Financial position of the Group
Total assets amounted to EUR 139.7 billion, down by EUR 1.6 billion against December 31, 2017.
The total carrying amounts of intangible assets and property, plant and equipment were up by EUR 1.7 billion against the prior year. Capital expenditure totaling EUR 6.6 billion – especially to upgrade the network in our United States operating segment and in connection with the broadband/fiber-optic build-out, the IP transformation and mobile infrastructure in the Germany operating segment – increased total assets. Positive exchange rate effects of EUR 1.3 billion, particularly from the translation of U.S. dollars into euros, and effects of changes in the composition of the Group in the amount of EUR 0.6 billion, mainly resulting from the acquisition of the online TV provider Layer3 TV in the United States operating segment, also increased the carrying amount. Depreciation, amortization and impairment losses of EUR 6.3 billion reduced the carrying amount. Compared with December 31, 2017, trade and other receivables decreased by EUR 0.8 billion, primarily due to reclassification and remeasurement effects from the mandatory first-time application of the new accounting standards IFRS 9 and IFRS 15. In addition, the volume of receivables for terminal equipment sold under installment plans in the United States operating segment decreased. Exchange rate effects, primarily from the translation from U.S. dollars into euros, had a slight offsetting effect. Under other assets, current and non-current other financial assets were reduced in particular. On March 23, 2018, we transferred our 12 percent financial stake in BT, which is worth EUR 3.1 billion, to the Group’s own trust, Deutsche Telekom Trust e.V., where it will serve as plan assets to cover pension entitlements. The impairment loss on the exchange-traded stake in BT – which was recognized in other comprehensive income for the period from January 1, 2018 until the date of transfer – reduced the carrying amount by EUR 0.7 billion. Capitalized contract assets in the amount of EUR 1.7 billion and capitalized contract costs of EUR 1.4 billion increased other assets. Their recognition relates to the remeasurement and reclassification effects recognized directly in equity following the mandatory application of IFRS 15 as of January 1, 2018.
There was an overall increase of EUR 3.7 billion in current and non-current financial liabilities compared with the end of 2017. This was mainly due to the euro bonds with a total volume of EUR 3.1 billion issued by Deutsche Telekom International Finance B.V. in the first half of 2018 and the U.S. dollar bonds with a total volume of EUR 1.4 billion (USD 1.75 billion), as well as to the bonds issued by T-Mobile US with a volume of EUR 2.0 billion (USD 2.5 billion). The settlement agreed in the Toll Collect arbitration proceedings increased financial liabilities by EUR 0.6 billion. The early repayment of T-Mobile US’ debt instruments in the amount of EUR 2.7 billion (USD 3.4 billion) and regular repayments of bond liabilities of EUR 1.1 billion had an offsetting effect. The net change of EUR 0.4 billion in commercial paper also decreased the carrying amount of financial liabilities. Provisions for pensions and other employee benefits decreased by EUR 2.7 billion compared with December 31, 2017, mainly due to the transfer of our stake in BT and the associated netting of these plan assets with the defined benefit obligations. Trade and other payables decreased by EUR 2.0 billion, mainly due to a seasonal reduction in procurement volumes, especially in the United States, Europe, and Germany operating segments. Exchange rate effects, mainly from the translation of U.S. dollars into euros, had a minor offsetting effect. Other liabilities rose due to an increase of EUR 2.4 billion in current and non-current contract liabilities. The contract liabilities relate to the remeasurement and reclassification effects recognized directly in equity following the mandatory application of IFRS 15 as of January 1, 2018. At the same time, current and non-current other liabilities decreased by a comparable amount on first-time application of IFRS 15.
Shareholders’ equity decreased from EUR 42.5 billion as of December 31, 2017 to EUR 41.4 billion, mainly due to dividend payments for the 2017 financial year to Deutsche Telekom AG shareholders in the amount of EUR 3.1 billion and to non-controlling interests in the amount of EUR 0.2 billion. Transactions with owners reduced shareholders’ equity by a further EUR 1.3 billion. These transactions include EUR 0.9 billion for the share buy-back program launched by T-Mobile US in December 2017, EUR 0.3 billion for the acquisition of another 5 percent stake in the Greek subsidiary OTE, and EUR 0.2 billion for the T-Mobile US shares acquired by Deutsche Telekom in the first quarter of 2018. Furthermore, the subsequent measurement in other comprehensive income of equity instruments held reduced the carrying amount by EUR 0.6 billion; this figure includes the impairment loss of EUR 0.7 billion on the exchange-traded stake in BT that was recognized in other comprehensive income for the period from January 1, 2018 through March 23, 2018. By contrast, profit after taxes of EUR 2.1 billion had an increasing effect. The transition to IFRS 9 and IFRS 15 had a cumulative effect recognized directly in equity as of January 1, 2018, namely an increase of EUR 1.5 billion in retained earnings that included shares attributable to non-controlling interests. Currency translation effects of EUR 0.5 billion recognized directly in equity increased shareholders’ equity.
For further information on the statement of financial position, please refer to the interim consolidated financial statements.
Other effects of EUR 0.6 billion include, among other factors, financing options under which the payments for trade payables become due at a later point in time by involving banks in the process, increased liabilities for the acquisition of spectrum licenses, and payments for the acquisition of broadcasting rights. For more information on net debt, please refer to the disclosures on the reconciliation of alternative performance measures in the section “Additional information”.
|Free cash flow (before dividend payments and spectrum investment)|
|millions of €|
|Q1 2018||Q2 2018||Q2 2017||Change %||H1 2018||H1 2017||Change %||FY 2017|
|CASH GENERATED FROM OPERATIONS||4,805||4,947||4,955||(0.2)||9,753||10,235||(4.7)||19,706|
|Interest received (paid)||(509)||(555)||(752)||26.2||(1,064)||(1,676)||36.5||(2,509)|
|NET CASH FROM OPERATING ACTIVITIES||4,297||4,392||4,204||4.5||8,689||8,559||1.5||17,196|
|Cash outflows for investments in intangible assets (excluding goodwill and before spectrum investment) and property, plant and equipment (CASH CAPEX)||(3,076)||(3,021)||(2,994)||(0.9)||(6,097)||(6,238)||2.3||(12,099)|
|Proceeds from disposal of intangible assets (excluding goodwill) and property, plant and equipment||161||144||91||58.2||304||209||45.5||400|
|FREE CASH FLOW
(BEFORE DIVIDEND PAYMENTS AND SPECTRUM INVESTMENT)
Free cash flow. Free cash flow in the Group before dividend payments and spectrum investment increased by EUR 0.4 billion year-on-year to EUR 2.9 billion. Net cash from operating activities increased by EUR 0.1 billion. At the same time, cash outflows for investments in intangible assets (excluding goodwill and before spectrum investment) and property, plant and equipment decreased by EUR 0.1 billion.
Net cash from operating activities increased by EUR 0.1 billion year-on-year to EUR 8.7 billion. Exchange rate effects weighed on the continuing positive business trend in the United States operating segment. In addition, positive effects from factoring agreements – in particular in the Systems Solutions and Germany operating segments – on net cash from operating activities were EUR 0.2 billion lower than in the prior-year period. In addition to a dividend payment of EUR 0.1 billion from BT – which was also included in the prior-year period – the profit distribution of EUR 0.1 billion from Toll Collect GmbH had a positive effect on net cash from operating activities. A EUR 0.6 billion decrease in net interest payments enhanced net cash from operating activities.
The EUR 0.1 billion decrease in cash capex (before spectrum investment) compared with the prior-year period related primarily to a reduction of EUR 0.3 billion in the United States operating segment, whereas cash capex was EUR 0.1 billion higher in the Germany operating segment. Adjusted for exchange rate effects, cash capex was higher than in the prior-year period. In each case, the cash outflows were for investments in network build-out and network modernization.
For further information on the statement of cash flows, please refer to the interim consolidated financial statements.