Results of operations of Deutsche Telekom AG

Statement of income of Deutsche Telekom AG under German GAAP (total cost method)
millions of €
  2017 2016 Change Change % 2015
Net revenue 3,603 3,927 (324) (8.3) 3,313
Other own capitalized costs 4 4 0 7
Total operating performance 3,607 3,931 (324) (8.2) 3,320
Other operating income 2,769 2,120 649 30.6 4,065
Goods and services purchased (1,060) (1,151) 91 7.9 (1,165)
Personnel costs a (2,732) (3,516) 784 22.3 (2,949)
Depreciation, amortization and write-downs (341) (338) (3) (0.9) (387)
Other operating expenses a (4,251) (3,570) (681) (19.1) (4,186)
Operating results (2,008) (2,524) 516 20.4 (1,302)
Financial income (expense), net 7,151 4,717 2,434 51.6 3,492
Income taxes (198) (154) (44) (28.6) (282)
Income after income taxes 4,945 2,039 2,906 n. a. 1,908
Other taxes (18) (19) 1 5.3 (19)
Income after taxes 4,927 2,020 2,907 n. a. 1,889
a Pursuant to the provisions of IDW RS HFA 30, as amended, which was adopted in December 2016, the expenses arising from the collateral promise for pensions are recognized under personnel costs; in 2015, they had been included under other operating expenses. Figures for 2015 have been adjusted accordingly.

The negative operating results improved by approximately EUR 0.5 billion year-on-year, due mainly to a year-on-year decrease in personnel costs of EUR 0.8 billion and an increase in other operating income of EUR 0.6 billion. Higher other operating expenses of EUR 0.7 billion and a decline of EUR 0.3 billion in net revenue had an offsetting effect.

The decline in net revenue compared with the previous year is primarily attributable to lower revenue from renting and leasing out.

An increase of EUR 0.4 billion in foreign currency translation gains and income from derivatives were the main drivers of the year-on-year growth in other operating income, which was up by EUR 0.6 billion. The foreign currency translation gains in the reporting year result in particular from exchange rate effects realized from the repayment of U.S. dollar loans extended or taken out. Offsetting effects from hedging are included in other operating expenses. Furthermore, other operating income improved in the reporting year as a result of the sale of the remaining shares in Scout24 AG, Munich, which generated EUR 0.3 billion.

Other operating expenses were up EUR 0.7 billion year-on-year, due mainly to an increase of EUR 0.7 billion as a result of higher foreign currency transaction losses and expenses arising from derivatives, caused in particular by the repayment in the current year of U.S. dollar loans extended or taken out and by effects from the market performance of U.S. dollar currency derivatives. Offsetting effects from hedging are included in other operating income.

The decrease in personnel costs of EUR 0.8 billion is mainly attributable to lower expenses arising from the early retirement program for civil servants.

Net financial income increased by EUR 2.4 billion to EUR 7.2 billion, primarily as a result of a EUR 3.2 billion increase in income related to subsidiaries, associated and related companies. The increase of EUR 1.0 billion in write-downs on financial assets, primarily due to the write-down of the carrying amount of the investment in T-Systems International GmbH, Frankfurt/Main, had an offsetting effect.

Income related to subsidiaries, associated and related companies, which increased by EUR 3.2 billion compared with the prior year, was positively affected in the reporting year by profits transferred by DFMG Holding GmbH, Bonn, T-Mobile Global Zwischenholding GmbH, Bonn, and Telekom Deutschland GmbH, Bonn. The transfer of the loss from Deutsche Telekom IT GmbH, Bonn, and from
T-Systems International GmbH, Frankfurt/Main, had an offsetting effect.

In addition to the operating business of the consolidated subsidiaries, the income related to subsidiaries, associated and related companies resulted from effects arising from reorganization measures as well as from a write-up to the original acquisition costs at a subsidiary. A write-down on the investment held indirectly by T-Mobile Global Holding GmbH, Bonn, in the British BT Group plc, London, had an offsetting effect.

The reduction of EUR 0.2 billion in the net interest expense compared with the prior year was primarily the result of higher interest income from subsidiaries in the amount of EUR 0.3 billion, especially from T-Mobile USA, Inc., Bellevue. By contrast, expenses in connection with the interest added back on noncurrent accruals increased by EUR 0.2 billion.

Income after income taxes was particularly impacted by the aforementioned effects and increased by a total of EUR 2.9 billion year-on-year in 2017.

Other tax expense of EUR 18 million combined with the aforementioned factors resulted in income after taxes of EUR 4,927 million in 2017. Taking into account EUR 1,001 million in unappropriated net income carried forward, unappropriated net income totaled EUR 5,928 million.