Changes in the composition of the Group and other transactions
In the first nine months of 2023, Deutsche Telekom conducted the following transactions, which had 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.
Sale of the GD tower companies
On July 13, 2022, Deutsche Telekom agreed to sell a 51.0 % stake in the cell tower business companies in Germany and Austria (GD tower companies), hitherto assigned to the Group Development operating segment, to DigitalBridge and Brookfield. The sale price is based on an enterprise value of EUR 17.5 billion. Since closing of the transaction on February 1, 2023, Deutsche Telekom has lost control over the GD tower companies. All necessary regulatory approvals had been duly granted and all other closing conditions met. The total gain on deconsolidation resulting from the sale amounts to EUR 15.9 billion, of which EUR 12.9 billion is included as other operating income in profit/loss after taxes from discontinued operation as of the deconsolidation date. The remaining EUR 3.0 billion will be recognized pro rata in later periods due to the sale-and-leaseback transaction described below. The stake retained by Deutsche Telekom of 49.0 % has been included in the consolidated financial statements using the equity method since February 1, 2023. The carrying amount of the investment amounted to EUR 6.1 billion as of September 30, 2023.
As a result of the sales agreement, the GD tower companies had been recognized in the interim consolidated financial statements as discontinued operation from the third quarter of 2022 until their sale on February 1, 2023. The consolidated income statement was adjusted with retrospective effect in the comparative period. Thus, the contributions by the GD tower companies were no longer included in the individual items of the consolidated income statement. Instead, profit or loss after taxes was recognized in the item “Profit/loss after taxes from discontinued operation.” Assets and the directly associated liabilities have been shown as held for sale in the consolidated statement of financial position since December 31, 2022. In the consolidated statement of cash flows, the contributions by the GD tower companies have each been stated in a separate “of which” line item.
For further information on the assets and liabilities of the GD tower companies included in the consolidated financial statements as of December 31, 2022, please refer to Note 5 “Non-current assets and disposal groups held for sale and liabilities directly associated with non-current assets and disposal groups held for sale” in the notes to the consolidated financial statements in the 2022 Annual Report.
Once the transaction was consummated, Deutsche Telekom leased back the majority of the sold passive network infrastructure in Germany and Austria under a sale-and-leaseback agreement with a non-cancellable lease term of eight years. Overall, lease liabilities were recognized in the amount of EUR 5.0 billion and, as a result of the sale-and-leaseback agreement, retained right-of-use assets in the amount of EUR 2.0 billion. The portion of the gain attributable to the retained use of the sold assets, amounting to EUR 3.0 billion, will have an impact in later periods by way of lower depreciation of the capitalized right-of-use assets. Furthermore, deferred tax assets of EUR 0.9 billion were recognized in the consolidated statement of financial position.
The cash inflow totaling EUR 10.7 billion resulting from the sale of the GD tower companies is recognized in the consolidated statement of cash flows as of September 30, 2023, with EUR 7.6 billion relating to the sale of the business operation recognized under net cash from/used in investing activities and EUR 3.1 billion relating to the sale and leaseback of the passive mobile infrastructure recognized under net cash used in/from financing activities.
Sale of the U.S. wireline business
On September 6, 2022, T‑Mobile US reached an agreement with Cogent Infrastructure (Cogent) on the sale of T‑Mobile US’ fiber-optic-based wireline business. Under the agreement, Cogent will take over all shares in the entity that holds all of the assets and liabilities related to the former Sprint’s fiber-optic-based wireline network. The transaction was consummated on May 1, 2023. All necessary regulatory approvals had been duly granted and all other closing conditions met. The sale price was USD 1 and was subject to customary adjustments laid down in the purchase agreement. The cash proceeds received upon completion of the transaction amounted to USD 14 million (EUR 13 million). The loss on deconsolidation resulting from the sale amounted to EUR 4 million. In addition, upon completion of the transaction, T‑Mobile US undertook to enter into a separate agreement on IP transit services, according to which T‑Mobile US will pay a total of USD 0.7 billion (around EUR 0.6 billion) in agreed installments in subsequent periods to Cogent. In connection with the payment obligations entered into as part of the transaction, total liabilities of EUR 0.7 billion had already been recognized in the 2022 financial year. These liabilities included, under financial liabilities, the present value of the future payments for IP transit services. Since a specific use for these services has not been identified, the corresponding expense was already recognized in full in the 2022 financial year under other operating expenses.
As a result of the concluded sales agreement, the assets and liabilities of the wireline business were reported in the consolidated statement of financial position as “held for sale” from September 30, 2022 up until their sale on May 1, 2023.
The following transaction will change the composition of the Deutsche Telekom Group in the future:
Agreement on the acquisition of Ka’ena in the United States
On March 9, 2023, T‑Mobile US entered into a Merger and Unit Purchase Agreement for the acquisition of 100 % of the outstanding equity of Ka’ena Corporation and its subsidiaries including, among others, Mint Mobile, for a maximum purchase price of USD 1.35 billion to be paid out 39 % in cash and 61 % in shares of T‑Mobile US common stock. Ka’ena Corporation is currently one of the wholesale partners of T‑Mobile US, offering wireless telecommunications services to customers. The purchase price is variable dependent upon specified performance indicators of Ka’ena Corporation during certain periods before and after closing and consists of an upfront payment at deal close, subject to certain agreed-upon adjustments, and a variable earnout payable 24 months after the close of the transaction. The upfront payment is expected to be a revised amount of around USD 1.2 billion (before working capital adjustments). The acquisition is subject to certain customary closing conditions, including certain regulatory approvals, and the transaction is expected to close around the end of the first quarter of 2024.