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38 Lessor relationships

Finance leases. Deutsche Telekom is a lessor in connection with finance leases. Essentially, these relate to the leasing of routers and other hardware, which Deutsche Telekom provides to its customers for data and telephone network solutions.

The following table shows how the amount of the net investment in a finance lease is determined:

millions of €

 

 

 

Dec. 31, 2021

Dec. 31, 2020

Minimum lease payments

240

260

Unguaranteed residual value

2

3

Gross investment

242

262

Unearned finance income

(13)

(15)

Net investment (present value of the minimum lease payments)

228

248

The following table presents the gross investment amounts and the present value of payable minimum lease payments:

millions of €

 

 

 

 

 

Dec. 31, 2021

Dec. 31, 2020

 

 

 

 

 

Maturity

Gross investment

Present value of minimum lease payments

Gross investment

Present value of minimum lease payments

Within 1 year

93

88

93

87

In 1 to 2 years

78

72

74

69

In 2 to 3 years

45

44

46

44

In 3 to 4 years

15

15

35

34

In 4 to 5 years

6

5

9

8

After 5 years

5

5

5

4

 

242

228

262

248

Operating leases. Deutsche Telekom is a lessor in connection with operating leases. The underlying leases mainly relate to mobile terminal equipment in the United States operating segment, cell sites, building and co-location space, and unbundled local loop lines. By contrast, contracts on the provision of the latest generation of modems/routers to consumers in the fixed-network mass-market – where modem and router features are incorporated in one device – are not defined as leases.

Where terminal equipment is leased in the United States operating segment, customers are entitled to receive a new device once per month during the term of the lease. On receipt of the new device or at the end of the contract, the customer either returns or purchases the equipment. The purchase price at the end of the lease is set at the commencement of the lease and is equal to the estimated residual value of the equipment. This value is based on the type of equipment and the advance payment. The contracts do not contain any residual value guarantees or variable lease payments, nor do they contain any restrictions or covenants. Terminal equipment returned by customers is prepared for sale in the secondary market or for use as a replacement for defective devices. This reduces the residual value risk of the returned equipment.

The leasing of local loop lines and space to wholesale fixed-network customers (e.g., co-location space) is also classified as a lease. The regulator requires Deutsche Telekom to make co-location space and unbundled local loop lines available to competitors. In contrast to unregulated products, the residual value risk for these assets is rather low because competitors are economically dependent on the use of these assets. In the unlikely event that co-location space and unbundled local loop lines are not leased, Deutsche Telekom will try to find new tenants for the vacant space or unleased lines. In the case of its own cell sites, Deutsche Telekom will also strive to continue leasing – where possible – all of the free space that it does not itself occupy. The aim here is to reduce the vacancy rate of unused space as far as possible by re-letting and to spread the cost.

Operating leases exist for the following items of property, plant and equipment:

millions of €

 

 

 

 

 

Land and buildings

Technical equipment and machinery

Other equipment, operating and office equipment

Total

Cost

 

 

 

 

At December 31, 2019

80

1,578

0

1,657

Currency translation

(1)

(710)

0

(712)

Changes in the composition of the Group

0

5,124

0

5,124

Additions

0

2,600

0

2,600

Disposals

(14)

(2,490)

0

(2,505)

Change from non-current assets and disposal groups held for sale

(61)

0

0

(61)

Reclassifications

(1)

218

2

219

At December 31, 2020

2

6,318

2

6,322

Currency translation

0

352

0

352

Changes in the composition of the Group

0

0

0

0

Additions

0

1,134

0

1,134

Disposals

0

(3,733)

0

(3,733)

Change from non-current assets and disposal groups held for sale

0

0

0

0

Reclassifications

20

167

2

189

At December 31, 2021

22

4,239

3

4,264

Accumulated depreciation and impairment losses

 

 

 

 

At December 31, 2019

(59)

(762)

0

(821)

Currency translation

1

129

0

130

Changes in the composition of the Group

0

0

0

0

Additions (depreciation)

(1)

(2,642)

0

(2,644)

Additions (impairment)

0

0

0

0

Disposals

12

1,215

0

1,227

Change from non-current assets and disposal groups held for sale

44

0

0

44

Reclassifications

3

(96)

0

(94)

Reversal of impairment losses

0

0

0

0

At December 31, 2020

(1)

(2,156)

(1)

(2,157)

Currency translation

0

(157)

0

(157)

Changes in the composition of the Group

0

0

0

0

Additions (depreciation)

(1)

(2,716)

(1)

(2,718)

Additions (impairment)

0

0

0

0

Disposals

0

2,521

0

2,521

Change from non-current assets and disposal groups held for sale

0

0

0

0

Reclassifications

(18)

(92)

0

(109)

Reversal of impairment losses

0

0

0

0

At December 31, 2021

(20)

(2,599)

(2)

(2,621)

Net carrying amounts

 

 

 

 

At December 31, 2020

1

4,163

1

4,164

At December 31, 2021

2

1,640

2

1,644

millions of €

 

 

 

 

 

 

Land and buildings

Technical equipment and machinery

Other equipment, operating and office equipment

Total

 

Cost

 

 

 

 

 

At December 31, 2019

80

1,578

0

1,657

 

Currency translation

(1)

(710)

0

(712)

 

Changes in the composition of the Group

0

5,124

0

5,124

 

Additions

0

2,600

0

2,600

 

Disposals

(14)

(2,490)

0

(2,505)

 

Change from non-current assets and disposal groups held for sale

(61)

0

0

(61)

 

Reclassifications

(1)

218

2

219

 

At December 31, 2020

2

6,318

2

6,322

 

Currency translation

0

352

0

352

 

Changes in the composition of the Group

0

0

0

0

 

Additions

0

1,134

0

1,134

 

Disposals

0

(3,733)

0

(3,733)

 

Change from non-current assets and disposal groups held for sale

0

0

0

0

 

Reclassifications

20

167

2

189

 

At December 31, 2021

22

4,239

3

4,264

 

Accumulated depreciation and impairment losses

 

 

 

 

 

At December 31, 2019

(59)

(762)

0

(821)

 

Currency translation

1

129

0

130

 

Changes in the composition of the Group

0

0

0

0

 

Additions (depreciation)

(1)

(2,642)

0

(2,644)

 

Additions (impairment)

0

0

0

0

 

Disposals

12

1,215

0

1,227

 

Change from non-current assets and disposal groups held for sale

44

0

0

44

 

Reclassifications

3

(96)

0

(94)

 

Reversal of impairment losses

0

0

0

0

 

At December 31, 2020

(1)

(2,156)

(1)

(2,157)

 

Currency translation

0

(157)

0

(157)

 

Changes in the composition of the Group

0

0

0

0

 

Additions (depreciation)

(1)

(2,716)

(1)

(2,718)

 

Additions (impairment)

0

0

0

0

 

Disposals

0

2,521

0

2,521

 

Change from non-current assets and disposal groups held for sale

0

0

0

0

 

Reclassifications

(18)

(92)

0

(109)

 

Reversal of impairment losses

0

0

0

0

 

At December 31, 2021

(20)

(2,599)

(2)

(2,621)

 

Net carrying amounts

 

 

 

 

 

At December 31, 2020

1

4,163

1

4,164

 

At December 31, 2021

2

1,640

2

1,644

 

The future minimum lease payments arising from non-cancelable operating leases are as follows:

millions of €

 

 

Maturity

Dec. 31, 2021

Dec. 31, 2020

Within 1 year

771

1,822

In 1 to 2 years

371

393

In 2 to 3 years

255

232

In 3 to 4 years

268

241

In 4 to 5 years

219

203

After 5 years

861

751

 

2,745

3,641

The reduction in future minimum lease payments is mainly the result of the decline in terminal equipment leasing in the United States operating segment.

Router
A coupling element that connects two or more sub-networks. Routers can also extend the boundaries of a network, monitor data traffic, and block any faulty data packets.
Glossary
ULL – Unbundled Local Loop
Competitors whose own networks do not reach into customers’ premises can rent unbundled local loop lines from Deutsche Telekom. Their networks end at the local exchanges. The ULL bridges the distance between the local exchange and the termination point on the customer’s premises or in their home, so it is also known as the “last mile.”
Glossary
Wholesale
Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing.
Glossary