Profitability and financial position of the Group

Profitability

ROCE decreased by 0.5 percentage points in the reporting year to 8.5 %, due to a EUR 1.4 billion reduction in net operating profit after taxes (NOPAT) to EUR 21.4 billion, while the average amount of net operating assets (NOA) remained almost constant at EUR 253.1 billion.

The reduction in NOPAT is primarily attributable to the development of special factors in profit from operations (EBIT). Special factors totaling EUR 0.4 billion had a positive effect on EBIT in the reporting year including the reversal in full of impairment losses recognized in prior years on FCC licenses at T‑Mobile US. In the prior year, EBIT was affected by positive special factors totaling EUR 10.5 billion. This was due to the deconsolidation gain from the sale of GD Towers. At EUR 2.5 billion, the share of profit of associates and joint ventures included in the consolidated financial statements using the equity method, had a positive effect on NOPAT in the reporting year, after a loss of EUR 2.8 billion was recorded in the prior year. The positive result in the reporting year was attributable to reversals of impairment losses of EUR 2.1 billion and EUR 0.3 billion, respectively, on the carrying amounts of the investments in GD Towers and in GlasfaserPlus. These impairment losses had to be recognized in the prior year mainly due to lower discount rates as a result of macroeconomic developments.

For further information on the definition of ROCE and the methods used to calculate this key performance indicator, please refer to the section “Management of the Group.”

Finance management

Our finance management ensures our Group’s ongoing solvency and hence its financial equilibrium. The fundamentals of Deutsche Telekom’s finance policy are established each year by the Board of Management and overseen by the Supervisory Board. Group Treasury is responsible for implementing the finance policy and for ongoing risk management. In order to ensure we have scope for financing, we continuously monitor the development of net debt, Deutsche Telekom AG’s rating, financial flexibility, and free cash flow AL. There have been no material changes resulting from our finance management in the reporting year. We set out the course for the next few years at our Capital Markets Day in October 2024.

Changes in net debt

millions of €

Net debt increased compared with December 31, 2023 to EUR 137.3 billion. The main factors increasing net debt were the share buy-back program at T‑Mobile US, exchange rate effects, the dividend payments (including to non-controlling interests), additions to lease liabilities and to right-of-use assets, and the acquisition of spectrum, primarily in the United States operating segment. Corporate transactions mainly included payments by Deutsche Telekom AG for the acquisition of T‑Mobile US shares by exercising existing fixed-price options, and changes in cash and cash equivalents in connection with the acquisition of Ka’ena in the United States. Other effects included a large number of offsetting effects. Factors reducing net debt were free cash flow (before dividend payments and spectrum investment) and the sale of T‑Mobile US shares by Deutsche Telekom.

Other financing options

Off-balance-sheet financing instruments mainly relate to the sale of receivables by means of factoring. Total receivables sold as of December 31, 2024 amounted to EUR 2.0 billion (December 31, 2023: EUR 2.7 billion). At the end of 2024, this solely related to factoring agreements in the United States operating segment. The agreements are used in particular for active receivables management.

On October 23, 2024, the rating agency Moody’s raised our rating outlook, which stood at Baa1 with a positive outlook as of December 31, 2024. We are therefore still a solid investment-grade company with access to the international capital markets.

To ensure financial flexibility, we primarily use the KPI “relative debt” (ratio of net debt to adjusted EBITDA). This is a core component of our finance strategy and an important performance indicator for investors, analysts, and rating agencies. At 2.78x, we did not fully meet the target value for relative debt of ≤ 2.75x, mainly due to exchange rate effects, in particular from the translation of U.S. dollars into euros.

Free cash flow AL (before dividend payments and spectrum investment) increased from EUR 16.1 billion in the prior year to EUR 19.2 billion. The following effects impacted on this development:

Net cash from operating activities increased by EUR 2.6 billion to EUR 39.9 billion. In addition to strong development of the operating business, lower cash outflows in connection with the integration of Sprint in the United States also had a positive impact.

Cash capex (before spectrum investment) decreased by EUR 0.6 billion to EUR 16.0 billion. In the United States operating segment, cash capex decreased by EUR 0.8 billion to EUR 8.2 billion, mainly as a result of higher cash outflows in the prior year for the accelerated build-out of the 5G network. In the Germany operating segment, capital expenditure totaled around EUR 4.8 billion in the reporting year, EUR 0.2 billion more than in the prior year, with much of this figure going towards the fiber-optic build-out. In the Europe operating segment, cash capex stood at EUR 1.9 billion, which was up EUR 0.1 against the prior-year level. We continue to invest here in the provision of broadband and fiber-optic technology and in 5G as part of our integrated network strategy. In the Systems Solutions operating segment, our capital expenditure stood at the prior-year level of EUR 0.2 billion.

An increase of EUR 0.2 billion in cash outflows – in particular in the Germany and United States operating segments – for the repayment of lease liabilities reduced free cash flow AL.

For further information on the statement of cash flows, please refer to Note 37 “Notes to the consolidated statement of cash flows” in the notes to the consolidated financial statements.