Selected notes to the consolidated income statement

Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. As a result of the change in the composition of the Group during the course of the year, the remeasured assets and liabilities were recognized as of this date, and all income and expenses generated from the date of first-time consolidation are included in Deutsche Telekom’s consolidated income statement. This affects the comparability of the figures for the current period with the prior-year figures.

For further information on the business combination of T‑Mobile US and Sprint, please refer to the section “Changes in the composition of the Group.”

Net revenue

Net revenue breaks down into the following revenue categories:

For further information on changes in net revenue, please refer to the section “Development of business in the Group” in the interim Group management report.

Other operating income

Miscellaneous other operating income includes a transaction fee from SoftBank of EUR 0.3 billion, which T‑Mobile US received in return for support in the immediate sale by SoftBank of T‑Mobile US shares. In addition, miscellaneous other operating income includes a large number of individual items accounting for marginal amounts.

Other operating expenses

The increase in impairment losses on financial assets is mainly attributable to impairment losses on customer receivables due to lowered credit ratings as a consequence of the coronavirus pandemic in the United States operating segment. Expenses for legal and audit fees increased, mainly in connection with the business combination of T‑Mobile US and Sprint. Losses from asset disposals of EUR 0.2 billion resulted from the derecognition of billing software for postpaid customers in the United States, which was still in development. Due to the migration of Sprint contract customers to the T‑Mobile US billing software, it was decided that this software was not suitable for the joint customer base and would not be put into operation. Miscellaneous other operating expenses include a large number of individual items accounting for marginal amounts.

For further information on the business combination of T‑Mobile US and Sprint, please refer to the section “Changes in the composition of the Group.”

Depreciation, amortization and impairment losses

At EUR 11.4 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 2.8 billion higher overall than in the prior-year period. This increase is due in particular to depreciation of EUR 1.6 billion and amortization of EUR 0.6 billion. Depreciation of right-of-use assets increased by EUR 0.6 billion. These increases are all largely due to Sprint, which has been included since April 1, 2020.

Profit/loss from financial activities

The loss from financial activities increased by EUR 1.3 billion compared with the first half of 2019 to EUR 2.2 billion. This increase is primarily due to a EUR 0.8 billion increase in finance costs to EUR 2.0 billion, mainly due to the financial liabilities recognized in connection with the acquisition of Sprint and the restructuring begun in connection with this acquisition and related increase in financing, including the handling charges incurred for a briefly utilized bridge loan facility. Other financial income decreased by EUR 0.4 billion year-on-year to an expense of EUR 0.2 billion, mainly due to the decrease of EUR 0.3 billion in gains from financial instruments to losses of EUR 0.1 billion. Overall, the share of profit/loss of associates and joint ventures accounted for using the equity method was slightly down on the prior-year period.

For further information on embedded derivatives at T‑Mobile US, please refer to the section “Disclosures on financial instruments.”

Income taxes

A tax expense of EUR 1.0 billion was recognized in the first half of 2020. The effective tax rate of 29 percent essentially reflects the shares of the different countries in profit before income taxes and their respective national tax rates. A tax expense of EUR 1.0 billion was also recorded in the prior-year period. With somewhat higher profit before income taxes, the tax rate stood at 28 percent.