Financial position of the Group

Total assets/total liabilities and shareholders’ equity amounted to EUR 270.5 billion as of June 30, 2021, up by EUR 5.6 billion against December 31, 2020. This increase is mainly attributable to investments in intangible assets for spectrum acquisition in the United States and Europe operating segments. In addition, exchange rate effects, especially from the translation of U.S. dollars into euros, increased total assets/total liabilities and shareholders’ equity. This effect was offset in part by a decline in cash and cash equivalents.

On the assets side, trade receivables amounted to EUR 14.0 billion, up by EUR 0.4 billion against the 2020 year-end. The increase resulted from higher receivables in the United States operating segment due to the reporting date and exchange rate effects. Lower receivables in the Germany operating segment had an offsetting effect.

Intangible assets and property, plant and equipment increased by EUR 9.8 billion to total EUR 188.9 billion. This is mainly due to the conclusion of the C-band auction in the United States, at which T‑Mobile US purchased 142 licenses for around EUR 7.8 billion (USD 9.3 billion). Furthermore, in the Europe operating segment, T‑Mobile Czech Republic purchased 5G licenses for EUR 0.1 billion at auction in November 2020. In Hungary, proceedings to re-award 900 and 1,800 MHz spectrum licenses were held on January 28, 2021 and concluded the same day. Magyar Telekom acquired spectrum licenses for EUR 0.1 billion. Capital expenditure to upgrade and build out the network and acquire mobile terminal equipment in our United States operating segment and in connection with the broadband/fiber-optic build-out and mobile infrastructure in the Germany and Europe operating segments also increased the carrying amount. Positive exchange rate effects additionally increased the carrying amount by EUR 3.9 billion. Depreciation, amortization and impairment losses reduced the net carrying amounts by EUR 10.7 billion in total, as did disposals of EUR 1.0 billion.

Right-of-use assets increased by EUR 0.3 billion year-on-year 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. 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 on the set-up of an infrastructure fund, please refer to the section “Changes in the composition of the Group and other transactions” in the interim consolidated financial statements.

Current and non-current financial assets decreased by EUR 0.6 billion 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 of originated loans and receivables 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 received from SoftBank in June 2020 and from energy forward agreements embedded in contracts. By contrast, negative measurement effects from the subsequent measurement of embedded derivatives at T‑Mobile US resulted in part from the premature repayment of bonds. In addition, the carrying amount increased by EUR 0.2 billion due to grants still to be received from funding projects for the broadband build-out in Germany.

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 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.

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

Other assets increased by EUR 0.3 billion to EUR 10.7 billion, primarily due to the increase in the carrying amount of investments accounted for using the equity method from EUR 0.5 billion 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 NL 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. Exchange rate effects also increased the carrying amount.

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

On the liabilities and shareholders’ equity side, current and non-current financial liabilities increased by EUR 2.6 billion compared with the end of 2020 to a total of EUR 109.7 billion. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 1.9 billion. T‑Mobile US issued senior notes in the first half of 2021 with a total volume of USD 9.8 billion (EUR 8.2 billion) and made early repayments on bonds with a total volume of USD 4.8 billion (EUR 4.0 billion). In addition, euro bonds with a volume of EUR 1.4 billion were repaid on schedule in the Group. Financial liabilities decreased by EUR 0.3 billion in connection with collateral received for derivative financial instruments.

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. 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.

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 increased the carrying amount.

Provisions for pensions and other employee benefits decreased by EUR 1.8 billion compared with 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.

Liabilities directly associated with non-current assets and disposal groups held for sale decreased from EUR 0.4 billion compared with December 31, 2020 to EUR 0.3 billion, mainly in connection with the sale of the Dutch company T‑Mobile Infra as of June 1, 2021.

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

Other liabilities increased by EUR 0.8 billion compared to December 31, 2020 to EUR 9.2 billion, mainly due to an increase of EUR 0.4 billion in other liabilities, partly in connection with grants still to be received from funding projects for the broadband build-out in Germany as well as exchange rate effects.

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.

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 39 million included a large number of smaller effects.

Free cash flow AL (before dividend payments and spectrum investment) increased from EUR 3.7 billion in the prior-year period to EUR 5.4 billion. The following effects impacted on this development:

Net cash from operating activities increased by EUR 3.5 billion. The strong performance of the operating segments both in the United States and outside of the United States had a positive effect on net cash from operating activities. In addition, the increase is attributable to the business combination of T‑Mobile US and Sprint effective April 1, 2020. The increase was partially offset in particular by a net increase of EUR 0.6 billion in interest payments, mainly as a result of the financial liabilities recognized and the restructuring begun in connection with the acquisition of Sprint, and the related increase in financing. Income tax payments increased by EUR 0.3 billion compared with the prior-year period. Factoring agreements of EUR 0.1 billion had a positive impact on net cash from operating activities in the first half of 2021. In the prior-year period, factoring agreements had had negative effects of EUR 0.5 billion, mainly as a result of the contractual termination of a revolving factoring agreement in the Germany operating segment.

Cash capex (before spectrum investment) increased from EUR 7.0 billion to EUR 8.6 billion, mainly in the United States operating segment (EUR 1.8 billion) as a result of the inclusion of Sprint as well as the ongoing build-out of the 5G network. A decline of EUR 0.3 billion in cash capex in the Germany operating segment due to lower capital expenditure had an offsetting effect: construction measures planned for 2021 were brought forward to the fourth quarter of 2020 and investments in optical fiber were lower due to bad weather.

The increase in the principal portion of repayment of lease liabilities was due in particular to payments for leases in the United States operating segment resulting from the inclusion of Sprint.

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.