Germany Customer development (XLS:) Download thousands Dec. 31, 2018 Dec. 31, 2017 Change Change % Dec. 31, 2016 a The baseline as of January 1, 2018 increased (by 62 thousand) due to the inclusion of new products launched in the Business Customer portfolio. Prior-year comparatives were not adjusted. b The baseline as of January 1, 2018 increased (by 53 thousand) due to the inclusion of new products launched in the Business Customer portfolio. Prior-year comparatives were not adjusted. Mobile customers 44,202 43,125 1,077 2.5 41,849 Contract customers 25,435 25,887 (452) (1.7) 25,219 Prepay customers 18,767 17,238 1,529 8.9 16,630 Fixed-network linesa 18,625 19,239 (614) (3.2) 19,786 Of which: retail IP-based 15,356 11,996 3,360 28.0 9,042 Retail broadband linesb 13,561 13,209 352 2.7 12,922 Of which: optical fiber 7,236 5,803 1,433 24.7 4,250 Television (IPTV, satellite) 3,353 3,139 214 6.8 2,879 Unbundled local loop lines (ULLs) 5,236 6,138 (902) (14.7) 7,195 Wholesale broadband lines 6,722 5,639 1,083 19.2 4,377 Of which: optical fiber 4,970 3,783 1,187 31.4 2,555 For information on changes in the organizational structure, please refer to the section “Group organization” and Note 35 “Segment reporting” in the notes to the consolidated financial statements. Total In Germany we continue to be market leader both in terms of fixed-network and mobile revenues. This success is attributable to our high-performance networks. SDG 9 We offer best customer experience with multi-award winning network quality – like in the connect readers’ choice awards where we came top of the fixed and mobile provider categories – and a broad portfolio of products. Due to the growing demand for our convergent product MagentaEINS the number of new customers increased by 642 thousand year-on-year, bringing the total number of customers to 4.3 million at the end of 2018. In mobile communications, we won another 1,077 thousand customers in 2018. High demand for mobile rate plans with included data volumes resulted in an increase in the number of branded contract customers under the Telekom and congstar brands. Business fluctuations at one of our service providers in 2018, due in part to the deregistration of inactive SIM cards, had a negative impact overall on customer development. We recorded growth in the number of prepay customers. By the end of 2018, we had migrated 21.9 million retail and wholesale lines to IP, which corresponds to an overall migration rate of 86 percent. We continued to see strong demand for our fiber-optic products. As of the end of 2018, the number of lines had increased to 12.2 million overall. In other words, we connected another 2.6 million lines to our fiber-optic network in Germany in the course of the reporting year. With the progress made in fiber-optic rollout and innovative vectoring technology, we also drove the marketing of higher bandwidths. Mobile communications In 2018, we won a total of 329 thousand contract customers under the Telekom and congstar brands and at Telekom Deutschland Multibrand GmbH. The number of mobile contract customers with service providers decreased, primarily due to business fluctuations – in part from the deregistration of inactive SIM cards – at one of our service providers. The number of prepay customers increased by 1,529 thousand. Fixed network Due to the persistently challenging development in the fixed-network market, primarily owing to aggressive pricing offers of competitors, we are pursuing new paths in marketing. Our focus is on convergent offerings, such as the market launch of MagentaTV in October 2018 with exclusive access to a wide range of extra content from the German TV stations ARD and ZDF, and our TV and fiber-optic lines. As a result, in 2018 the number of broadband lines grew by 299 thousand and the number of TV customers by 214 thousand. In the traditional fixed network, the number of lines decreased by 676 thousand. Our MagentaZuhause rate plans offer a comprehensive product portfolio for the fixed network based on IP technology and rate plan-specific bandwidths. MagentaZuhause Hybrid bundles fixed-network and mobile technology in a single router. To date, 458 thousand customers, primarily based in rural areas, have selected this innovative product. Wholesale As of December 31, 2018, fiber-optic lines accounted for 41.6 percent of all lines – 9.5 percentage points higher than the prior-year figure. This accelerated growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 902 thousand or 14.7 percent compared with the end of the prior year. This is due first to the move to higher-quality fiber-optic lines, and second to retail customers switching to cable operators. In addition, wholesale customers are migrating their retail customers to their own fiber-optic lines. The total number of lines in the wholesale sector increased compared with 2017 to 12.0 million. Development of operations (XLS:) Download millions of € 2018 2017 Change Change % 2016 a As of July 1, 2017, a share of revenue previously recognized under “Other” was assigned to Business Customers on account of a reorganization. Prior-year comparatives were not adjusted. TOTAL REVENUE 21,700 21,931 (231) (1.1) 21,774 Consumers 11,543 11,797 (254) (2.2) 11,739 Business Customersa 6,082 6,017 65 1.1 5,923 Wholesale 3,720 3,747 (27) (0.7) 3,742 Othera 355 370 (15) (4.1) 370 Profit from operations (EBIT) 3,969 4,276 (307) (7.2) 3,552 EBIT margin % 18.3 19.5 16.3 Depreciation, amortization and impairment losses (4,042) (3,828) (214) (5.6) (3,703) EBITDA 8,012 8,104 (92) (1.1) 7,256 Special factors affecting EBITDA (598) (308) (290) (94.2) (905) EBITDA (ADJUSTED FOR SPECIAL FACTORS) 8,610 8,412 198 2.4 8,161 EBITDA margin (adjusted for special factors) % 39.7 38.4 37.5 CASH CAPEX (4,240) (4,214) (26) (0.6) (4,031) Total revenue Total revenue decreased by 1.1 percent year-on-year in 2018. Adjusted for the effects of the IFRS 15 accounting standard, the application of which is mandatory from January 1, 2018, total revenue developed on a par with the prior year. In mobile business, revenue declined by 2.0 percent year-on-year; excluding the effects of IFRS 15, revenue increased compared with the prior year. Higher IT and broadband revenues had a positive impact on fixed-network revenue. This was sufficient to almost completely offset the year-on-year decrease in fixed-network revenues (primarily from voice components). Revenue from Consumers declined by 2.2 percent year-on-year; adjusted for the effects of IFRS 15, the decline was only marginal. Volume-related revenue decreases continued to affect traditional fixed-network business. By contrast, revenue from broadband business increased. Revenue from Business Customers grew by 1.1 percent; this growth was even slightly stronger once adjusted for the effects of IFRS 15. Mobile revenues increased by 2.6 percent and IT revenues by 22.1 percent compared with 2017. In the fixed network, by contrast, a decline was recorded in traditional voice telephony, due largely to the increasing number of customers moving to flat-rate plans. Wholesale revenue was down slightly year-on-year. Adjusted for the effects of IFRS 15, revenue would have grown. EBITDA, adjusted EBITDA EBITDA amounted to EUR 8.0 billion in 2018, a decline of 1.1 percent against the prior year, due mainly to higher special factors for expenses in connection with our staff restructuring. EBITDA adjusted for special factors totaled EUR 8.6 billion in the reporting year, up 2.4 percent compared with the prior year. This year-on-year increase was attributable largely to the lower headcount and the successful implementation of our efficiency and digitalization initiatives. Our adjusted EBITDA margin increased to 39.7 percent, up from 38.4 percent in the prior year. EBIT Profit from operations decreased by 7.2 percent year-on-year to EUR 4.0 billion. In addition to the effects described under EBITDA, depreciation, amortization and impairment losses increased on account of sustained high investments in our network infrastructure. Cash capex Cash capex increased by 0.6 percent year-on-year. As part of our integrated network strategy, we again made significant investments in the broadband and fiber-optic rollout, our IP transformation, and our mobile infrastructure. schließen SIM card - Subscriber Identification Module Card Chip card that is inserted into a cell phone to identify it in the mobile network. Deutsche Telekom counts its customers by the number of SIM cards activated and not churned. Customer totals also include the SIM cards with which machines can communicate automatically with one another (M2M cards). The churn rate is determined and reported based on the local markets of the respective countries. schließen Vectoring Vectoring is a noise-canceling technology that removes the electro-magnetic interference between lines, enabling higher bit rates. However, in order to cancel noise, the operator must have control over all lines. This means that other operators cannot install their own technology at the cable distribution boxes. schließen Fiber-optic lines Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH). schließen Router A coupling element that connects two or more sub-networks. Routers can also extend the boundaries of a network, monitor data traffic, and block any faulty data packets. schließen Contingent model Contract concluded over a long period of time with defined advance payment and minimum purchase requirement. In return, the resellers pay a reduced monthly charge for VDSL. This allows them to put together interesting offers for their own consumers without having to invest in fiber-optic lines of their own. This improves the utilization of Telekom Deutschland GmbH’s existing VDSL network. The current “contingent model” is being developed further to reflect the network build-out in terms of availability and bandwidth. schließen Retail The sale of goods and services to end users, as opposed to resale or wholesale. schließen Fiber-optic lines Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH). schließen IP - Internet Protocol Non-proprietary transport protocol in Layer 3 of the OSI reference model for inter-network communications.