Financial position of the Group

Total assets/total liabilities and shareholders’ equity amounted to EUR 173.6 billion as of March 31, 2020, up by EUR 3.0 billion against December 31, 2019.

On the assets side, trade receivables amounted to EUR 10.6 billion, down slightly by EUR 0.3 billion against the 2019 year-end. In the United States operating segment, receivables declined in connection with the falling number of new contracts concluded for Equipment Installment Plans (EIP) on account of the temporary store closures as a consequence of the coronavirus pandemic. By contrast, receivables increased in the Germany operating segment as a result of the contractual termination of a revolving factoring agreement. The carrying amounts of intangible assets and property, plant and equipment were up by EUR 0.8 billion against the end of 2019. Capital expenditure totaling EUR 3.4 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. Additions of EUR 0.2 billion to intangible assets related to advance payments for the acquisition of 5G licenses in the United States operating segment in connection with the auction of mobile licenses in the 37 GHz, 39 GHz, and 47 GHz bands, which ended in March 2020. In addition, positive exchange rate effects, primarily from the translation of U.S. dollars into euros, increased the carrying amount by EUR 0.9 billion. Depreciation of property, plant and equipment and amortization of intangible assets reduced the carrying amounts by EUR 10.1 billion and disposals by EUR 0.3 billion. Rights to use lease assets were recognized in the amount of EUR 18.1 billion as of March 31, 2020. Other assets increased primarily on the back of the rise in current and non-current other financial assets. EUR 1.2 billion of this increase was attributable to the increase in positive fair values from interest rate swaps in fair value hedges and is primarily due to the significant decline in the interest rate level. Furthermore, EUR 0.5 billion of the increase was due to the depositing of further cash collateral in connection with forward-payer swaps concluded for borrowings at T‑Mobile US. In addition, other financial assets increased by EUR 0.2 billion in connection with the change in approach as of the start of the third quarter of 2019 of capitalizing grants receivable from funding projects for the broadband build-out in Germany upon conclusion of the contract. Negative effects from the measurement of embedded derivatives at T‑Mobile US of EUR 0.3 billion had an offsetting effect. An increase of EUR 0.3 billion in inventories, mainly due to the stockpiling of higher-priced smartphones in the United States operating segment and temporary store closures in the United States as a consequence of the coronavirus pandemic, increased the carrying amount. Cash and cash equivalents decreased by EUR 1.3 billion.

On the liabilities and shareholders’ equity side, current and non-current financial liabilities increased by EUR 2.1 billion compared with the end of 2019 to a total of EUR 68.4 billion. This was largely attributable to the bonds issued by Deutsche Telekom AG in various currencies in the first quarter of 2020, with a total volume of EUR 1.6 billion when translated into euros. In connection with the increase in positive fair values from interest rate swaps in fair value hedges, the carrying amount of bonds and other securitized liabilities also increased by EUR 1.2 billion. Scheduled repayments of U.S. dollar bonds totaling USD 1.3 billion (EUR 1.1 billion), euro bonds totaling EUR 0.7 billion, and a zero-coupon bond of EUR 0.4 billion, had an offsetting effect. A Deutsche Bundespost treasury note (zero-coupon bond) issued in the past with a carrying amount of EUR 1.4 billion fell due on December 31, 2019 and was repaid on that date by a bank using its own funds. The payment by Deutsche Telekom AG to this bank was made on the following bank working day of January 2, 2020. Financial liabilities increased by EUR 1.5 billion in connection with collateral received for derivative financial instruments. The measurement of forward-payer swaps concluded for borrowings at T‑Mobile US gave rise to a change in the carrying amount of EUR 1.0 billion, which also increased financial liabilities. EUR 0.9 billion of this resulted from a remeasurement loss recognized directly in equity. Current and non-current lease liabilities totaled EUR 19.7 billion as of March 31, 2020. Trade and other payables decreased by EUR 0.7 billion to EUR 8.7 billion due to the reduction in the level of liabilities, mainly in the Europe, United States, and Germany operating segments. Provisions for pensions and other employee benefits increased by EUR 1.0 billion overall compared with December 31, 2019, mainly due to the current upheavals on the financial markets and the associated sharp decline in the prices of plan assets. Interest rate adjustments in the first quarter of 2020 had an offsetting effect. Other liabilities increased compared with December 31, 2019, due in particular to higher current and non-current other liabilities. EUR 0.2 billion of this increase resulted from higher liabilities to the Civil Service Pension Fund in connection with early retirement arrangements for civil servants. In addition, other liabilities increased by EUR 0.1 billion due to existing build-out obligations in connection with grants receivable from funding projects for the broadband build-out in the Germany operating segment.

Shareholders’ equity decreased from EUR 46.2 billion as of December 31, 2019 to EUR 45.9 billion. The carrying amount was reduced by EUR 1.0 billion due to the remeasurement of defined benefit plans and by EUR 0.9 billion due to losses from hedging instruments – mainly in connection with forward-payer swaps concluded for borrowings at T‑Mobile US. Profit after taxes of EUR 1.1 billion, currency translation effects recognized directly in equity of EUR 0.2 billion, income taxes relating to components of other comprehensive income of EUR 0.2 billion, and capital increases from share-based payment of EUR 0.1 billion had an increasing effect on shareholders’ equity.

For further information on the statement of financial position, please refer to the section “Selected notes to the consolidated statement of financial position” in the interim consolidated financial statements.

Changes in net debt

millions of €

Other effects of EUR 0.7 billion included effects from the measurement of embedded derivatives at T‑Mobile US and a large number of smaller effects.

Free cash flow AL (before dividend payments and spectrum investment) decreased by EUR 0.3 billion year-on-year to EUR 1.3 billion. The following effects impacted on this development:

Net cash from operating activities decreased by EUR 2.0 billion year-on-year to EUR 4.0 billion. This decline is related in part to the repayment of a Deutsche Bundespost treasury note (zero-coupon bond) issued by Deutsche Telekom AG in 1990 with a nominal amount of EUR 0.2 billion, which fell due on December 31, 2019 and was repaid on that date by a bank using its own funds. The payment by Deutsche Telekom AG to this bank was made on the following bank working day of January 2, 2020. The interest portion amounted to EUR 1.2 billion. In addition, the repayment of EUR 0.4 billion in the first quarter of 2020 for another zero-coupon bond also had a negative impact. The interest portion amounted to EUR 0.4 billion. The interest payments for the two zero-coupon bonds are not taken into account when determining free cash flow AL (before dividend payments and spectrum investment). Excluding interest payments for zero-coupon bonds, net cash from operating activities decreased by EUR 0.4 billion. Our contractual termination of a revolving factoring agreement in the Germany operating segment resulted in negative effects of EUR 0.7 billion on net cash from operating activities in the reporting period. The continuing strong performance of the operating segments had an increasing effect on net cash from operating activities.

Cash capex (before spectrum investment) decreased by EUR 0.3 billion compared with the prior-year period. In the Germany operating segment, the decline is mainly a result of the changed accounting treatment of grants receivable from funding projects for the broadband build-out as of the start of the third quarter of 2019. Since then, the grants received and payments made for the build-out are no longer part of cash capex. In the United States operating segment, cash capex decreased – on a U.S. dollar basis – mainly due to higher capital expenditures in the first quarter of 2019 related to laying the initial groundwork for 5G.

The increase in repayments of lease liabilities was due in particular to payments for new leases concluded in 2019 in the United States operating segment for network technology and cell sites in connection with the 5G network build-out.

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