Business activities and organization

Business activities. With 178 million mobile customers, 28 million fixed-network lines, and 20 million broadband customers, we are one of the leading integrated telecommunications companies worldwide. We offer our consumers fixed-network/broadband, mobile, internet, and internet-based TV products and services, as well as ICT solutions for our business and corporate customers. We have an international focus and are represented in more than 50 countries. With a staff of some 215,675 employees (as of December 31, 2018) throughout the world, we generated revenue of EUR 75.7 billion in the 2018 financial year, around 68 percent of it outside Germany.

Fixed-network business includes all voice and data communications activities based on fixed-network and broadband technology. This includes the sale of terminal equipment and other hardware, as well as the sale of services to resellers. Our mobile communications business offers mobile voice and data services to consumers and business customers; in addition, we sell mobile devices and other hardware. We also sell mobile services to resellers and to companies that buy network services and market them to third parties (mobile virtual network operators, or MVNOs). Drawing on a global infrastructure of data centers and networks, our corporate customer arm, T-Systems, operates information and communication technology (ICT) systems for multinational corporations and public-sector institutions.

We believe that economic, social, and ecological aspects can be reconciled; sustainability is the guiding principle behind all our actions. A range of sector-specific and general conditions are crucial to the success of business activities. These include first-rate quality at reasonable costs – in data privacy and security, in customer service, in network build-out, and in materials procurement – as well as qualified staff and good working conditions within our own Group, but also at our suppliers. It is also important to consider the potential consequences of climate change for our business activities: for example, to construct our network infrastructure in such a way that it is protected from severe weather conditions, changes in temperatures, and higher wind speeds. We also help our customers to reduce their carbon footprint with innovative products and services. Furthermore, we want to reduce the Group’s CO₂ emissions despite rapid growth in data traffic and the network build-out that this requires. Also beyond our core business, we do everything we can to ensure that our actions are socially acceptable. For us, this means conducting ourselves in a way that is ethical and compliant with the law and informing and involving our stakeholders in a transparent way. SDG 12

Our responsible corporate governance and business success are based on our shared corporate values and our Guiding Principles, which are as follows:

• Customer delight and simplicity drive our action
• Respect and integrity guide our behavior
• Team together – Team apart
• Best place to perform and grow
• I am T – count on me

We want to be a sustainably growing company that delights its customers, creates value for its investors, and in which employees enjoy their work.

Organization. Our financial reporting conforms with our Group strategy and is based on the following organizational structure.

Organizational structure

Our Group is divided into five operating segments plus the Group Headquarters & Group Services segment, each of which we describe in detail below.

Our Germany operating segment comprises all fixed-network and mobile activities for consumers and business customers in Germany. It also focuses on the wholesale business to provide telecommunications services for carriers and our Group’s other operating segments. Separate sales entities for consumers and business customers allow the operating segment to take a customer-centric sales approach. The bundling of customer service activities places a further focus on customer satisfaction and quality assurance. Build-out of the mobile and fixed networks is managed by the Technology business unit in the Germany operating segment. As a pioneer of digitalization, the Germany operating segment offers its customers an individual service and product portfolio that is innovative while at the same time secure and simple.

Our United States operating segment combines all mobile activities in the U.S. market. T-Mobile US is the third largest provider in the United States and its mobile network offers the highest transmission speeds as well as high network coverage. T-Mobile’s success on the U.S. mobile market has been built on the back of the various Un-carrier initiatives launched in the last few years. T-Mobile US expects the acquisition of online TV provider Layer3 TV completed on January 22, 2018 to further strengthen its TV and video portfolio. Layer3 TV has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since the acquisition date. On April 29, 2018, T-Mobile announced that it had entered into a Business Combination Agreement with Sprint Corp. As a result of the merger, T-Mobile is expected to be able to rapidly launch a nationwide 5G network, accelerate innovation, and increase competition in the U.S. wireless, video, and broadband industries.

Our Europe operating segment comprises all fixed-network and mobile operations of the national companies in Greece, Romania, Hungary, Poland, the Czech Republic, Croatia, Slovakia, Austria, Albania, Macedonia, and Montenegro. The acquisition of cable network operator UPC Austria on July 31, 2018 has helped us to transform our subsidiary in Austria into an integrated provider. UPC Austria has been included in Deutsche Telekom’s consolidated financial statements as a fully consolidated subsidiary since the acquisition date. In addition to consumer business, most of the national companies also offer ICT solutions for business customers. As part of our international wholesale business, Deutsche Telekom Global Carrier (TGC) sells wholesale telecommunications services to our operating segments as well as to third parties.

As a leading ICT service provider, our Systems Solutions operating segment offers business customers a portfolio of integrated products and solutions. With offerings for fixed and mobile communications, IT infrastructure, digitalization, and security, in addition to global partnerships, we offer our customers help and guidance to implement digital business models. Our Systems Solutions segment is realigning itself towards a portfolio-based structure under the transformation program launched at the start of 2018. Alongside an integrated and customer-centric sales unit, operations are split over ten portfolio units with full profit and loss accountability (TC Services, SAP, Digital Solutions, Public Cloud, Security, Internet of Things, Classified ICT, Road Charging, Managed Infrastructure Services and Private Cloud, and Dedicated SI Solutions), plus the emerging business unit, Health. A new organizational structure took effect on January 1, 2019 on the basis of these business areas. A comprehensive cost-saving program has also been launched.

Our Group Development operating segment comprises the entities T-Mobile Netherlands and Deutsche Funkturm (DFMG) and our equity investment in Ströer SE & Co. KGaA. We plan to actively manage these entities and investments and increase their value, with the aim of giving them the level of entrepreneurial freedom they need and thus promoting their strategic further development. The management teams maintain an intensive dialog with the segment management and the relevant supervisory and advisory boards. Deutsche Telekom Capital Partners (DTCP) and the Group functions of Mergers & Acquisitions and Strategic Portfolio Management have also been assigned to Group Development. Our financial stake in BT was transferred to the Group’s own trust company, Deutsche Telekom Trust e.V., in March 2018 as capital funding to cover Deutsche Telekom’s future pension obligations.

Group Headquarters & Group Services comprises all Group units that cannot be allocated directly to one of the operating segments. The segment also reports on our new Technology and Innovation Board department. As the organization that sets the direction and provides momentum, it defines strategic aims for the Group, ensures they are met, and becomes directly involved in selected Group projects. Group Services provides services to the entire Group; in addition to typical services such as financial accounting, human resources services, and operational procurement, Group Services also includes agency services, which are provided by our personnel service provider, Vivento. On the one hand, it is in charge of securing external employment opportunities for employees, mainly civil servants, predominantly in the public sector. On the other, Vivento also seeks to strategically place them internally, with the aim of retaining professional expertise within the Group, so as to reduce the use of external staff. We integrated Vivento Customer Services GmbH, a provider of call center services, into our Germany operating segment as of January 1, 2018; previously it was part of our Group Headquarters & Group Services segment. Further units are Group Supply Services (GSUS) for our real estate management and our strategic procurement, and MobilitySolutions, which is a full-service provider for fleet management and mobility services.

Our Technology and Innovation Board department unites the cross-segment network, innovation, and IT activities of our Germany, Europe and Systems Solutions operating segments. These include Deutsche Telekom IT, which focuses on the Group’s internal national IT projects, and our central innovation unit, Product Innovation and Customer Experience (PIC), which works closely with our operating segments to develop new business areas and create products by focusing on the product and customer experience. Additional units are Network Infrastructure (NWI), Strategy & Technology Innovation (S&TI), and Pan-Net. NWI manages and operates a global network to offer voice and data communication services to wholesale customers. S&TI ensures efficient and customized research and provision of technologies, platforms, and services for mobile and fixed-network communications. Pan-Net is responsible for the shared pan-European network and for developing and providing services for our European national companies. The new Innovation Hub (IHUB), established as of October 1, 2018, pools the expertise required for future innovation projects within the Technology and Innovation Board department to ensure flexible innovation development.