Deutsche Telekom AG: Interim Report Q2/2022

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Contents

Deutsche Telekom at a glance

To our shareholders

• Selected financial data of the Group

• Highlights in the second quarter of 2022

Interim Group management report

• Group organization, strategy, and management
  11 The economic environment
  13 Development of business in the Group
  23 Development of business in the operating segments
  36 Events after the reporting period
  36 Forecast
  36 Risks and opportunities

Interim consolidated financial statements

1. Consolidated statement of financial position
2. Consolidated income statement
3. Consolidated statement of comprehensive income
4. Consolidated statement of changes in equity

1. Consolidated statement of cash flows
2. Significant events and transactions

1. Other disclosures

1. Events after the reporting period

Responsibility statement

Review report

Additional information

1. Reconciliation for the organic development of key figures for the prior-year comparative period
2. Glossary

1. Disclaimer
2. Financial calendar

In the interest of clarity, we have tended to avoid using a combination of pronouns such as "he/she/they," etc. with regard to gender. All references to individuals refer equally to all genders.

Deutsche Telekom. Interim Group Report H1 2022.

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Deutsche Telekom at a glance

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Deutsche Telekom at a glance

millions of €
				Change			Change
		H1 2022	H1 2021	%	Q2 2022	Q2 2021	%	FY 2021
Revenue and earnings
Net revenue		56,191	52,983	6.1	28,168	26,593	5.9	108,794
Of which: domestic	%	22.3	21.6		21.4	19.5		23.0
Of which: international	%	77.7	78.4		78.6	80.5		77.0
Service revenue		45,178	40,913	10.4	22,891	20,657	10.8	84,057
EBITDA		23,019	20,830	10.5	9,927	10,469	(5.2)	40,539
EBITDA (adjusted for special factors)		22,912	21,575	6.2	11,476	10,877	5.5	43,175
EBITDA AL		18,539	17,591	5.4	7,453	8,793	(15.2)	33,893
EBITDA AL (adjusted for special factors)		19,763	18,662	5.9	9,891	9,418	5.0	37,330
EBITDA AL margin (adjusted for special factors)	%	35.2	35.2		35.1	35.4		34.3
Profit (loss) from operations (EBIT)		8,684	7,207	20.5	2,356	3,688	(36.1)	13,057
Net profit (loss)		5,409	2,815	92.1	1,460	1,879	(22.3)	4,176
Net profit (loss) (adjusted for special factors)		4,683	3,315	41.3	2,445	2,113	15.7	5,862
Earnings per share (basic/diluted)	€	1.09	0.59	84.7	0.29	0.40	(27.5)	0.87
Adjusted earnings per share (basic/diluted)	€	0.94	0.70	34.3	0.49	0.45	8.9	1.22
Statement of financial position
Total assets		301,686	270,504	11.5				281,627
Shareholders' equity		88,492	77,000	14.9				81,469
Equity ratio	%	29.3	28.5					28.9
Net debt		146,104	127,972	14.2				132,142
Cash flows
Net cash from operating activities		17,979	16,387	9.7	8,621	8,080	6.7	32,171
Cash capex		(12,259)	(16,593)	26.1	(5,086)	(4,322)	(17.7)	(26,366)
Cash capex (before spectrum investment)		(9,642)	(8,570)	(12.5)	(4,984)	(4,287)	(16.3)	(17,978)
Free cash flow (before dividend payments and
spectrum investment)		8,421	7,923	6.3	3,671	3,851	(4.7)	14,332
Free cash flow AL (before dividend payments and
spectrum investment)		6,540	5,350	22.2	2,759	2,766	(0.3)	8,810
Net cash used in investing activities		(10,148)	(16,307)	37.8	(5,636)	(3,934)	(43.3)	(27,403)
Net cash used in financing activities		(10,491)	(4,513)	n.a.	(7,838)	(5,100)	(53.7)	(10,779)

For information on the development of business in the operating segments, please refer to the section "Development of business in the operating segments" in the interim Group management report and in the IR back-up on our Investor Relations website.

millions
			Change		Change
			June 30, 2022/		June 30, 2022/
			Dec. 31, 2021		June 30, 2021
	June 30, 2022	Dec. 31, 2021	%	June 30, 2021	%
Fixed-network and mobile customers
Mobile customersa	241.1	248.2	(2.9)	246.6	(2.3)
Fixed-network lines	25.3	26.1	(3.0)	27.4	(7.7)
Broadband customersb	21.1	21.6	(2.3)	22.0	(4.3)

• Including T-Mobile US wholesale customers.

• Excluding wholesale.

The figures shown in this report were rounded in accordance with standard business rounding principles. As a result, the total indicated may not be equal to the precise sum of the individual figures. Changes were calculated on the basis of millions for greater precision.

Deutsche Telekom. Interim Group Report H1 2022.

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To our shareholders

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To our shareholders

Selected financial data of the Group

Net revenue

Net revenue increased by 6.1 % to EUR 56.2 billion. In organic terms, revenue increased by EUR 0.4 billion or 0.8 %. Service revenue increased by EUR 4.3 billion or 10.4 % to EUR 45.2 billion; in organic terms, it was up EUR 1.9 billion or 4.5 %.

Revenue growth in the United States of 10.7 % was mainly attributable to exchange rate effects. In organic terms, revenue remained more or less at the prior-year level.

Our Germany segment increased revenue by 1.8 %, on account of strong business performance. In the Europe segment, revenue declined by 1.8 % due to the sale of the Romanian fixed-network business, but grew on an organic basis by 4.2 %.

Revenue in Systems Solutions decreased year-on-year by 1.0 %, due primarily to the decline in traditional IT infrastructure business, in line with expectations.

In Group Development, revenue declined by 28.7 % due to the sale of T-Mobile Netherlands as of March 31, 2022. In organic terms, revenue increased by 5.8 % year-on-year on the back of operational and structural growth at our GD Towers business unit.

EBITDA AL (adjusted for special factors)

Adjusted EBITDA AL grew by 5.9 % to EUR 19.8 billion. In organic terms, it increased by EUR 0.1 billion or 0.7 %.

In the United States, adjusted EBITDA AL increased by 9.3 %, essentially due to exchange rate effects. In organic terms, it decreased by 1.3 %. Adjusted core EBITDA AL increased by EUR 1.9 billion or 19.6 % to EUR 11.7 billion.

In our Germany segment, adjusted EBITDA AL was up 3.3 %, driven by high-value revenue growth and enhanced cost efficiency.

Adjusted EBITDA AL in the Europe segment grew by 1.1 %, and by as much as 5.7 % in organic terms.

In Systems Solutions, adjusted EBITDA AL grew by 15.7 %. Efficiency effects from our transformation program and increased revenue in the growth areas exceeded the decline in the traditional IT infrastructure business.

The sale of T-Mobile Netherlands as of March 31, 2022 resulted in a decrease of 18.1 % in adjusted EBITDA AL at Group Development. In organic terms, it was up 15.0 % driven by the consistent growth of the GD Towers business.

At 35.2 %, the Group's adjusted EBITDA AL margin remained at the same high level posted in the prior year. The adjusted EBITDA AL margin was 39.9 % in the Germany segment, 36.0 % in the Europe segment, and 34.1 % in the United States segment.

Profit/loss from operations (EBIT)

EBIT increased by EUR 1.5 billion or 20.5 % to EUR 8.7 billion.

EBITDA AL increased by EUR 0.9 billion or 5.4 % to EUR 18.5 billion. Net special factors of EUR 1.2 billion had a negative effect. At EUR 0.6 billion, expenses for staff restructuring measures were up slightly on the prior-year level. The deconsolidation of GlasfaserPlus and T-Mobile Netherlands resulted in proceeds of EUR 1.7 billion and EUR 0.9 billion respectively. By contrast, T-Mobile US incurred integration expenses of EUR 2.8 billion in connection with the business combination with Sprint. Further expenses of EUR 0.4 billion related to the settlement reached and the further proceedings pending in consequence of the cyberattack on T-Mobile US. At EUR 14.3 billion, depreciation, amortization and impairment losses were EUR 0.7 billion higher than in the prior-year period, with depreciation and amortization increasing by EUR 0.3 billion. Impairment losses increased by EUR 0.4 billion year-on-year to EUR 0.5 billion, and were mainly attributable to the former Sprint's fiber-optic-based wireline assets in the reporting period.

billions of €

60
53.0	56.2
40
20
0
H1 2021	H1 2022

billions of €

25
20	18.7	19.8
15
10
5
0
	H1 2021	H1 2022

billions of €

10		8.7
8	7.2
6
4
2
0
	H1 2021	H1 2022

Deutsche Telekom. Interim Group Report H1 2022.

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To our shareholders

5

Net profit

Net profit increased by EUR 2.6 billion to EUR 5.4 billion.

Our loss from financial activities decreased by EUR 0.6 billion to EUR 1.5 billion, with other financial income improving in particular in connection with the measurement of derivatives. The interest component from the measurement of provisions and liabilities increased by EUR 0.4 billion. By contrast, finance costs increased by EUR 0.2 billion.

Tax expense increased by EUR 0.2 billion to EUR 1.4 billion.

Profit attributable to non-controlling interests decreased by EUR 0.6 billion to EUR 0.3 billion, a trend mainly attributable to the United States segment.

Adjusted earnings per share rose from EUR 0.70 to EUR 0.94.

Equity ratio

The equity ratio increased by 0.4 percentage points against December 31, 2021 to 29.3 %.

The EUR 7.0 billion increase in shareholders' equity is primarily attributable to profit of EUR 5.7 billion and to other comprehensive income of EUR 7.8 billion. This mainly includes effects from currency translations (EUR 6.0 billion) and the remeasurement of defined benefit plans (EUR 2.1 billion).

Shareholders' equity was reduced in particular by dividend payments to our shareholders (EUR 3.2 billion) and other shareholders of subsidiaries (EUR 0.2 billion), as well as the acquisition of T-Mobile US shares to further increase the stake in T-Mobile US (EUR 2.7 billion). The sale of T-Mobile Netherlands reduced shareholders' equity by EUR 0.6 billion.

Net debt

Net debt increased by EUR 14.0 billion to EUR 146.1 billion compared with the end of 2021.

The increase was attributable in particular to exchange rate effects of EUR 8.8 billion, as well as to the modification of the arrangements between T-Mobile US and Crown Castle, which resulted in an increase of EUR 6.6 billion in right-of-use assets and of EUR 0.8 billion in property, plant and equipment. This effect is mirrored by growth in net debt of EUR 7.4 billion. The dividend payment

• including to non-controlling interests - (EUR 3.2 billion), spectrum acquisitions primarily in the United States (EUR 2.7 billion), additions of lease liabilities (EUR 2.3 billion), and the increase of the stake in T-Mobile US (EUR 2.2 billion) also had an increasing effect.

The main factors reducing net debt were free cash flow (before dividend payments and spectrum investment) of EUR 8.4 billion and the corporate transactions involving T-Mobile Netherlands and GlasfaserPlus totaling EUR 4.7 billion.

Cash capex (before spectrum investment)

Cash capex (before spectrum investment) increased from EUR 8.6 billion to EUR 9.6 billion.

This increase is largely attributable to the ongoing 5G network build-out in the United States and to exchange rate effects, especially from the translation of U.S. dollars to euros.

Cash capex (including spectrum investment) decreased by EUR 4.3 billion to EUR 12.3 billion. Spectrum licenses were purchased for EUR 2.6 billion in the reporting period, in particular FCC mobile licenses in the United States segment. In the prior-year period, cash capex had included the acquisition of FCC mobile licenses at the C-band auction for EUR 8.0 billion in the United States segment.

billions of €

10
8
6		5.4
4	2.8
2
0
	H1 2021	H1 2022

%
40
30	28.9	29.3
20
10
0
	Dec. 31, 2021	June 30, 2022

billions of €

200
150	132.1	146.1
100
50
0
	Dec. 31, 2021	June 30, 2022

billions of €

15

10						9.6
	8.6
5
0

H1 2021

H1 2022

Free cash flow AL (before dividend payments and spectrum investment)

Free cash flow AL increased from EUR 5.4 billion to EUR 6.5 billion.

In addition to the positive business performance of the individual operating segments, the decrease of EUR 0.7 billion in the principal portion of repayment of lease liabilities and EUR 0.1 billion lower income tax payments also had an increasing effect.

Higher cash capex (before spectrum investment) and EUR 0.1 billion higher interest payments (net) had a negative impact on free cash flow.

billions of €

10
8		6.5
	5.4
6
4
2
0
	H1 2021	H1 2022

For further information, please refer to the section "Development of business in the Group" in the interim Group management report.

For further information on the development of business in the operating segments, please refer to the section "Development of business in the operating segments" in the interim Group management report and in the IR back-up on our Investor Relations website.

Deutsche Telekom. Interim Group Report H1 2022.