Financial position of the Group

Total assets amounted to EUR 165.5 billion as of March 31, 2019, up by EUR 20.1 billion against December 31, 2018. The recognition of right-of-use assets and current and non-current lease liabilities resulting from the mandatory first-time application of the IFRS 16 “Leases” accounting standard had a significant impact.

The total carrying amounts of intangible assets and property, plant and equipment were EUR 0.4 billion lower year-on-year. Capital expenditure totaling EUR 3.6 billion – especially to upgrade and build out the network in our United States operating segment and in connection with the broadband/fiber-optic build-out, the IP transformation, and mobile infrastructure in the Germany and Europe operating segments – increased total assets. Effects of changes in the composition of the Group totaling EUR 1.0 billion, mainly due to the acquisition of Tele2 Netherlands in the Group Development operating segment, and positive exchange rate effects totaling EUR 1.0 billion, particularly from the translation of U.S. dollars into euros, also increased the carrying amount. Depreciation of property, plant and equipment and amortization of intangible assets reduced the carrying amount by EUR 3.3 billion and disposals by EUR 0.1 billion. Rights to use the underlying leased assets were recognized in the amount of EUR 16.8 billion as of March 31, 2019; until December 31, 2018, these had been recorded in the amount of EUR 2.5 billion under property, plant and equipment as assets from finance leases. Trade and other receivables remained at the same level as at year-end 2018. Higher cash and cash equivalents in particular increased the carrying amount of other assets.

On the liabilities side, current and non-current financial liabilities increased by EUR 3.7 billion compared with the end of 2018. This increase is mainly due to the dividend of EUR 3.3 billion resolved by the shareholders’ meeting on March 28, 2019 and paid out to the shareholders of Deutsche Telekom AG at the beginning of April 2019. In addition, Deutsche Telekom AG issued euro bonds with a total volume of EUR 1.8 billion and pound sterling bonds with a total volume of GBP 0.4 billion (EUR 0.5 billion) in the first quarter of 2019. Scheduled repayments of promissory notes in the amount of EUR 0.2 billion in the first quarter of 2019 had an offsetting effect. The net change of EUR 0.5 billion in commercial paper and net short-term borrowings of EUR 0.6 billion also reduced the carrying amount of the financial liabilities. The transition to IFRS 16 resulted in finance lease liabilities being reclassified from financial liabilities to lease liabilities. Based on the carrying amounts as of December 31, 2018, this reclassification reduced financial liabilities by EUR 2.5 billion. The current and non-current lease liabilities to be recognized since the first-time application of IFRS 16 amounted to EUR 18.7 billion as of March 31, 2019. Trade and other payables decreased by EUR 0.5 billion due to the reduction in the level of liabilities, mainly in the Europe and Germany operating segments. The level of liabilities in the United States operating segment increased. Provisions for pensions and other employee benefits increased by EUR 0.2 billion compared with December 31, 2018 due to interest rate adjustments. Other liabilities were reduced in particular by liabilities of EUR 2.2 billion from straight-line leases, mainly for cell sites, in the United States operating segment that were no longer required to be reported under IFRS 16.

Shareholders’ equity decreased by EUR 0.7 billion as of December 31, 2018 to EUR 42.8 billion, due in particular to the resolved dividend of EUR 3.3 billion paid out by Deutsche Telekom AG. The subsequent measurement of equity instruments directly in equity and the remeasurement of defined benefit plans also reduced the carrying amount by EUR 0.2 billion in each case. By contrast, the profit of EUR 1.3 billion increased shareholders’ equity. The transition to the IFRS 16 accounting standard likewise increased the carrying amount. The cumulative effect of this was an increase of EUR 0.3 billion in retained earnings (including shares attributable to non-controlling interests) recognized directly in equity as of January 1, 2019. Currency translation effects of EUR 0.5 billion recognized directly in equity and capital increases from share-based payments of EUR 0.1 billion increased shareholders’ equity. The acquisition of Tele2 Netherlands in the Group Development operating segment resulted in effects of EUR 0.7 billion, increasing shareholders’ equity.

For further information on the statement of financial position, please refer to the interim consolidated financial statements.

Changes in net debt

millions of €

Other effects of EUR 0.9 billion include, among other factors, effects from the measurement of financial instruments, financing options under which the payments for trade payables become due at a later point in time by involving banks in the process, and the recognition of liabilities for the acquisition of broadcasting rights. For more information on net debt, please refer to the disclosures on the reconciliation of alternative performance measures in the section “Additional information.”

Free cash flow AL. Free cash flow AL in the Group before dividend payments and spectrum investment increased by EUR 0.2 billion year-on-year to EUR 1.6 billion.

Net cash from operating activities increased by EUR 1.7 billion year-on-year to EUR 6.0 billion. Due to the first-time application of the IFRS 16 accounting standard, the principal repayment portion of lease payments is presented in net cash used in/from financing activities. These payments totaling EUR 0.8 billion were taken into account in the calculation of free cash flow AL. In the first quarter of 2018, the cash outflows in connection with operating leases reduced net cash from operating activities. The strong performance of the United States operating segment significantly increased net cash from operating activities. Factoring agreements – especially in the Systems Solutions operating segment – resulted in positive effects of EUR 0.3 billion on net cash from operating activities in the reporting period. The effect from factoring agreements in the prior-year period also totaled EUR 0.3 billion. In addition, in the prior-year period dividends received in the amount of EUR 0.2 billion had had an increasing effect. Net cash from operating activities was also reduced by EUR 0.1 billion higher net interest payments.

Of the EUR 0.6 billion year-on-year increase in cash capex (before spectrum investment), EUR 0.5 billion is attributable to the United States operating segment, mainly due to the accelerated infrastructure build-out for the 600 MHz spectrum, laying the groundwork for 5G. Other capital expenditures were focused primarily on the Germany and Europe operating segments and went toward the build-out and upgrade of our networks.

For further information on the statement of cash flows, please refer to the interim consolidated financial statements.