Net assets of the Group

Total assets amounted to EUR 264.9 billion as of December 31, 2020, up by EUR 94.2 billion against December 31, 2019. This significant increase is mainly due to the change in the composition of the Group in connection with the acquisition of Sprint in the United States operating segment. The acquired and remeasured assets and liabilities of Sprint were included in all items of the statement of financial position upon consummation of the transaction on April 1, 2020.

For further information on the business combination of T‑Mobile US and Sprint, please refer to the section “Summary of accounting policies – Changes in the composition of the Group and other transactions” in the notes to the consolidated financial statements.

Cash and cash equivalents increased by EUR 7.5 billion year-on-year.

For further information, please refer to Note 35 “Notes to the consolidated statement of cash flows” in the notes to the consolidated financial statements.

On the assets side, trade receivables amounted to EUR 13.5 billion, up by EUR 2.7 billion against the 2019 year-end. Receivables increased by EUR 2.9 billion as of April 1, 2020 in connection with the inclusion of Sprint. Exchange rate effects, primarily from the translation from U.S. dollars into euros, reduced the carrying amount. Excluding this effect, receivables in the United States operating segment increased, mainly due to higher receivables from wholesale partners – in particular as a consequence of the sale of Sprint’s prepaid business to DISH – and higher receivables under the Equipment Installment Plan – primarily as a result of the market launch of higher-priced devices in the fourth quarter of 2020. In the Germany operating segment, receivables increased as a result of the contractual termination of a revolving factoring agreement for receivables from consumers and business customers. By contrast, receivables in the Europe operating segment decreased, among other factors, on account of the agreed sale of Telekom Romania Communications, which operates the Romanian fixed network business. This entity’s receivables were reclassified as of December 31, 2020 to non-current assets and disposal groups held for sale.

The carrying amounts of intangible assets and property, plant and equipment increased by EUR 61.3 billion overall to EUR 179.0 billion. Effects from changes in the composition of the Group of EUR 73.0 billion in connection with the acquisitions of Sprint and Simpel contributed to this increase, which also includes preliminary goodwill arising from the transactions; EUR 8.7 billion from the Sprint transaction and EUR 0.2 billion from the Simpel transaction. Capital expenditure totaling EUR 22.6 billion, especially to upgrade and build out the network in our United States operating segment, and for the broadband/fiber-optic build-out, the IP transformation, and mobile infrastructure in the Germany and Europe operating segments, also increased the carrying amounts. This also includes, in the United States operating segment, FCC spectrum licenses of EUR 1.1 billion – primarily acquired at a spectrum auction that ended in March 2020 – and in the Group Development and Europe operating segments, spectrum licenses totaling EUR 0.6 billion – mainly in the Netherlands, Hungary, Greece, and Austria. Depreciation and amortization of EUR 20.0 billion, negative exchange rate effects of EUR 13.3 billion, primarily from the translation of U.S. dollars into euros, and disposals of EUR 1.8 billion decreased the carrying amount. The latter included EUR 0.2 billion in the United States for the derecognition of billing software for postpaid customers, which was still in development. In connection with the intention to sell Telekom Romania Communications and T‑Mobile Infra, both companies were classified as held for sale as of December 31, 2020. As a result, the carrying amount declined by EUR 0.6 billion overall. Furthermore, the carrying amount of intangible assets and property, plant and equipment was increased by EUR 1.7 million in total as a result of the following reversals of impairment losses and was reduced by EUR 0.7 billion overall by the following impairment losses.

Impairment losses on spectrum licenses previously acquired by T‑Mobile US were partially reversed, increasing the carrying amount by EUR 1.6 billion. In part, the reasons leading to the impairment loss recognized in 2012 no longer exist, thus giving rise to the reversal. An initial reversal of the impairment in the amount of EUR 1.7 billion had already been recognized in 2017. The measurement of Sprint’s licenses in connection with the purchase price allocation following the business combination of T‑Mobile US and Sprint indicated a further increase in the licenses’ value.

In the Systems Solutions operating segment, the realignment of the B2B telecommunications business in combination with the effects of the coronavirus pandemic triggered ad hoc impairment testing of assets, which identified a reduction in the business outlook for IT operations. The result was the recognition of a non-cash impairment loss of EUR 0.5 billion on non-current assets of the Systems Solutions cash-generating unit. EUR 426 million of the impairment loss related to the Systems Solutions operating segment. Another EUR 44 million related to software recognized in the Group Headquarters & Group Services segment which is subject to use by the Systems Solutions operating segment and is allocated to the Systems Solutions cash-generating unit for the purposes of impairment testing.

An ad hoc impairment test was also conducted in the Europe operating segment on account of the agreed sale of the Romanian fixed-network business. In this context, the associated loss of the existing MVNO agreements results in the recognition of an impairment loss totaling EUR 160 million on non-current assets of the Romanian mobile business, which will remain within the Group. In the Romanian fixed-network business, the planned sale resulted in a reversal of impairment losses recognized in the past on property, plant and equipment of EUR 50 million.

Right-of-use assets with regard to leases increased by EUR 12.3 billion compared with December 31, 2019 to EUR 30.3 billion. In connection with the business combination with Sprint, right-of-use assets of EUR 6.3 billion were recognized. Another EUR 9.4 billion came from the agreement concerning the lease and use of cell sites concluded between T‑Mobile US and American Tower in September 2020. This was a modification to existing leases with American Tower. The agreement gives T‑Mobile US greater flexibility in the course of merging the mobile networks of T‑Mobile US and Sprint and of the 5G network build-out. By contrast, depreciation of EUR 5.1 billion, negative exchange rate effects of EUR 2.1 billion, disposals of EUR 0.4 billion, and reclassifications to assets and disposal groups held for sale of EUR 0.1 billion decreased the carrying amount.

Current and non-current financial assets increased by EUR 2.4 billion to EUR 9.6 billion. The acquisition of Sprint resulted in an increase of EUR 0.4 billion. Derivatives without a hedging relationship increased by EUR 1.1 billion, mainly in connection with the subsequent measurement of the stock options to buy shares in T‑Mobile US received from SoftBank in June 2020 and with new additions of embedded derivatives and embedded derivatives assumed in connection with the acquisition of Sprint at T‑Mobile US, including their subsequent measurement. Measurement effects from the derecognition of a derivative in connection with the repayment of a term loan raised during the course of the year had an offsetting effect. Derivatives with a hedging relationship increased by EUR 0.6 billion, primarily due to the increase in positive fair values from interest rate swaps in fair value hedges. In addition, other financial assets increased by EUR 0.3 billion in connection with grants receivable from funding projects for the broadband build-out in Germany.

The increase in non-current assets and disposal groups held for sale by EUR 1.0 billion to EUR 1.1 billion was mainly the result of the reclassified assets of T‑Mobile Infra, which is allocated to the Group Development operating segment, and Telekom Romania Communications, which operates the Romanian fixed-network business in the Europe operating segment. Both these companies were classified as held for sale as of December 31, 2020 on account of the intention to sell them.

The increase of EUR 1.8 billion in other assets to EUR 10.4 billion was also mainly due to the inclusion of Sprint.

On the liabilities and shareholders’ equity side, current and non-current financial liabilities increased by EUR 40.8 billion compared with the end of 2019 to a total of EUR 107.1 billion. EUR 39.1 billion of this resulted from the transfer of liabilities from Sprint. Immediately after the transaction, liabilities of the former Sprint totaling USD 9.8 billion (EUR 8.9 billion) were repaid. Since then, a number of refinancing measures have been implemented in connection with the business combination, some of which have already been reversed. On April 1, 2020, for example, T‑Mobile US raised a new term loan of USD 4 billion (EUR 3.7 billion), which was redeemed prematurely on October 9, 2020. Senior secured notes, issued on April 9, 2020 for a total of USD 19 billion (EUR 17.3 billion) were used to repay a briefly utilized bridge loan facility. In addition, T‑Mobile US issued senior secured notes with a volume of USD 4.0 billion (EUR 3.6 billion) on June 24, 2020, USD 4 billion (EUR 3.4 billion) on October 6, 2020, and USD 4.75 billion (EUR 4.0 billion) on October 28, 2020. In the course of the third quarter of 2020, T‑Mobile US repaid a number of bonds with a total value of EUR 3.6 billion, some of them prematurely. Furthermore, bonds with a total volume of EUR 1.8 billion when translated into euros were issued in the Group in various currencies in the course of the year. Euro and U.S. Dollar bonds with a total volume of EUR 6.3 billion when translated into euros were repaid. A Deutsche Bundespost treasury note (zero-coupon bond) issued in the past with a carrying amount of EUR 1.4 billion fell due on December 31, 2019 and was repaid on that date by a bank using its own funds. The payment by Deutsche Telekom AG to this bank was made on the following bank working day of January 2, 2020. Derivative financial liabilities decreased by EUR 0.8 billion in total, mainly due to the decline of EUR 1.0 billion from the premature termination of forward-payer swaps by T‑Mobile US at the start of April 2020. The secured term loan was originated on April 1, 2020. Exchange rate effects, in particular from the translation of U.S. dollars into euros, lowered the financial liabilities by EUR 6.9 billion.

For further information on the development of financial liabilities, please refer to Note 13 “Financial liabilities and lease liabilities” in the notes to the consolidated financial statements.

Current and non-current lease liabilities increased by EUR 12.9 billion to EUR 32.7 billion compared with December 31, 2019. EUR 6.8 billion of this increase was attributable to the inclusion of Sprint. In connection with the modification of existing leases that T‑Mobile US agreed with American Tower, lease liabilities increased by EUR 9.4 billion. Exchange rate effects, in particular from the translation of U.S. dollars into euros, lowered the carrying amount by EUR 2.3 billion.

Trade and other payables increased by EUR 0.3 billion to EUR 9.8 billion. The inclusion of Sprint increased the carrying amount by EUR 2.9 billion. This was offset in particular by lower liabilities to terminal equipment vendors and declines in liabilities in connection with the acquisition of assets in the United States operating segment. Liabilities also decreased in the other operating segments. Exchange rate effects, especially from the translation from U.S. dollars into euros, also decreased the carrying amount.

Provisions for pensions and other employee benefits increased by EUR 1.9 billion compared with December 31, 2019 to EUR 7.7 billion, mainly due to a decline in the prices of plan assets, interest rate adjustments, and the change in the composition of the Group in connection with the acquisition of Sprint.

Current and non-current other provisions increased by EUR 2.4 billion compared with December 31, 2019 to EUR 9.0 billion. EUR 1.9 billion of this related to the business combination of T‑Mobile US and Sprint. Furthermore, the provisions recognized for the Civil Service Health Insurance Fund (Postbeamtenkrankenkasse – PBeaKK) increased by EUR 0.5 billion, which is attributable to the subsequent measurement of the present value determined using actuarial principles (interest effect) and other additions.

The increase in liabilities directly associated with non-current assets and disposal groups held for sale by EUR 0.4 billion to EUR 0.4 billion mainly related to the aforementioned reclassified liabilities of T‑Mobile Infra and Telekom Romania Communications. Both these companies were classified as held for sale as of December 31, 2020 on account of the intention to sell them.

Other liabilities increased by EUR 1.0 billion compared with December 31, 2019 to EUR 8.4 billion, due in particular to higher current and non-current other liabilities. The inclusion of Sprint increased other liabilities by EUR 0.7 billion. In addition, other liabilities increased by EUR 0.2 billion due to existing build-out obligations in connection with grants receivable from funding projects for the broadband build-out in the Germany operating segment. The carrying amounts of contract liabilities increased in particular as a result of the inclusion of Sprint.

Shareholders’ equity increased from EUR 46.2 billion as of December 31, 2019 to EUR 72.6 billion. The business combination of T‑Mobile US and Sprint consummated on April 1, 2020 resulted in an increase in shareholders’ equity of EUR 30.6 billion as of the date of first-time consolidation. Profit of EUR 6.7 billion and capital increases from share-based payments of EUR 0.5 billion also increased the carrying amount. Shareholders’ equity was reduced in connection with dividend payments for the 2019 financial year to Deutsche Telekom AG shareholders in the amount of EUR 2.8 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion. Other comprehensive income also reduced shareholders’ equity by EUR 8.5 billion. The main factors in this negative other comprehensive income were the currency translation effects recognized directly in equity (EUR 6.6 billion), the remeasurement of defined benefit plans (EUR 1.4 billion), and losses from hedging instruments, mainly from forward-payer swaps concluded for borrowings at T‑Mobile US, which were terminated prematurely in April 2020 and for which the cumulative changes in value must be reversed over the terms of the loans (EUR 1.0 billion). By contrast, income taxes relating to components of other comprehensive income of EUR 0.4 billion had a positive impact on other comprehensive income.

For further information, please refer to Note 19 “Shareholders’ equity” in the notes to the consolidated financial statements.

For further information on the business combination of T‑Mobile US and Sprint and the acquisition of Simpel, please refer to the section “Summary of accounting policies – Changes in the composition of the Group and other transactions” in the notes to the consolidated financial statements.