Selected notes to the consolidated statement of financial position

Trade receivables

At EUR 17.1 billion, trade receivables increased by EUR 1.8 billion against the 2021 year-end level. In the United States operating segment, the increase in receivables was mainly due to exchange rate effects. The increase in receivables there was also attributable to the Equipment Installment Plan and to customer additions. By contrast, wholesale receivables in the United States declined.

Contract assets

The carrying amount of contract assets at the reporting date totaled EUR 2.1 billion compared with EUR 2.0 billion as of December 31, 2021. 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 increased by EUR 0.3 billion compared to December 31, 2021 to EUR 3.2 billion, mainly due to higher inventories of high-priced mobile terminal equipment in the Germany operating segment, partly as a preventive measure in connection with the prevailing supply chain uncertainty. Exchange rate effects, mainly from the translation from U.S. dollars into euros, also increased the carrying amount. Reduced inventories of high-priced terminal equipment in the United States operating segment due to marketing campaigns as well as to the now largely completed migration of Sprint customers to the T-Mobile US network had an offsetting effect.

Intangible assets

The carrying amount of intangible assets increased by EUR 19.3 billion to EUR 151.9 billion, due in particular to exchange rate effects of EUR 18.1 billion, primarily from the translation of U.S. dollars into euros. The carrying amount was further increased by additions of EUR 6.9 billion, EUR 3.1 billion of which related to the acquisition of mobile spectrum and resulted almost entirely from the licenses acquired at the FCC Auctions 110 and 108 in the United States. Positive effects from changes in the composition of the Group also contributed EUR 0.1 billion to the increase in the carrying amount, while amortization and impairment losses of EUR 5.1 billion reduced it. This includes impairment losses of EUR 0.1 billion. The reclassification of assets worth EUR 0.6 billion to non-current assets and disposal groups held for sale also reduced the carrying amount. These relate to the agreements on the sale of the Group’s cell tower business in Germany and Austria (GD tower companies) and of the wireline business in the United States. Disposals decreased the carrying amount by EUR 0.1 billion.

For further information on impairment losses, please refer to the section “Property, plant and equipment.”

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

Property, plant and equipment

The carrying amount of property, plant and equipment increased by EUR 5.1 billion compared to December 31, 2021 to EUR 66.9 billion. Additions of EUR 13.3 billion for the upgrade and build-out of the network and in connection with the broadband/fiber-optic build-out and mobile infrastructure build-out increased the carrying amount. The modification of the arrangements between T‑Mobile US and Crown Castle for existing cell sites increased the carrying amount by EUR 0.8 billion. Exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 4.5 billion. Reclassifications of lease assets upon expiry of the contractual lease term to property, plant and equipment, in the United States operating segment in particular, increased the carrying amount by EUR 0.3 billion, while depreciation and impairment losses of EUR 10.4 billion had an offsetting effect. This includes impairment losses of EUR 0.5 billion, mainly relating to the impairment test described below of the former Sprint’s fiber-optic-based wireline assets, which was carried out in the second quarter of 2022, and the corresponding sale agreed in the third quarter of 2022. The reclassification of assets worth EUR 1.6 billion to non-current assets and disposal groups held for sale reduced the carrying amount. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. Disposals of EUR 0.9 billion also reduced the carrying amount.

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please refer to the section “Right-of-use assets.”

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

In the second quarter of 2022, T‑Mobile US decommissioned its 3G CDMA network and began switching off the former Sprint’s 4G LTE network. Until now, the operation of these networks has been supported by Sprint’s own fiber-optic-based wireline network. The assets of this wireline network, which mainly comprise land and buildings, communication systems and network technology, fiber-optic cable equipment and right-of-use assets, therefore had to be grouped together with the mobile assets for the purposes of the impairment test and were thus part of the United States cash-generating unit. Due to the decommissioning of Sprint’s mobile networks, the assets of Sprint’s fiber-optic-based wireline network now generate cash inflows independently of the assets of the mobile business. As such, they are no longer assigned to the United States cash-generating unit. This resulted in an ad hoc impairment test of the fiber-optic-based wireline assets as of June 30, 2022. The fair value of the assets was determined using the combination of cost, income, and market-value-based approaches, including assumptions of the market participants. The value was calculated using Level 3 input parameters. A discount rate of 7.5 % was used. The recoverable amount of the assets, calculated as fair value less costs of disposal, was EUR 452 million below the carrying amount and stood at EUR 649 million. EUR 228 million of the impairment loss recognized in this connection related to property, plant and equipment, EUR 201 million to right-of-use assets, and EUR 23 million to intangible assets.

On September 6, 2022, T‑Mobile US reached an agreement with Cogent on the sale of the fiber-optic-based wireline business of the former Sprint. The sale price is USD 1 and is subject to customary adjustments laid down in the purchase agreement. As a result of the purchase agreement concluded, the assets of the wireline business were reclassified as of September 30, 2022 to non-current assets and disposal groups held for sale. This required a remeasurement of these assets at the lower of carrying amount and fair value based on the purchase price less costs of disposal, which resulted in an impairment loss of EUR 375 million as of the date of the reclassification. EUR 300 million of the impairment loss related to property, plant and equipment, EUR 71 million to right-of-use assets, and EUR 4 million to intangible assets.

Right-of-use assets

The carrying amount of the right-of-use assets increased by EUR 7.0 billion compared to December 31, 2021 to EUR 37.8 billion. This increase was driven by additions of EUR 9.9 billion, primarily as a result of the modification to existing leases agreed between T‑Mobile US and Crown Castle in January 2022, mainly concerning the lease of Crown Castle’s cell sites. This agreement includes a modification of the monthly lease payments for existing cell sites and an extension of the non-cancelable lease term until December 31, 2033 (with additional extension options). The modification of the arrangements resulted in an increase of USD 7.3 billion (EUR 6.6 billion) each in the right-of-use assets and in lease liabilities, and an increase of USD 0.9 billion (EUR 0.8 billion) each in property, plant and equipment and in other financial liabilities for contract components that, due to their financing character, do not fall under the scope of IFRS 16. In addition, the agreement on the sale of 51.0 % of the shares in the GD tower companies triggered a remeasurement of the lease liabilities, which resulted in an increase in the right-of-use assets and the lease liabilities of EUR 0.5 billion in each case. Exchange rate effects, primarily from the translation of U.S. dollars into euros, also increased the carrying amount by EUR 5.0 billion. Depreciation and impairment losses of EUR 5.8 billion reduced the carrying amount. This included a EUR 1.4 billion increase in depreciation 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. This also includes impairment losses of EUR 0.3 billion, mainly relating to the impairment test of the former Sprint’s fiber-optic-based wireline assets, which was carried out in the second quarter of 2022, and the corresponding sale agreed in the third quarter of 2022. The reclassification of assets worth EUR 1.5 billion to non-current assets and disposal groups held for sale reduced the carrying amount. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. Reclassifications of lease assets upon expiry of the contractual lease term to property, plant and equipment, in the United States operating segment in particular, also reduced the carrying amount by EUR 0.3 billion. Disposals of EUR 0.2 billion also reduced the carrying amount.

For further information on impairment losses, please refer to the section “Property, plant and equipment.”

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

Capitalized contract costs

As of September 30, 2022, the carrying amount of capitalized contract costs was up by EUR 0.6 billion against the level of December 31, 2021 to EUR 3.2 billion. The capitalized contract costs primarily relate to the United States, Germany, and Europe operating segments. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.2 billion.

Investments accounted for using the equity method

Compared to December 31, 2021, the carrying amount of investments accounted for using the equity method increased by EUR 0.9 billion to EUR 1.8 billion, mainly in connection with the completed sale of a 50 % stake in GlasfaserPlus. Following the loss of control as a result of the transaction, the GlasfaserPlus entities were deconsolidated as of February 28, 2022. Since this date, the remaining 50 % of the shares in the joint venture have been included in the consolidated financial statements as an investment accounted for using the equity method. After the transaction was consummated, EUR 0.1 billion was paid into the reserves of GlasfaserPlus as per agreement. The carrying amount of the investment amounted to EUR 1.0 billion as of September 30, 2022. In addition, DIV II was deconsolidated on August 2, 2022 as a result of the admission of new investors and the associated loss of control over the entity. Since then, the stake retained by the Group of 41.25 % has been included in the consolidated financial statements as an associate using the equity method. The carrying amount of the investment amounted to EUR 0.3 billion as of September 30, 2022. It was reduced by the disposal of 37.65 % of the shares in Cellnex Netherlands B.V. in the amount of EUR 0.4 billion as a result of the deconsolidation of DIV II. Since June 1, 2021, the shares in Cellnex Netherlands B.V. had been indirectly included in the consolidated financial statements through the investment in DIV II using the equity method and related to the transaction consummated in the prior year concerning the combination of the cell tower business in the Netherlands and the set-up of an infrastructure fund.

For further information on the joint venture GlasfaserPlus with IFM and on the associate DIV II, please refer to the section “Changes in the composition of the Group and other transactions.”

For further information on the combination of the cell tower business in the Netherlands and on the set-up of an infrastructure fund, please refer to the section “Changes in the composition of the Group and other transactions” in the notes to the consolidated financial statements in the 2021 Annual Report.

Other financial assets

The carrying amount of current and non-current other financial assets increased by EUR 2.3 billion compared to December 31, 2021 to EUR 11.2 billion. The net total of originated loans and receivables increased by EUR 0.9 billion to EUR 4.3 billion, with the carrying amount of cash collateral deposited increasing by EUR 0.6 billion. In connection with receivables from grants still to be received from funding projects for the broadband build-out in Germany, the carrying amount of other receivables increased by EUR 0.2 billion. The carrying amount of debt instruments measured at fair value through profit or loss increased by EUR 0.4 billion. A contingent consideration receivable was recorded in connection with the sale of a 50 % stake in GlasfaserPlus. As the remainder of the purchase price, this receivable will fall due in stages upon achieving certain build-out milestones and, as of September 30, 2022, amounted to EUR 0.4 billion. The carrying amount of derivatives with a hedging relationship remained unchanged against the level at December 31, 2021, due on the one hand to the decrease in positive fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. On the other hand, the fair values of interest rate and currency derivatives in cash flow hedges decreased as a result of the significant rise in the interest rate level and due to exchange rate effects (primarily from the strengthening of the U.S. dollar against the euro). The carrying amount of derivatives without a hedging relationship increased by EUR 0.7 billion to EUR 1.9 billion, due to an increase of EUR 0.8 billion in the carrying amount of interest rate and currency derivatives mainly as a result of exchange rate effects (primarily from the strengthening of the U.S. dollar against the euro). In connection with the stock options received from SoftBank to purchase shares in T‑Mobile US, the carrying amount of the stock options recorded a net increase of EUR 0.2 billion against December 31, 2021, due on the one hand to the positive development of the T‑Mobile US share price and the amortization in full of the initial measurement of the stock options at fair value, and on the other, to the derecognition of the exercised options in April 2022. At the time of exercising the stock options, they had a fair value of EUR 0.5 billion. In connection with negative measurement effects from derivatives embedded in bonds issued by T‑Mobile US, the carrying amount of derivatives without a hedging relationship decreased by EUR 0.4 billion. The carrying amount of energy forward agreements embedded in contracts remained stable against December 31, 2021.

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

For further information on the joint venture GlasfaserPlus with IFM, please refer to the section “Changes in the composition of the Group and other transactions.”

Other assets

The carrying amount of current and non-current other assets increased by EUR 0.4 billion to EUR 3.5 billion. As of September 30, 2022, the carrying amount included various advance payments, totaling EUR 2.8 billion (December 31, 2021: EUR 2.6 billion), mainly including advance payments in connection with agreements on services for certain mobile communications equipment that do not fall under the scope of IFRS 16. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 0.3 billion.

Non-current assets and disposal groups held for sale

The carrying amount of non-current assets and disposal groups held for sale decreased by EUR 0.3 billion compared with December 31, 2021 to EUR 4.6 billion. The sale of T‑Mobile Netherlands as of March 31, 2022 reduced the carrying amount by EUR 4.7 billion, and the sale of the 50 % stake in GlasfaserPlus as of February 28, 2022 by EUR 0.1 billion. By contrast, the reclassification of the assets of the GD tower companies increased the carrying amount by EUR 4.1 billion, and those of the wireline business in the United States operating segment by EUR 0.4 billion. The assets were classified as held for sale as of September 30, 2022 on account of the sales agreements concluded.

For further information on these corporate transactions, 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, 2022:

The carrying amount of current and non-current financial liabilities increased by EUR 10.9 billion compared with year-end 2021 to EUR 122.4 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 12.3 billion.

The carrying amount of bonds and other securitized liabilities increased by EUR 7.3 billion. Exchange rate effects increased the carrying amount of bonds and other securitized liabilities by EUR 11.0 billion. The carrying amount was also increased by senior notes issued in the reporting period by T‑Mobile US with a total volume of USD 3.0 billion (EUR 3.0 billion) with terms ending between 2033 and 2062 and bearing interest of between 5.2 % and 5.8 %. Repayments by T‑Mobile US of a bond with a volume of USD 0.5 billion (EUR 0.5 billion) and in the Group of EUR bonds with a volume of EUR 1.7 billion and a GBP bond with a volume of GBP 0.7 billion (EUR 0.8 billion) reduced the carrying amount in the reporting period. In addition, the carrying amount decreased by EUR 3.4 billion in connection with measurement effects from derivatives with a hedging relationship, the offsetting entry for which is posted under bonds and other securitized liabilities. This is mainly due to the decline in fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The subsequent measurement under the effective interest method reduced the carrying amount by EUR 0.3 billion.

The carrying amount of liabilities to banks remained unchanged against December 31, 2021 at EUR 4.0 billion. The carrying amount was increased by new borrowings of EUR 0.2 billion and the net increase of EUR 0.5 billion in the balance of short-term borrowings. It was reduced by repayments of EUR 0.5 billion and a decrease of EUR 0.2 billion in connection with measurement effects from derivatives with a hedging relationship.

The liabilities with the right of creditors to priority repayment in the event of default of EUR 3.3 billion (December 31, 2021: EUR 3.2 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 0.4 billion when translated into euros reduced the carrying amount. Exchange rate effects from the translation of U.S. dollars into euros raised the carrying amount by EUR 0.5 billion.

The carrying amount of other interest-bearing liabilities increased by EUR 0.9 billion compared with December 31, 2021 to EUR 8.7 billion. The modification of the arrangements between T‑Mobile US and Crown Castle regarding cell sites increased the carrying amount by EUR 0.8 billion. In addition, liabilities recognized by T‑Mobile US for future payments for IP transit services in connection with the agreement on the sale of the wireline business increased the carrying amount by EUR 0.6 billion. Exchange rate effects, especially from the translation of U.S. dollars into euros, increased the carrying amount of other interest-bearing liabilities by EUR 0.5 billion. In connection with cash collateral received for derivative financial instruments, the carrying amount of other interest-bearing liabilities decreased by EUR 0.6 billion.

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

For further information on the modification of the arrangements between T‑Mobile US and Crown Castle, please refer to the section “Right-of-use assets.”

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

The carrying amount of derivative financial liabilities increased by EUR 2.2 billion to EUR 2.9 billion, driven by negative measurement effects of derivatives with a hedging relationship. This is mainly due to the increase in negative fair values from interest rate swaps in fair value hedges, which is primarily the result of a significant increase in the interest rate level. The carrying amount was reduced by positive measurement effects from a forward transaction to hedge the price of acquiring T‑Mobile US shares in the future.

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 9.7 billion to EUR 42.8 billion compared with December 31, 2021. This increase primarily relates to the modification of the arrangements between T‑Mobile US and Crown Castle, which resulted in an increase in the carrying amounts of lease liabilities of EUR 6.6 billion. In addition, the agreement on the sale of 51.0 % of the shares in the GD tower companies triggered a remeasurement of the lease liabilities, which increased by EUR 0.5 billion accordingly. Exchange rate effects, in particular from the translation of U.S. dollars into euros, raised the carrying amount by EUR 5.6 billion. The reclassification of lease liabilities to liabilities directly associated with non-current assets and disposal groups held for sale reduced the carrying amount by EUR 2.3 billion. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States. Furthermore, the carrying amount was reduced, in part in connection with the decommissioning of former Sprint cell sites and the closure of some former Sprint shops in the United States operating segment, and also in part due to the decline in the Europe operating segment and in the Group Headquarters & Group Services segment.

For more information on the modification of the arrangements between T‑Mobile US and Crown Castle, and on the remeasurement of the lease liabilities of the GD tower companies, please refer to the section “Right-of-use assets.”

Trade and other payables

The carrying amount of trade and other payables increased by EUR 1.1 billion to EUR 11.5 billion, due in particular to higher liabilities in the United States, Systems Solutions, and Germany operating segments. In the United States operating segment, the increase was mainly attributable to exchange rate effects. Liabilities in the segment also increased in connection with the acquisition of property, plant and equipment and intangible assets. In the Europe operating segment, liabilities declined. The reclassification to liabilities directly associated with non-current assets and disposal groups held for sale also reduced the carrying amount. These relate to the agreements on the sale of the GD tower companies and of the wireline business in the United States.

For further information on these corporate transactions, 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 1.9 billion as of December 31, 2021 to EUR 4.3 billion, mainly due to interest rate adjustments. The development of the fair values of plan assets had an offsetting effect. Overall, the remeasurement of defined benefit plans resulted in an actuarial gain of EUR 1.8 billion.

Current and non-current other provisions

The carrying amount of current and non-current other provisions decreased by EUR 1.6 billion compared with the end of 2021 to EUR 7.9 billion. Other provisions for personnel costs decreased by EUR 0.9 billion, mainly in connection with the performance-based remuneration components for the prior year paid out to employees in the first half of 2022 and a reduction in the carrying amount of the provision recognized for the Civil Health Insurance Fund (Postbeamtenkrankenkasse – PBeaKK), due to a significant increase in the interest rate level. The provisions for restoration obligations decreased by EUR 1.0 billion in connection with reclassifications to liabilities directly associated with non-current assets and disposal groups held for sale, in particular in connection with the agreement on the sale of the GD tower companies. In addition, this resulted from the increase in the interest rate level. By contrast, the provisions for litigation risks increased by a net amount of EUR 0.2 billion, mainly in connection with the proceedings pending in consequence of the cyberattack on T‑Mobile US. Exchange rate effects, in particular from the translation of U.S. dollars into euros, also contributed to the increase.

Other liabilities

The carrying amount of current and non-current other liabilities increased by EUR 0.8 billion to EUR 6.4 billion, EUR 0.7 billion of which was attributable to an increase in liabilities from other taxes. 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. Exchange rate effects, in particular from the translation of U.S. dollars into euros, also contributed to the increase.

Contract liabilities

The carrying amount of current and non-current contract liabilities increased by EUR 0.3 billion compared with December 31, 2021 to EUR 2.6 billion. These mainly comprise deferred revenues. The increase resulted from higher contract liabilities in the United States and Germany operating segments.

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 2.0 billion against December 31, 2021 to EUR 3.4 billion. The sale of T‑Mobile Netherlands as of March 31, 2022 reduced the carrying amount by EUR 1.4 billion. The reclassification of the liabilities of the GD tower companies (EUR 3.0 billion) and of the wireline business in the United States operating segment (EUR 0.4 billion) had an increasing effect on the carrying amount. The liabilities were classified as held for sale as of September 30, 2022 on account of the sales agreements concluded.

For further information on these corporate transactions, 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 81.5 billion as of December 31, 2021 to EUR 94.5 billion, with profit of EUR 7.7 billion and other comprehensive income of EUR 12.4 billion having an increasing effect. Other comprehensive income increased mainly as a result of currency translation effects of EUR 10.8 billion recognized directly in equity and the remeasurement of defined benefit plans accounting for EUR 1.8 billion, as well as gains from hedging instruments of EUR 0.8 billion. By contrast, income taxes relating to components of other comprehensive income of EUR 1.0 billion in particular had a negative impact on other comprehensive income. Capital increases from share-based payments increased shareholders’ equity by EUR 0.5 billion. Shareholders’ equity was reduced in connection with dividend payments for the 2021 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.2 billion and to other shareholders of subsidiaries in the amount of EUR 0.2 billion. Transactions with owners also reduced the carrying amount by EUR 3.6 billion, mainly due to the acquisition of additional T‑Mobile US shares to increase the stake and due to the share buy-back program underway at T‑Mobile US. Changes in the composition of the Group resulting from the sale of T‑Mobile Netherlands in the Group Development operating segment reduced the carrying amount of shareholders’ equity by EUR 0.6 billion.

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 “Changes in the composition of the Group and other transactions.”

The following table shows the changes in the composition of the Group, the development of transactions with owners, and the capital increase made against contribution in kind in the previous financial year: