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 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 and other transactions.”

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

In the prior-year period, income from the reversal of impairment losses on non-current assets had 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 had been planned since October 2020. Miscellaneous other operating income in the prior-year period had included a structuring fee received 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. Gains resulting from deconsolidations and from the sale of stakes accounted for using the equity method were attributable to the sale of the Dutch cell tower company T‑Mobile Infra to the independently managed investment company Digital Infrastructure Vehicle (DIV) and its subsequent contribution into Cellnex NL in connection with the combination of the cell tower business in the Netherlands. Miscellaneous other operating income includes a large number of individual items accounting for marginal amounts.

For further information on the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund, please refer to the section “Changes in the composition of the Group and other transactions.”

Other operating expenses

The year-on-year decrease in impairment losses on financial assets was mainly attributable to impairment losses on customer receivables due to lowered credit ratings recognized in the first half of 2020 as a consequence of the coronavirus pandemic in the United States operating segment; by contrast, no such impairment losses had to be recognized in 2021. The losses from asset disposals incurred in the first nine months of 2021 resulted in part from the derecognition of damaged non-current assets such as telephone lines, central offices, and cell sites in the aftermath of the catastrophic flooding in Germany in July 2021. In the prior-year period, losses from asset disposals of EUR 0.2 billion had resulted from the derecognition of billing software for postpaid customers in the United States, which had still been in development. Prior to the migration of Sprint contract customers to the T‑Mobile US billing software, it had been decided that this software was not suitable for the joint customer base and would not be put into operation. The losses resulting from deconsolidations and from the sale of stakes accounted for using the equity method were attributable, among others, to the sale of the 54 % stake in Telekom Romania Communications (TKR) as of September 30, 2021 (EUR 29 million), the derecognition of the associated currency reserve in the Group (EUR 20 million), and the sale of a business operation in the Systems Solutions operating segment. Miscellaneous other operating expenses include a large number of individual items accounting for marginal amounts.

Depreciation, amortization and impairment losses

At EUR 20.6 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 1.7 billion higher overall in the first three quarters of 2021 than in the prior-year period. Depreciation of property, plant and equipment increased by EUR 1.2 billion, amortization of intangible assets by EUR 0.9 billion, and depreciation of right-of-use assets by EUR 0.9 billion. These increases are all largely due to Sprint, which has been included in the consolidated group 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 0.6 billion.

Impairment losses decreased by EUR 0.7 billion year-on-year to EUR 0.1 billion. The figure for the prior-year period included impairment losses of EUR 0.5 billion resulting from an ad hoc impairment test of assets assigned to the Systems Solutions cash-generating unit, and of EUR 0.2 billion, likewise from an ad hoc impairment test of assets assigned to the Romania cash-generating unit. The impairment losses recognized in the first three quarters of 2021 mainly resulted from the ad hoc impairment test carried out in the prior year of assets assigned to the Systems Solutions cash-generating unit, with EUR 68 million relating to the Systems Solutions operating segment and EUR 14 million to the Group Headquarters & Group Services segment.

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

Profit/loss from financial activities

The loss from financial activities increased from EUR 3.2 billion in the first nine months of 2020 to EUR 3.7 billion, with finance costs increasing by EUR 0.4 billion to EUR 3.5 billion, mainly due to the financial liabilities assumed in connection with the acquisition of Sprint and the related restructuring and increase in financing. Other financial expense increased by EUR 0.1 billion year-on-year to EUR 0.2 billion. On the one hand, interest income from the measurement of provisions and liabilities increased, in particular in the Group Headquarters & Group Services segment by EUR 0.5 billion. On the other, there was a EUR 0.5 billion decrease in gains/losses (net) from financial instruments, due in part to negative measurement effects resulting, among other factors, from the premature repayment of bonds and the resulting derecognition of embedded derivatives at T‑Mobile US and from a forward transaction concluded with a bank in May 2021 to hedge the price of acquiring T‑Mobile US shares in the future. And in part, net positive measurement effects resulted from the amortization and subsequent measurement of the stock options received from SoftBank in June 2020 to purchase shares in T‑Mobile US. Overall, the share of profit/loss of associates and joint ventures accounted for using the equity method was on a par with the prior-year period.

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

For a presentation of the effects resulting from the partial exercise and subsequent measurement of the stock options in connection with the capital increase against a non-cash contribution, please refer to the sections “Other financial assetsOther financial assets” and “Disclosures on financial instruments.”

Income taxes

In the first three quarters of 2021, a tax expense of EUR 1.7 billion was recorded. The tax amount essentially reflects the shares of the different countries in profit before income taxes and their respective national tax rates. Tax was furthermore reduced by deferred tax effects for prior years in the United States operating segment of EUR 0.2 billion. In the prior-year period, a tax expense of EUR 1.5 billion had been recorded despite lower profit/loss before income taxes.