Selected notes to the consolidated income statement

Sprint has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since April 1, 2020. As a result of the change in the composition of the Group during the course of the year, the remeasured assets and liabilities were recognized as of this date, and all income and expenses generated from the date of first-time consolidation are included in Deutsche Telekom’s consolidated income statement. This affects the comparability of the figures for the current period with the prior-year figures.

For further information on the business combination of T‑Mobile US and Sprint, please refer to the section “Changes in the composition of the Group.”

Net revenue

Net revenue breaks down into the following revenue categories:

For further information on changes in net revenue, please refer to the section “Development of business in the Group” in the interim Group management report.

Other operating income

Income from the reversal of impairment losses on non-current assets included a reversal of EUR 50 million on property, plant and equipment in the Europe operating segment. This arose in connection with the sale of the Romanian fixed-network business, which has been planned since October 2020. Miscellaneous other operating income includes a structuring fee from SoftBank of EUR 0.3 billion, which T‑Mobile US received in return for support in the immediate sale by SoftBank of T‑Mobile US shares. The prior-year period included income from the divestitures of shares accounted for using the equity method as a result of the transfer on August 14, 2019 of the 11.34 percent stake in Ströer SE & Co. KGaA to Deutsche Telekom Trust e.V. as plan assets. In addition, miscellaneous other operating income includes a large number of individual items accounting for marginal amounts.

For further information on the ad hoc reversal of impairment losses, please refer to the section “Selected notes to the consolidated statement of financial position.”

Other operating expenses

The increase in impairment losses on financial assets is mainly attributable to impairment losses on customer receivables due to lowered credit ratings as a consequence of the coronavirus pandemic in the United States operating segment. Expenses for legal and audit fees increased, mainly in connection with the business combination of T‑Mobile US and Sprint. Losses from asset disposals of EUR 0.2 billion resulted from the derecognition of billing software for postpaid customers in the United States, which was still in development. Due to the migration of Sprint contract customers to the T‑Mobile US billing software, it was decided that this software was not suitable for the joint customer base and would not be put into operation. Miscellaneous other operating expenses include a large number of individual items accounting for marginal amounts.

Depreciation, amortization and impairment losses

At EUR 18.9 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 6.1 billion higher overall in the first three quarters of 2020 than in the prior-year period. Depreciation of property, plant and equipment increased by EUR 3.2 billion and amortization of intangible assets by EUR 1.2 billion. Depreciation of right-of-use assets increased by EUR 1.0 billion. These increases are all largely due to Sprint, which has been included since April 1, 2020. In the United States operating segment, a reduction in the useful life of leased network technology for cell sites following the business combination of T‑Mobile US and Sprint increased depreciation of the corresponding right-of-use assets by EUR 0.1 billion. Impairment losses increased by EUR 0.1 billion year-on-year to EUR 0.7 billion. EUR 0.5 billion of this increase resulted from an ad hoc impairment test of assets assigned to the Systems Solutions cash-generating unit and relate to intangible assets and property, plant and equipment in the Systems Solutions operating segment and in the Group Headquarters & Group Services segment. EUR 0.2 billion of this resulted from another ad hoc impairment test of the assets assigned to the Romania cash-generating unit. This also relates to intangible assets and property, plant and equipment.

For further information on the ad hoc impairment testing, please refer to the section “Selected notes to the consolidated statement of financial position.”

Profit/loss from financial activities

In the first three quarters of 2020, the loss from financial activities increased by EUR 1.7 billion year-on-year to EUR 3.2 billion. This increase is primarily due to a EUR 1.3 billion increase in finance costs to EUR 3.1 billion, mainly due to the financial liabilities recognized and the restructuring begun in connection with the acquisition of Sprint and the related increase in financing, including the handling charges incurred for a briefly utilized bridge loan facility. Other financial income decreased by EUR 0.3 billion year-on-year to an expense of EUR 0.1 billion, due, among other factors, to an increase of EUR 0.2 billion in interest expense from the measurement of provisions and liabilities. Gains/losses from financial instruments also decreased year-on-year by EUR 0.1 billion, partly due to measurement effects in connection with derivatives. Overall, the share of profit/loss of associates and joint ventures accounted for using the equity method was down EUR 0.1 billion on the prior-year period.

For further information on embedded derivatives at T‑Mobile US, please refer to the section “Disclosures on financial instruments.”

Income taxes

In the first three quarters of 2020, a tax expense of EUR 1.5 billion was recorded. The effective tax rate of 27 percent essentially reflects the shares of the different countries in profit before income taxes and their respective national tax rates. In the prior-year period, a tax expense of EUR 1.7 billion was recorded. The higher tax expense was attributable to a higher profit before income taxes.