Changes in the composition of the Group In the first nine months of 2020, Deutsche Telekom conducted the following transaction, which has an impact on the composition of the Group. Other changes to the composition of the Group not shown here were of no material significance for Deutsche Telekom’s interim consolidated financial statements. Business combination of T‑Mobile US and Sprint Together with their respective majority shareholders Deutsche Telekom AG and SoftBank K.K., T‑Mobile US and Sprint Corp. concluded a binding agreement on April 29, 2018 to combine their companies. On July 26, 2019 and on February 20, 2020, further conditions for the business combination were agreed. The transaction was consummated on April 1, 2020. Prior to this, the approvals required from the national and regional regulatory and antitrust authorities and courts in the United States had been obtained and additional closing conditions met. Most recently, on April 16, 2020, the business combination was approved by the California Public Utilities Commission (CPUC). As a consequence of the business combination, T‑Mobile US took over all shares in Sprint. Sprint is a U.S. telecommunications company which offers a comprehensive range of wireless and wireline communications products and services. The “new” T‑Mobile US will successfully drive forward its Un-carrier strategy and step up the 5G network build-out. This provides a much stronger basis for T‑Mobile US to significantly expand nationwide coverage and to extend its mobile network capacities, which translates into clear potential for sustained customer growth. The business combination will increase the market share of the “new” T‑Mobile US and is expected to generate synergies and economies of scale. The business combination of T‑Mobile US and Sprint was executed by means of a share exchange without a cash component (all-stock transaction). For every 9.75 Sprint shares held, the Sprint shareholders, with the exception of SoftBank, received one new share in T‑Mobile US in return. Pursuant to the supplementary agreement dated February 20, 2020, SoftBank agreed to surrender to T‑Mobile US immediately, for no additional consideration, an aggregate of 48,751,557 ordinary shares in T‑Mobile US, received in connection with this transaction, such that SoftBank received one new share in T‑Mobile US for every 11.31 Sprint shares. Taking these adjustments into account, a total of 373,396,310 new ordinary shares in T‑Mobile US were issued to Sprint shareholders. The preliminary consideration transferred is comprised as follows: (XLSX:) Download millions of € Fair value at the acquisition date T‑Mobile US ordinary shares issued 28,649 + Vested rights from share-based compensation plans 350 + Contingent consideration paid to SoftBank 1,721 – Payment received in relation to cost allocation from SoftBank in connection with CPUC (93) = CONSIDERATION TRANSFERRED (PRELIMINARY) 30,627 Based on the closing T‑Mobile US share price of USD 83.90 as of March 31, 2020 – which was the most recent publicly available closing price at the time of consummation – the total value of T‑Mobile US ordinary shares issued in exchange for Sprint ordinary shares was USD 31.3 billion (EUR 28.6 billion). In addition, the consideration transferred included the replacement of share-based compensation for certain Sprint employees for services provided prior to the business combination and contingent consideration payable to SoftBank. The contingent consideration results from the agreement concluded on February 20, 2020 that if the trailing 45-day volume-weighted average price of the T‑Mobile US ordinary share at any time during the period commencing on April 1, 2022 and ending on December 31, 2025 reaches or exceeds the value of USD 150.00, then T‑Mobile US will issue to SoftBank for no additional consideration 48,751,557 ordinary shares, i.e., the number of shares that SoftBank surrendered to T‑Mobile US in the course of the closing of the transaction. The Monte Carlo simulation method was used to measure the contingent consideration. The main inputs and assumptions are the volatility of 28.5 percent, the risk-free interest rate of 0.44 percent, the period for fulfillment of conditions, the 45-day volume-weighted average price per ordinary share of T‑Mobile US, and the corresponding share price at the date of acquisition. Thus, the maximum value of the undiscounted contingent consideration equals the number of shares multiplied by the price at the time the contingency is met. The consideration transferred is reduced by a pro rata reimbursement of costs by SoftBank to Deutsche Telekom related to the fulfillment of closing conditions in connection with the CPUC. The financing structure was also reorganized in the course of combining the businesses of T‑Mobile US and Sprint. Immediately after the transaction, liabilities of the former Sprint totaling USD 9.8 billion (around EUR 8.9 billion) were repaid, of which USD 7.4 billion (around EUR 6.8 billion) fell due pursuant to a binding change-in-control clause. The amounts repaid are included in current financial liabilities as of the date of consummation and are recognized, in the statement of cash flows as of September 30, 2020, under net cash used in investing activities (mandatory repayments) and net cash used in/from financing activities (optional repayments). Thus the total costs of the acquisition, including the mandatory repayment of financial liabilities as of the acquisition date, amounted to EUR 37.4 billion. On completion of the transaction, Deutsche Telekom and SoftBank, indirectly and directly, held approximately 43.6 percent and 24.7 percent, respectively, and other shareholders approximately 31.7 percent of the shares in the “new” T‑Mobile US. Due to a proxy agreement concluded with SoftBank and the fact that persons nominated by Deutsche Telekom hold a majority on the Board of Directors of the new company, T‑Mobile US will continue to be included in the consolidated financial statements of Deutsche Telekom as a fully consolidated subsidiary. The purchase price allocation and the measurement of Sprint’s assets and liabilities at the acquisition date had not been finalized as of September 30, 2020. The preliminary fair values of Sprint’s acquired assets and liabilities are presented in the following table: (XLSX:) Download millions of € Fair value at the acquisition date ASSETS CURRENT ASSETS 7,853 Cash and cash equivalents 2,024 Trade receivables 2,751 Contract assets 141 Other financial assets 205 Other assets 364 Current recoverable income taxes 21 Inventories 602 Non-current assets and disposal groups held for sale 1,745 NON-CURRENT ASSETS 86,352 Goodwill 8,407 Other intangible assets 51,123 Of which: FCC spectrum licenses 41,629 Of which: customer base 4,481 Of which: other 5,013 Property, plant and equipment 14,123 Right-of-use assets 6,286 Other financial assets 224 Deferred tax assets 5,977 Other assets 212 TOTAL ASSETS 94,205 LIABILITIES CURRENT LIABILITIES 18,764 Financial liabilities 11,912 Lease liabilities 1,669 Trade and other payables 2,939 Income tax liabilities 56 Other provisions 855 Contract liabilities 209 Other liabilities 690 Liabilities associated with assets and disposal groups held for sale 434 NON-CURRENT LIABILITIES 44,814 Financial liabilities 27,899 Lease liabilities 5,146 Provisions for pensions and other employee benefits 814 Other provisions 1,013 Deferred tax liabilities 9,863 Other liabilities 58 Contract liabilities 21 TOTAL LIABILITIES 63,578 The acquired intangible assets mainly comprise FCC spectrum licenses and customer relationships, which were measured at fair value in the amount of EUR 41,629 million and EUR 4,481 million, respectively. Spectrum licenses were measured using the greenfield method. Under the greenfield method, the value of the intangible asset is determined using a hypothetical cash flow scenario. The scenario projects the development of an entity’s operating business on the assumption that the entity owns only this intangible asset at inception. FCC spectrum licenses have an indefinite useful life. The multi-period excess earnings method was used to measure customer relationships. Under this method, the fair value of the customer base is calculated by determining the present value of earnings after tax attributable to existing customers. The expected useful life of customer relationships is eight years on average. Other intangible assets include, among other things, fixed-term spectrum leases, the measurement of which includes the contractual payment obligations and also reflects the extent to which contractual terms are favorable compared to current market values. The measurement and hence also the determination of useful lives requires a detailed analysis of a large number of individual agreements, which has not yet been finalized. The fair value of the acquired trade and other receivables amounts to EUR 2,751 million. The gross amount of trade receivables totals EUR 2,903 million, of which EUR 152 million is expected to be bad debt. The preliminary acquired goodwill of EUR 8,407 million to be recognized in Deutsche Telekom’s consolidated statement of financial position is calculated as follows: (XLSX:) Download millions of € Fair value at the acquisition date Consideration transferred 30,627 – Fair value of assets acquired 85,798 + Fair value of the liabilities recognized 63,578 = GOODWILL 8,407 Non-controlling interests participated fully in the transaction by means of the share exchange. As a result of the issuance of T‑Mobile US ordinary shares to the former Sprint shareholders, the total non-controlling interest increased. The preliminary carrying amount of the cumulative non-controlling interests in T‑Mobile US was calculated on the basis of the revalued interests in the shareholders’ equity of T‑Mobile US and was EUR 34.7 billion as of April 1, 2020 (December 31, 2019: EUR 11.0 billion) based on the preliminary purchase price allocation. Since the shares issued to the former Sprint shareholders as part of the share exchange are measured at fair value, the full goodwill method was applied. The goodwill calculated using this method comprises the value of synergies anticipated in connection with the acquisition, expected new customer additions, and the combined workforce. No part of the recognized goodwill is deductible for income tax purposes. Transaction-related costs totaling EUR 0.2 billion were incurred in the Group in the first nine months of 2020 (in the 2019 financial year: EUR 0.1 billion). These mainly comprised legal and consulting fees and are included under other operating expenses. Deutsche Telekom’s net revenue increased by EUR 12.7 billion in the reporting period due to the business combination of T‑Mobile US and Sprint. Net profit for the reporting period includes Sprint’s profit before income tax and before non-controlling interests of EUR 0.6 billion. If the business combination had taken place at the beginning of the 2020 financial year, net revenue and consolidated profit before non-controlling interests would have been respectively EUR 5.6 billion and EUR 0.3 billion higher than reported. These effects are based on estimates and they neither represent the actual consolidated figures of the Group if the transaction had taken place on January 1, 2020, nor do they project the future consolidated results of operations. On July 26, 2019, T‑Mobile US, Deutsche Telekom, Sprint, SoftBank, and the U.S. satellite TV operator DISH Network Corp. entered into an agreement, subject to specific conditions, with the U.S. Department of Justice (DoJ), which is material for the future structure of the new T‑Mobile US. Under this agreement, following the consummation of the business combination of T‑Mobile US and Sprint, Sprint’s prepaid business was sold as part of an asset deal to DISH for around USD 1.4 billion (EUR 1.2 billion), taking into account provisional working capital purchase price adjustments. The transaction was consummated on July 1, 2020. The agreement also includes the sale of part of the 800 MHz spectrum held by Sprint to DISH for approximately USD 3.6 billion. The sale of the spectrum is subject to approval by the regulatory authority, to be applied for after three years following the closing of the business combination of T‑Mobile US and Sprint, and to additional closing conditions. For two additional years following the closing of the spectrum sale, T‑Mobile US will have the option to lease back, as needed, a portion of the spectrum. On June 22, 2020, SoftBank and Deutsche Telekom agreed that SoftBank is permitted to sell 198,314,426 ordinary shares of T‑Mobile US with a total value of more than USD 20 billion. The agreement ensures that Deutsche Telekom retains control of T‑Mobile US. SoftBank’s share is therefore reduced to approximately 8 percent. In return, Deutsche Telekom receives call options from SoftBank on a total of 101,491,623 ordinary shares of T‑Mobile US, which can be exercised until June 22, 2024. The subsequent sales of the shares held by SoftBank reduced the proportion of T‑Mobile US shares for which Deutsche Telekom can exercise voting rights to around 52.5 percent as of August 5, 2020. For further information, please refer to the section “Group organization, strategy, and management” in the interim Group management report and the section “Disclosures on financial instruments.” Sprint is party to a variety of agreements with Shenandoah Personal Communications Company (Shentel), pursuant to which Shentel is the exclusive provider of Sprint wireless mobility communications network products in certain parts of several U.S. states that are home to approximately 1.1 million subscribers. Pursuant to one such agreement, Sprint was granted an option to purchase Shentel’s wireless telecommunications assets. On August 26, 2020, Sprint exercised its option by delivering a binding notice of exercise to Shentel. The purchase price for the Shentel wireless telecommunications assets to be purchased by Sprint will be determined through the appraisal process prescribed in the agreement. We expect the appraisal process to be completed in the first quarter of 2021. The following transactions will change the composition of the Deutsche Telekom Group in future. Agreed acquisition of Simpel On October 16, 2020, T‑Mobile Netherlands Holding B.V. signed an agreement for the acquisition of 100 percent of the shares in the Dutch MVNO and SIM provider Simpel.nl B.V. Simpel sells SIM-only subscriptions through its own website and currently has around 1 million customers. It has been using the T‑Mobile NL network since 2014. The transaction is expected to be closed in the first half of 2021, following approval by the responsible antitrust authority. Agreed sale of Telekom Romania Communications On November 6, 2020, OTE concluded an agreement with Orange Romania concerning the sale of the 54 percent stake in Telekom Romania Communications S.A., which operates the Romanian fixed-network business, to Orange Romania for a purchase price of EUR 268 million. The transaction is subject to approval by the authorities as well as other closing conditions. schließen Carrier A telecommunications network operator. schließen 5G New communications standard, which offers data rates in the gigabit range, converges fixed-network and mobile communications, and supports the Internet of Things – rollout starting 2020. schließen Prepay/prepaid In contrast to postpay contracts, prepay communication services are services for which credit has been purchased in advance with no fixed-term contractual obligations. schließen MVNO - Mobile Virtual Network Operator Company that offers mobile minutes at relatively low prices without subsidized handsets. A mobile virtual network operator does not have its own wireless network, but uses the infrastructure of another mobile operator to provide its services. schließen SIM card - Subscriber Identification Module card Chip card that is inserted into a cell phone to identify it in the mobile network. Deutsche Telekom counts its customers by the number of SIM cards activated and not churned. Customer totals also include the SIM cards with which machines can communicate automatically with one another (M2M cards). The churn rate is determined and reported based on the local markets of the respective countries.