-on-year to EUR 23.1 billion. In the prior year, the cash outflows in connection with operating leases reduced net cash from operating activities. Due to the first-time application of IFRS 16, the principal repayment portion of lease payments is presented in net cash used in financing activities. The strong performance of the operating segments, in particular the United States, significantly increased net cash from operating activities. In the 2019 financial year, factoring agreements – especially in the Germany and Systems Solutions operating segments – resulted in negative effects of EUR 0.3 billion on net cash from operating activities. Factoring agreements had had no material effects in the prior year. Net cash from operating activities was also reduced in the reporting year by a EUR 0.5 billion increase in net interest payments and a EUR 0.1 billion increase in tax payments. In the previous year, dividends received in the amount of EUR 0.2 billion had had an increasing effect.

For further information on the first-time application of IFRS 16, please refer to the section “Initial application of standards, interpretations, and amendments in the financial year.”

Deutsche Telekom’s working capital measures are focused on improvements in the area of liabilities as well as in the management of receivables and inventories. However, they are not used for active liquidity management. The negative effect on the change in assets carried as active working capital is mainly attributable to the acquisition of mobile devices in connection with the JUMP! On Demand business model in the United States operating segment and to the expiration of a factoring agreement in the Systems Solutions operating segment. By contrast, the reduction in inventories of mobile devices in the United States and Germany operating segments had a positive effect on working capital. Liabilities carried as working capital decreased mainly as a result of the reduction in trade payables and a lower procurement volume in nearly all operating segments.

For further information on individual assets carried as working capital, please refer to Note 2 “Trade receivables” and Note 4 “Inventories.”

For further information, please refer to Note 14 “Trade and other payables.”

Cash capex increased by EUR 1.9 billion to EUR 14.4 billion. In the 2019 financial year, mobile spectrum licenses were acquired for total cash of EUR 1.2 billion. EUR 0.1 billion of this related to the United States operating segment and was primarily attributable to the purchase of FCC licenses in two auctions for the 24 GHz and 28 GHz spectrum. In the reporting year, EUR 0.1 billion was spent on the 5G licenses purchased in the Germany operating segment, for which annual installments through 2030 have been agreed. Another EUR 0.1 billion was paid for spectrum in the Europe operating segment. The prior-year figure had included EUR 0.3 billion for the acquisition of mobile spectrum licenses, predominantly for the United States operating segment. Adjusted for investments in mobile spectrum licenses, cash capex was up by EUR 0.9 billion. This increase relates almost entirely to the United States operating segment and was primarily attributable to the infrastructure build-out for the 600 MHz spectrum, which also lays the groundwork for 5G. Interest payments (including capitalized interest) of EUR 4.3 billion (2018: EUR 3.6 billion; 2017: EUR 4.0 billion) were made in the reporting period. Capitalized interest was reported within cash capex in net cash used in investing activities, together with the associated assets.

The contractual grants receivable from publicly funded projects for the broadband build-out in Germany were recognized in full as of the start of the second half of 2019. The grants received and payments made for the build-out continue to be recognized in net cash used in investing activities, however, they are not part of cash capex, because the payments made do not result in additions to property, plant and equipment. Since the payments are not made at the same point in time as the proceeds are received, the net amounts can be positive or negative in the individual periods.

Non-cash transactions in the consolidated statement of cash flows

A Deutsche Bundespost treasury note (zero-coupon bond) issued by Deutsche Telekom AG in 1990 with a nominal amount of EUR 0.2 billion fell due on December 31, 2019 and was repaid on that date by a bank using its own funds. The payment to this bank by Deutsche Telekom AG was made on the following banking day, January 2, 2020, which is why it is not shown in the consolidated statement of cash flows for the 2019 financial year. The full interest component of EUR 1.2 billion became payable on the due date. The repayment of the nominal amount will be reported under cash used in financing activities in the 2020 financial year. The interest component due will be recognized in net cash from operating activities in 2020.

In the 2019 financial year, Deutsche Telekom chose financing options totaling EUR 0.7 billion under which the payments for trade payables from operating and investing activities primarily become due at a later point in time by involving banks in the process (2018: EUR 0.2 billion). These are shown under financial liabilities in the statement of financial position. As soon as the payments have been made, they are disclosed under net cash used in/from financing activities.

In the 2019 financial year, Deutsche Telekom leased assets totaling EUR 5.5 billion, mainly technical equipment and machinery plus land and buildings. These assets are now recognized in the statement of financial position under right-of-use assets and the related liabiliteis under lease liabilities. Future repayments of the liabilities will be recognized in net cash used in/from financing activities. In the prior year, finance leases totaling EUR 1.0 billion had been concluded in accordance with the previously applicable standard IAS 17.

Consideration for the acquisition of broadcasting rights will be paid by Deutsche Telekom in accordance with the terms of the contract on the date of its conclusion or spread over the term of the contract. Financial liabilities of EUR 0.3 billion were recognized in the 2019 financial year for future consideration for acquired broadcasting rights (2018: EUR 0.3 billion). As soon as the payments have been made, they are disclosed under net cash used in/from financing activities.

In the United States operating segment, EUR 0.9 billion was recognized for mobile handsets under property, plant and equipment in the 2019 financial year (2018: EUR 0.9 billion). These relate to the JUMP! On Demand business model at T‑Mobile US, under which customers do not purchase the devices but lease them. The payments are presented under net cash from operating activities.

As part of the acquisition of 100 percent of the shares in Tele2 Netherlands, Deutsche Telekom transferred a 25 percent share in T‑Mobile Netherlands (prior to the business combination).

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

In the Germany operating segment, Deutsche Telekom acquired mobile spectrum licenses worth EUR 2.2 billion in the 2019 financial year for the construction of a 5G network. Under the payment schedule agreed with the Federal Republic of Germany, EUR 0.1 billion was paid in the reporting period and presented as cash capex. Future payments will primarily be recognized in net cash used in/from financing activities.

The carrying amounts of the financial liabilities disclosed in net cash used in/from financing activities, divided into carrying amount changes having and not having an effect on cash flows, developed as follows in the reporting year:

Total carrying amount changes having an effect on cash flows of EUR -3.4 billion in the items of the financial position allocated to net cash used in/from financing activities deviate from net cash used in financing activities due in particular to the dividend entitlements of Deutsche Telekom AG’s shareholders having an effect on cash flows. The introduction of the IFRS 16 accounting standard led to the recognition of current and non-current lease liabilities and to the reclassification of finance lease liabilities that in the past had been recognized under financial liabilities. This resulted in an adjustment of the opening balances as of January 1, 2019. The other carrying amount changes in lease liabilities not having an effect on cash flows are mainly attributable to additions to liabilities in connection with the recognition of right-of-use assets. The other carrying amount changes in financial liabilities not having an effect on cash flows include additions of EUR 0.7 billion for selected financing options under which the payments become due at a later point in time by involving banks in the process, as well as additions of EUR 0.3 billion for the acquisition of broadcasting rights.

In the 2019 financial year, Deutsche Telekom made total interest payments of EUR 3.9 billion to service interest obligations. This figure includes interest payments for derivative and non-derivative financial liabilities as well as for lease liabilities. The above reconciliation only shows the carrying amounts of the financial liabilities, lease liabilities, and derivative financial assets allocated to net cash used in financing activities.

For further information, please refer to the section “Non-cash transactions in the consolidated statement of cash flows” above.

For further information on the first-time application of IFRS 16, please refer to the section “Initial application of standards, interpretations, and amendments in the financial year.”

The carrying amounts of the financial liabilities disclosed in net cash used in/from financing activities, divided into carrying amount changes having and not having an effect on cash flows, developed as follows in 2018: