Selected notes to the consolidated statement of financial position

Trade receivables

At EUR 16.9 billion, trade receivables increased by EUR 1.6 billion against the 2021 year-end level. In the United States operating segment, the increase in receivables was mainly due to exchange rate effects. The increase in receivables there was also attributable to the Equipment Installment Plan and customer additions. The carrying amount also increased as a result of higher receivables in the Germany operating segment.

Contract assets

The carrying amount of contract assets at the reporting date totaled EUR 2.1 billion compared with EUR 2.0 billion as of December 31, 2021. 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 increased by EUR 0.1 billion compared to December 31, 2021 to EUR 3.0 billion, mainly due to higher inventories of high-priced mobile terminal equipment in the Germany operating segment. Exchange rate effects, mainly from the translation from U.S. dollars into euros, also increased the carrying amount. By contrast, inventories in the United States operating segment declined in particular due to a lack of new, high-priced devices being launched on the market.

Intangible assets

The carrying amount of intangible assets increased by EUR 11.9 billion to EUR 144.5 billion, due in particular to exchange rate effects of EUR 10.0 billion, primarily from the translation of U.S. dollars into euros. The carrying amount was further increased by additions of EUR 5.1 billion, EUR 2.7 billion of which related to the acquisition of mobile spectrum and resulted almost entirely from the 199 mobile licenses acquired in January 2022 at the 3,450 MHz auction held by the Federal Communications Commission (FCC). Positive effects from changes in the composition of the Group also contributed EUR 0.1 billion to the increase in the carrying amount, while amortization and impairment losses of EUR 3.3 billion reduced it. This includes impairment losses of EUR 0.1 billion. Disposals decreased the carrying amount by EUR 0.1 billion.

For further information on impairment losses, please refer to the section “Property, plant and equipment.”

Property, plant and equipment

The carrying amount of property, plant and equipment increased by EUR 3.4 billion compared to December 31, 2021 to EUR 65.2 billion. Additions of EUR 8.5 billion for the upgrade and build-out of the network and in connection with the broadband/fiber-optic build-out and mobile infrastructure build-out increased the carrying amount. The modification of the arrangements between T‑Mobile US and Crown Castle for existing cell sites increased the carrying amount by EUR 0.8 billion. Exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 2.5 billion. Reclassifications of lease assets upon expiry of the contractual lease term to property, plant and equipment, in the United States operating segment in particular, increased the carrying amount by EUR 0.2 billion, while depreciation and impairment losses of EUR 6.9 billion had an offsetting effect. This includes impairment losses of EUR 0.2 billion, relating to the impairment test of the former Sprint’s fiber-optic-based wireline assets, which is described below. Disposals of EUR 0.7 billion also reduced the carrying amount.

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please refer to the section “Right-of-use assets.”

In the second quarter of 2022, T‑Mobile US decommissioned its 3G CDMA network and began switching off the former Sprint’s 4G LTE network. Until now, the operation of these networks has been supported by Sprint’s own fiber-optic-based wireline network. The assets of this wireline network, which mainly comprise land and buildings, communication systems and network technology, fiber-optic cable equipment and right-of-use assets, therefore had to be grouped together with the mobile assets for the purposes of the impairment test and were thus part of the United States cash-generating unit. Due to the decommissioning of Sprint’s mobile networks, the assets of Sprint’s fiber-optic-based wireline network now generate cash inflows independently of the assets of the mobile business. As such, they are no longer assigned to the United States cash-generating unit. This resulted in an ad hoc impairment test of the fiber-optic-based wireline assets as of June 30, 2022. The fair value of the assets was determined using the combination of cost, income, and market-value-based approaches, including assumptions of the market participants. The value was calculated using Level 3 input parameters. A discount rate of 7.5 % was used. The recoverable amount of the assets, calculated as fair value less costs of disposal, was EUR 452 million below the carrying amount and stood at EUR 649 million. EUR 228 million of the impairment loss related to property, plant and equipment, EUR 201 million to right-of-use assets, and EUR 23 million to intangible assets.

Right-of-use assets

The carrying amount of the right-of-use assets increased by EUR 7.3 billion compared to December 31, 2021 to EUR 38.1 billion. This increase was driven by additions of EUR 8.9 billion, primarily as a result of the modification to existing leases agreed between T‑Mobile US and Crown Castle in January 2022, mainly concerning the lease of Crown Castle’s cell sites. This agreement includes a modification of the monthly lease payments for existing cell sites and an extension of the non-cancelable lease term until December 31, 2033 (with additional extension options). The modification of the arrangements results in an increase of USD 7.3 billion (EUR 6.6 billion) each in the right-of-use assets and in lease liabilities, and an increase of USD 0.9 billion (EUR 0.8 billion) each in property, plant and equipment and in other financial liabilities for contract components that, due to their financing character, do not fall under the scope of IFRS 16. Exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 2.8 billion. Depreciation, amortization and impairment losses of EUR 4.1 billion reduced the carrying amount. This included a EUR 1.1 billion increase in depreciation and amortization due to a reduction in the useful life of leased network technology for cell sites in the United States operating segment following the business combination of T‑Mobile US and Sprint. This also includes impairment losses of EUR 0.2 billion, relating to the impairment test of the former Sprint’s fiber-optic-based wireline assets. Reclassifications of lease assets upon expiry of the contractual lease term to property, plant and equipment, in the United States operating segment in particular, also reduced the carrying amount by EUR 0.2 billion. Disposals of EUR 0.1 billion also reduced the carrying amount.

For further information on impairment losses, please refer to the section “Property, plant and equipment.”

Capitalized contract costs

As of June 30, 2022, the carrying amount of capitalized contract costs was up by EUR 0.4 billion against the level of December 31, 2021 to EUR 3.0 billion. The capitalized contract costs primarily relate to the United States, Germany, and Europe operating segments.

Investments accounted for using the equity method

The carrying amount of investments accounted for using the equity method increased by EUR 1.1 billion as of December 31, 2021 to EUR 2.0 billion, mainly in connection with the completed sale of a 50 % stake in GlasfaserPlus. Following the loss of control as a result of the transaction, the GlasfaserPlus entities were deconsolidated as of February 28, 2022. Since this date, the remaining 50 % of the shares in the joint venture have been included in the consolidated financial statements as an investment accounted for using the equity method. After the transaction was consummated, EUR 0.1 billion was paid into the reserves of GlasfaserPlus as per agreement. The carrying amount of the investment amounted to EUR 1.0 billion as of June 30, 2022.

For further information on the joint venture GlasfaserPlus with IFM, please refer to the section “Changes in the composition of the Group and other transactions.”

Since June 1, 2021, 37.65 % of the shares in Cellnex Netherlands B.V. have been included in the consolidated financial statements using the equity method as a result of the transaction completed in the prior year in connection with the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund. The purchase price allocation to measure the 37.65 % shares in Cellnex Netherlands B.V. as of the acquisition date of June 1, 2021 was finalized in May 2022. According to the purchase price allocation, the consideration transferred amounted to EUR 0.4 billion. The pro rata hidden reserves mainly related to goodwill (EUR 0.2 billion). The carrying amount of the investment amounted to EUR 0.4 billion as of June 30, 2022.

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 notes to the consolidated financial statements in the 2021 Annual Report.

Other financial assets

The carrying amount of current and non-current other financial assets increased by EUR 0.5 billion compared to December 31, 2021 to EUR 9.4 billion. The net total of originated loans and receivables increased by EUR 0.2 billion to EUR 3.6 billion. A contingent consideration receivable was recorded in connection with the sale of a 50 % stake in GlasfaserPlus. As the remainder of the purchase price, this receivable will fall due in stages upon achieving certain build-out milestones and, as of June 30, 2022, amounted to EUR 0.4 billion. The carrying amount of cash collateral also increased. In connection with receivables from grants still to be received from funding projects for the broadband build-out in Germany, the carrying amount of other receivables increased by EUR 0.2 billion. The carrying amount of derivatives with a hedging relationship decreased by EUR 0.5 billion to EUR 1.0 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 significant increase in the interest rate level. A net increase from EUR 1.2 billion to EUR 1.4 billion was recorded in the carrying amount of derivatives without a hedging relationship. This was due to an increase of EUR 0.4 billion in the carrying amount of interest rate and currency derivatives due to exchange rate effects (primarily from the strengthening of the U.S. dollar against the euro). The carrying amount was also increased by positive measurement effects of EUR 0.1 billion from energy forward agreements embedded in contracts. In connection with the stock options received from SoftBank to purchase shares in T‑Mobile US, the carrying amount of the stock options remained stable against December 31, 2021, due on the one hand to the positive development of the T‑Mobile US share price and the amortization from the initial measurement of the stock options at fair value, and on the other, to the derecognition of the exercised options in April 2022. At the time of exercising the stock options, they had a fair value of EUR 0.5 billion. In connection with negative measurement effects from derivatives embedded in bonds issued by T‑Mobile US, the carrying amount of derivatives without a hedging relationship decreased by EUR 0.4 billion.

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

For further information on the joint venture GlasfaserPlus with IFM, please refer to the section “Changes in the composition of the Group and other transactions.”

Other assets

The carrying amount of current and non-current other assets increased by EUR 0.3 billion to EUR 3.4 billion. As of June 30, 2022, the carrying amount included various advance payments, totaling EUR 2.8 billion (December 31, 2021: EUR 2.6 billion), mainly including advance payments in connection with agreements on services for certain mobile communications equipment that do not fall under the scope of IFRS 16 – Leases. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised 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 4.8 billion compared with December 31, 2021 to EUR 0.1 billion. EUR 4.7 billion of this decrease related to the sale of T‑Mobile Netherlands as of March 31, 2022 and EUR 0.1 billion to the sale of the 50 % stake in GlasfaserPlus on February 28, 2022. Both these companies were classified as held for sale as of December 31, 2021 on account of the specific intention to sell them.

For further information on these corporate transactions, 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, 2022:

The carrying amount of current and non-current financial liabilities increased by EUR 3.0 billion compared with year-end 2021 to EUR 114.5 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 6.8 billion.

The carrying amount of bonds and other securitized liabilities increased by EUR 2.1 billion. Exchange rate effects, especially from the translation of U.S. dollars into euros, increased the carrying amount of bonds and other securitized liabilities by EUR 6.1 billion. Repayments by T‑Mobile US of a bond with a volume of USD 0.5 billion (EUR 0.5 billion) and in the Group of a EUR bond with a volume of EUR 0.1 billion and a GBP bond with a volume of GBP 0.7 billion (EUR 0.8 billion) reduced the carrying amount in the reporting period. In addition, the carrying amount decreased by EUR 2.4 billion in connection with measurement effects from derivatives with a hedging relationship, the offsetting entry for which is posted under bonds and other securitized liabilities. This is mainly due to the decline in fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The subsequent measurement under the effective interest method reduced the carrying amount by EUR 0.2 billion.

The carrying amount of liabilities to banks remained unchanged against December 31, 2021 at EUR 4.0 billion.

The liabilities with the right of creditors to priority repayment in the event of default of EUR 3.3 billion (December 31, 2021: EUR 3.2 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 0.2 billion when translated into euros reduced the carrying amount. Exchange rate effects from the translation of U.S. dollars into euros raised the carrying amount by EUR 0.3 billion.

The carrying amount of other interest-bearing liabilities decreased by EUR 0.3 billion compared with December 31, 2021 to EUR 7.5 billion. In connection with cash collateral received for derivative financial instruments, the carrying amount of other interest-bearing liabilities decreased by a total of EUR 1.3 billion. The modification of the arrangements between T‑Mobile US and Crown Castle regarding cell sites increased the carrying amount by EUR 0.8 billion.

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

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please refer to the section “Right-of-use assets.”

The carrying amount of derivative financial liabilities increased by EUR 1.1 billion to EUR 1.8 billion, driven by negative measurement effects of derivatives with a hedging relationship. This is mainly due to the increase in negative fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The carrying amount was reduced by positive measurement effects from a forward transaction to hedge the price of acquiring T‑Mobile US shares in the future.

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 9.4 billion to EUR 42.5 billion compared with December 31, 2021. This increase primarily relates to the modification of the arrangements between T‑Mobile US and Crown Castle, which resulted in an increase in the carrying amounts of lease liabilities of EUR 6.6 billion. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 3.1 billion. By contrast, the carrying amount was reduced by EUR 0.1 billion, in part in connection with the decommissioning of former Sprint cell sites and the closure of some former Sprint shops in the United States operating segment. The carrying amount was also reduced by the decline of EUR 0.1 billion in the Group Headquarters & Group Services segment.

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please refer to the section “Right-of-use assets.”

Trade and other payables

The carrying amount of trade and other payables increased by EUR 0.7 billion to EUR 11.2 billion, due in particular to higher liabilities in the Germany, United States, and Systems Solutions operating segments. In the United States operating segment, the increase was attributable to exchange rate effects. By contrast, liabilities to terminal equipment vendors, among others, declined in this segment. In the Europe operating segment, liabilities declined slightly.

Provisions for pensions and other employee benefits

The carrying amount of provisions for pensions and other employee benefits decreased by EUR 2.2 billion as of December 31, 2021 to EUR 3.9 billion, mainly due to interest rate adjustments. The development of the fair values of plan assets had an offsetting effect. Overall, the remeasurement of defined benefit plans resulted in an actuarial gain of EUR 2.1 billion.

Current and non-current other provisions

The carrying amount of current and non-current other provisions decreased by EUR 1.1 billion compared with the end of 2021 to EUR 8.4 billion. Other provisions for personnel costs decreased by EUR 1.0 billion, mainly in connection with the performance-based remuneration components for the prior year paid out to employees in the first half of 2022 and a decline in the provision recognized for the Civil Health Insurance Fund (Postbeamtenkrankenkasse – PBeaKK). The latter was primarily attributable to the subsequent measurement of the present value determined using actuarial principles (interest effect) and is due to a significant increase in the interest rate level. The provisions for restoration obligations decreased by EUR 0.4 billion. This was also attributable to the increase in the interest level. By contrast, the provisions for litigation risks increased by a net amount of EUR 0.3 billion. This included EUR 0.4 billion in connection with the settlement reached and the further proceedings pending in consequence of the cyberattack on T‑Mobile US. Exchange rate effects, in particular from the translation of U.S. dollars into euros, also contributed to the increase.

Other liabilities

The carrying amount of current and non-current other liabilities increased by EUR 0.8 billion to EUR 6.4 billion, EUR 0.4 billion of which was attributable to an increase in liabilities from other taxes. 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. Exchange rate effects, in particular from the translation of U.S. dollars into euros, also contributed to the increase.

Contract liabilities

The carrying amount of current and non-current contract liabilities increased by EUR 0.3 billion compared with December 31, 2021 to EUR 2.6 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 1.4 billion against December 31, 2021 to EUR 0.0 billion, in connection with the sale of T‑Mobile Netherlands as of March 31, 2022. This company was classified as held for sale as of December 31, 2021 on account of the specific intention to sell it.

For further information on the sale of T‑Mobile Netherlands, 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 81.5 billion as of December 31, 2021 to EUR 88.5 billion, with profit of EUR 5.7 billion and other comprehensive income of EUR 7.8 billion having an increasing effect. Other comprehensive income increased mainly as a result of currency translation effects of EUR 6.0 billion recognized directly in equity and the remeasurement of defined benefit plans accounting for EUR 2.1 billion, as well as gains from hedging instruments of EUR 0.5 billion. By contrast, income taxes relating to components of other comprehensive income of EUR 0.7 billion had a negative impact on other comprehensive income. Capital increases from share-based payments increased shareholders’ equity by EUR 0.3 billion. Shareholders’ equity was reduced in connection with dividend payments for the 2021 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.2 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion. Transactions with owners also reduced the carrying amount by EUR 2.9 billion – mainly due to the acquisition of additional T‑Mobile US shares to increase the stake. Changes in the composition of the Group – mainly due to the sale of T‑Mobile Netherlands in the Group Development operating segment – reduced the carrying amount of shareholders’ equity by EUR 0.6 billion.

For further information on the increase of the stake in T‑Mobile US by way of the agreement concluded with SoftBank, please refer to the section “Changes in the composition of the Group and other transactions.”

The following table shows the changes in the composition of the Group, the development of transactions with owners, and the capital increase made against contribution in kind in the previous financial year: