Financial position of the Group

Total assets amounted to EUR 174.3 billion as of September 30, 2019, up by EUR 29.0 billion against December 31, 2018. The recognition of right-of-use assets and current and non-current lease liabilities resulting from the mandatory first-time application of the IFRS 16 “Leases” accounting standard had a significant impact.

The total carrying amounts of intangible assets and property, plant and equipment were up by EUR 4.0 billion against the end of 2018. Capital expenditures in the amount of EUR 13.4 billion had an increasing effect. In the Germany operating segment, additions of EUR 2.2 billion related to the 5G licenses acquired in Germany. The acquisition of FCC mobile licenses for a total of EUR 1.0 billion in the United States operating segment also increased the carrying amount. Investments primarily to upgrade and build out the network in our United States operating segment and in connection with the broadband/fiber-optic rollout, the IP transformation, and mobile infrastructure in the Germany and Europe operating segments increased the carrying amount of property, plant and equipment. Effects of changes in the composition of the Group totaling EUR 1.0 billion, mainly due to the acquisition of Tele2 Netherlands in the Group Development operating segment, and positive exchange rate effects totaling EUR 2.6 billion, particularly from the translation of U.S. dollars into euros, also increased the carrying amount. Depreciation of property, plant and equipment and amortization of intangible assets reduced the carrying amounts by EUR 10.1 billion and disposals by EUR 0.3 billion. Rights to use lease assets were recognized in the amount of EUR 18.5 billion as of September 30, 2019; until December 31, 2018, these had been reported in the amount of EUR 2.5 billion under property, plant and equipment as assets from finance leases. Trade and other receivables decreased slightly from the 2018 year-end level by EUR 0.1 billion. Other assets increased primarily on the back of the rise in current and non-current other financial assets, due in part to positive effects from the measurement of embedded derivatives at T‑Mobile US and to the change in approach as of the start of the third quarter of 2019 of capitalizing grants receivable from funding projects for the broadband build-out in Germany upon conclusion of the contract (EUR 1.3 billion). Cash and cash equivalents also increased. The transfer of the stake of around 11 percent in Ströer SE & Co. KGaA to Deutsche Telekom Trust e.V. as plan assets as of August 14, 2019 to cover existing pension obligations had an offsetting effect.

On the liabilities side, current and non-current financial liabilities increased by EUR 7.4 billion compared with the end of 2018. This was largely attributable to the euro bonds issued by Deutsche Telekom in 2019 with a total volume of EUR 3.9 billion and pound sterling bonds with a total volume of GBP 0.4 billion (EUR 0.5 billion). In addition, OTE issued a euro bond with a volume of EUR 0.4 billion. A loan of EUR 0.5 billion was issued by the European Investment Bank. Scheduled repayments of U.S. dollar bonds totaling USD 1.8 billion (EUR 1.6 billion) among other things had an offsetting effect. Financial liabilities increased in connection with the spectrum licenses acquired in Germany. In place of a lump-sum payment, government representatives agreed to let us pay the purchase price in annual installments through 2030. After deducting collateral and the first, already paid installment, financial liabilities increased by EUR 2.0 billion. The transition to IFRS 16 resulted in finance lease liabilities being reclassified from financial liabilities to lease liabilities. Based on the carrying amounts as of December 31, 2018, this reclassification reduced financial liabilities by EUR 2.5 billion. The current and non-current lease liabilities to be recognized since the first-time application of IFRS 16 amounted to EUR 20.3 billion as of September 30, 2019. Trade and other payables decreased by EUR 1.8 billion due to the reduction in the level of liabilities, mainly in the United States, Europe, and Germany operating segments. Provisions for pensions and other employee benefits increased by EUR 1.2 billion overall compared with December 31, 2018, due in part to interest rate adjustments and the decline in the price of the BT share, which has been transferred to plan assets. The transfer of the stake of around 11 percent in Ströer SE & Co. KGaA to plan assets as of August 14, 2019 had an offsetting effect. Other liabilities were reduced in particular by liabilities of EUR 2.2 billion from straight-line leases, mainly for cell sites in the United States operating segment that were no longer required to be reported under IFRS 16. In connection with the change in approach for the accounting treatment of contractual grants receivable from funding projects for the broadband build-out in Germany, non-financial other liabilities of EUR 0.9 billion were recognized for existing build-out obligations. The carrying amount of non-current other provisions was reduced among other things by a slight increase in provisions for restoration obligations.

Shareholders’ equity increased by EUR 1.7 billion as of December 31, 2018 to EUR 45.1 billion, due in particular to profit of EUR 4.5 billion. Non-cash effects from currency translation of EUR 1.2 billion, capital increases from share-based payments of EUR 0.4 billion, and income taxes relating to components of other comprehensive income of EUR 0.6 billion increased shareholders’ equity. The transition to IFRS 16 as of January 1, 2019 also increased the carrying amount by EUR 0.3 billion. The acquisition of Tele2 Netherlands resulted in transactions with owners which increased shareholders’ equity by EUR 0.5 billion, and effects of EUR 0.2 billion from changes in the composition of the Group. The carrying amount was reduced by dividend payments for the 2018 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.3 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion. Shareholders’ equity was also reduced by EUR 1.5 billion due to the remeasurement of defined benefit plans and by a total of EUR 1.0 billion due to losses from hedging instruments, mainly in connection with forward-payer swaps concluded for future borrowings at T‑Mobile US.

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 1.2 billion include, among other factors, effects from the measurement of financial instruments, 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 AL in the Group before dividend payments and spectrum investment increased by EUR 0.6 billion year-on-year to EUR 5.3 billion.

Net cash from operating activities increased by EUR 4.0 billion year-on-year to EUR 17.5 billion. Due to the first-time application of the IFRS 16 accounting standard, the principal repayment portion of lease payments is presented in net cash used in/from financing activities. These payments totaling EUR 2.3 billion were taken into account in the calculation of free cash flow AL. The strong performance of our operating segments, in particular the United States, significantly increased net cash from operating activities. Factoring agreements, especially in the Systems Solutions operating segment, resulted in positive effects of EUR 0.1 billion on net cash from operating activities compared with the prior-year period. In addition, in the prior-year period, dividends received in the amount of EUR 0.2 billion had had an increasing effect. Net cash from operating activities was reduced by a EUR 0.3 billion increase in net interest payments and a EUR 0.1 billion increase in tax payments.

The EUR 0.9 billion year-on-year increase in cash capex (before spectrum investment) is attributable to the United States operating segment, mainly due to the accelerated infrastructure build-out for the 600 MHz spectrum, laying the groundwork for 5G. Other capital expenditures were focused primarily on the Germany and Europe operating segments and went toward the build-out and upgrade of our networks.

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