Selected notes to the consolidated statement of financial position

Trade receivables

At EUR 14.1 billion, trade receivables increased by EUR 0.6 billion against the 2020 year-end level. The increase resulted from higher receivables in the United States operating segment due to the reporting date, and exchange rate effects, especially from the translation of U.S. dollars to euros. Lower receivables in the Group Development operating segment, primarily as a result of the reclassification of T‑Mobile Netherlands’ assets to non-current assets and disposal groups held for sale in connection with the agreed sale, and in the Germany operating segment had an offsetting effect.

For further information on the agreed sale of T‑Mobile Netherlands, please refer to the section “Changes in the composition of the Group and other transactions.”

Contract assets

At EUR 2.0 billion as of the reporting date, the carrying amount of contract assets remained unchanged against December 31, 2020. Contract assets relate to receivables that have not yet legally come into existence, which arise from the earlier – as compared to billing – recognition of revenue, in particular from the sale of goods and merchandise. Furthermore, receivables from long-term construction contracts are recognized under contract assets.

Inventories

The carrying amount of inventories decreased by EUR 0.6 billion compared to December 31, 2020 to EUR 2.1 billion, mainly due to sales of high-priced mobile terminal equipment as a result of a marketing campaign in the United States operating segment. Positive exchange rate effects, mainly from the translation from U.S. dollars into euros, increased the carrying amount.

Intangible assets

The carrying amount of intangible assets increased by EUR 12.6 billion to EUR 130.7 billion, primarily due to the following effects: Additions of EUR 12.4 billion resulting mainly from the conclusion of the FCC C-band auction in the United States increased the carrying amount of intangible assets. T‑Mobile US purchased 142 licenses for EUR 7.8 billion (USD 9.3 billion) in the auction and made initial “relocation payments” of EUR 0.2 billion to relocate incumbent licensees. In the Europe operating segment, licenses were purchased for a total value of EUR 0.2 billion. The 5G licenses acquired at auction in November 2020 by T‑Mobile Czech Republic were purchased in 2021 for EUR 0.1 billion. In addition, proceedings to re-award 900 and 1,800 MHz spectrum licenses in Hungary were held on January 28, 2021 and concluded the same day. Magyar Telekom acquired spectrum licenses for EUR 0.1 billion. Positive exchange rate effects of EUR 5.9 billion, primarily from the translation of U.S. dollars into euros, and effects of changes in the composition of the Group of EUR 1.6 billion, mainly from the first-time inclusion of Shentel, acquired by T‑Mobile US, also increased the carrying amount. This also includes preliminary goodwill arising from the transaction of EUR 0.9 billion. The reclassification of T‑Mobile Netherlands’ assets, in connection with the agreed sale, to non-current assets and disposal groups held for sale in the amount of EUR 2.2 billion as well as depreciation, amortization and impairment losses of EUR 5.0 billion reduced the carrying amount.

For further information on these business transactions and others, please refer to the section “Changes in the composition of the Group and other transactions.”

As part of the realignment of the B2B telecommunications business, the assets and liabilities assigned to the relevant business areas were transferred to the Germany operating segment in September 2020, primarily from the Systems Solutions and Europe operating segments. The realignment of the B2B telecommunications business in combination with the effects of the coronavirus pandemic in the third quarter of 2020 triggered ad hoc impairment testing of the assets assigned to the Systems Solutions cash-generating unit, which identified a deterioration in the business outlook for IT operations. As a consequence, impairment losses were recognized on intangible assets and property, plant and equipment in the Systems Solutions operating segment and on intangible assets in the Group Headquarters & Group Services segment. In the first three quarters of 2021, this resulted in total impairment losses of EUR 0.1 billion mainly on intangible assets under development and under construction.

For further information on the impairment losses, please refer to Note 6 “Intangible assets” in the 2020 Annual Report.

Property, plant and equipment

The carrying amount of property, plant and equipment decreased by EUR 0.9 billion compared to December 31, 2020 to EUR 60.1 billion. Additions of EUR 10.4 billion to upgrade and build out the network and acquire mobile devices in our United States operating segment and in connection with the broadband/fiber-optic build-out and mobile infrastructure build-out in the Germany and Europe operating segments increased the carrying amount. Positive exchange rate effects of EUR 1.6 billion, primarily from the translation of U.S. dollars into euros, and effects of changes in the composition of the Group of EUR 0.1 billion, mainly in connection with the acquisition of Shentel also increased the carrying amount. By contrast, depreciation, amortization and impairment losses of EUR 11.0 billion, disposals of EUR 1.3 billion, and the reclassification of T‑Mobile Netherlands’ assets to assets and disposal groups held for sale in the amount of EUR 0.7 billion had an offsetting effect.

For further information on the agreed sale of T‑Mobile Netherlands, please refer to the section “Changes in the composition of the Group and other transactions.”

Right-of-use assets

The carrying amount of the right-of-use assets increased by EUR 0.5 billion compared with December 31, 2020 to EUR 30.8 billion, mainly due to the following effects: The carrying amount was increased by additions of EUR 4.3 billion, partly as a result of a sale-and-leaseback transaction concluded after the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund. The carrying amount was also increased by positive exchange rate effects of EUR 1.5 billion, primarily from the translation of U.S. dollars into euros, and effects from changes in the composition of the Group of EUR 0.3 billion, mainly in connection with the acquisition of Shentel. The carrying amount was decreased by depreciation, amortization and impairment losses of EUR 4.6 billion. This included a EUR 0.6 billion increase in depreciation and amortization due to a reduction in the useful life of leased network technology for cell sites in the United States operating segment following the business combination of T‑Mobile US and Sprint. The reclassification of T‑Mobile Netherlands’ assets to non-current assets and disposal groups held for sale in the amount of EUR 0.5 billion and disposals of EUR 0.2 billion also reduced the carrying amount.

For further information on these business transactions and others, please refer to the section “Changes in the composition of the Group and other transactions.”

Capitalized contract costs

As of September 30, 2021, the carrying amount of capitalized contract costs was up by EUR 0.1 billion against the level of December 31, 2020 to EUR 2.3 billion. The capitalized contract costs primarily relate to the United States, Germany, and Europe operating segments.

Investments accounted for using the equity method

The carrying amount of investments accounted for using the equity method increased from EUR 0.5 billion on December 31, 2020 to EUR 1.0 billion, mainly as a result of the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund. As a result of the transaction, 37.65 % of the shares in Cellnex Netherlands B.V. with a carrying amount of EUR 0.4 billion were included in the Group Development operating segment in the consolidated financial statements using the equity method.

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 financial assets

The carrying amount of current and non-current other financial assets decreased by EUR 1.3 billion compared with the level of December 31, 2020 to EUR 8.4 billion. The carrying amount of derivatives with a hedging relationship decreased by EUR 0.5 billion to EUR 1.6 billion, mainly due to the decrease in positive fair values from interest rate swaps in fair value hedges, which is primarily the result of a rise in the interest rate level. The carrying amount of derivatives without a hedging relationship decreased by a net effect of EUR 0.7 billion to EUR 1.3 billion. Taking into account the partial exercise of the stock options received from SoftBank in June 2020 to purchase shares in T‑Mobile US, as well as measurement effects, the carrying amount of these stock options decreased by EUR 0.5 billion compared with December 31, 2020 to EUR 0.3 billion for the following reasons: Due to the negative development of the T‑Mobile US share price, a remeasurement loss of EUR 0.2 billion was recorded in other financial income/expense in the first nine months of 2021. Furthermore, the amortization from the initial measurement of the stock options at fair value resulted in current income of EUR 0.2 billion and, in connection with the exercise of the options, in one-time income of EUR 0.4 billion in other financial income/expense. At the time of exercising the stock options, they had a fair value of EUR 0.8 billion. This amount was recognized directly in equity as part of the consideration paid to SoftBank, as a result of the derecognition of the exercised options. The carrying amount of other financial assets decreased as a result. In addition, the carrying amount of the derivatives without a hedging relationship decreased by EUR 0.4 billion due to negative measurement effects from embedded derivatives of T‑Mobile US, including from the premature repayment of bonds. By contrast, the carrying amount was increased by positive measurement effects of EUR 0.2 billion from energy forward agreements embedded in contracts and of EUR 0.2 billion from receivables from grants still to be received from funding projects for the broadband build-out in Germany. At EUR 0.5 billion, cash collateral deposited was at the same level as at the end of 2020. The conclusion of the FCC C-band auction in the United States in February 2021 reduced the carrying amount by EUR 0.4 billion. It was increased by cash collateral of EUR 0.3 billion paid by the Group Headquarters & Group Services segment and the deposit of cash collateral of EUR 0.1 billion for the spectrum auction that began in the United States in October 2021.

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

Non-current assets and disposal groups held for sale

The carrying amount of non-current assets and disposal groups held for sale increased by EUR 3.4 billion compared with December 31, 2020 to EUR 4.6 billion. Of this increase, EUR 4.5 billion resulted from the reclassification of T‑Mobile Netherlands’ assets in connection with the sale agreed on September 6, 2021. By contrast, the sale of the Dutch company T‑Mobile Infra as of June 1, 2021 and of Telekom Romania Communications as of September 30, 2021 in particular had decreasing effects on the carrying amount of EUR 0.4 billion and EUR 0.6 billion respectively. Both these companies were classified as held for sale as of December 31, 2020 on account of the specific intention to sell them.

For further information on these business transactions and others, please refer to the section “Changes in the composition of the Group and other transactions.”

Financial liabilities and lease liabilities

The following table shows the composition and maturity structure of financial liabilities as of September 30, 2021:

The carrying amount of current and non-current financial liabilities increased by EUR 1.8 billion compared with year-end 2020 to EUR 108.9 billion, primarily due to the factors described below. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 3.6 billion.

The carrying amount of bonds and other securitized liabilities increased by EUR 3.9 billion. The main factors in this increase were senior notes issued in the reporting period by T‑Mobile US with a total volume of USD 11.8 billion (EUR 9.8 billion) with terms ending between 2026 and 2060 and bearing interest of between 2.25 % and 3.6 %. The carrying amount was also increased by AUD bonds with a volume of AUD 0.1 billion (EUR 0.1 billion) issued by Deutsche Telekom AG and euro bonds with a volume of EUR 0.1 billion. The early repayment by T‑Mobile US in the reporting period of bonds with a volume of USD 5.8 billion (EUR 4.9 billion) with terms originally ending between 2023 and 2026 and bearing interest of between 4.5 % and 6.5 %, and scheduled repayments by T‑Mobile US of bonds with a volume of USD 2.3 billion (EUR 1.9 billion) and in the Group of euro bonds with a volume of EUR 1.7 billion and U.S. dollar bonds with a volume of USD 0.3 billion (EUR 0.2 billion) had a contrasting effect. The carrying amount of bonds and other securitized liabilities increased by EUR 3.2 billion due to exchange rate effects, especially from the translation of U.S. dollars into euros.

The carrying amount of liabilities to banks decreased by EUR 1.4 billion compared with December 31, 2020 to EUR 3.9 billion, mainly due to scheduled repayments of EUR 1.2 billion made in the reporting period and a decline of EUR 0.2 billion in connection with factoring in the United States operating segment.

The liabilities with the right of creditors to priority repayment in the event of default of EUR 3.3 billion (December 31, 2020: EUR 3.9 billion) relate primarily to bonds issued by Sprint. Collateral was provided for these bonds, hence they constitute a separate class of financial instruments. Repayments in the reporting period in the amount of EUR 0.8 billion when translated into euros reduced the carrying amount. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.2 billion.

The carrying amount of other interest-bearing liabilities decreased by EUR 0.2 billion compared with December 31, 2020 to EUR 7.0 billion. The carrying amount of other interest-bearing liabilities decreased by a total of EUR 0.2 billion in connection with collateral received for derivative financial instruments.

For further information on collateral, please refer to the section “Disclosures on financial instruments.”

The carrying amount of derivative financial liabilities decreased by EUR 0.2 billion to EUR 0.7 billion, mainly in connection with positive measurement effects in the reporting period.

For further information on derivative financial liabilities, please refer to the section “Disclosures on financial instruments.”

The carrying amount of current and non-current lease liabilities increased by EUR 0.1 billion to EUR 32.8 billion compared with December 31, 2020. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 1.6 billion. Effects of changes in the composition of the Group, mainly from the first-time inclusion of Shentel, acquired by T‑Mobile US, also increased the carrying amount by EUR 0.3 billion. This was offset in particular by the decommissioning of former Sprint cell sites and the closure of some former Sprint shops in the United States operating segment and by an advance payment for the lease of sites of EUR 0.9 billion made by T‑Mobile US to a U.S. cell tower company in September 2021 in connection with a change to the existing lease agreed in the reporting period. Overall, lease liabilities in the amount of EUR 4.7 billion are due within one year.

Trade and other payables

The carrying amount of trade and other payables decreased by EUR 1.5 billion to EUR 8.2 billion, due in particular to lower liabilities to terminal equipment vendors and declines in liabilities for purchased services in the United States operating segment. In addition, liabilities in the Group Development operating segment decreased as a result of the reclassification of T‑Mobile Netherlands’ liabilities to the liabilities directly associated with non-current assets and disposal groups held for sale. Liabilities also decreased in the Europe operating segment. By contrast, exchange rate effects, primarily from the translation of U.S. dollars into euros, increased the carrying amount.

For further information on the agreed sale of T‑Mobile Netherlands, please refer to the section “Changes in the composition of the Group and other transactions.”

Provisions for pensions and other employee benefits

The carrying amount of provisions for pensions and other employee benefits decreased by EUR 1.2 billion as of December 31, 2020 to EUR 6.4 billion, mainly due to an increase in the share prices of plan assets and interest rate adjustments. All this resulted in an actuarial gain of EUR 1.1 billion from the remeasurement of defined benefit plans to be recognized directly in equity.

In the first quarter of 2021, the risk benefits (death in the active phase and/or disability) for employees not covered by collective agreements in Germany were restructured, as had already been done for employees covered by collective agreements in the fourth quarter of 2020. As a result of the change from an annual (pro rata) contribution to payment of a lump sum, the employer will in future grant the risk benefit irrespective of the employee’s length of service with the company. Future risk benefit payments will thus directly be recognized as expenses in the payout year. Provisions of EUR 0.1 billion recognized according to the previous rules were released against a reduction in expenses in the first quarter of 2021.

For further information on the Global Pension Policy and a description of the plan, please refer to Note 15 “Provisions for pensions and other employee benefits” in the 2020 Annual Report.

Current and non-current other provisions

The carrying amount of current and non-current other provisions decreased by EUR 0.3 billion compared with the end of 2020 to EUR 8.8 billion. This decline resulted in part from the reclassification of T‑Mobile Netherlands’ liabilities in connection with the agreed sale to non-current assets and disposal groups held for sale. In addition, provisions were reduced by the reversal of other provisions for personnel costs, which had been recognized by OTE in 2010 and 2011 for an additional payment to the Greek social insurance fund IKA-ETAM, as a result of proceedings concluded in September 2021.

For further information on the agreed sale of T‑Mobile Netherlands, please refer to the section “Changes in the composition of the Group and other transactions.”

Other liabilities

The carrying amount of current and non-current other liabilities increased by EUR 0.4 billion to EUR 6.0 billion. Liabilities due to existing build-out obligations in connection with grants still to be received from funding projects for the broadband build-out in Germany increased by EUR 0.1 billion. The carrying amount was also increased by higher deferrals in the United States operating segment as well as negative exchange rate effects, primarily from the translation of euros into U.S. dollars. By contrast, the carrying amount was reduced by the reclassification of the liabilities of T‑Mobile Netherlands directly associated with non-current assets and disposal groups held for sale.

For further information on the agreed sale of T‑Mobile Netherlands, please refer to the section “Changes in the composition of the Group and other transactions.”

Contract liabilities

The carrying amount of current and non-current contract liabilities increased by EUR 0.2 billion compared with December 31, 2020 to EUR 2.2 billion. These mainly comprise deferred revenues.

Liabilities directly associated with non-current assets and disposal groups held for sale

The carrying amount of liabilities directly associated with non-current assets and disposal groups held for sale increased by EUR 0.8 billion against December 31, 2020 to EUR 1.3 billion. Of this increase, EUR 1.3 billion resulted from the reclassification of T‑Mobile Netherlands’ liabilities in connection with the sale agreed on September 6, 2021. By contrast, the sale of the Dutch company T‑Mobile Infra as of June 1, 2021 and of Telekom Romania Communications as of September 30, 2021 in particular had decreasing effects on the carrying amount of EUR 0.2 billion and EUR 0.3 billion respectively. Both these companies were classified as held for sale as of December 31, 2020 on account of the specific intention to sell them.

For further information on these business transactions and others, please refer to the section “Changes in the composition of the Group and other transactions.”

Shareholders’ equity

The carrying amount of shareholders’ equity increased from EUR 72.6 billion as of December 31, 2020 to EUR 78.9 billion. Profit of EUR 5.3 billion and capital increases from share-based payments of EUR 0.3 billion increased shareholders’ equity, as did other comprehensive income of EUR 4.9 billion, primarily as a result of currency translation effects of EUR 3.8 billion recognized directly in equity and the remeasurement of defined benefit plans accounting for EUR 1.1 billion, as well as gains from hedging instruments of EUR 0.2 billion. By contrast, income taxes relating to components of other comprehensive income of EUR 0.3 billion had a negative impact on other comprehensive income. Shareholders’ equity was reduced in connection with dividend payments for the 2020 financial year to Deutsche Telekom AG shareholders in the amount of EUR 2.8 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion. The carrying amount of shareholders’ equity also decreased by a net EUR 0.8 billion due to the acquisition of T‑Mobile US shares by way of a capital increase against a non-cash contribution. Changes in the composition of the Group – mainly due to the sale of Telekom Romania Communications in the Europe operating segment – of EUR 0.2 billion and transactions with owners of EUR 0.1 billion also decreased the carrying amount.

The following table shows the changes in the composition of the Group, the development of transactions with owners, and the capital increase made against a non-cash contribution:

In connection with the agreement concluded on September 6, 2021 between Deutsche Telekom and SoftBank for the acquisition of around 45.4 million T‑Mobile US shares, an increase in issued capital was entered in the commercial register and executed on September 28, 2021 by issuing 225 million no par value shares at the lowest issue price of EUR 2.56 per share against a non-cash contribution. Issued capital was increased by EUR 576 million in total. The number of Deutsche Telekom AG’s outstanding shares increased as a result from 4,761 million to 4,986 million shares.

The non-cash capital increase was executed by SoftBank contributing 45.4 million T‑Mobile US shares to Deutsche Telekom AG in return for the transfer of 225 million Deutsche Telekom AG shares from the 2017 Authorized Capital. As a result of the transaction, Deutsche Telekom AG’s stake in T‑Mobile US increased by 3.6 percentage points to 46.8 %. Because T‑Mobile US is already included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary, the increase in the stake merely led to a decrease in the non-controlling interests in consolidated shareholders’ equity by EUR 2,358 million and to an increase in the share of equity held by the owners of the parent company by a net total of EUR 1,511 million.

In order to acquire the around 45.4 million T‑Mobile US shares, on September 23, 2021, Deutsche Telekom exercised a portion of the stock options received from SoftBank in June 2020. On the exercise date, these stock options had a fair value of EUR 847 million. This amount was recognized directly in equity as part of the consideration paid to SoftBank, as a result of the derecognition of the exercised options (issued capital and reserves attributable to owners of the parent). Other financial assets decreased as a result.

For further information on the increase of the stake in T‑Mobile US by way of the agreement concluded with SoftBank, please refer to the section “Other transactions that had no effect on the composition of the Group.”

For more information on the presentation of the effects in connection with the stock options, please refer to the sections “Other financial assetsOther financial assets” and “Disclosures on financial instruments.”