Financial position of the Group

Total assets amounted to EUR 301.7 billion as of June 30, 2022, up by EUR 20.1 billion against December 31, 2021. Exchange rate effects in particular, primarily from the translation of U.S. dollars into euros, had an increasing effect. This increase is also due to the sustained high level of investing activities including, among other investments, spectrum acquisitions in the United States operating segment. The agreement signed between T‑Mobile US and Crown Castle on the modification of existing arrangements concerning the lease of cell sites also increased total assets. Total assets were reduced due to the sale of T‑Mobile Netherlands.

On the assets side, trade receivables amounted to EUR 16.9 billion, up by EUR 1.6 billion against the 2021 year-end. 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.

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 totaling EUR 3.3 billion and disposals of EUR 0.1 billion reduced the carrying amount.

Property, plant and equipment increased by EUR 3.4 billion to EUR 65.2 billion compared to December 31, 2021. 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 carried out as of June 30, 2022. Disposals of EUR 0.7 billion also reduced the carrying amount.

Compared with December 31, 2021, right-of-use assets increased by EUR 7.3 billion to EUR 38.1 billion. The increase of the carrying amount was driven by additions of EUR 8.9 billion, primarily as a result of the agreement signed between T‑Mobile US and Crown Castle on the modification of existing arrangements, mainly concerning the lease of Crown Castle’s cell sites. As a result of the modification of the arrangements, right-of-use assets increased by EUR 6.6 billion. 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 carried out as June 30, 2022. 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.

Current and non-current financial assets increased by EUR 0.5 billion to EUR 9.4 billion. Originated loans and receivables increased by EUR 0.2 billion to EUR 3.6 billion. A contingent consideration receivable of EUR 0.4 billion was recorded in connection with the sale of a 50 % stake in GlasfaserPlus. Cash collateral also increased. In connection with receivables from grants still to be received from funding projects for the broadband build-out in Germany, originated loans and 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 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.

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 as of 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 and others, please refer to the section “Group organization, strategy, and management.”

Other assets increased by EUR 1.8 billion to EUR 13.7 billion, EUR 1.1 billion of which was due to the increase in the carrying amount of investments accounted for using the equity method, essentially as a result of the sale of the 50 % stake in GlasfaserPlus. Following the loss of control from an accounting perspective as a result of the transaction, GlasfaserPlus was 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. The carrying amount of the investment amounted to EUR 1.0 billion as of June 30, 2022. Inventories increased by EUR 0.1 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.

On the liabilities and shareholders’ equity side, current and non-current financial liabilities increased by EUR 3.0 billion compared with the end of 2021 to a total of EUR 114.5 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 EUR 0.7 billion (EUR 0.8 billion) reduced the carrying amount. In addition, the carrying amount of bonds and other securitized liabilities 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. 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. Negative measurement effects of derivatives with a hedging relationship increased the carrying amount, 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.

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 lease liabilities 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.

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 decreased by EUR 2.2 billion compared with 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 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). The provisions for restoration obligations decreased by EUR 0.4 billion. 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.

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.

Other liabilities increased by EUR 1.4 billion compared to December 31, 2021 to EUR 9.8 billion, mainly due to an increase in other liabilities of EUR 0.8 billion, driven by an increase in liabilities from other taxes of EUR 0.4 billion. In addition, income tax liabilities increased by EUR 0.3 billion.

Shareholders’ equity increased from EUR 81.5 billion as of December 31, 2021 to EUR 88.5 billion. Profit of EUR 5.7 billion, other comprehensive income of EUR 7.8 billion, and capital increases from share-based payments of EUR 0.3 billion contributed to this increase. 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 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 €

The modification of the arrangements between T‑Mobile US and Crown Castle resulted in an overall increase in net debt of EUR 7.4 billion, due to an increase in right-of-use assets and in lease liabilities of EUR 6.6 billion each and an increase in property, plant and equipment and in other financial liabilities of EUR 0.8 billion each. Other effects included a large number of smaller effects.

Free cash flow AL (before dividend payments and spectrum investment) increased from EUR 5.4 billion in the prior-year period to EUR 6.5 billion. The following effects impacted on this development:

Net cash from operating activities increased by EUR 1.6 billion to EUR 18.0 billion on the back of the good business performance. EUR 0.1 billion lower income tax payments were offset by EUR 0.1 billion higher net interest payments.

Cash capex (before spectrum investment) increased from EUR 8.6 billion to EUR 9.6 billion. Cash capex in the United States operating segment increased by EUR 1.1 billion to EUR 6.4 billion, mainly as a result of the ongoing build-out of the 5G network and due to exchange rate effects, primarily from the translation of U.S. dollars into euros. In the Germany operating segment, capital expenditure totaled around EUR 1.8 billion in the first half of 2022, EUR 0.1 billion more than in the prior-year period, with much of this figure going towards the build-out of our fiber-optic and 5G networks. In the Europe operating segment, our investments remained stable at EUR 0.8 billion. Here, we also continue to invest in the provision of broadband and fiber-optic technology and in 5G as part of our integrated network strategy.

The decrease in the principal portion of repayment of lease liabilities was due in particular to payments for leases in the United States operating segment.

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.