30 Notes to the consolidated statement of cash flows
Net cash from operating activities
Net cash from operating activities increased by EUR 1.7 billion year-on-year to EUR 17.2 billion, mainly as a result of the positive business development of the United States operating segment. During the reporting period, factoring agreements were concluded concerning monthly revolving sales of trade receivables. Factoring agreements resulted in positive effects of EUR 0.3 billion on net cash from operating activities in the reporting period. This mainly relates to factoring agreements in the United States and Germany operating segments. The effect from factoring agreements in the prior-year period totaled EUR 0.8 billion. In 2016, cash inflows from the cancellation of or changes in the terms of interest rate derivatives had a negative effect of EUR 0.3 billion, as did a EUR 0.1 billion increase in income tax payments. The dividend payments received from BT amounted to EUR 0.2 billion compared with the prior year in which dividend payments comprised EUR 0.1 billion from BT and EUR 0.2 billion from the former joint venture EE. A EUR 0.1 billion decrease in net interest payments compared with the prior year had a positive effect on the trend in net cash from operating activities.
Deutsche Telekom’s working capital measures are focused on improve-ments in the area of liabilities as well as in the management of receivables and inventories. However, they are not used for active liquidity management. The negative effect on the change in assets carried as working capital can be attributed to the acquisition of mobile devices in connection with the JUMP! On Demand business model and to the increase in trade receivables as a result of net customer additions in the United States, mainly from agreements under the Equipment Installment Plan (EIP). Stockpiling of new terminal equipment models, especially in the United States, also had a negative effect on working capital. Cash inflows from factoring agreements had a positive effect. For further explanations on individual assets carried as working capital, please refer to Note 2 “Trade and other receivables” and Note 3 “Inventories.” Liabilities carried as working capital increased mainly as a result of the rise in trade payables in connection with the stockpiling of new terminal equipment models, especially in the United States. By contrast, cash outflows for severance payments had a negative impact on other liabilities carried as working capital. For further explanations, please refer to Note 11 “Trade and other payables.”
The amounts included under other non-cash transactions in the reporting period mainly relate to the partial reversal of impairment losses on spectrum licenses previously acquired by T-Mobile US, accounting for EUR 1.7 billion.
|Net cash used in investing activities|
|millions of €|
|Germany operating segment||(4,214)||(4,031)||(5,459)|
|United States operating segment||(11,932)||(5,855)||(6,381)|
|Europe operating segment||(1,874)||(2,600)||(1,469)|
|Systems Solutions operating segment||(383)||(402)||(432)|
|Group Development operating segment||(290)||(271)||(373)|
|Group Headquarters & Group Services||(1,005)||(936)||(983)|
|Net cash flows for collateral deposited and hedging transactions a||1,390||(3,015)||1,785|
|Cash inflows from the sale of the shares in Scout24 AG||319||135||390|
|Proceeds from the disposal of intangible assets and property, plant and equipment||400||364||367|
|Cash flows from the loss of control of subsidiaries and associates b||528||4||(58)|
|Allocation under contractual trust agreement (CTA) on pension commitments||–||(250)||(250)|
|Acquisition/sale of government bonds, net||5||2,873||(2,759)|
|a EUR 2.0 billion of which relates to a cash deposit placed in the first half of 2016 for the U.S. spectrum auction concluded in April 2017.
b In 2017, EUR 600 million of this relates to the cash inflows from purchase price payments and EUR 72 million to outflows of cash and cash equivalents. In 2015, these mainly included outflows of cash and cash equivalents.
c EUR 201 million of this relates to a payment received from BT in connection with a settlement agreement.
Cash capex increased by EUR 5.9 billion to EUR 19.5 billion. In the reporting period, the United States operating segment acquired spectrum licenses for a total amount of EUR 7.3 billion. In the prior-year period, the United States and Germany operating segments in particular had acquired mobile spectrum licenses for EUR 2.7 billion in total. Excluding spectrum investment, cash capex increased by EUR 1.1 billion year-on-year, mainly in the United States, Germany, and Europe operating segments. Cash outflows relate to network modernization and the continued network build-out, including build-out of the 4G/LTE network and the broadband/fiber-optic build-out.
Interest payments (including capitalized interest) of EUR 4.0 billion (2016: EUR 3.6 billion, 2015: EUR 3.7 billion) were made in the 2017 financial year. Capitalized interest was reported within cash capex in net cash used in investing activities, together with the associated assets.
|Net cash used in financing activities|
|millions of €|
|Repayment of bonds||(10,992)||(3,255)||(4,056)|
|Dividends (including to non-controlling interests)||(1,559)||(1,596)||(1,256)|
|Repayment of financial liabilities from financed capex and opex||(266)||(225)||(846)|
|Repayment of EIB loans||(374)||(830)||(412)|
|Net cash flows for collateral deposited and hedging transactions||39||605||(254)|
|Repayment of lease liabilities||(715)||(374)||(224)|
|Repayment of financial liabilities for media broadcasting rights||(259)||(215)||(192)|
|Cash deposits from the EE joint venture, net||‒||(220)||(16)|
|Deutsche Telekom AG share buy-back||‒||‒||(15)|
|Cash flows from continuing involvement factoring, net||1||(12)||30|
|Sale of Deutsche Telekom AG treasury shares||‒||‒||31|
|Loans taken out with the EIB||825||889||1,199|
|Promissory notes, net||317||(582)||1,655|
|Issuance of bonds||10,189||8,631||2,208|
|Commercial paper, net||735||(3,658)||2,645|
|Cash inflows from transactions with non-controlling entities|
|T-Mobile US stock options||18||26||43|
|Cash outflows from transactions with non-controlling entities|
|Acquisition of the remaining shares in Slovak Telekom||‒||‒||(900)|
|T-Mobile US share buy-backs||(511)||(112)||(141)|
Non-cash transactions in the consolidated statement of cash flows
In June 2017, dividend entitlements of Deutsche Telekom AG shareholders in the amount of EUR 1.4 billion did not have an effect on net cash used in/from financing activities when fulfilled; rather, they were substituted by shares from authorized capital (please refer to Note 15 “Shareholders’ equity”). The dividend entitlements of Deutsche Telekom AG shareholders having an effect on cash flows also totaled EUR 1.4 billion. In the previous year, dividend entitlements of Deutsche Telekom AG shareholders amounting to EUR 1.0 billion did not have an impact on cash flows, while dividend entitlements of EUR 1.5 billion did have an effect on cash flows.
In the 2017 financial year, Deutsche Telekom chose financing options totaling EUR 0.3 billion under which the payments for trade payables from operating and investing activities primarily become due at a later point in time by involving banks in the process (2016: EUR 0.2 billion). These payables will subsequently be recognized under financial liabilities in the statement of financial position. As soon as the payments have been made, they are disclosed under net cash used in/from financing activities.
In 2017, Deutsche Telekom leased network equipment (classified as a finance lease) for a total of EUR 1.0 billion (2016: EUR 0.9 billion) in particular in the United States operating segment. The finance lease is then also shown under financial liabilities in the statement of financial position. Future repayments of the liabilities will be recognized in net cash used in/from financing activities.
Consideration for the acquisition of broadcasting rights will be paid by Deutsche Telekom in accordance with the terms of the contract on the date of its conclusion or spread over the term of the contract. Financial liabilities of EUR 0.4 billion were recognized in the 2017 financial year for future consideration for acquired broadcasting rights (2016: EUR 0.3 billion). As soon as the payments have been made, they are disclosed under net cash used in/from financing activities.
In the United States operating segment, mobile devices amounting to EUR 1.0 billion (2016: EUR 1.5 billion) were recognized under property, plant and equipment in the reporting period. These relate to the terminal equipment lease model JUMP! On Demand introduced at T-Mobile US in 2015 under which customers no longer purchase the device but lease it. The payments are presented under net cash from operating activities.
In the United States operating segment, the exchange of spectrum licenses agreed between T-Mobile US and a telecommunications company in the third quarter of 2016 was completed in March 2017 and spectrum licenses with a value of EUR 0.1 billion were acquired in a non-cash transaction. In September 2017, another exchange of spectrum licenses was completed in the United States operating segment and spectrum licenses with a value of EUR 0.1 billion were acquired in a non-cash transaction. In December 2017, another exchange of spectrum licenses was completed in the United States operating segment and spectrum licenses with a value of EUR 0.3 billion were acquired in a non-cash transaction.
In December 2017, the Mandatory Convertible Preferred Stock issued by T-Mobile US in December 2014 was converted into
T-Mobile US ordinary shares. Up until the conversion date, the preferred stock was recognized under financial liabilities. In total, EUR 1.7 billion was reclassified from financial liabilities as well as the associated embedded conversion rights to capital reserves in a non-cash transaction.
The carrying amounts of the financial liabilities disclosed in net cash used in/from financing activities, divided into carrying amount changes having and not having an effect on cash flows, developed as follows in the reporting year:
|millions of €|
|Carrying amount changes having an effect on cash flows||Carrying amount changes not having an effect on cash flows|
|As of January 1, 2017||Of which to be disclosed in net cash used in/from financing activities||Total carrying amount changes having an effect on cash flows||Changes in the composition of the Group||Currency translation||Fair value||Change in carrying amount according to the effective interest method||Other||Total carrying amount changes not having an effect on cash flows||As of December 31, 2017 disclosed in net cash from/used in financing activities||As of December 31, 2017|
|Bonds and other securitized liabilities||50,090||50,090||(69)||5||(3,438)||(255)||(13)||(867)||(4,568)||45,453||45,453|
|Liabilities to banks||4,097||3,402||832||16||(20)||(3)||26||(10)||9||4,243||4,974|
|Finance lease liabilities||2,547||2,547||(715)||0||(200)||‒||‒||1,003||803||2,635||2,635|
|Liabilities to non-banks from promissory notes||535||535||(35)||‒||(21)||‒||0||1||(20)||480||480|
|Liabilities with the right of creditors to priority repayment in the event of default||1,866||1,866||(1,863)||‒||(15)||‒||13||(1)||(3)||‒||‒|
|Other interest-bearing liabilities||1,823||975||(719)||4||(8)||‒||38||723||757||1,013||1,598|
|Other non-interest-bearing liabilities||1,958||3||1||‒||0||‒||‒||‒||‒||4||1,443|
|Derivative financial liabilities||1,734||590||(203)||‒||‒||420||‒||‒||420||807||946|
|Derivative financial assets||2,379||288||(242)||‒||‒||241||‒||–||241||287||1,317|
|Derivative financial assets||2,379||288||(242)||‒||‒||241||–||–||241||287||1,317|
Total carrying amount changes having an effect on cash flows disclosed in net cash used in/from financing activities of EUR 2.5 billion deviate from the net cash used in financing activities of EUR 4.6 billion due in particular to the dividend entitlements of Deutsche Telekom AG shareholders having an effect on cash flows and the T-Mobile US share buy-back program begun in December 2017. Other carrying amount changes not having an effect on cash flows mainly relate to the derecognition of financial liabilities of EUR 0.8 billion in connection with the conversion of T-Mobile US preferred stock into ordinary shares, and additions to financial liabilities in connection with the recognition of leased network equipment of EUR 1.0 billion and of broadcasting rights of EUR 0.4 billion. This item also includes additions to financial liabilities of EUR 0.3 billion relating to selected financing options under which payments for trade payables become due at a later point in time by involving banks in the process. For further explanations, please refer to the passage entitled “Non-cash transactions in the consolidated statement of cash flows.”