Deutsche Telekom at a glance Net revenue We are well on track to meeting our growth forecast, posting an increase in net revenue of 0.9 percent to EUR 75.7 billion. On a comparable basis, i.e., excluding exchange rate effects and effects of changes in the composition of the Group, net revenue increased by as much as EUR 2.3 billion or 3.1 percent. Our United States operating segment posted an increase in revenue of 2.2 percent; in U.S. dollars, the continuing success of our U.S. operations was evident in revenue growth of 6.8 percent. Revenue in our Europe operating segment grew by 2.6 percent. The business trend was stable in our Germany operating segment, with revenue down 1.1 percent due to the first-time application of the IFRS 15 accounting standard. Revenue remained on a par with the prior year in our Systems Solutions operating segment, while in our Group Development operating segment revenue declined. Net revenue billions of € Adjusted EBITDA Adjusted EBITDA grew by EUR 1.1 billion to EUR 23.3 billion. Excluding exchange rate effects, adjusted EBITDA rose by EUR 1.6 billion or 7.2 percent and thus exceeded our expectations. Due to the ongoing success of T-Mobile US, we generated an increase in adjusted EBITDA of 8.3 percent in the United States operating segment. In U.S. dollars, this growth reached as much as 13.6 percent. Adjusted EBITDA also grew in our Europe operating segment (by 3.5 percent) and in our Germany operating segment (by 2.4 percent). While adjusted EBITDA remained stable in our Group Development operating segment, it declined in our Systems Solutions operating segment (-15.7 percent). At 30.8 percent, the Group’s adjusted EBITDA margin increased slightly against the prior-year level of 29.7 percent. The EBITDA margin was 39.7 percent in Germany, 32.6 percent in Europe, and 27.6 percent in the United States. Adjusted EBITDA billions of € EBIT EBIT decreased by EUR 1.4 billion to EUR 8.0 billion. EBITDA was negatively affected by special factors of EUR 1.5 billion in contrast to positive net special factors of EUR 1.7 billion in the previous year. Staff-related measures and non-staff-related restructuring accounted for negative special factors of EUR 1.3 billion, an increase of EUR 0.6 billion year-on-year. The prior-year period had also benefited from positive special factors of EUR 1.7 billion from the reversal of impairment losses previously recognized for spectrum licenses at T-Mobile US, the sale of Strato (EUR 0.5 billion) and of further shares in Scout24 AG (EUR 0.2 billion), and a settlement agreement concluded with BT (EUR 0.2 billion). At EUR 13.8 billion, depreciation, amortization and impairment losses were down EUR 0.8 billion year-on-year. This was largely attributable to impairment losses of EUR 0.7 billion on goodwill and property, plant and equipment recognized as special factors in the Europe operating segment, whereas, in the prior year, impairment losses of EUR 2.2 billion had been recognized in the Europe and Systems Solutions operating segments. Depreciation and amortization increased by EUR 0.7 billion. EBIT billions of € Net profit Net profit decreased from EUR 3.5 billion to EUR 2.2 billion. At EUR 2.8 billion, the loss from financial activities was EUR 1.5 billion lower than a year earlier, offsetting the effects of the reduction in EBIT. The higher loss in the prior year was attributable to the EUR 1.5 billion impairment of our financial stake in BT recognized in profit or loss, as well as to higher negative effects from the remeasurement of derivatives. While the settlement amount of EUR 0.6 billion agreed in the Toll Collect arbitration proceedings had a negative impact in the reporting year, finance costs improved by EUR 0.4 billion year-on-year. The tax expense amounted to EUR 1.8 billion; in the prior year there had been a tax benefit of EUR 0.6 billion, which was mainly attributable to the remeasurement of deferred taxes at T-Mobile US as a result of the U.S. tax reform. Profit attributable to non-controlling interests decreased year-on-year by EUR 0.9 billion. Adjusted earnings per share declined from EUR 1.28 in the prior year to EUR 0.96 in the reporting year. Net profit billions of € Net debt Net debt increased from EUR 50.8 billion at the end of 2017 to EUR 55.4 billion. Factors in this increase included, in particular, the dividend payment (including to non-controlling interests) of EUR 3.3 billion, the acquisition of UPC Austria (EUR 1.8 billion), additions to liabilities in connection with finance leases (EUR 1.0 billion), exchange rate effects (EUR 1.1 billion), T-Mobile US’ share buy-back program (EUR 0.9 billion), payment obligations arising out of the Toll Collect settlement (EUR 0.6 billion), and further acquisitions of shares in T-Mobile US and OTE (EUR 0.4 billion). The main factor reducing net debt was free cash flow of EUR 6.2 billion. Net debt billions of € Cash capex Cash capex (including spectrum investment) decreased from EUR 19.5 billion to EUR 12.5 billion. In the prior year, mobile spectrum licenses had been acquired for EUR 7.4 billion, mainly in the United States operating segment, compared with cash outflows in the reporting year of EUR 0.3 billion, primarily in the United States. Adjusted for the effects of spectrum acquisition, cash capex was up by EUR 0.1 billion. Capital expenditures were focused primarily on the United States, Germany, and Europe operating segments and went toward the build-out and upgrade of our networks. Cash capex billions of € Free cash flow (before dividend payments and spectrum investment) Free cash flow was up by EUR 0.7 billion to EUR 6.2 billion. Adjusted for exchange rate effects and changes in the composition of the Group, the value thus exceeded our expectations. Net cash from operating activities increased by EUR 0.8 billion year-on-year. Lower net interest payments, which were essentially due to the fact that T-Mobile US has increasingly been financed internally since 2017, and that refinancing terms continue to be favorable, in particular had a positive effect on free cash flow. The positive business development in our United States operating segment was adversely affected by currency translation effects. The year-on-year increase of EUR 0.1 billion in cash capex (excluding spectrum investment) had a negative impact on free cash flow. Free cash flow (before dividend payments and spectrum investment) billions of € ROCE Our key performance indicator ROCE (return on capital employed) decreased by 1.1 percentage points in the reporting period to 4.7 percent. This was attributable to the decrease in net operating profit after taxes (NOPAT), while the average amount of net operating assets (NOA) increased slightly over the year. NOPAT was impacted in 2018 primarily by negative special factors in connection with staff-related measures and impairment losses on goodwill, which even the significant improvement in adjusted EBITDA could not completely offset. In particular, positive special factors in the prior year had had an offsetting effect on NOPAT. NOA increased in 2018 as a result of growth in intangible assets and property, plant and equipment, as well as an increase in the present value of unrecognized rental and lease obligations, reflecting Deutsche Telekom’s consistently high level of investment. ROCE % For further information, please refer to the section “Development of business in the Group”.