13 Financial liabilities and lease liabilities

The following table shows the composition and maturity structure of financial liabilities as of December 31, 2020:

The carrying amount of current and non-current financial liabilities increased by EUR 40.8 billion to EUR 107.1 billion compared with the end of 2019. This increase is mainly attributable to the first-time consolidation of Sprint following the consummation of the business combination with T‑Mobile US. Exchange rate effects, in particular from the translation of U.S. dollars into euros, lowered the carrying amount by EUR 6.9 billion.

The first-time consolidation of Sprint as of April 1, 2020 increased the carrying amount of financial liabilities by a total of EUR 39.1 billion. The financing structure was also reorganized in the course of the business combination. Immediately after the transaction, liabilities of the former Sprint totaling USD 9.8 billion (EUR 8.9 billion) were repaid, of which USD 7.4 billion (EUR 6.8 billion) fell due pursuant to a binding change-in-control clause.

In connection with the business combination with Sprint, on April 1, 2020, the “new” T‑Mobile US drew down on a bridge loan facility agreed with a total of 16 banks with a total volume of USD 19 billion (EUR 17.3 billion). In connection with the financing provided with this bridge loan facility, fees of USD 0.4 billion (EUR 0.3 billion) were paid to the banks. Additionally, T‑Mobile US raised a new term loan of USD 4 billion (EUR 3.7 billion) on April 1, 2020. The loan facilities were used, among other things, for the early repayment of intragroup loan liabilities to Deutsche Telekom AG and to refinance debt of the former Sprint. Senior secured notes, issued on April 9, 2020 for a total of USD 19 billion (EUR 17.3 billion), with terms of between 5 and 30 years and bearing interest of between 3.500 % and 4.500 %, were used to repay the bridge loan facility. On June 24, 2020, T‑Mobile US issued senior secured notes with a total volume of USD 4 billion (EUR 3.6 billion) with terms of between 6 and 11 years and bearing interest of between 1.500 % and 2.550 %. These notes were used to repay intragroup loans and refinance high-yield bonds issued by the former Sprint. On July 4, 2020, T‑Mobile US prematurely redeemed the USD 1.0 billion (EUR 0.9 billion) aggregate principal amount of a 6.500 % senior note originally due in 2024. On August 15, 2020, T‑Mobile US repaid a senior note on schedule with a nominal volume of USD 1.5 billion (EUR 1.3 billion) with a term of 8 years and bearing interest of 7.000 %. On September 1, 2020, the USD 1.7 billion (EUR 1.4 billion) aggregate principal amount of another 6.375 % senior note, originally due in 2025, was prematurely redeemed. On October 6, 2020, T‑Mobile US issued senior secured notes with a total volume of USD 4 billion (EUR 3.4 billion) with terms ending between 2028 and 2051 and bearing interest of between 2.050 % and 3.300 %. The cash received was used on October 9, 2020 to prematurely repay the term loan originated on April 1, 2020. On October 28, 2020, T‑Mobile US issued senior secured notes with a total volume of USD 4.75 billion (EUR 4.0 billion) with terms ending between 2031 and 2060 and bearing interest of between 2.250 % and 3.600 %.

The carrying amount was also increased by bonds issued by Deutsche Telekom AG in the first quarter of 2020: a U.S. dollar bond of USD 1.3 billion (EUR 1.1 billion), a euro bond of EUR 0.2 billion, and a bond in Swiss francs of CHF 0.3 billion (EUR 0.3 billion). Magyar Telekom issued a bond in Hungarian forints of HUF 70 billion (EUR 0.2 billion) in the fourth quarter of 2020.

Scheduled repayments in the Group of U.S. dollar bonds totaling USD 1.3 billion (EUR 1.2 billion), euro bonds totaling EUR 2.6 billion, and a zero-coupon bond of EUR 0.4 billion, had an offsetting effect in the reporting period. In addition, as part of the liabilities management in the Group, early repayments were made on euro bonds and U.S. dollar bonds of Deutsche Telekom International Finance B.V. which fall due in 2021 and 2022. These repayments took the form of partial buybacks totaling EUR 0.8 billion and USD 1.4 billion (EUR 1.3 billion) respectively.

The carrying amount of liabilities to banks decreased by EUR 1.3 billion compared with December 31, 2019 to EUR 5.3 billion. This decline is mainly due to the net reduction of EUR 1.4 billion in the balance of short-term borrowings. This includes a Deutsche Bundespost treasury note (zero-coupon bond) issued in the past with a carrying amount of EUR 1.4 billion, which 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.

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

The liabilities with right of creditors to priority repayment in the event of default with a carrying amount of EUR 3.9 billion (December 31, 2019: EUR 0.0 billion) relate primarily to fixed-income bonds issued by Sprint. The bonds are repayable on a pro rata basis and mature between 2021 and 2028. Their entire outstanding nominal amount at the reporting date was EUR 3.7 billion when translated into euros. Collateral was provided for these bonds, hence they constitute a separate class of financial instruments. At the reporting date, cash and cash equivalents with a carrying amount of EUR 63 million when translated into euros were pledged as collateral for these bonds.

The carrying amount of other interest-bearing liabilities increased by EUR 2.8 billion compared with December 31, 2019 to EUR 7.2 billion. The acquisition of Sprint resulted in an increase of EUR 2.7 billion in the carrying amount of non-current other interest-bearing liabilities as of the date of first-time consolidation.

The carrying amount of derivative financial liabilities decreased by EUR 0.8 billion in total to EUR 0.9 billion, 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. These forward-payer swaps with a nominal value of EUR 8.8 billion when translated into euros were concluded for borrowings at T‑Mobile US and designated as cash flow hedges in effective hedging relationships. By the date of termination, they gave rise to a remeasurement loss recognized directly in equity in the reporting period of EUR 0.9 billion. The secured term loan was originated on April 1, 2020.

For further information on derivative financial liabilities, please refer to Note 41 “Financial instruments and risk management.”

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. Since the successful business combination between T‑Mobile US and Sprint, T‑Mobile US has pursued its own separate financing and liquidity strategy.

At December 31, 2020, Deutsche Telekom (excluding T‑Mobile US) had standardized bilateral credit agreements with 21 banks for a total of EUR 12.6 billion. None of these lines of credit had been utilized as of December 31, 2020. In the prior year, a transaction of EUR 0.6 billion was temporarily deducted from a credit line. 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.

Furthermore, bilateral credit lines with an aggregate total volume of USD 5.5 billion (EUR 4.5 billion) plus a cash balance of USD 10.4 billion (EUR 8.5 billion) were available to T‑Mobile US as of December 31, 2020. None of these credit lines had been utilized as of December 31, 2020.

The carrying amount of current and non-current lease liabilities increased by EUR 12.9 billion to EUR 32.7 billion compared with December 31, 2019, primarily due to the following effects. EUR 6.8 billion of the increase resulted from the inclusion of Sprint in the United States operating segment, to which the majority of the lease liabilities relate. The carrying amount also increased by EUR 9.4 billion as a result of the lease modification to existing leases that T‑Mobile US concluded with American Tower. Exchange rate effects, in particular from the translation of U.S. dollars into euros, lowered the carrying amount by EUR 2.3 billion.

For further information on lessee relationships, please refer to Note 8 “Right of use assets – lessee relationships.”

In the reporting year and in the 2019 financial year, there were no significant expenses for variable lease payments that were not included in the measurement of lease liabilities.

As of December 31, 2020, future payment obligations for leases that have not yet begun and which are not taken into account in the measurement of lease liabilities amounted to EUR 0.2 billion (December 31, 2019: EUR 0.3 billion).

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

All instruments held at December 31, 2020 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, 2020. 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, 2020, this figure was a nominal EUR 0.1 billion (December 31, 2019: EUR 0.5 billion).