Financial position of the Group

Structure of the consolidated statement of financial position

millions of €

Total assets amounted to EUR 142.3 billion, up by EUR 0.9 billion against December 31, 2017.

The total carrying amounts of intangible assets and property, plant and equipment were up by EUR 4.6 billion against the prior year. Capital expenditure totaling EUR 10.3 billion – especially to upgrade the network in our United States operating segment and in connection with the broadband/fiber-optic build-out, the IP transformation, and mobile infrastructure in the Germany operating segment – increased total assets. Effects of changes in the composition of the Group totaling EUR 2.9 billion, mainly due to the acquisition of the Austrian cable operator UPC Austria in the Europe operating segment and the online TV provider Layer3 TV in the United States operating segment, and positive exchange rate effects totaling EUR 1.7 billion, particularly from the translation of U.S. dollars into euros, also increased the carrying amount. Depreciation, amortization and impairment losses of EUR 9.6 billion reduced the carrying amount. Compared with December 31, 2017, trade and other receivables decreased by EUR 0.4 billion, primarily due to reclassification and remeasurement effects from the mandatory first-time application of the new accounting standards IFRS 9 and IFRS 15. Exchange rate effects, primarily from the translation from U.S. dollars into euros, had a slight offsetting effect. Under other assets, current and non-current other financial assets were reduced in particular. On March 23, 2018, we transferred our 12 percent financial stake in BT, which is worth EUR 3.1 billion, to the Group’s own trust, Deutsche Telekom Trust e.V., where it will serve as plan assets to cover pension entitlements. The impairment loss on the exchange-traded stake in BT – which was recognized in other comprehensive income for the period from January 1, 2018 until the date of transfer – reduced the carrying amount by EUR 0.7 billion. Capitalized contract assets in the amount of EUR 1.7 billion and capitalized contract costs of EUR 1.6 billion increased other assets. Their recognition relates to the remeasurement and reclassification effects recognized directly in equity following the mandatory application of IFRS 15 as of January 1, 2018. By contrast, inventories declined by EUR 0.4 billion, especially due to a reduction in inventories of higher-priced smartphones in the United States operating segment.

There was an overall increase of EUR 3.6 billion in current and non-current financial liabilities compared with the end of 2017. This was mainly due to the euro bonds with a total volume of EUR 3.4 billion issued by Deutsche Telekom International Finance B.V. and U.S. dollar bonds with a total volume of EUR 1.5 billion (USD 1.75 billion), as well as to the bonds issued by T-Mobile US with a volume of EUR 2.0 billion (USD 2.5 billion). In addition, OTE issued a euro bond with a volume of EUR 0.4 billion. The settlement agreed in the Toll Collect arbitration proceedings increased financial liabilities by EUR 0.6 billion. Payment of the first tranche of EUR 0.2 billion in the reporting period reduced financial liabilities. The early repayment of T-Mobile US’ debt instruments in the amount of EUR 2.7 billion (USD 3.4 billion) and regular repayments in the Group of euro bonds of EUR 1.1 billion and U.S. dollar bonds of EUR 0.7 billion (USD 0.85 billion) also decreased the carrying amount of financial liabilities, as did the net change of EUR 0.7 billion in commercial paper. Provisions for pensions and other employee benefits decreased by EUR 3.0 billion compared with December 31, 2017, mainly due to the transfer of our stake in BT and the associated netting of these plan assets with the defined benefit obligations. Trade and other payables decreased by EUR 2.0 billion due to the reduction in the portfolio of liabilities, mainly in the United States, Europe, and Germany operating segments, and also as a result of the reduction in procurement volumes, especially in the United States. Exchange rate effects, mainly from the translation of U.S. dollars into euros, had a minor offsetting effect. Other liabilities rose due to an increase of EUR 2.4 billion in current and non-current contract liabilities. The contract liabilities relate to the remeasurement and reclassification effects recognized directly in equity following the mandatory application of IFRS 15 as of January 1, 2018. At the same time, current and non-current other liabilities decreased by a comparable amount on first-time application of IFRS 15.

Shareholders’ equity increased by EUR 1.0 billion compared with December 31, 2017 to EUR 43.5 billion. This increase was attributable in particular to the net profit of EUR 3.5 billion and to the transition to IFRS 9 and IFRS 15. The cumulative effect of this was an increase of EUR 1.5 billion in retained earnings (including shares attributable to non-controlling interests) recognized directly in equity as of January 1, 2018. Currency translation effects of EUR 0.7 billion recognized directly in equity and capital increases from share-based payments of EUR 0.4 billion, especially in our United States operating segment, also increased shareholders’ equity. By contrast, the carrying amount was reduced in particular by dividend payments for the 2017 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.1 billion and to non-controlling interests in the amount of EUR 0.2 billion. Transactions with owners reduced shareholders’ equity by a further EUR 1.4 billion. These transactions include EUR 0.9 billion for the share buy-back program launched by T-Mobile US, EUR 0.3 billion for the acquisition of another 5 percent stake in the Greek subsidiary OTE, and EUR 0.2 billion for the T-Mobile US shares acquired by Deutsche Telekom in the first quarter of 2018. Furthermore, the subsequent measurement in other comprehensive income of equity instruments held reduced the carrying amount by EUR 0.6 billion; this figure includes the impairment loss of EUR 0.7 billion on the exchange-traded stake in BT that was recognized in other comprehensive income for the period from January 1, 2018 through March 23, 2018.

For further information on the statement of financial position, please refer to the interim consolidated financial statements.

Changes in net debt

millions of €

Other effects of EUR 0.7 billion include, among other factors, financing options under which the payments for trade payables become due at a later point in time by involving banks in the process, and the recognition of liabilities for the acquisition of broadcasting rights. For more information on net debt, please refer to the disclosures on the reconciliation of alternative performance measures in the section “Additional information”.

Free cash flow. Free cash flow in the Group before dividend payments and spectrum investment increased by EUR 0.4 billion year-on-year to EUR 4.8 billion. Net cash from operating activities increased by EUR 0.2 billion. Cash outflows for investments in intangible assets (excluding goodwill and before spectrum investment) and property, plant and equipment decreased year-on-year by EUR 0.1 billion.

Net cash from operating activities increased by EUR 0.2 billion year-on-year to EUR 13.5 billion. Exchange rate effects adversely affected the continuing positive business trend in the United States operating segment. In addition, positive effects from factoring agreements – in particular in the Systems Solutions and Germany operating segments – on net cash from operating activities were EUR 0.3 billion lower than in the prior-year period. The comparable figure in the prior-year period included a EUR 0.1 billion higher dividend payment from BT (totaling EUR 0.2 billion), while the profit of EUR 0.1 billion distributed by Toll Collect GmbH was a key component in the reporting period. A EUR 0.7 billion decrease in net interest payments enhanced net cash from operating activities.

The EUR 0.1 billion decrease in cash capex (before spectrum investment) compared with the prior-year period related primarily to a reduction of EUR 0.4 billion in the United States operating segment, whereas cash capex was EUR 0.1 billion higher in the Germany operating segment. Adjusted for exchange rate effects, cash capex (before spectrum investment) was higher than in the prior-year period. In each case, the cash outflows were for investments in network build-out and network modernization.

For further information on the statement of cash flows, please refer to the interim consolidated financial statements.

For further details, please refer to our (PDF:) IR Backup (PDF).