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Disclosures on financial instruments

Carrying amounts, amounts recognized, and fair values by class and measurement category

millions of €

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in the statement of financial position in accordance with IFRS 9

 

 

 

Measurement category in accordance with IFRS 9

Carrying amount June 30, 2023

Amortized cost

Fair value through other comprehensive income without recycling to profit or loss

Fair value through other comprehensive income with recycling to profit or loss

Fair value through profit or lossa

Amounts recognized in the statement of financial position in accordance with IFRS 16

Fair value June 30, 2023b

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

AC

8,742

8,742

 

 

 

 

 

Trade receivables

 

 

 

 

 

 

 

 

At amortized cost

AC

7,039

7,039

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

8,711

 

 

8,711

 

 

8,711

Other financial assets

 

 

 

 

 

 

 

 

Originated loans and other receivables

 

 

 

 

 

 

 

 

At amortized cost

AC

6,711

6,711

 

 

 

 

6,721

Of which: collateral paid

AC

1,533

1,533

 

 

 

 

 

Of which: publicly funded projects

AC

2,074

2,074

 

 

 

 

 

At fair value through profit or loss

FVTPL

695

 

 

 

695

 

695

Equity instruments

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

441

 

441

 

 

 

441

At fair value through profit or loss

FVTPL

4

 

 

 

4

 

4

Derivative financial assets

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

1,131

 

 

 

1,131

 

1,131

Of which: termination rights embedded in bonds issued

FVTPL

206

 

 

 

206

 

206

Of which: energy forward agreements embedded in contracts

FVTPL

140

 

 

 

140

 

140

Of which: options received from third parties for the purchase or sale of shares in subsidiaries and associates

FVTPL

362

 

 

 

362

 

362

Derivatives with a hedging relationship

n.a.

1,043

 

 

1,043

 

 

1,043

Lease assets

n.a.

182

 

 

 

 

182

 

Cash and cash equivalents and trade receivables and other financial assets directly associated with non-current assets and disposal groups held for sale

AC

0

0

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Trade payables

AC

10,384

10,384

 

 

 

 

 

Bonds and other securitized liabilities

AC

91,822

91,822

 

 

 

 

87,146

Liabilities to banks

AC

3,610

3,610

 

 

 

 

3,435

Liabilities with the right of creditors to priority repayment in the event of default

AC

2,533

2,533

 

 

 

 

2,432

Other interest-bearing liabilities

AC

7,149

7,149

 

 

 

 

6,955

Of which: collateral received

AC

85

85

 

 

 

 

 

Liabilities from deferred interest

AC

1,036

1,036

 

 

 

 

 

Other non-interest-bearing liabilities

AC

1,006

1,006

 

 

 

 

 

Of which: puttable shares of non-controlling interests in consolidated partnerships

AC

19

19

 

 

 

 

 

Lease liabilities

n.a.

41,999

 

 

 

 

41,999

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

379

 

 

 

379

 

379

Of which: energy forward agreements embedded in contracts

FVTPL

34

 

 

 

34

 

34

Derivatives with a hedging relationship

n.a.

2,446

 

 

92

2,354

 

2,446

Of which: energy forward agreements

n.a.

29

 

 

29

 

 

29

Trade payables and other financial liabilities directly associated with non-current assets and disposal groups held for sale

AC

0

0

 

 

 

 

 

Of which: aggregated by measurement category in accordance with IFRS 9

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Financial assets at amortized cost

AC

22,492

22,492

 

 

 

 

6,721

Financial assets at fair value through other comprehensive income with recycling to profit or loss

FVOCI

8,711

 

 

8,711

 

 

8,711

Financial assets at fair value through other comprehensive income without recycling to profit or loss

FVOCI

441

 

441

 

 

 

441

Financial assets at fair value through profit or loss

FVTPL

1,830

 

 

 

1,830

 

1,830

Liabilities

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

AC

117,540

117,540

 

 

 

 

99,968

Financial liabilities at fair value through profit or loss

FVTPL

379

 

 

 

379

 

379

a

For energy forward agreements embedded in contracts please refer to the detailed comments in the following section.

b

The practical expedients under IFRS 7.29 were applied for disclosures on specific fair values.

Carrying amounts, amounts recognized, and fair values by class and measurement category

millions of €

 

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in the statement of financial position in accordance with IFRS 9

 

 

 

 

Measurement category in accordance with IFRS 9

Carrying amount June 30, 2023

Amortized cost

Fair value through other comprehensive income without recycling to profit or loss

Fair value through other comprehensive income with recycling to profit or loss

Fair value through profit or lossa

Amounts recognized in the statement of financial position in accordance with IFRS 16

Fair value June 30, 2023b

 

Assets

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

AC

8,742

8,742

 

 

 

 

 

 

Trade receivables

 

 

 

 

 

 

 

 

 

At amortized cost

AC

7,039

7,039

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

8,711

 

 

8,711

 

 

8,711

 

Other financial assets

 

 

 

 

 

 

 

 

 

Originated loans and other receivables

 

 

 

 

 

 

 

 

 

At amortized cost

AC

6,711

6,711

 

 

 

 

6,721

 

Of which: collateral paid

AC

1,533

1,533

 

 

 

 

 

 

Of which: publicly funded projects

AC

2,074

2,074

 

 

 

 

 

 

At fair value through profit or loss

FVTPL

695

 

 

 

695

 

695

 

Equity instruments

 

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

441

 

441

 

 

 

441

 

At fair value through profit or loss

FVTPL

4

 

 

 

4

 

4

 

Derivative financial assets

 

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

1,131

 

 

 

1,131

 

1,131

 

Of which: termination rights embedded in bonds issued

FVTPL

206

 

 

 

206

 

206

 

Of which: energy forward agreements embedded in contracts

FVTPL

140

 

 

 

140

 

140

 

Of which: options received from third parties for the purchase or sale of shares in subsidiaries and associates

FVTPL

362

 

 

 

362

 

362

 

Derivatives with a hedging relationship

n.a.

1,043

 

 

1,043

 

 

1,043

 

Lease assets

n.a.

182

 

 

 

 

182

 

 

Cash and cash equivalents and trade receivables and other financial assets directly associated with non-current assets and disposal groups held for sale

AC

0

0

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

 

Trade payables

AC

10,384

10,384

 

 

 

 

 

 

Bonds and other securitized liabilities

AC

91,822

91,822

 

 

 

 

87,146

 

Liabilities to banks

AC

3,610

3,610

 

 

 

 

3,435

 

Liabilities with the right of creditors to priority repayment in the event of default

AC

2,533

2,533

 

 

 

 

2,432

 

Other interest-bearing liabilities

AC

7,149

7,149

 

 

 

 

6,955

 

Of which: collateral received

AC

85

85

 

 

 

 

 

 

Liabilities from deferred interest

AC

1,036

1,036

 

 

 

 

 

 

Other non-interest-bearing liabilities

AC

1,006

1,006

 

 

 

 

 

 

Of which: puttable shares of non-controlling interests in consolidated partnerships

AC

19

19

 

 

 

 

 

 

Lease liabilities

n.a.

41,999

 

 

 

 

41,999

 

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

379

 

 

 

379

 

379

 

Of which: energy forward agreements embedded in contracts

FVTPL

34

 

 

 

34

 

34

 

Derivatives with a hedging relationship

n.a.

2,446

 

 

92

2,354

 

2,446

 

Of which: energy forward agreements

n.a.

29

 

 

29

 

 

29

 

Trade payables and other financial liabilities directly associated with non-current assets and disposal groups held for sale

AC

0

0

 

 

 

 

 

 

Of which: aggregated by measurement category in accordance with IFRS 9

 

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

 

Financial assets at amortized cost

AC

22,492

22,492

 

 

 

 

6,721

 

Financial assets at fair value through other comprehensive income with recycling to profit or loss

FVOCI

8,711

 

 

8,711

 

 

8,711

 

Financial assets at fair value through other comprehensive income without recycling to profit or loss

FVOCI

441

 

441

 

 

 

441

 

Financial assets at fair value through profit or loss

FVTPL

1,830

 

 

 

1,830

 

1,830

 

Liabilities

 

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

AC

117,540

117,540

 

 

 

 

99,968

 

Financial liabilities at fair value through profit or loss

FVTPL

379

 

 

 

379

 

379

 

a

For energy forward agreements embedded in contracts please refer to the detailed comments in the following section.

b

The practical expedients under IFRS 7.29 were applied for disclosures on specific fair values.

Carrying amounts, amounts recognized, and fair values by class and measurement category

millions of €

 

 

 

 

 

 

 

 

 

 

 

Amounts recognized in the statement of financial position
in accordance with IFRS 9

 

 

 

Measurement category in accordance with IFRS 9

Carrying amount Dec. 31, 2022

Amortized cost

Fair value through other comprehensive income without recycling to profit or loss

Fair value through other comprehensive income with recycling to profit or loss

Fair value through profit or lossa

Amounts recognized in the statement of financial position in accordance with IFRS 16

Fair value Dec. 31, 2022b

Assets

 

 

 

 

 

 

 

 

Cash and cash equivalents

AC

5,767

5,767

 

 

 

 

 

Trade receivables

 

 

 

 

 

 

 

 

At amortized cost

AC

6,926

6,926

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

9,841

 

 

9,841

 

 

9,841

Other financial assets

 

 

 

 

 

 

 

 

Originated loans and other receivables

 

 

 

 

 

 

 

 

At amortized cost

AC

6,337

6,337

 

 

 

 

6,347

Of which: collateral paid

AC

1,484

1,484

 

 

 

 

 

Of which: publicly funded projects

AC

2,019

2,019

 

 

 

 

 

At fair value through profit or loss

FVTPL

646

 

 

 

646

 

646

Equity instruments

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

FVOCI

446

 

446

 

 

 

446

At fair value through profit or loss

FVTPL

3

 

 

 

3

 

3

Derivative financial assets

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

1,239

 

 

 

1,239

 

1,239

Of which: termination rights embedded in bonds issued

FVTPL

117

 

 

 

117

 

117

Of which: energy forward agreements embedded in contracts

FVTPL

204

 

 

 

204

 

204

Of which: options received from third parties for the purchase or sale of shares in subsidiaries and associates

FVTPL

402

 

 

 

402

 

402

Derivatives with a hedging relationship

n.a.

1,034

 

 

1,034

0

 

1,034

Lease assets

n.a.

205

 

 

 

 

205

 

Cash and cash equivalents and trade receivables and other financial assets directly associated with non-current assets and disposal groups held for sale

AC

75

75

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

 

Trade payables

AC

12,035

12,035

 

 

 

 

 

Bonds and other securitized liabilities

AC

93,103

93,103

 

 

 

 

86,943

Liabilities to banks

AC

4,122

4,122

 

 

 

 

3,926

Liabilities with the right of creditors to priority repayment in the event of default

AC

3,623

3,623

 

 

 

 

3,498

Other interest-bearing liabilities

AC

7,526

7,526

 

 

 

 

7,311

Of which: collateral received

AC

156

156

 

 

 

 

 

Liabilities from deferred interest

AC

999

999

 

 

 

 

 

Other non-interest-bearing liabilities

AC

769

769

 

 

 

 

 

Of which: puttable shares of non-controlling interests in consolidated partnerships

AC

13

13

 

 

 

 

 

Lease liabilities

n.a.

38,792

 

 

 

 

38,792

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

FVTPL

368

 

 

 

368

 

368

Of which: energy forward agreements embedded in contracts

FVTPL

59

 

 

 

59

 

59

Derivatives with a hedging relationship

n.a.

2,521

 

 

44

2,477

 

2,521

Of which: energy forward agreements

n.a.

0

 

 

0

 

 

0

Trade payables and other financial liabilities directly associated with non-current assets and disposal groups held for sale

AC

2,431

2,431

 

 

 

 

 

Of which: aggregated by measurement category in accordance with IFRS 9

 

 

 

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Financial assets at amortized cost

AC

19,105

19,105

 

 

 

 

6,347

Financial assets at fair value through other comprehensive income with recycling to profit or loss

FVOCI

9,841

 

 

9,841

 

 

9,841

Financial assets at fair value through other comprehensive income without recycling to profit or loss

FVOCI

446

 

446

 

 

 

446

Financial assets at fair value through profit or loss

FVTPL

1,888

 

 

 

1,888

 

1,888

Liabilities

 

 

 

 

 

 

 

 

Financial liabilities at amortized cost

AC

124,608

124,608

 

 

 

 

101,678

Financial liabilities at fair value through profit or loss

FVTPL

368

 

 

 

368

 

368

a

For energy forward agreements embedded in contracts please refer to the detailed comments in the following section.

b

The practical expedients under IFRS 7.29 were applied for disclosures on specific fair values.

Trade receivables include receivables amounting to EUR 2.2 billion (December 31, 2022: EUR 2.8 billion) due in more than one year. The fair value generally equals the carrying amount.

Disclosures on fair value

When determining the fair value, it is important to maximize the use of current inputs observable in liquid markets for the financial instrument in question and minimize the use of other inputs (e.g., historical prices, prices for similar instruments, prices on illiquid markets). A three-level measurement hierarchy is defined for these purposes. If prices quoted in liquid markets are available at the reporting date for the respective financial instrument, these will be used unadjusted for the measurement (Level 1 measurement). Other input parameters are then irrelevant for the measurement. One such example is shares and bonds that are actively traded on a stock exchange. If quoted prices on liquid markets are not available at the reporting date for the respective financial instrument, but the instrument can be measured using other inputs that are observable on the market at the reporting date, a Level 2 measurement will be applied. The conditions for this are that no major adjustments have been made to the observable inputs and no unobservable inputs are used. Examples of Level 2 measurements are collateralized interest rate swaps, currency forwards, and cross-currency swaps that can be measured using current interest rates or exchange rates. If the conditions for a Level 1 or Level 2 measurement are not met, a Level 3 measurement is applied. In such cases, major adjustments must be made to observable inputs or unobservable inputs must be used.

Financial instruments measured at fair value

millions of €

 

 

 

 

 

 

 

 

 

June 30, 2023

Dec. 31, 2022

 

 

 

 

 

 

 

 

 

 

Level 1

Level 2

Level 3

Total

Level 1

Level 2

Level 3

Total

Assets

 

 

 

 

 

 

 

 

Trade receivables

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

 

 

8,711

8,711

 

 

9,841

9,841

At fair value through profit or loss

 

 

0

0

 

 

0

0

Other financial assets – Originated loans and other receivables

 

 

 

 

 

 

 

 

At fair value through profit or loss

234

0

461

695

206

0

440

646

Equity instruments

 

 

 

 

 

 

 

 

At fair value through other comprehensive income

9

 

432

441

9

 

437

446

At fair value through profit or loss

 

 

4

4

 

 

3

3

Derivative financial assets

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

 

753

378

1,131

 

884

355

1,239

Derivatives with a hedging relationship

 

1,043

 

1,043

 

1,034

 

1,034

Liabilities

 

 

 

 

 

 

 

 

Derivative financial liabilities

 

 

 

 

 

 

 

 

Derivatives without a hedging relationship

 

345

34

379

 

309

59

368

Derivatives with a hedging relationship

 

2,417

29

2,446

 

2,521

 

2,521

Of the equity instruments measured at fair value through other comprehensive income and recognized under other financial assets, the instruments presented in the different levels constitute separate classes of financial instruments. In each case, the fair values of the total volume of equity instruments recognized as Level 1 are the price quotations at the reporting date.

The listed bonds and other securitized liabilities are assigned to Level 1 or Level 2 depending on the market liquidity of the relevant instrument. Consequently, issues denominated in euros or U.S. dollars with relatively large nominal amounts are to be classified as Level 1, the rest as Level 2. The fair values of the instruments assigned to Level 1 equal the nominal amounts multiplied by the price quotations at the reporting date. The fair values of the instruments assigned to Level 2 are calculated as the present values of the payments associated with the debts, based on the applicable yield curve and Deutsche Telekom’s credit spread curve for specific currencies.

The fair values of liabilities to banks and other interest-bearing liabilities are calculated as the present values of the payments associated with the debts, based on the applicable yield curve and Deutsche Telekom’s credit spread curve for specific currencies. The fair values of trade receivables and of originated loans and other receivables are calculated as the present values of the payments associated with the receivables, based on the applicable yield curve and the credit risk of the debtors.

Since there are no market prices available for the derivative financial instruments in the portfolio assigned to Level 2 due to the fact that they are not listed on the market, the fair values are calculated using standard financial valuation models, based entirely on observable inputs. The fair value of derivatives is the price that Deutsche Telekom would receive or have to pay if the financial instrument were transferred at the reporting date. Interest rates of contractual partners relevant as of the reporting date are used in this respect. The middle rates applicable as of the reporting date are used as exchange rates. In the case of interest-bearing derivatives, a distinction is made between the clean price and the dirty price. In contrast to the clean price, the dirty price also includes the interest accrued. The fair values carried correspond to the full fair value or the dirty price.

The equity instruments measured at fair value through other comprehensive income comprise a large number of investments in strategic, unlisted individual positions. Deutsche Telekom considers the chosen measurement through other comprehensive income without recycling to profit or loss to be appropriate because there are no plans to use the investments for short-term profit-taking. At the date of disposal of an investment, the total cumulative gain or loss is reclassified to retained earnings. Acquisitions and disposals are based on business policy investment decisions.

Development of the carrying amounts of the financial assets and financial liabilities assigned to Level 3

millions of €

 

 

 

 

 

 

Equity instruments at fair value through other comprehensive income

Derivative financial assets at fair value through profit or loss:
termination rights embedded in bonds issued

Derivative financial assets at fair value through profit or loss:
energy forward agreements

Derivative financial liabilities at fair value through profit or loss:
energy forward agreements

Originated loans and other receivables at fair value through profit or loss:
contingent consideration receivable

Carrying amount as of January 1, 2023

436

117

204

(59)

415

Additions (including first-time classification as Level 3)

31

16

0

0

0

Decreases in fair value recognized in profit/loss (including losses on disposal)

 

(30)

(57)

(25)

0

Increases in fair value recognized in profit/loss (including gains on disposal)

 

106

1

45

8

Decreases in fair value recognized directly in equity

(62)

 

 

 

 

Increases in fair value recognized directly in equity

41

 

 

 

 

Disposals (including last classification as Level 3)a

(14)

0

(5)

5

0

Currency translation effects recognized directly in equity

(1)

(3)

(3)

0

0

Carrying amount as of June 30, 2023

431

206

140

(34)

423

a

The disposals under energy forward agreements include billing amounts paid.

The equity instruments assigned to Level 3 that are measured at fair value through other comprehensive income and carried under other financial assets are equity investments with a carrying amount of EUR 431 million measured using the best information available at the reporting date. As a rule, Deutsche Telekom considers transactions involving shares in those companies to have the greatest relevance. Transactions involving shares in comparable companies are also considered. The proximity of the relevant transaction to the reporting date, and the question of whether it was conducted at arm’s length, are relevant for deciding which information is used for the measurement. Furthermore, the degree of similarity between the object being measured and comparable companies must be taken into consideration. Based on Deutsche Telekom’s own assessment, the fair values of the equity investments at the reporting date could be determined with sufficient reliability. For the development of the carrying amounts in the reporting period, please refer to the table above. At the reporting date, no investments were held for sale. In the case of investments with a carrying amount of EUR 79 million, transactions involving shares in these companies took place at arm’s length sufficiently close to the reporting date, which is why the share prices agreed in the transactions were to be used without adjustment for the measurement as of the current reporting date. In the case of investments with a carrying amount of EUR 15 million, an analysis of operational indicators (especially revenue, EBIT, and liquidity) revealed that the carrying amounts were equivalent to current fair values. Due to better comparability, previous arm’s length transactions involving shares in these companies are preferable to more recent transactions involving shares in similar companies. In the case of investments with a carrying amount of EUR 277 million, for which the last arm’s length transactions relating to shares in these companies took place further in the past, a measurement performed more recently relating to shares in similar companies provides the most reliable representation of the fair values. Here, multiples to the reference variable of expected revenue (ranging between 3 and 12.4) were applied and a range of equally distributed percentiles in intervals of 16.7 % around the median were taken as a basis. For each investment, the appropriate percentile was used depending on the specific circumstances. If other values had been used for the multiples and for the expected revenue amounts, the calculated fair values would have been different. These hypothetical deviations (sensitivities) are shown in the table below. In addition, non-material individual items with a carrying amount of EUR 60 million when translated into euros are included with differences in value of minor relevance.

The derivatives without a hedging relationship assigned to Level 3 and carried under derivative financial assets relate to options embedded in bonds issued by T-Mobile US with a carrying amount of EUR 206 million when translated into euros. The options, which can be exercised by T-Mobile US at any time, allow early redemption of the bonds at fixed exercise prices. Observable market prices are available regularly and also at the reporting date for the bonds as entire instruments, but not for the options embedded therein. The termination rights are measured using an option pricing model. Historical interest rate volatilities of bonds issued by T-Mobile US and comparable issuers are used for the measurement because these provide a more reliable estimate at the reporting date than current market interest rate volatilities. The spread curve, which is also unobservable, was derived on the basis of current market prices of bonds issued by T-Mobile US and debt instruments of comparable issuers. Risk-free interest rates and spreads were simulated separately from each other. At the current reporting date, the following interest rate volatility and spreads were used for the various rating levels of the bonds:

Interest rate volatilities and spreads used by rating levels

%

 

 

 

Interest volatility (absolute figure)

Spread

BBB+

0.1 – 0.2

1.4 – 1.9

BBB-

0.1 – 0.2

1.7 – 2.2

BB+

0.1 – 0.2

1.9 – 2.4

For the mean reversion input, which is unobservable, 3 % was used. In our opinion, the values used constitute the best estimate in each case. If other values had been used for interest rate volatility, spread curve, or mean reversion, the calculated fair values would have been different. These hypothetical deviations (sensitivities) are shown in the table below. If the risk-free interest rate had been 50 basis points higher (lower) at the reporting date, the fair value of the options would have been EUR 65 million lower (EUR 83 million higher). In the reporting period, net income of EUR 76 million when translated into euros was recognized under the Level 3 measurement in other financial income/expense for unrealized gains for the options in the portfolio at the reporting date. In the reporting period, no option was exercised. Please refer to the table above for the development of the carrying amounts in the reporting period. The changes in value recognized in profit or loss in the reporting period were mainly attributable to fluctuations in the interest rates and historical interest rate volatilities in absolute terms that are relevant for measurement. Due to their distinctiveness, these instruments constitute a separate class of financial instruments.

Sensitivitiesa of the carrying amounts of the financial assets and financial liabilities assigned to Level 3 depending on unobservable inputs

millions of €

 

 

 

 

 

 

Equity instruments at fair value through other comprehensive income

Derivative financial assets at fair value through profit or loss:
termination rights embedded in bonds issued

Derivative financial assets at fair value through profit or loss:
energy forward agreements

Derivative financial liabilities at fair value through profit or loss:
energy forward agreements

Originated loans and other receivables at fair value through profit or loss:
contingent consideration receivable

Multiple next-level-up quantile

84

 

 

 

 

Multiple next-level-down quantile

(53)

 

 

 

 

Expected revenues +10 %

24

 

 

 

 

Expected revenues -10 %

(24)

 

 

 

 

Interest rate volatilityb +10 %

 

14

 

 

 

Interest rate volatilityb -10 %

 

(16)

 

 

 

Spread curvec +50 basis points

 

(83)

 

 

(8)

Spread curvec -50 basis points

 

116

 

 

8

Mean reversiond +100 basis points

 

(11)

 

 

 

Mean reversiond -100 basis points

 

12

 

 

 

Future energy prices +10 %

 

 

35

8

 

Future energy prices -10 %

 

 

(43)

(9)

 

Future energy output +5 %

 

 

23

2

 

Future energy output -5 %

 

 

(30)

(3)

 

Future prices for renewable energy creditse +100 %

 

 

9

17

 

Future prices for renewable energy creditse from zero

 

 

(17)

(17)

 

Planned fiber-optic build-out is completed one year earlier than expected

 

 

 

 

17

Planned fiber-optic build-out is completed one year later than expected

 

 

 

 

(16)

Actual fiber-optic build-out is 5 % higher than planned each year

 

 

 

 

42

Actual fiber-optic build-out is 5 % lower than planned each year

 

 

 

 

(42)

a

Change in the relevant input parameter assuming all other input parameters are unchanged.

b

Interest rate volatility shows the magnitude of fluctuations in interest rates over time (relative change). The larger the fluctuations, the higher the interest rate volatility.

c

The spread curve shows, for the respective maturities, the difference between the interest rates payable by the debtor and the risk-free interest rates. A minimum of zero was set for the spread curve for the sensitivity calculation, i.e., negative spreads are not applicable.

d

Mean reversion describes the assumption that, after a change, an interest rate will revert to its average over time. The higher the selected value (mean reversion speed), the faster the interest rate will revert to its average in the measurement model.

e

Renewable energy credits is the term used for U.S. emission certificates.

With a carrying amount of EUR 140 million when translated into euros, the derivatives without a hedging relationship assigned to Level 3 and carried under derivative financial assets relate to energy forward agreements embedded in contracts entered into by T-Mobile US. The same applies to derivative financial liabilities with a carrying amount of EUR 34 million when translated into euros. These agreements consist of two components: the energy forward agreement and the acquisition of renewable energy credits by T-Mobile US. In the case of one energy forward agreement, commercial operation is set to begin in 2025; with the others, it has already begun. Under the energy forward agreements, which are accounted for separately as derivatives, T-Mobile US receives variable amounts based on the actual energy output and the then current energy prices, and pays fixed amounts per unit of energy generated from the start of commercial operations throughout the term of the contract. The energy forward agreements are measured using valuation models because no observable market prices are available. The value of the derivatives is significantly influenced by the future energy output, the future energy prices on the relevant markets, and the future prices of renewable energy credits. The main contract parameters, including the assumptions made for unobservable parameters and periods, are set out in the following table. In our opinion, these assumptions made constitute the best estimate in each case. In the view of T-Mobile US, the contracts were entered into at current market conditions, and the most appropriate parameters for the unobservable inputs were used for measurement purposes. The transaction price at inception was zero in each case. Since the unobservable inputs have a significant influence on the measurement of the derivatives, the respective amount resulting from initial measurement (day 1 gain) – with the exception of the agreements concluded by Sprint that are explained below – was not recognized in profit or loss on initial recognition. Instead, these day 1 gains are amortized in profit or loss on a straight-line basis over the period of commercial energy production. This amortization adjusts the effects from measuring the derivatives in each accounting period using the respective valuation models and updated parameters. All amounts from the measurement of the derivatives are presented in net terms per contract in the statement of financial position (derivative financial assets/liabilities) and in the income statement (other operating income/expenses). Sprint also has agreements of this kind in its portfolio. These were concluded before the business combination with T-Mobile US and, for these agreements too, unobservable inputs have a material influence on the measurement of the derivatives. However, under the requirements for business combinations, the respective amounts resulting from the measurement are recognized as derivative financial assets, as a result of which there are no amounts yet to be amortized for these agreements. On the following reporting dates, the effects from the periodic measurement of the derivatives will be recorded in full in the income statement (other operating expenses or other operating income). At the reporting date, the calculated fair value from Deutsche Telekom’s perspective for one of the energy forward agreements described above is negative and amounts to EUR -8 million when translated into euros. All the rest are positive and amount to EUR 239 million when translated into euros. If other values had been used for future energy prices, future energy output, or future prices of renewable energy credits, the calculated fair values would have been different. These hypothetical deviations (sensitivities) are shown in the table above. In the reporting period, a net expense of EUR 21 million when translated into euros was recognized under the Level 3 measurement in other operating income/expense for unrealized losses for the derivatives for all the above energy forward agreements. Please refer to the corresponding table for the development of the carrying amounts in the reporting period. The market-price changes in the reporting period were attributable in part to changes in observable and unobservable energy prices and to interest rate effects. On the other hand, contract adjustments gave rise to income of EUR 33 million. The development of the day 1 gain yet to be amortized in the income statement in the reporting period is shown in the following table. The straight-line amortization of the day 1 gains through profit or loss over the period of commercial energy production amounts to a total of EUR 11 million per year when translated into euros. In addition, similar energy forward agreements were concluded in Europe for which, however, no significant volatility in fair value is to be expected. At the reporting date, their carrying amount when translated into euros was EUR 29 million (liability), and they were designated as hedging instruments in hedge relationships. Due to their distinctiveness, the energy forward agreements constitute a separate class of financial instruments.

 

 

 

United States

Term of the contract from the start of commercial operation in years

12 to 15

End of the term of contracts for which commercial operation has already begun

2029 to 2035

Expected energy output in GWh per year

4,057

Expected energy prices per MWh for the unobservable portion of the term in €

 

On-peak (i.e., times of relatively high energy demand) in €

25 to 103

Off-peak (i.e., times of relatively low energy demand) in €

18 to 118

On-peak/off-peak ratio

52 %

Length of time in years, for which energy prices are regularly observable

up to 10

Length of time in years, for which the prices of renewable energy credits are regularly observable

around 3

Development of the not yet amortized amounts

millions of €

 

 

Energy forward agreementsa

Measurement amounts on initial recognition

173

Measurement amounts on initial recognition (additions during the reporting period)

72

Measurement amounts amortized in profit or loss in prior periods

(40)

Measurement amounts amortized in profit or loss in the current reporting period

(4)

Currency translation adjustments

8

Disposals in prior periods

0

Disposals in the current reporting period

(85)

Measurement amounts not amortized as of June 30, 2023

124

a

For more details, please refer to the explanations above.

The financial assets assigned to Level 3 (originated loans and other receivables) include the contingent consideration receivable from the sale of a 50 % stake in GlasfaserPlus with a carrying amount of EUR 423 million, which arises in stages upon achieving certain fiber-optic build-out milestones and is measured at fair value through profit or loss. Deutsche Telekom measures this receivable on the basis of GlasfaserPlus’ current build-out plans. At the current reporting date, it can be assumed that payments will fall due from 2025 to 2029. The spread of the debtor IFM constitutes an unobservable input; at the current reporting date, values of between 1.1 % and 1.5 % were used for the discounting of the individual payments. In our opinion, the assumptions used constitute the best estimate in each case. If other assumptions had been used for the amount and due dates of the payments and for the spread, the calculated fair value would have been different. These hypothetical deviations (sensitivities) are shown in the table above. In the reporting period, net income of EUR 8 million was recognized under the Level 3 measurement of the receivable in other operating income/expense for unrealized discounting effects. Please refer to the table above for the development of the carrying amounts in the reporting period. The market-price change in the reporting period is largely attributable to a change in the interest rates that are relevant for measurement. Due to its distinctiveness, this instrument constitutes a separate class of financial instruments. The other financial assets assigned to Level 3 (originated loans and other receivables) with a carrying amount of EUR 38 million relate to immaterial items for which no significant volatility in fair value is to be expected.

For the trade receivables measured at fair value through other comprehensive income assigned to Level 3 and for the originated loans and other receivables measured at fair value through profit or loss, the main factor in determining fair value is the credit risk of the relevant counterparties. If the default rates applied as of the reporting date had been 1 % higher (lower) with no change in the reference variables, the fair values of the instruments would have been 1 % lower (higher). The financial assets assigned to Level 3 include trade receivables measured at fair value through other comprehensive income, for which the credit risk of customers constitutes an unobservable input for the measurement, with a carrying amount of EUR 8,711 million (December 31, 2022: EUR 9,841 million) when translated into euros. As a rule, a credit scoring model is used for receivables paid in installments. The cash flows are discounted on the basis of the weighted average of the original effective interest rates of the financial assets in the relevant portfolio. A weighted average credit-risk spread of 7.13 % (December 31, 2022: 6.28 %) was applied to the respective receivables portfolios at the reporting date. The credit-risk spreads applied are derived from the expected future credit loss of the relevant portfolio and are updated on an ongoing basis. Changes in the fair value of these trade receivables are caused mainly by changes in observable Level 2 inputs (in particular market interest rates).

The financial assets measured at fair value through profit or loss and assigned to Level 3 include additional options acquired from third parties for the purchase of company shares, with a carrying amount of EUR 32 million. No notable fluctuations in value are expected from these individual items. Due to their distinctiveness, these instruments constitute a separate class of financial instruments.

Disclosures on credit risk

In line with the contractual provisions, in the event of insolvency, all derivatives with a positive or negative fair value that exist with the respective counterparty are offset against each other, leaving a net receivable or liability. The net amounts are normally recalculated every bank working day and offset against each other. When the netting of the positive and negative fair values of all derivatives was positive from Deutsche Telekom’s perspective, Deutsche Telekom received unrestricted cash collateral from counterparties pursuant to collateral agreements in the amount of EUR 85 million (December 31, 2022: EUR 156 million). The credit risk was thus reduced by EUR 85 million (December 31, 2022: EUR 134 million) because, on the reporting date, the cash collateral received was offset by corresponding net derivative positions in the same amount. On the basis of these contracts, derivatives with a positive fair value and a total carrying amount of EUR 1,465 million as of the reporting date (December 31, 2022: EUR 1,549 million) had a residual credit risk of EUR 22 million as of June 30, 2023 (December 31, 2022: EUR 0.6 million).

When the netting of the positive and negative fair values of all derivatives was negative from Deutsche Telekom’s perspective, Deutsche Telekom provided cash collateral in the amount of EUR 1,462 million as of the reporting date (December 31, 2022: EUR 1,411 million) to counterparties pursuant to collateral agreements. The cash collateral paid is offset by corresponding net derivative positions of EUR 1,393 million at the reporting date (December 31, 2022: EUR 1,392 million), which is why it was not exposed to any credit risks in this amount.

On account of its close connection to the corresponding derivatives, the collateral received (paid) constitutes a separate class of financial liabilities (assets). There were no other significant agreements reducing the maximum exposure to the credit risk of financial assets. The maximum exposure to credit risk of the other financial assets thus corresponds to their carrying amounts.

In accordance with the terms of the bonds issued by T-Mobile US, T-Mobile US has the right to terminate the majority of bonds prematurely under specific conditions. The rights of early termination constitute embedded derivatives and are presented separately as derivative financial assets in the consolidated statement of financial position. Since they are not exposed to any credit risk, they constitute a separate class of financial instruments. Please refer to the explanations above for more information on the energy forward agreements for which no material collateral is provided. There is also no credit risk on embedded derivatives held. No collateral is provided for the options acquired from third parties for shares in a subsidiary of Deutsche Telekom or shares in other companies (see explanations above).

In connection with auctions for the acquisition of spectrum licenses, subsidiaries of Deutsche Telekom have not deposited any cash collateral as of the reporting date (December 31, 2022: EUR 2 million). At the reporting date, cash and cash equivalents of EUR 68 million (December 31, 2022: EUR 63 million) when translated into euros were pledged as cash collateral for liabilities issued by Sprint with the right of creditors to priority repayment in the event of default. This cash collateral is not exposed to any significant credit risk.