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 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 and other transactions.”

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

Gains resulting from deconsolidations and from the sale of stakes accounted for using the equity method were attributable to the sale of the Dutch cell tower company T‑Mobile Infra to the independently managed investment company Digital Infrastructure Vehicle (DIV) and its subsequent contribution into Cellnex NL in connection with the combination of the cell tower business in the Netherlands. Miscellaneous other operating income includes a large number of individual items accounting for marginal amounts.

For further information on the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund, please refer to the section “Changes in the composition of the Group and other transactions.”

Other operating expenses

The year-on-year decrease in impairment losses on financial assets was mainly attributable to impairment losses on customer receivables due to lowered credit ratings recognized in the first half of 2020 as a consequence of the coronavirus pandemic in the United States operating segment. Expenses for legal and audit fees primarily resulted from the business combination of T‑Mobile US and Sprint. In the prior-year period, losses from asset disposals of EUR 0.2 billion had resulted from the derecognition of billing software for postpaid customers in the United States, which had still been in development. Prior to the migration of Sprint contract customers to the T‑Mobile US billing software, it had been 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.

Depreciation, amortization and impairment losses

At EUR 13.6 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 2.3 billion higher overall in the first half of 2021 than in the prior-year period. Depreciation of property, plant and equipment increased by EUR 1.3 billion and amortization of intangible assets by EUR 0.3 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 in the consolidated group since April 1, 2020. At EUR 0.1 billion, impairment losses were EUR 0.1 billion higher than in the prior-year period. This increase was attributable, among other factors, to impairment losses resulting from ad hoc impairment testing conducted in 2020 of assets assigned to the Systems Solutions cash-generating unit.

For further information on the impairment losses recognized following ad hoc testing, please refer to the section “Selected notes to the consolidated statement of financial position.”

Profit/loss from financial activities

The loss from financial activities was unchanged against the first half of 2020 at EUR 2.2 billion, with finance costs increasing by EUR 0.3 billion to EUR 2.3 billion. This was mainly due to the financial liabilities assumed in connection with the acquisition of Sprint and the related restructuring and increase of financing. By contrast, other financial expense decreased by EUR 0.4 billion year-on-year to income of EUR 0.2 billion, mainly due to higher interest income from the measurement of provisions and liabilities, especially in the Group Headquarters & Group Services segment. Gains/losses from financial instruments remained more or less stable. Positive measurement effects resulted from the subsequent measurement of the stock options to buy shares in T‑Mobile US received from SoftBank in June 2020. By contrast, negative effects from subsequent measurement resulted, among other things, from the premature repayment of bonds and the resulting derecognition of embedded derivatives at T‑Mobile US. Overall, the share of profit/loss of associates and joint ventures accounted for using the equity method was also on a par with 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 1.3 billion was recognized in the first half of 2021. The effective tax rate of 25 % essentially reflects the shares of the different countries in profit before income taxes and their respective national tax rates. The tax rate is also reduced by the gain from the sale of shares in a shareholding in the Group Development operating segment. In the prior-year period, a tax expense of EUR 1.0 billion had been recorded despite lower profit/loss before income taxes.