Results of operations of Deutsche Telekom AG

Statement of income of Deutsche Telekom AG under German GAAP (total cost method)
millions of €
  2016 2015 Change Change % 2014
Net revenue 3,927 3,313 614 18.5 % 3,677
Other own capitalized costs 4 7 (3) (42.9) % 18
Total operating performance 3,931 3,320 611 18.4 % 3,695
Other operating income 2,120 4,065 (1,945) (47.8) % 3,639
Goods and services purchased (1,151) (1,165) 14 1.2 % (1,372)
Personnel costs a (3,516) (2,949) (567) (19.2) % (2,866)
Depreciation, amortization and write-downs (338) (387) 49 12.7 % (434)
Other operating expenses a (3,570) (4,186) 616 14.7 % (3,675)
Operating results (2,524) (1,302) (1,222) (93.9) % (1,013)
Financial income (expense), net 4,717 3,492 1,225 35.1 % 5,281
Income taxes (154) (282) 128 45.4 % (243)
Income after income taxes 2,039 1,908 131 6.9 % 4,025
Other taxes (19) (19) (20)
Income after taxes 2,020 1,889 131 6.9 % 4,005
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 must be recognized under personnel costs; in previous years, they had been included under other operating expenses. Prior-year figures have been adjusted accordingly.

The negative operating results deteriorated further by approximately EUR 1.2 billion year-on-year, due to a year-on-year decrease in other operating income of EUR 1.2 billion before reclassifications to net revenue, and an increase in personnel costs of EUR 0.6 billion compared with the prior year. A decrease in other operating expenses of EUR 0.6 billion had an offsetting effect.

The year-on-year increase in net revenue is primarily due to changes in presentation on account of the German Accounting Directive Implementation Act (Bilanzrichtlinie-Umsetzungsgesetz – BilRUG). Pursuant to this Act, income of EUR 0.7 billion allocable to units including HR Business Services, Group Legal Services, and Group Innovation+ had to be recognized as revenue in the reporting year. In the prior year, it had been disclosed under other operating income.

Other operating income declined by EUR 1.9 billion overall year-on-year, with the change in presentation due to the BilRUG accounting for EUR 0.7 billion thereof. The item was also impacted by a year-on-year decline of EUR 0.3 billion in foreign currency transaction gains and income from derivatives, due largely to realized exchange rate effects from U. S. dollar cross-currency interest rate hedges and U. S. dollar derivatives which fell due as planned in the reporting year. Offsetting effects from hedging are included in other operating expenses. In the prior year, the sale of further shares in Scout24 AG, Munich, and the sale of Digital Media Products GmbH, Cologne (formerly T-Online Beteiligungs GmbH, Darmstadt), to Ströer SE, Cologne, had raised other operating income by EUR 0.3 billion in each case.

Other operating expenses were down by EUR 0.6 billion year-on-year, mainly due to a decrease of EUR 0.5 billion as a result of lower foreign currency transaction losses and decreased expenses arising from derivatives, caused in particular by U. S. dollar cross-currency interest rate hedges and U. S. dollar currency derivatives which fell due as planned in the reporting year. Offsetting effects from hedging are included in other operating income.

The EUR 0.6 billion increase in personnel costs is mainly attributable to the increase in the use of the early retirement program for civil servants compared with the previous year.

Net financial income increased by EUR 1.2 billion to EUR 4.7 billion. This was largely attributable to EUR 0.9 billion lower write-downs on financial assets.

The reduction of EUR 0.6 billion in the net interest expense compared with the prior year was primarily the result of a decrease of EUR 0.5 billion in the interest cost of pension accruals. The application of the Act on the Implementation of the Mortgage Credit Directive and Amending Commercial Regulations (Gesetz zur Umsetzung der Wohnimmobilienkreditrichtlinie und zur Änderung handelsrechtlicher Vorschriften), which entered into force on March 21, 2016, and the associated discounting of pension accruals at the average market interest rate from the last ten financial years for the first time in the reporting year (previously: seven financial years) resulted in a decrease of EUR 0.5 billion in interest added back to pension accruals.

Income related to subsidiaries, associated and related companies, which declined slightly by EUR 0.3 billion compared with the prior year, was positively affected again in the reporting year by profits transferred by Telekom Deutschland GmbH, Bonn, and T-Mobile Global Zwischenholding GmbH, Bonn. The transfer of the loss from T-Systems International GmbH, Frankfurt/Main, had an offsetting effect.

The main positive effects on the profits transferred by T-Mobile Global Zwischenholding GmbH, Bonn, in the 2016 financial year were the write-up to T-Mobile Global Holding GmbH, Bonn, and the financial asset indirectly held there, T-Mobile US, Inc., Bellevue. The write-up of T-Mobile US, Inc., Bellevue, is primarily a result of the sustained positive development of business. The write-down at T-Mobile Global Holding GmbH, Bonn, on the investment held indirectly there in the British BT Group plc had a negative effect.

Income after income taxes was particularly impacted by the aforementioned effects and increased by a total of EUR 0.1 billion year-on-year in 2016.

Other tax expense of EUR 19 million combined with the aforementioned factors resulted in income after taxes of EUR 2,020 million in 2016. Taking into account EUR 1,775 million in unappropriated net income carried forward, unappropriated net income totaled EUR 3,795 million.