Selected notes to the consolidated statement of financial position

Trade receivables

At EUR 14.0 billion, trade receivables increased by EUR 0.4 billion against the 2020 year-end level. The increase resulted from higher receivables in the United States operating segment due to the reporting date, and exchange rate effects, especially from the translation of U.S. dollars to euros. Lower receivables in the Germany operating segment had an offsetting effect.

Contract assets

At EUR 2.0 billion as of the reporting date, the carrying amount of contract assets remained unchanged against December 31, 2020. Contract assets relate to receivables that have not yet legally come into existence, which arise from the earlier – as compared to billing – recognition of revenue, in particular from the sale of goods and merchandise. Furthermore, receivables from long-term construction contracts are recognized under contract assets.

Inventories

The carrying amount of inventories decreased by EUR 0.6 billion compared to December 31, 2020 to EUR 2.1 billion, mainly due to sales of high-priced mobile terminal equipment as a result of a marketing campaign in the United States operating segment. By contrast, positive exchange rate effects, mainly from the translation from U.S. dollars into euros, increased the carrying amount.

Intangible assets

The carrying amount of intangible assets increased by EUR 10.4 billion to EUR 128.4 billion, primarily due to the following effects: additions of EUR 10.6 billion, resulting mainly from the conclusion of the FCC C-band auction in the United States, where T‑Mobile US purchased 142 licenses for EUR 7.8 billion (USD 9.3 billion). In the Europe operating segment, licenses were purchased for a total value of EUR 0.2 billion. The 5G licenses acquired at auction in November 2020 by T‑Mobile Czech Republic were purchased in the first half of 2021 for EUR 0.1 billion. In addition, proceedings to re-award 900 and 1,800 MHz spectrum licenses in Hungary were held on January 28, 2021 and concluded the same day. Magyar Telekom acquired spectrum licenses for EUR 0.1 billion. Positive exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 3.1 billion, while amortization and impairment losses of EUR 3.3 billion had an offsetting effect.

As part of the realignment of the B2B telecommunications business, the assets and liabilities assigned to the relevant business areas were transferred to the Germany operating segment in September 2020, primarily from the Systems Solutions and Europe operating segments. The realignment of the B2B telecommunications business in combination with the effects of the coronavirus pandemic in the third quarter of 2020 triggered ad hoc impairment testing of the assets assigned to the Systems Solutions cash-generating unit, which identified a deterioration in the business outlook for IT operations. As a consequence, impairment losses were recognized on intangible assets and property, plant and equipment in the Systems Solutions operating segment and on intangible assets in the Group Headquarters & Group Services segment. In the first half of 2021, this resulted in impairment losses of EUR 47 million on intangible assets and property, plant and equipment under development and under construction.

For further information on the impairment losses, please refer to Note 6 “Intangible assets” in the 2020 Annual Report.

Property, plant and equipment

The carrying amount of property, plant and equipment decreased by EUR 0.5 billion compared to December 31, 2020 to EUR 60.4 billion. Additions of EUR 6.8 billion to upgrade and build out the network and acquire mobile devices in our United States operating segment and in connection with the broadband/fiber-optic build-out and mobile infrastructure build-out in the Germany and Europe operating segments increased the carrying amount. Positive exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 0.9 billion, while depreciation and impairment losses totaling EUR 7.3 billion and disposals of EUR 0.9 billion had an offsetting effect.

Right-of-use assets

The carrying amount of the right-of-use assets increased by EUR 0.3 billion compared with December 31, 2020 to EUR 30.6 billion, mainly due to the following effects: The carrying amount was increased by additions of EUR 2.7 billion, partly as a result of a sale-and-leaseback transaction concluded after the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund, and by positive exchange rate effects of EUR 0.8 billion, primarily from the translation of U.S. dollars into euros. Depreciation and impairment losses totaling EUR 3.0 billion and disposals of EUR 0.2 billion had a reducing effect.

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.”

Capitalized contract costs

As of June 30, 2021, the carrying amount of capitalized contract costs was up by EUR 0.1 billion against the level of December 31, 2020 to EUR 2.3 billion. These assets mainly relate to the Germany, United States, and Europe operating segments.

Investments accounted for using the equity method

The carrying amount of investments accounted for using the equity method increased from EUR 0.5 billion on December 31, 2020 to EUR 0.9 billion, mainly as a result of the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund. As a result of the transaction, 37.65 % of the shares in Cellnex Netherlands B.V. with a carrying amount of EUR 0.4 billion were included in the Group Development operating segment in the consolidated financial statements using the equity method.

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 financial assets

The carrying amount of current and non-current other financial assets decreased by EUR 0.6 billion compared with December 31, 2020 to EUR 9.1 billion. The carrying amount of derivatives with a hedging relationship decreased by EUR 0.5 billion to EUR 1.5 billion, mainly due to the decrease in positive fair values from interest rate swaps in fair value hedges, which is primarily the result of a rise in the interest rate level. In connection with cash collateral, in particular in connection with the conclusion of the FCC C-band auction in the United States operating segment, the carrying amount decreased by EUR 0.4 billion. The carrying amount of derivatives without a hedging relationship increased by a net effect of EUR 0.1 billion to EUR 2.1 billion. Positive measurement effects resulted from the subsequent measurement of the stock options to buy shares in T‑Mobile US in the amount of EUR 0.4 billion received from SoftBank in June 2020 and from energy forward agreements embedded in contracts totaling EUR 0.2 billion. By contrast, negative measurement effects in the amount of EUR 0.5 billion from the subsequent measurement of embedded derivatives at T‑Mobile US resulted in part from the premature repayment of bonds. In addition, receivables resulting from grants still to be received from funding projects for the broadband build-out in Germany increased the carrying amount by EUR 0.2 billion.

Non-current assets and disposal groups held for sale

The carrying amount of non-current assets and disposal groups held for sale decreased by EUR 0.4 billion compared with December 31, 2020 to EUR 0.7 billion, mainly in connection with the sale of the Dutch company T‑Mobile Infra B.V. as of June 1, 2021. As of June 30, 2021, non-current assets and disposal groups held for sale included the assets of Telekom Romania Communications S.A., which runs the Romanian fixed-network business in the Europe operating segment. Both these companies were classified as held for sale as of December 31, 2020 on account of the specific intention to sell them.

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.”

Financial liabilities and lease liabilities

The following table shows the composition and maturity structure of financial liabilities as of June 30, 2021:

The carrying amount of current and non-current financial liabilities increased by EUR 2.6 billion compared with year-end 2020 to EUR 109.7 billion, primarily due to the factors described below. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 1.9 billion.

The carrying amount of bonds and other securitized liabilities increased by EUR 4.0 billion. The main factors in this increase were senior notes issued in the reporting period by T‑Mobile US with a total volume of USD 9.8 billion (EUR 8.2 billion) with terms ending between 2026 and 2031 and bearing interest of between 2.25 % and 3.5 %. The carrying amount was also increased by AUD bonds with a volume of AUD 0.1 billion (EUR 0.1 billion) issued by Deutsche Telekom AG and euro bonds with a volume of EUR 0.1 billion. The early repayment by T‑Mobile US in the reporting period of bonds with a volume of USD 4.8 billion (EUR 4.0 billion) with terms originally ending between 2023 and 2026 and bearing interest of between 5.125 % and 6.5 % as well as scheduled repayments in the Group of euro bonds of EUR 1.4 billion had a contrasting effect. The carrying amount of bonds and other securitized liabilities increased by EUR 1.6 billion due to exchange rate effects, especially from the translation of U.S. dollars into euros.

The carrying amount of liabilities to banks decreased by EUR 0.8 billion compared with December 31, 2020 to EUR 4.5 billion, mainly due to scheduled repayments of EUR 0.6 billion made in the reporting period and a decline of EUR 0.3 billion in connection with factoring in the United States operating segment.

The liabilities with the right of creditors to priority repayment in the event of default of EUR 3.5 billion (December 31, 2020: EUR 3.9 billion) relate primarily to bonds issued by Sprint. Collateral was provided for these bonds, hence they constitute a separate class of financial instruments. Repayments in the reporting period in the amount of EUR 0.5 billion when translated into euros reduced the carrying amount. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.1 billion.

The carrying amount of other interest-bearing liabilities decreased by EUR 0.2 billion compared with December 31, 2020 to EUR 7.0 billion. The carrying amount of other interest-bearing liabilities decreased by a total of EUR 0.3 billion in connection with collateral received for derivative financial instruments. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.1 billion.

For further information on collateral, please refer to the section “Disclosures on financial instruments.”

The carrying amount of derivative financial liabilities decreased by EUR 0.3 billion overall to EUR 0.5 billion, mainly in connection with positive measurement effects in the reporting period.

For further information on derivative financial liabilities, please refer to the section “Disclosures on financial instruments.”

The carrying amount of current and non-current lease liabilities increased by EUR 0.5 billion to EUR 33.3 billion compared with December 31, 2020. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.9 billion. The sale-and-leaseback transaction concluded in connection with the combination of the cell tower business in the Netherlands and the set-up of the infrastructure fund also increased the carrying amount by EUR 0.4 billion. In particular, the decommissioning of former Sprint cell sites and the closure of some former Sprint shops in the United States operating segment had an offsetting effect. Overall, lease liabilities in the amount of EUR 5.0 billion are due within one year.

Trade and other payables

The carrying amount of trade and other payables decreased by EUR 1.4 billion to EUR 8.3 billion, due in particular to lower liabilities to terminal equipment vendors and declines in liabilities for purchased services in the United States operating segment. Liabilities also decreased in the Europe operating segment. By contrast, exchange rate effects, primarily from the translation of U.S. dollars into euros, increased the carrying amount.

Provisions for pensions and other employee benefits

The carrying amount of provisions for pensions and other employee benefits decreased by EUR 1.8 billion as of December 31, 2020 to EUR 5.9 billion, mainly due to an increase in the share prices of plan assets and interest rate adjustments. All this resulted in an actuarial gain of EUR 1.6 billion from the remeasurement of defined benefit plans to be recognized directly in equity.

In the first quarter of 2021, the risk benefits (death in the active phase and/or disability) for employees not covered by collective agreements in Germany were restructured, as had already been done for employees covered by collective agreements in the fourth quarter of 2020. As a result of the change from an annual (pro rata) contribution to payment of a lump sum, the employer will in future grant the risk benefit irrespective of the employee’s length of service with the company. Future risk benefit payments will thus directly be recognized as expenses in the payout year. Provisions of EUR 0.1 billion recognized according to the previous rules were released against a reduction in expenses in the first quarter of 2021.

For further information on the Global Pension Policy and a description of the plan, please refer to Note 15 “Provisions for pensions and other employee benefits” in the 2020 Annual Report.

Current and non-current other provisions

The carrying amount of current and non-current other provisions decreased by EUR 0.5 billion compared with the end of 2020 to EUR 8.6 billion. This decrease was mainly due to the performance-related compensation components for the prior year paid to employees in the first half of 2021.

Other liabilities

The carrying amount of current and non-current other liabilities increased by EUR 0.4 billion to EUR 6.1 billion. Liabilities due to existing build-out obligations in connection with grants still to be received from funding projects for the broadband build-out in Germany increased by EUR 0.1 billion. In addition, negative exchange rate effects, mainly from the translation of euros into U.S. dollars, increased the carrying amount.

Contract liabilities

The carrying amount of current and non-current contract liabilities increased by EUR 0.2 billion compared with December 31, 2020 to EUR 2.3 billion. These mainly comprise deferred revenues.

Liabilities directly associated with non-current assets and disposal groups held for sale

The carrying amount of liabilities directly associated with non-current assets and disposal groups held for sale decreased by EUR 0.2 billion compared with December 31, 2020 to EUR 0.3 billion, mainly in connection with the sale of the Dutch company T‑Mobile Infra B.V. as of June 1, 2021. As of June 30, 2021, the carrying amounts include the liabilities of Telekom Romania Communications S.A., which operates the Romanian fixed-network business in the Europe operating segment. Both these companies were classified as held for sale as of December 31, 2020 on account of the specific intention to sell them.

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.”

Shareholders’ equity

The carrying amount of shareholders’ equity increased from EUR 72.6 billion as of December 31, 2020 to EUR 77.0 billion. This growth was attributable to profit of EUR 3.8 billion and to the increase in other comprehensive income of EUR 3.7 billion, primarily as a result of currency translation effects of EUR 2.1 billion recognized directly in equity and the remeasurement of defined benefit plans accounting for EUR 1.6 billion, as well as gains from hedging instruments of EUR 0.2 billion. By contrast, income taxes relating to components of other comprehensive income of EUR 0.3 billion had a negative impact on other comprehensive income. Shareholders’ equity was reduced in connection with dividend payments for the 2020 financial year to Deutsche Telekom AG shareholders in the amount of EUR 2.8 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion.

Primarily as a result of the business combination of T‑Mobile US and Sprint in the prior year, the share of shareholders’ equity attributable to non-controlling interests increased substantially. The following table shows the development of transactions with owners and the change in the composition of the Group in the statement of changes in equity: