Selected notes to the consolidated income statement

As a result of the sales agreement concluded on July 13, 2022, the GD tower companies had been recognized as a discontinued operation from the third quarter of 2022 until their sale on February 1, 2023. 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 disclosed in aggregate form in the item “Profit/loss after taxes from discontinued operation.”

For further information on the sale of the GD tower companies, 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:

The breakdown of revenues by revenue category was changed in line with the Group’s management model, effective January 1, 2023. Comparative figures have been adjusted retrospectively.

For further information on this change, please refer to the section “Changes in accounting policies and changes in the reporting structure.”

The service revenues essentially comprise predictable and/or recurring revenues from Deutsche Telekom’s core activities. These relate to revenues that are generated from services (i.e., revenues from fixed and mobile network voice services, incoming and outgoing calls, as well as data services) plus roaming revenues, monthly basic charges and visitor revenues, as well as revenues from the ICT business. Service revenues also include revenues earned in connection with premium services for customers, such as reinsurance for device insurance policies and extended warranties. Revenue from insurance contracts in the scope of IFRS 17 in the Group amounted to EUR 3.4 billion (Q1-Q3 2022: EUR 3.4 billion).

Non-service revenues mainly comprise one-time and variable revenues, e.g., revenue from the sale or rental of fixed-network or mobile devices, from value-added services, from application and contract services, revenue with virtual network operators, one-time revenue from the build-out of technical infrastructure, and revenue from vehicle and property leasing.

Net revenue includes revenue from the use of entity assets by others in the scope of IFRS 16 in the amount of EUR 0.9 billion (Q1-Q3 2022: EUR 1.8 billion). Of the revenue from the use of entity assets by others reported in net revenue, EUR 0.6 billion (Q1-Q3 2022: EUR 0.6 billion) relates to service revenues and EUR 0.3 billion (Q1-Q3 2022: EUR 1.2 billion) to non-service revenues.

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 insurance compensation in the first three quarters of 2023 mainly relates to further refunds from insurance companies for expenses incurred in connection with the cyberattack on T‑Mobile US in August 2021. In the prior year, this income mainly resulted from payments from insurance companies in connection with damage sustained in the catastrophic flooding in North Rhine-Westphalia and Rhineland-Palatinate in July 2021. Gains resulting in the prior year from the deconsolidation and sale of stakes accounted for using the equity method were attributable to the loss of control over the GlasfaserPlus entities (EUR 1.7 billion), the sale of T‑Mobile Netherlands (EUR 0.9 billion), and the loss of control over DIV II (EUR 0.1 billion). Other operating income in the prior year also included a payment of EUR 0.2 billion in connection with the settlement of a series of patent disputes between T‑Mobile US and a competitor.

For further information on the sale of the GD tower companies, please refer to the section “Changes in the composition of the Group and other transactions.”

Other operating expenses

Expenses for legal and audit fees in the prior year included, among other factors, expenses in connection with the proceedings brought in consequence of the cyberattack on T‑Mobile US in August 2021. Miscellaneous other operating expenses include expenses of EUR 0.4 billion for data storage in data centers, in cloud applications, or other IT services, and of EUR 0.3 billion for regulatory duties in the United States. Miscellaneous other operating expenses in the prior year included expenses of EUR 0.7 billion in connection with the payment obligations entered into in that period under the agreement to sell the wireline business in the United States.

Depreciation, amortization and impairment losses

At EUR 17.8 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 3.4 billion lower in the first three quarters of 2023 than in the prior-year period, with the decrease being mainly attributable to the United States operating segment. Depreciation and amortization at T‑Mobile US were lower due to the ongoing strategic withdrawal from the terminal equipment lease business. Depreciation and amortization also decreased due to the complete write-off of certain 4G network components, including assets affected by the decommissioning of the former Sprint’s legacy CDMA and LTE networks in 2022. The decrease was offset by increased depreciation and amortization in connection with the further build-out of the nationwide 5G network in the United States. In addition, a further 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 0.2 billion. In the Germany operating segment, depreciation and amortization increased, partly as a result of the sale and leaseback of passive network infrastructure in Germany and Austria in connection with the sale of the GD tower companies and the associated recognition of retained right-of-use assets. Impairment losses amounted to EUR 0.1 billion in the reporting period. The impairment losses recorded in the prior-year period of EUR 0.9 billion were mainly attributable to the former Sprint’s fiber-optic-based wireline assets in the United States operating segment and related in part to the sale of the business to Cogent agreed in September 2022.

Profit/loss from financial activities

Loss from financial activities increased year-on-year from EUR 2.6 billion to EUR 4.4 billion, with other financial income declining from EUR 1.3 billion to a financial expense of EUR 0.2 billion, in particular in connection with the interest component from the measurement of provisions and liabilities. This decrease was mainly attributable to the subsequent measurement using actuarial principles of the present value of the provision recognized for the Civil Service Health Insurance Fund. In the prior year, the measurement was affected by the significant increase in the interest rate level in that period. Gains/losses from financial instruments also declined, partly due to less pronounced positive measurement effects from derivatives compared with the prior-year period. Finance costs increased from EUR 3.9 billion to EUR 4.2 billion, mainly due to the sale and leaseback of passive network infrastructure in Germany and Austria in connection with the sale of the GD tower companies, which resulted in an increase in the carrying amounts of the lease liabilities, and due to an increase in the average interest rates of financial liabilities.

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

Income taxes

A tax expense of EUR 2.9 billion was recorded in the first three quarters of 2023. The tax amount 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 1.6 billion was recognized on the lower profit/loss before income taxes, which also essentially reflects the respective national tax rates. However, the tax rate was reduced in the prior year by the realization of tax-free income from the sale of T‑Mobile Netherlands and the shares in GlasfaserPlus.

Profit/loss after taxes from discontinued operation

The sale of the GD tower companies was consummated on February 1, 2023, and these companies have not been part of the Group since that date. The development presented contains the contributions for the first month of 2023.

The following table provides a breakdown of profit/loss after taxes from the discontinued operation:

Value contributions by GD tower companies are presented separately in the income statement of the discontinued operation. Since Deutsche Telekom largely continues to use the sold passive network infrastructure after consummation of the transaction effective February 1, 2023, the intragroup eliminations of income and expenses between discontinued and continuing operations are disclosed at the level of the discontinued operation. So, for example, goods and services purchased include eliminations of intragroup onward charging of purchased services of GD tower companies mainly to Telekom Deutschland GmbH. In this way, the net effect is that internal cost allocations are no longer included in Deutsche Telekom’s interim consolidated financial statements. Due to continuing contractual relationships, the corresponding expenses for purchased services will also be incurred after the sale of the GD tower companies.

Other operating income of EUR 12.9 billion relates to the deconsolidation gain realized from the loss of control over the GD tower companies. Income from income taxes resulted from deferred tax effects arising in connection with the concluded sale-and-leaseback transaction.

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