6 Intangible assets

The carrying amount of intangible assets increased by EUR 13.1 billion to EUR 149.1 billion, mainly due to capital expenditure of EUR 9.6 billion, EUR 4.3 billion of which related to the acquisition of mobile spectrum in the United States operating segment. EUR 2.7 billion of this related to the acquisition of the first tranche and parts of the second tranche of spectrum licenses in the 600 MHz band in connection with the agreements between T‑Mobile US and Channel 51 described in the section “Agreements on spectrum licenses.” In addition, T‑Mobile US received spectrum licenses worth EUR 1.1 billion in transactions for the exchange of spectrum licenses described in the same section. Also in the United States operating segment, the reversal of impairment losses recognized on FCC licenses in prior years increased the carrying amount by EUR 2.6 billion. Effects of changes in the composition of the Group resulting from the acquisition of Ka’ena in the United States operating segment increased the carrying amount by EUR 1.4 billion, EUR 0.7 billion of which related to the goodwill acquired in this connection. Exchange rate effects, primarily from the translation of U.S. dollars into euros, increased the carrying amount by EUR 7.3 billion. By contrast, depreciation, amortization and impairment losses decreased the carrying amount by EUR 6.7 billion. Reclassifications of intangible assets to non-current assets and disposal groups held for sale also reduced the carrying amount by EUR 1.0 billion. These mainly related to the transactions for the exchange of spectrum licenses in the United States operating segment described in the section “Agreements on spectrum licenses.” Disposals of EUR 0.2 billion also decreased the carrying amount.

For further information on amortization and impairment losses, please refer to Note 27 “Depreciation, amortization and impairment losses.”

Agreements on spectrum licenses

T‑Mobile US consummated a number of transactions agreed with telecommunications companies for the exchange of spectrum licenses in the reporting year. The fair values of the licenses received in these transactions amounted to EUR 1.1 billion in total. The resulting overall gains of EUR 0.2 billion were included in other operating income. The licenses transferred as part of the exchange transactions, which had a carrying amount of totaling EUR 0.9 billion, were recognized in non-current assets and disposal groups held for sale after being reclassified when the agreements were concluded, and up to the point at which the transactions were consummated.

For further information, please refer to Note 5 “Non-current assets and disposal groups held for sale and liabilities directly associated with non-current assets and disposal groups held for sale.”

On July 1, 2020, T‑Mobile US and DISH Network Corporation (DISH) reached an agreement on the sale of spectrum licenses, under which DISH agreed to purchase certain 800 MHz spectrum licenses from T‑Mobile US for USD 3.6 billion (EUR 3.5 billion) On October 15, 2023, T‑Mobile US and DISH modified the agreement to include, among other changes, a non-refundable extension fee of USD 0.1 billion (EUR 0.1 billion) which DISH will pay to T‑Mobile US, as well as the requirement that the purchase of the spectrum licenses must be finalized by April 1, 2024. DISH did not exercise its purchase option by April 1, 2024. The extension fee, which was already paid on October 25, 2023, was retained in accordance with the agreement and recognized in profit or loss as other operating income in 2024. T‑Mobile US was contractually obligated to offer the licenses for sale at auction. The associated auction process ended on October 1, 2024. Since bidding did not reach the defined minimum purchase price of USD 3.6 billion by the end of the auction, T‑Mobile US was relieved of its obligation to sell the licenses. T‑Mobile US is currently exploring alternatives regarding the sale or use of the licenses.

On August 8, 2022, T‑Mobile US entered into agreements with Channel 51 License Co LLC and LB License Co, LLC (Sellers) for the acquisition of spectrum licenses in the 600 MHz band in exchange for a total cash consideration of USD 3.5 billion (EUR 3.4 billion). The licenses are to be acquired without any associated network assets. T‑Mobile US currently utilizes these licenses under an existing arrangement with the Sellers covering fixed-term spectrum leases. On March 30, 2023, the contractual parties further agreed that the transaction be divided into two separate tranches. The transfer of the remaining licenses is subject to regulatory approvals and certain other customary closing conditions. On December 29, 2023, the Federal Communications Commission (FCC) approved the transfer of the licenses in the first tranche. The first tranche was concluded on June 24, 2024. The corresponding purchase price payment of USD 2.4 billion (EUR 2.2 billion) was made on August 5, 2024. On October 22, 2024, the FCC approved the transfer of certain licenses (Dallas licenses) from the second tranche. These licenses were transferred and the associated purchase price of USD 0.5 billion (EUR 0.5 billion) paid on December 6, 2024. The transfer transaction for the remaining licenses from the second tranche is expected to be closed in 2025.

The following agreements will have an impact on the presentation of Deutsche Telekom’s results of operations and financial position in the future:

On September 12, 2023, T‑Mobile US agreed with U.S. cable network operator Comcast to acquire spectrum in the 600 MHz band in exchange for total cash consideration of between USD 1.2 billion and USD 3.3 billion (EUR 1.2 billion and EUR 3.2 billion), depending on the number of underlying licenses. The final purchase price will be determined at the time the parties make the required transfer filings with the FCC. At the same time, T‑Mobile US and Comcast have agreed exclusive leasing arrangements. The leasing rights for T‑Mobile US will apply for at least two years, regardless of whether Comcast decides to remove part of its licenses from the purchase agreement. The transaction is expected to be closed in the first half of 2028. On January 13, 2025, T‑Mobile US and Comcast entered into an amendment to the license purchase agreement pursuant to which T‑Mobile US will acquire additional spectrum. Subsequent to the amendment, the total cash consideration for the transaction is between USD 1.2 billion and USD 3.4 billion (EUR 1.2 billion and EUR 3.3 billion).

For further information, please refer to Note 42 “Other financial obligations.”

On September 10, 2024, T‑Mobile US and N77 License (N77) entered into an agreement on the sale of spectrum licenses, pursuant to which N77 has the option to purchase all or a portion of T‑Mobile US’ remaining 3.45 GHz licenses for a certain range of cash consideration. The number of licenses sold will be determined based upon the amount of committed financing granted to N77. At the reporting date, the licenses concerned had a carrying amount of USD 2.7 billion (EUR 2.6 billion). The transaction is subject to approval by the Federal Communications Commission (FCC).

Reversal of impairment losses recognized in prior years on FCC licenses in the United States operating segment. The reversal in full of impairment losses on FCC licenses previously acquired by T‑Mobile US increased the carrying amount of intangible assets by EUR 2.6 billion before deferred taxes. These FCC licenses were impaired as of September 30, 2012 following ad hoc impairment testing of the United States cash-generating unit. Regular assessments had to be made in subsequent periods to determine whether the reasons for impairment still existed – in full or in part. The fair value less costs of disposal of the United States cash-generating unit derived from the share price of T‑Mobile US, which has been listed since 2013, has significantly exceeded its carrying amount for some years now. However, the reversal is limited to the lower of the recoverable amount of the impaired spectrum licenses determined by the fair value less costs of disposal on the one hand and the acquisition cost of these licenses on the other. An initial reversal of the impairment loss in the amount of EUR 1.7 billion (before deferred taxes) was recognized in the third quarter of 2017, which was indicated back then by the results of the 600 MHz spectrum auction completed in 2017. The measurement of Sprint’s FCC licenses at fair value in connection with the purchase price allocation following the business combination of T‑Mobile US and Sprint effective April 1, 2020 indicated a further increase in the PCS licenses’ value, and resulted in a further reversal of an impairment loss of EUR 1.6 billion as of December 31, 2020. As the impairment of the FCC licenses related entirely to the PCS licenses, only these licenses were subject to the reversals of the impairment losses.

Starting in 2024, in connection with the build-out of the 5G network, PCS and AWS spectrum – both of which belong to the mid-band spectrum – have increasingly been used on the same network components. That means the two frequency bands are now ultimately interchangeable and, as such, are to be regarded as a single unit of account for the purposes of testing for reversal of impairment. Furthermore, with the conclusion of the integration of the Sprint network, the licenses acquired under that business combination are now also part of the unit of account. Overall, these developments indicated a fair value of the combined mid-band unit of account that was significantly higher than the sum of the carrying amounts. This resulted in a remeasurement of the combined PCS and AWS licenses of T‑Mobile US using the greenfield method (Level 3 input pursuant to IFRS 13), which was validated by a market value approach (Level 2 input pursuant to IFRS 13). The market approach drew on market prices from comparable auctions and secondary market transactions, as well as analyst estimates. Analyst estimates were used because they included estimated market values for the individual frequency ranges of mobile companies in the United States. Multipliers were derived from these market prices for the price in U.S. dollars per MHz per member of the population (price per MHz/pop). Based on the bandwidth of observable multipliers, a multiplier of USD 1.95 per MHz/pop was used to derive the fair value of T‑Mobile US’ PCS and AWS licenses. As a result of the remeasurement, a recoverable amount of EUR 69.8 billion was calculated for the PCS and AWS licenses. Taking the carrying amount of EUR 48.6 billion into account, the remaining amount of the impairment loss on the FCC licenses of EUR 2.6 billion was therefore reversed in full and recorded under other operating income.

Goodwill

In the reporting year, the carrying amount of goodwill in cash-generating units in the operating segments increased by EUR 1.3 billion to EUR 21.6 billion. This was the result of the following effects:

United States operating segment. The increase in goodwill of EUR 1.4 billion was due to an increase of EUR 0.7 billion from the acquisition of Ka’ena, with the remaining amount resulting from exchange rate effects from the translation of U.S. dollars to euros.

For further information on the acquisition of Ka’ena, please refer to the section “Changes in the composition of the Group and other transactions” under “Summary of accounting policies.”

Europe operating segment. Changes in goodwill in the cash-generating units Poland, Hungary, and the Czech Republic resulted from exchange rate effects.

Disclosures on annual impairment tests. As of December 31, 2024, Deutsche Telekom carried out its annual impairment tests on the goodwill and intangible assets with an indefinite useful life (in particular, FCC licenses in the United States) assigned to the cash-generating units.

The recoverable amounts to be identified for the impairment tests were largely determined on the basis of the fair values less costs of disposal. With the exception of the United States cash-generating unit (Level 1 measurement), these figures were calculated using the net present value method. The main parameters are shown in the following table. The impairment tests on goodwill as of December 31, 2024 did not result in any need for impairment in the cash-generating units. Likewise no need for impairment had been identified in the cash-generating units at the reporting date of the prior year.

The recoverable amounts at the cash-generating units Croatia, Montenegro, and North Macedonia were determined using the value in use. The market price of an active and liquid market (share price) of T‑Mobile US was used to determine the fair value less costs of disposal in the case of the United States cash-generating unit. The measurements of all other cash-generating units, as for the value in use, are founded on projections for a ten-year projection period that are based on financial plans that have been approved by management and are also used for internal purposes. The chosen planning horizon reflects the assumptions for short- to medium-term market developments and is selected to achieve a steady state in the business outlook that is necessary for calculating the perpetual annuity. This steady state can only be established based on this planning horizon, in particular due to the sometimes long investment cycles in the telecommunications industry and the investments planned and expected in the long run to acquire and extend the rights of spectrum use. Cash flows beyond the internal mid-term planning are extrapolated using appropriate growth rates defined separately for each cash-generating unit. These growth rates are based on real growth and inflation expected in the long term for the countries in which the respective unit operates. To achieve the sustainable growth rates set for the period of the perpetual annuity, additional sustainable investments derived specifically for each cash-generating unit are taken into account. The key assumptions on which management has based its determination of the recoverable amount include the following assumptions that were primarily derived from internal sources and are based on past experience and extended to include internal expectations, and that are underscored by external market data and estimates: development of revenue, customer acquisition and retention costs, churn rates, capital expenditure, market share, and growth rates. Discount rates are determined on the basis of external data derived from the market, taking account of the market and country risks associated with the cash-generating unit. Any significant future changes in the aforementioned assumptions would have an impact on the fair values of the cash-generating units. Changes in the assumptions may have a negative impact, as a result of future macroeconomic trends, continued intense competition, further possible legislation changes (e.g., as part of national austerity programs), and regulatory intervention.

For further information on the determination of the recoverable amounts of the cash-generating units, please refer to the section “Accounting policies” under “Summary of accounting policies.”

The following table provides an overview of the main factors affecting the measurement and the classification of the input parameters (levels) used to determine the recoverable amounts in accordance with IFRS 13.

The sensitivity analyses for the need for impairment resulting from a change in the main parameters affecting measurement did not result in any need for impairment for any cash-generating unit to which goodwill is allocated. Changes of plus or minus 50 basis points in the discount rate and in the sustainable growth rate, and of 5 percentage points in net cash flows were each analyzed separately.

Impairment losses on non-current assets in the Europe operating segment. In the reporting year, impairment losses on property, plant and equipment and intangible assets totaling EUR 88 million were recognized. These related to the Romania cash-generating unit, which operates in the structurally challenging and highly competitive Romanian market. The fair value less costs of disposal was calculated at EUR 18 million, which is EUR 88 million lower than the carrying amount of the cash-generating unit. The fair value was derived on the basis of purchase offers. EUR 71 million of the impairment loss related to property, plant and equipment and EUR 17 million to intangible assets.

Deutsche Telekom had commitments for the acquisition of intangible assets in the amount of EUR 6.0 billion (December 31, 2023: EUR 8.2 billion) as of the reporting date. The majority of this related to commitments entered into by T‑Mobile US.

Expenditure on research and development recognized as an expense by Deutsche Telekom amounted to EUR 21.3 million in the reporting year (2023: EUR 25.1 million).