Highlights in the 2018 financial year

For further information, please refer to the Media section on our website at www.telekom.com/en/media/media-information.

Board of Management

Dr. Dirk Wössner was appointed as the new Board member responsible for Germany effective January 1, 2018. In addition, Adel Al-Saleh was appointed as the new Board member responsible for T-Systems effective January 1, 2018.

The former Board member responsible for Human Resources (CHRO), Dr. Christian P. Illek, became the new CFO as of January 1, 2019. He succeeds Thomas Dannenfeldt, who left the Company for personal reasons when his contract expired at the end of 2018. Birgit Bohle joined the Board of Management as of January 1, 2019 as the Board member responsible for Human Resources as successor to Dr. Illek.

Thorsten Langheim became a member of the Board of Management at Deutsche Telekom AG as of January 1, 2019, taking up the role of head of the newly created Board department responsible for USA and Group Development. The Supervisory Board intends the new Board department to better reflect the importance of U.S. business to the Group, in addition to placing a stronger emphasis on evolving the portfolio. Deutsche Telekom AG thus has had nine Board departments since the start of 2019.  For more details, please refer to our media information.

Capital markets day 2018

In May 2018, we presented our new medium-term strategy and the financial outlook at our Capital Markets Day in Bonn. Our forecast for growth through to 2021 remains at the same high level we anticipated at our Capital Markets Day in 2015: Revenue is expected to increase by 1 to 2 percent annually, adjusted EBITDA by 2 to 4 percent, and free cash flow by around 10 percent. From 2019 onwards, we expect that all business units will contribute to earnings growth in the Group. The focus of our strategy is on convergent products and services for consumers and business customers. Our capital expenditure is to remain at a high level and will center on the ongoing build-out of broadband networks and upgrading to the LTE and 5G standards. The dividend for the financial years starting 2019 will reflect the development of adjusted earnings per share. We expect this figure to increase to around EUR 1.20 per share by 2021.  For more details, please refer to our media information.

Corporate transactions

In March 2018, we exercised our right of first refusal as invited by the Greek privatization authority Hellenic Republic Asset Development Fund (HRADF) and acquired a 5 percent stake in our Greek subsidiary OTE. The transaction was completed in May 2018 through the acquisition of additional shares in the amount of EUR 0.3 billion. As a result, we hold around 45 percent in the company’s shares.

In December 2017, T-Mobile Austria agreed to acquire Austria’s leading cable operator, UPC Austria. The European Commission approved the deal on July 9, 2018 and the transaction was consummated on July 31, 2018. A purchase price of EUR 1.8 billion was paid in cash. The UPC Austria group has been fully included in our consolidated financial statements since the acquisition date. In line with our strategy, this acquisition will allow us to offer convergent product bundles to our customers on the European market.

Together with their respective majority shareholders Deutsche Telekom AG and Softbank K.K., T-Mobile US and Sprint Corp. concluded a binding agreement in April 2018 to combine their companies. The larger T-Mobile US is expected to achieve cost and capital expenditure synergies with a net present value of around USD 43 billion (after integration costs). Around USD 15 billion has been budgeted for integration costs. The business combination is expected to make a positive contribution to adjusted earnings per share at the Deutsche Telekom Group after the first three years. The new company will have a customer base of around 127 million. Under the agreement, T-Mobile US will acquire all of the shares in Sprint. On completion of the transaction, Deutsche Telekom will hold around 42 percent of T-Mobile US’ shares and Softbank around 27 percent, while the free float will account for about 31 percent. Due to the voting-rights agreement with Softbank, and to the fact that Deutsche Telekom has the right to appoint the majority of the members of the Board of Directors, T-Mobile US will continue to be included as a fully consolidated subsidiary in the consolidated financial statements. The agreement is subject to approval by the authorities as well as other closing conditions.

On November 27, 2018, the European Commission approved the acquisition of Tele2 Netherlands by T-Mobile Netherlands and the transaction was consummated on January 2, 2019. This transaction is part of our long-term strategy and will establish a stronger, more sustainable provider of convergent fixed-network and mobile services on the Dutch market. Tele2 Group receives a purchase price in the form of a 25 percent stake in T-Mobile Netherlands and a cash component of some EUR 190 million taking any retrospective adjustments to the purchase price into account. Tele2 Netherlands has been fully included in our consolidated financial statements since the acquisition date.

Settlement in the toll collect arbitration proceedings

Together with Daimler Financial Services AG, we reached an agreement with the Federal Republic of Germany in May 2018 to end the toll collection arbitration proceedings. This agreement puts an end to a lengthy legal dispute regarding the implementation of heavy truck road tolls in Germany. The agreed settlement amount of around EUR 3.2 billion includes services previously provided to the Federal Republic of Germany. Daimler Financial Services AG and Deutsche Telekom have both agreed to make final payments of EUR 550 million each. The payments will be made in three tranches by 2020; the first tranche has already been paid.  For more details, please refer to our media information.

T-Mobile US share buy-back program

In April 2018, T-Mobile US’ Board of Directors authorized an increase in the total share buy-back program to up to USD 9.0 billion, consisting of the USD 1.5 billion in repurchases already executed and for up to an additional USD 7.5 billion of T-Mobile US common stock until the end of 2020. This Board resolution applies in the event that the business combination of Sprint and T-Mobile US does not materialize. In addition, in the 2018 financial year we purchased shares in T-Mobile US on the capital market totaling USD 0.2 billion, bringing our stake to around 63 percent.

Increase in external capital funding for company pensions

We place high importance on our company pension plans in the Group. SDG 8 Going forward, pension payments are to be covered to a greater extent by our own assets. To achieve this, in March 2018 the 12 percent financial stake in the BT Group was transferred to the Group’s own trust, Deutsche Telekom Trust e.V., roughly doubling the level of external capital funding. This capital may only be used for pension payments. BT continues to be an integral part of our strategic orientation.

Investments in networks SDG 9

5G network for Germany. At our Network Day in Berlin in October, we presented an eight-point plan for a fast, successful 5G rollout. By 2025, we plan to cover 99 percent of the population nationwide and 90 percent of the country with 5G. We intend to invest an additional EUR 20 billion in Germany in the four years through 2021. To ensure that business, industry, and the general public get the most powerful 5G network, we will also team up with partners. With over 500,000 kilometers of cable now laid, our fiber-optic network forms the basis for high-performance fixed and mobile infrastructure. It currently serves 26 million households with surfing speeds of up to 100 Mbit/s and more over the fixed network. Following the market launch of supervectoring in August 2018, maximum speeds of up to 250 Mbit/s became available to 6 million households. As of the end of 2018, some 14 million households were benefiting from such transmission rates. Our aim is to offer speeds of up to 250 Mbit/s to 28 million households in 2019.  For more details, please refer to our media information.

Fiber-optic rollout progresses apace. A host of major fiber-optic projects to bring light speeds to urban and rural areas got under way in 2018, for instance in the German rural districts of Vorpommern-Rügen and Burgenlandkreis, the city of Bautzen, the town of Lüneburg, and at the Port of Hamburg. A large-scale digitalization project for Stuttgart and five neighboring rural districts was also given the go-ahead, under which gigabit connections are to be rolled out to approximately 90 percent of the 1.38 million households in the region as well as to all of the around 140,000 business sites and facilities.  For more details, please refer to our media information. The nationwide build-out of FTTH is gathering speed. We also started the fourth wave of our nationwide rollout of optical fiber to business parks. Almost 45,000 businesses located at 106 business parks in over 70 municipalities are already benefiting from bandwidths of up to 100 Gbit/s. The aim is to connect a total of 3,000 business parks across Germany to the fiber-optic network by the end of 2022.  For more details, please refer to our media information. In addition, we are already planning or preparing to implement further large-scale fiber-optic projects at our national companies in Europe, such as FTTH coverage of up to one million households and businesses in Greece and a comprehensive FTTH project in the Czech Republic.

1,300 new cell sites for added capacity and coverage. We installed 1,300 new cell sites in 2018, bringing the total number of sites in Germany to around 29,000. More than 2,000 new sites will be added over the next few years. Our high-speed LTE network covers 97.8 percent of the population. This percentage is set to increase to 98 percent by the end of 2019. The three big network tests – carried out by connect, Chip, and Computer Bild – confirm that we have the best mobile communications network in Germany. More than 80 percent of our cell sites are already connected with optical fiber. They are also equipped with Single RAN technology and thus ready for the fifth-generation mobile standard, 5G.  For more details, please refer to our media information.

European Aviation Network (EAN) ready. At the start of 2018, together with Inmarsat and our technology partner Nokia, we set up the first trans-European integrated LTE network consisting of 300 base stations. The network offers seamless connectivity over land and sea: Airline passengers benefit from the high bandwidth with high-speed transmission rates that let them browse social media, share pictures, and even stream broadband content. Airlines using the service do not have to share the network capacities with LTE users on the ground.  For more details, please refer to our media information.

German cloud data center continues to grow. The next phase of our expansion activities at the high-performance data center in Biere, near Magdeburg, went live in September 2018. Biere now has a capacity of 150 petabytes for processing and storing cloud data. Since the commissioning of this high-tech Fort Knox in 2014, global demand for cloud services has continued to increase substantially. In response, T-Systems has systematically developed into a multi-cloud provider that collaborates with leading international providers of cloud solutions. The Open Telekom Cloud, our public cloud offering, was the first cloud in Germany to receive the TCDP 1.0 certification promoted by the Federal Ministry for Economic Affairs and Energy. SDG 16 For more details, please refer to our media information.

T-Mobile Polska signs wholesale FTTH agreement with Orange. Under an agreement signed in July 2018, T-Mobile Polska will gain access to Orange’s fiber-optic infrastructure and will use it to provide services based on data transmissions in non-regulated areas. The contract will guarantee T-Mobile Polska access to 1.7 million households. Together with the partner’s plans to invest in the deregulated area by the end of 2020 and in the fiber-optic network in regulated areas, this will enable T-Mobile Polska to potentially reach over 4 million households. T-Mobile Polska aims to provide initial individual customers, and small and medium-sized enterprises with the full range of fixed-network services based on fiber-optic infrastructure in the first quarter of 2019 at the latest. The agreement is to run for up to 20 years. In addition to the agreement with Orange, T-Mobile Polska signed another wholesale FTTH agreement with network operator Nexera, covering more than 450 thousand further households, which will be connected by the end of 2020.

Internet of Things gets off the ground. We are one of the leading providers in the large-scale technology roll-out of the Internet of Things (IoT) in Germany, Europe, and North America. The new NarrowBand-IoT (NB-IoT) network technology is now available in over 2,000 locations across Germany, and more than 300 businesses from various industries are already utilizing its potential. We also operate NB-IoT infrastructure in eight further European markets and in the United States, with nationwide rollout completed in the Netherlands, Austria, Slovakia, and the United States. Our NB-IoT networks are already up and running in several cities across Poland, the Czech Republic, Hungary, Croatia, and Greece.  For more details, please refer to our media information.

First European NB-IoT roaming tests concluded. In June 2018 we announced that, together with the Vodafone Group, we had successfully concluded the first international roaming tests in Europe using NB-IoT technology. This service will deliver seamless coverage and continuity of service for millions of connections over low-power wide-area networks. The success of this test marks an important milestone in the development of a stable roaming environment for mobile IoT networks.  For more details, please refer to our media information.

Innovation

5G under live conditions. SDG 9 The first 5G antennas in Europe to fully support the fifth-generation communication standard have been transmitting data under real-world conditions via our network in Berlin since May 2018 and via our network in Warsaw since December 2018. In the T-Mobile Austria network in Innsbruck, a preliminary version of the final 5G standard is reaching record speeds of 2 Gbit/s with latency of just three milliseconds. For more details, please refer to our media information. The first live 5G demonstrations were also conducted in Greece and Macedonia. In a world first, the Hamburg Port Authority, Deutsche Telekom, and Nokia are testing new aspects of the 5G standard using various applications in real-world industrial conditions at the Port of Hamburg in Germany. Since January 2018, the testing ground covering around 8,000 hectares has been used to review this innovative technology and its suitability for rollout in an industrial environment.  For more details, please refer to our media information.

NOW. NEW. NEXT. This was the motto of our booth at the Mobile World Congress in Barcelona in February 2018, where we showcased innovative solutions and visions for the smart society of today and tomorrow based on the network of the future. The focus was on the new 5G communication standard, which will facilitate the interconnection of billions of devices, and the Internet of Things. In an urban setting, visitors had the opportunity to experience and interact with digital innovations across a range of themed zones, including smart city and Industry 4.0, as well as security topics and future technologies like drones, smart textiles, and augmented reality sports.  For more details, please refer to our media information.

Digitalization reaches all areas of healthcare. SDG 3 From hospital beds that transmit their whereabouts automatically to ultrasound scanners that request maintenance work, telemedical patient care, and mobile apps – the digital revolution is radically changing the face of healthcare and poses a complex challenge for everyone affected. Telekom Healthcare Solutions delivers IT solutions designed to help overcome these challenges. conhIT, the world’s leading trade fair for healthcare IT, took place in Berlin in April 2018. Under the motto “Set for a digital future” (Digital auf Zukunft programmiert), T-Systems showcased its latest innovations, which include a tracking system to localize medical equipment and a secure platform for digital collaboration.

“Shape the digital now.” We presented digital solution modules for industry at Hannover Messe in April 2018. The focus was on practical and concrete implementation options for production planning, manufacturing, and logistics. Visitors were able to see products and services relating to cloud computing, the Internet of Things, connectivity, and security, and experience new trends such as digital twins, blockchains, and artificial intelligence. We also showcased the new PLM Cloud service, a cloud-based product lifecycle management (PLM) solution that was launched at the start of the year. Companies can use the PLM Cloud to transform what is probably their most important process, i.e., the development of new products from initial design through to test simulation, bring that process into the digital age, and thus accelerate their approach to innovation. SDG 9 For more details, please refer to our media information.

“Magenta connects.” At our booth at IFA 2018 in Berlin, we brought our entire world of Magenta products to life for trade fair visitors. The main focus was on Magenta Entertainment, “In the best network,” Magenta Connected Life, MagentaEINS, and MagentaSERVICE. Selected highlights: An interactive multi-player drone race on a 5G LED big screen demonstrated the capabilities of the network of the future. The booth also featured an e-sport arena where experts from SK Gaming invited visitors to try out e-sport games including League of Legends and FIFA, as well as mobile gaming. In the MagentaSERVICE zone, the new SprachID service took center stage. In the future, customers will not need to remember account numbers and passwords – when they phone up they will be recognized by their voice alone.  For more details, please refer to our media information. For further information on our innovations, please refer to the section “Innovation and product development”.

Partnerships

Partnerships are key to the success of our Group. We again entered into and expanded a large number of partnerships in the reporting year. We would like to present some of them in detail:

Accession to the Industrial Internet Consortium (IIC). We are now able to contribute our strengths in the field of IoT connectivity, in particular with NB-IoT and 5G, to the IIC to strengthen Europe’s standing in the global consortium. The U.S. organization is spearheading the digital transformation of economy and society on an international scale by driving the development, rollout, and expansion of IoT and Industry 4.0 solutions. Our goal is to develop common approaches for the interoperability of systems in dialog with IIC members and their partners. Additionally, the aim is to outline needs and framework conditions in the context of standardization along with security requirements for IoT services and hardware.  For more details, please refer to our media information.

Open Telekom Cloud wins European tenders. The European nuclear research center CERN has enlisted T-Systems to operate the proven solution developed in 2017 as a pilot system for the Helix Nebula European research cloud. To this end, T-Systems will provide a high-performance solution and a multi-cloud solution, both based on the Open Telekom Cloud. Research institutions throughout Europe can use these solutions and combine the Open Telekom Cloud with their own IT resources and solutions to create a hybrid model. T-Systems has also designed a cloud platform for the European Space Agency ESA. The Copernicus Data and Information Access Services (DIAS) platform was launched in the first quarter of 2018 and makes earth observation data collected by ESA satellites available to the public via the cloud at no cost for direct processing.  For more details, please refer to our media information.

Public cloud – strategic partnerships. T-Systems and Microsoft are entering into a strategic partnership that will focus on promoting public cloud services in four key areas: SAP applications, managed services on Microsoft Azure and Microsoft Office 365, digital solutions using artificial intelligence and mixed reality, and IoT. SAP certified the Open Telekom Cloud in time for Hannover Messe 2018, thus guaranteeing the performance of SAP HANA in the public cloud and enabling the solution to be integrated seamlessly into SAP support processes. The additional service in the public cloud means companies can complement their IT landscape with SAP applications flexibly and easily by self-service and receive appropriate support where needed.  For more details, please refer to our media information.

Global initiative for sustainable cities. SDG 11 In September 2018, we announced a far-reaching collaboration with United Smart Cities (USC) to help cities become smarter and more sustainable. The United Smart Cities program is a global initiative established and coordinated by the United Nations Economic Commission for Europe (UNECE) in cooperation with the Organization for International Economic Relations (OiER). As part of the partnership, we have also taken on a board position in USC’s Global Industry Advisory Board (GIAB). The GIAB consists of 12 members who provide strategic counsel to all UN organizations on smart city issues across the globe. In addition, in November 2018 we presented our newest solutions for the smart city ecosystem at the Smart City Expo World Congress in Barcelona. We also invited representatives from five partner cities with whom we have already successfully rolled out various smart city solutions to appear at our booth. Trenčín in Slovakia, Athens in Greece, Kazimierz in Poland, Gijón in Spain, and Krk in Croatia.  For more details, please refer to our media information.

5G for connected mobility. In just a few years, cars, traffic signals, and street lights will all share information via the 5G communication standard. And these are just three examples for traffic in the future. The systems involved will have to be secure. Together with DEKRA, we are working to equip the Lausitzring test and race track with 5G technology to create an intelligent mobility test site. Multiple scenarios will be played out at the site: Connected cars and autonomous vehicles will communicate in real time with each other, with road infrastructure, and with cyclists and pedestrians. This creates the perfect environment for car manufacturers, suppliers, and telecommunications component manufacturers to test intelligent mobility in a real-world environment.  For more details, please refer to our media information.

Digital Cities and Regions initiative. In July 2018, we joined forces with the German Association of Towns and Municipalities (DStGB) to launch a new initiative called the Executive Program Digital Cities and Regions. The partners develop intelligent, tailor-made solutions with the aim of promoting digitalization in cities and communities and preparing the regions for the digital future. The defined success factors are common platforms, a good digital infrastructure, and courage for cultural change. As a digital partner, we provide the necessary expertise and help the towns and municipalities to launch initial projects. 23 cities from across Germany with very different expectations of the program have now joined the initiative, which will continue in 2019 on the back of the successful launch and strong demand.  For more details, please refer to our media information.

Strategic partnership for better road safety. In August 2018, we launched a strategic partnership with the automobile association ADAC, with plans to offer products and attractive benefits to our customers and ADAC members. To this end, we intend to leverage the opportunities of traffic digitalization. For example, we worked together with ADAC to further enhance our CarConnect solution which now lets drivers report breakdowns to ADAC via just a few clicks in the CarConnect app.  For more details, please refer to our media information.

Cybersecurity for banks. SDG 16 The number of cyberattacks on banks worldwide is on the rise. Industry regulators are continually tightening up IT security requirements for banks. That is why Fiducia & GAD IT AG (IT service provider for all 900 Volksbank and Raiffeisenbank branches in Germany) and the German DZ Bank group have joined forces with Telekom Security to improve cybersecurity for the credit unions over the long term. In the first phase, the partners established a Security Operation Center (SOC) to handle specific IT security incidents for DZ Bank.

Corporate customer deals

T-Systems wins major contract with the Sparda group. The group of Sparda-Banks has signed a seven-year outsourcing contract with T-Systems with a volume in the mid-three-digit million euro range. We will take over the entire IT infrastructure of Sparda-Datenverarbeitung eG, the Sparda group’s central IT service provider, and migrate all mainframe computers and server landscapes to high-security data centers operated by T-Systems.  For more details, please refer to our media information.

Brandenburg’s government administration to get high-speed network. Brandenburg has placed a major telecommunications order in the high two-digit million euro range with T-Systems. We will provide the infrastructure and components for telephony and the wide-area network of the state’s administration. In future, sites will get connection speeds of up to 10 Gbit/s using up to ten times more bandwidth than before. Brandenburg intends to have the network certified by the German Federal Office for Information Security (BSI).  For more details, please refer to our media information.

Campus network for OSRAM. Together with Ericsson we are building a customized campus solution for high-tech company OSRAM. With the industry focusing increasingly on the digitalization of processes, the key to this transformation is wireless connectivity across production sites that is adapted to each specific use case. Our campus solution offers the companies their own exclusive network linked to the public network. The technology for the campus networks is being provided by our partner Ericsson. We are also working with OSRAM to develop prototypes for a mobile robot. In the future, driverless transport vehicles will navigate the works site autonomously using the campus network.  For more details, please refer to our media information.

New products and rate plans

Of course, we again launched new products, services, and rate plans on the market in the reporting year, some of which are presented below:

MagentaMobil XL: unlimited data. In March 2018, we presented our new mobile rate plan for the German market: MagentaMobil XL includes flat rates and unlimited high-speed data in Germany’s best mobile network (as judged by computer magazine Chip 1/2019). Quality-conscious customers with modest data needs can choose the new entry-level rate plan MagentaMobil XS. We also updated our business customer portfolio with the new Business Mobil XL Plus rate plan featuring flat rates and unlimited high-speed data.

Full-service Internet of Things bundles. The Internet of Things is revolutionizing our world, improving corporate processes, and opening up new business models. This transformation calls for products that are not only quick, simple, and safe to use, but also enhance transparency. We offer these kinds of products for a range of usages in virtually all industries. One key tenet for us is our end-to-end approach: connectivity, management of connectivity and hardware, solutions and services – all from a single source. Our product bundles offer solutions for tracking, monitoring and maintenance, identity and access control, connected mobility, and analytics. In May 2018, Hrvatski Telekom became the first provider in Croatia to make NB-IoT services available commercially.  For more details, please refer to our media information. A new IoT solution for consumers, Combi Protect, lets users keep track of pets, purses, luggage, and more on their smartphone using a GPS tracker and app. Customers can choose to track movements in real time and set digital boundaries that trigger an alarm on the smartphone if crossed.

Team of Experts. In August 2018, T-Mobile US introduced Un-carrier Next, a new initiative that changes the structure of their customer service department and solves several significant pain points for customers: Postpaid customers will get directly through to a human when they call customer support, and that human will be one member of a team of experts devoted to that customer and other customers in their geographic region.

In September 2018, T-Mobile US announced that MetroPCS is becoming Metro^TM by T-Mobile (Metro) and Metro introduced new unlimited rate plans with tiers that include added benefits. Metro will offer Amazon Prime, expanded cloud storage, and mobile backup through Google One, as well as the latest smartphones.

Awards

We once again won a number of awards in the reporting year, the largest of which can be seen in the following graphic.  For information on further awards received for our HR activities, please refer to the section “Employees”.

Major awards in 2018