13 Financial liabilities and lease liabilities

The following table shows the composition and maturity structure of financial liabilities as of December 31, 2022:

The carrying amount of current and non-current financial liabilities increased by EUR 1.6 billion compared with year-end 2021 to EUR 113.0 billion, primarily due to the factors described below. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 4.3 billion.

The carrying amount of bonds and other securitized liabilities decreased by EUR 0.1 billion in total. Exchange rate effects increased the carrying amount of bonds and other securitized liabilities by EUR 3.9 billion. The carrying amount was also increased by senior notes issued by T‑Mobile US in the reporting year with a total volume of USD 3.0 billion (EUR 3.0 billion) with terms ending between 2033 and 2062 and bearing interest of between 5.2 and 5.8 %, and by asset-backed securities (ABS notes) with a volume of USD 0.8 billion (EUR 0.8 billion). The net change of EUR 2.3 billion in commercial paper also increased the carrying amount. Repayments by T‑Mobile US of bonds with a total volume of USD 2.8 billion (EUR 2.7 billion) and in the Group of EUR bonds with a volume of EUR 2.6 billion and a GBP bond with a volume of GBP 0.7 billion (EUR 0.8 billion) reduced the carrying amount. In addition, the carrying amount decreased by EUR 3.5 billion in connection with measurement effects from derivatives with a hedging relationship, the offsetting entry for which is posted under bonds and other securitized liabilities. This is mainly due to the decline in fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The subsequent measurement under the effective interest method reduced the carrying amount by EUR 0.3 billion.

The carrying amount of liabilities to banks increased by EUR 0.1 billion compared with December 31, 2021 to EUR 4.1 billion. The carrying amount was increased by new borrowings of EUR 0.7 billion and the net increase of EUR 0.2 billion in the balance of short-term borrowings. Exchange rate effects increased the carrying amount by EUR 0.1 billion. It was reduced by repayments of EUR 0.5 billion and a decrease of EUR 0.2 billion in connection with measurement effects from derivatives with a hedging relationship.

The liabilities with the right of creditors to priority repayment in the event of default of EUR 2.9 billion (December 31, 2021: EUR 3.2 billion) relate primarily to bonds issued by Sprint. Collateral was provided for these bonds, hence they constitute a separate class of financial instruments. Repayments in the reporting period in the amount of EUR 0.5 billion when translated into euros reduced the carrying amount. Exchange rate effects increased the carrying amount by EUR 0.1 billion. At the reporting date, cash and cash equivalents with a carrying amount of EUR 63 million (December 31, 2021: EUR 76 million) when translated into euros were pledged as collateral for these bonds.

The carrying amount of other interest-bearing liabilities decreased by EUR 0.3 billion compared with December 31, 2021 to EUR 7.5 billion. In connection with cash collateral received for derivative financial instruments – primarily forward-payer swaps – the carrying amount of other interest-bearing liabilities decreased by EUR 1.5 billion. By contrast, the modification of the arrangements between T‑Mobile US and Crown Castle regarding cell sites increased the carrying amount by EUR 0.8 billion. In addition, liabilities recognized by T‑Mobile US for future payments for IP transit services in connection with the agreement on the sale of the wireline business increased the carrying amount by EUR 0.6 billion. Exchange rate effects, especially from the translation of U.S. dollars into euros, increased the carrying amount of other interest-bearing liabilities by EUR 0.1 billion.

For further information on cash collateral, please refer to Note 42 “Financial instruments and risk management.”

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please refer to Note 8 “Right-of-use assets – lessee relationships.”

For further information on the agreement on the sale of the wireline business in the United States, please refer to the section “Changes in the composition of the Group and other transactions” under “Summary of accounting policies.”

The carrying amount of derivative financial liabilities increased by EUR 2.2 billion to EUR 2.9 billion. Negative measurement effects of derivatives with a hedging relationship increased the carrying amount, mainly due to the increase in negative fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The carrying amount was reduced by positive measurement effects from a forward transaction to hedge the price of acquiring T‑Mobile US shares in the future.

For further information on derivative financial liabilities, please refer to Note 42 “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 business combination between T‑Mobile US and Sprint, T‑Mobile US has pursued its own separate financing and liquidity strategy.

At December 31, 2022, Deutsche Telekom (excluding T‑Mobile US) had standardized bilateral credit agreements with 21 banks for a total of EUR 12.6 billion. As of December 31, 2022, EUR 0.2 billion of these credit lines had been utilized. 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 12 months, be extended by a further 12 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 7.5 billion (EUR 7.0 billion) plus a cash balance of USD 4.6 billion (EUR 4.3 billion) were available to T‑Mobile US as of December 31, 2022. None of these credit lines had been utilized as of December 31, 2022.

The carrying amount of current and non-current lease liabilities increased by EUR 5.7 billion to EUR 38.8 billion compared with December 31, 2021. This increase primarily relates to the modification of the arrangements between T‑Mobile US and Crown Castle, which resulted in an increase in the carrying amounts of lease liabilities of EUR 6.6 billion. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 2.1 billion. The reclassification of lease liabilities to liabilities directly associated with non-current assets and disposal groups held for sale reduced the carrying amount by EUR 1.8 billion. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. The carrying amount was further reduced, in part in connection with the decommissioning of former Sprint cell sites and the closure of some former Sprint shops in the United States operating segment. The carrying amount was also reduced by declines in the Group Headquarters & Group Services segment and in the Systems Solutions operating segment.

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

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please also refer to Note 8 “Right-of-use assets – lessee relationships.”

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

As of December 31, 2022, 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, 2021: EUR 0.1 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:

For information on the guarantees to Glasfaser NordWest, please refer to Note 44 “Related party disclosures.”

All instruments held at December 31, 2022 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, 2022. 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, 2022, this figure was a nominal EUR 0.1 billion (December 31, 2021: EUR 0.1 billion).