Expectations for the operating segments

Germany

The German market for telecommunications services saw a slight contraction of 0.4 percent in 2019. The downward trend is expected to slow in 2020, with revenues anticipated to decline by 0.1 percent. The negative trends resulting from regulatory effects and the decline in traditional fixed-network telephony will not be fully compensated for by growing demand for mobile data volumes and faster connectivity in the consumer and business customer area. In the German mobile market, revenues are expected to increase again in 2020 – by 1.0 percent (source: EITO).

For the wider ICT market, which covers IT services as well as telecommunications, EITO forecasts growth of 1.9 percent for 2020. This plus will primarily result from IT market growth, which, at 2.8 percent, will continue to exceed growth in telecommunications revenues in 2020. This growth will be down to continuing strong demand in two areas: services for business customers (B2B) (e.g., outsourcing, project business, consulting) and software-based services (virtualization and cloud business, e.g., in the shape of software as a service, platform as a service, and infrastructure as a service).

Innovative integrated products and attractive supplementary services – such as TV and streaming options, and smart-home services – are becoming increasingly important for our competitive position with consumers, while cloud services, security applications, and solutions for Industry 4.0 are gaining in significance with business customers. We set ourselves apart from other providers with our broad range of products and services, rate plan innovations like StreamOn Gaming, and innovative fixed-network products like the Smart Speaker. We are the first telecommunications company in Germany to tackle the topic of sustainability head on in the form of our "we care" sustainability label, which we launched to improve the transparency of our products. The introduction of the first sustainable smartphone recycling scheme is another of our initiatives.

The mobile communications market in Germany is currently dominated by three providers, each with its own network infrastructure, who deploy 4G/LTE technology – and also 5G going forward – to ensure that the majority of the population has access to high-speed mobile internet. At the spectrum auction that concluded on June 12, 2019, Drillisch Netz AG acquired mobile spectrum and has announced its intention to set up a fourth mobile network. By contrast, the fixed-network broadband market hosts a large number of players with differing infrastructures – from national through to regional providers. We are assuming that competition from cable network operators will remain intense and that the number of providers who have their own DSL and fiber-optic networks will increase.

In our Germany operating segment, we continue to work on our comprehensive transformation program and are aiming to secure our market position as the leading integrated telecommunications provider in Germany by means of innovative, competitive offers. As of the end of 2019, we had for the most part implemented the migration to IP in Germany. We will complete it in full before the end of 2020 and continue building out the infrastructure of our high-performance networks. We will increasingly reduce the complexity of our products and processes through automation and digitalization initiatives, and ensure greater end-to-end responsibility. Our goal is to deliver the best customer experience with the best service. Hence, we continue to make systematic investments in the brand and shopping experience and are working to realign consumer sales. With the digital transformation and online boom driving a notable shift in market trends and customer behavior, footfall in brick-and-mortar retail is dropping and the number of attractive shopping locations is on the decline. The aim of our realignment activities is to improve the organizational structure and make the necessary workforce adjustments. The new organization is scheduled to be in place as of July 1, 2020. Nevertheless, we remain committed to our nationwide shop infrastructure in Germany, via which we offer personalized advice and one-on-one customer contact. Our network of shops is the largest of all our German competitors.

In the fixed network, we want to offer the best customer experience with fiber-optic-based products. We are paving the way for this with our integrated network strategy – building an IP-based network with high transmission bandwidths so that we can consistently offer our customers competitive high-speed lines, e.g., by systematically building out our fiber-optic network. In addition, we are investing heavily to offer greater coverage and even higher speeds in rural areas as well. For this purpose, we will continue in the future to rely on our hybrid router, which combines the bandwidths of fixed-network and mobile communications, thus enabling much higher transmission speeds. What is more, we are working towards further partnerships to provide even more customers with high-bit-rate internet access – and setting a benchmark for sustainable broadband infrastructure.

In mobile communications, we are keeping our promise to build out the network and are the leader in terms of network coverage, speeds, and customer experience. Our high capital expenditure on 5G technology is geared to our customers’ requirements. Over the coming the months, we will focus on Germany’s biggest cities, where data usage levels are high. We set ourselves apart from our competitors by offering the best convergent connectivity and will continue to grow with MagentaEINS, our integrated, convergent fixed-network/mobile product. When designing our products, we pay particular attention to consistently high quality, a simple rate plan structure, and the innovative evolution of our existing service portfolio. We are focusing on enhancing the performance of our rate plans and will orient the latter to the needs of our customers – for example, by expanding all our MagentaMobil rate plans to include StreamOn flat rates and higher data volumes, and by utilizing the 5G mobile communications standard. Deutsche Telekom’s 5G network is already available in eight German cities. In addition, our multi-brand strategy in mobile communications allows us to address the entire customer spectrum – from smart shoppers through to premium customers. We impress our business customers with our Business Mobile rate plans, which already include the new 5G standard and can be expanded with additional options catering exclusively to this target group.

We want to secure an ever-larger share of the growing TV market, focusing on our entertainment and exclusive streaming offers (e.g., with exclusive series such as “The Handmaid’s Tale” and “Godfather of Harlem” on MagentaTV and more than 100 seasons from the FOX+ series catalog). To enable us to offer our customers the best-possible TV experience, we optimized MagentaTV in 2019, introducing the MagentaTV Netflix rate plan and marketing the MagentaTV stick. To this end, we are investing in our IPTV platform and winning new customers with attractive content, services, and strong partnerships.

We want to remain the market leader in Germany in terms of revenue over the coming years and extend our lead through rising service revenues. We are responding to our customers’ constantly growing demand for bandwidth and continuing to invest extensively in broadband networks, innovative products, and outstanding customer service. In our broadband business, revenues are constantly growing and customer satisfaction levels rising, and we want to continue this growth trend again in 2020. We will improve customer satisfaction by actively evolving our mobile services (e.g., Magenta apps) and ensuring seamless service across all channels (e.g., web, hotline, shop).

We expect revenue to grow slightly in our Germany operating segment in 2020, despite considerable adverse regulatory effects in our core business and tough competition. Our value drivers are growing mobile and TV revenues (a result of our multi-brand strategy), rising numbers of customers with high-speed lines, and revenue growth with business customers, for example, thanks to the positive trend in IT and cloud business. We want to continue expanding our fiber-optic services, both by means of business models with wholesale products (such as the contingent model) and through further partnerships.

We also anticipate that our growth initiatives in Germany will offset the volume-driven decline in revenue from traditional fixed-network business and that we will continue consolidating our position as market leader in mobile and fixed-network communications. Thanks to our outstanding network quality and the progress we are making with fiber-optic build-out, we expect to see an increase in the number of mobile customers as well as slight growth in our broadband products, fueled by demand for TV, high-speed, and hybrid lines. Our initiatives to digitalize ICT solutions business for our business customers will continue enhancing revenues from IT and cloud services, and from M2M/IoT business. Wholesale sales volumes should remain on a positive trajectory thanks to strong demand for our contingent model.

In each of the next two years, we expect to post year-on-year increases in earnings in our Germany operating segment. For 2020, we expect adjusted EBITDA AL of around EUR 8.9 billion, driven in particular by revenue growth and a simultaneous reduction in indirect costs, mainly through digitalization and automation. Our adjusted EBITDA AL is likely to rise further in 2021. We are also forecasting a slight improvement in the adjusted EBITDA AL margin in both 2020 and 2021.

Our course is set for innovation and growth: While we will continue to consistently promote investments in new technologies with great intensity in the future, we are reducing investments in legacy systems. The focus of our capital expenditures in the coming years will thus fall on our network infrastructure and our mobile network (e.g., FTTH, super vectoring, MIMO, 5G). At the same time, we want to continue building out our fiber-optic network and close gaps in the network in rural areas. In this context, the focus is on business parks. We are expediting the build-out of FTTH accordingly. We want to continue this rollout efficiently and, to this end, are participating in funding programs. We expect our cash capex to decline slightly year-on-year in 2020 and to remain stable year-on-year in 2021.

Changes to the organizational structure in 2020. Business-to-business (B2B) telecommunications business is to be realigned throughout 2020. The changes include setting up a new B2B unit within the Germany operating segment. The new unit will incorporate the TC Services and Classified ICT units which are currently assigned to the Systems Solutions operating segment – with the exception of a number of activities assigned to Classified IT project business. Our expectations for 2020 and 2021 do not include the effects of these changes.

United States

The U.S. economy’s positive momentum in 2019 did not impact as heavily as in years past the country’s ICT market, for which overall spending grew by 2.1 percent in 2019. Growth in ICT sectors either slowed or reversed, almost across the board, with a 0.2 percent negative growth in IT equipment expenditures, and slowed growth rates in IT services, software, and telecommunications equipment. Some reversals are forecast for 2020 – with stronger growth expected in total market ICT growth, mobile data services, and telecommunications equipment.

The U.S. mobile market, in particular, continues to be characterized by intense competition among the major mobile carriers. Overall mobile revenues are expected to increase. Recent changes by service providers, such as the removal of overage charges, the move toward unlimited data plans, and Equipment Installment Plans (EIPs) have contributed to reported declines in ARPU and other revenue metrics.

Leading industry associations such as GSMA expect the United States to lead global migration to 5G. United States’ 5G is expected to accelerate in 2020 and beyond, with providers expanding their capacity and coverage in spectrum bands below 6 GHz. The FCC has also taken an aggressive stance on putting millimeter Wave (mmWave) frequencies in the hands of operators, auctioning off the 24 and 28 GHz bands, and undertaking more mmWave auctions (in the 37, 39, and 47 GHz bands) in late 2019. GSMA expects almost half of all mobile connections to be running on 5G networks by 2025. Since December 2019, T‑Mobile US has covered large parts of the United States with its 5G network, utilizing its spectrum holding, including the 600 MHz band acquired in April 2017.

In 2020, T‑Mobile US will continue to execute on its Un-carrier promise to deliver the best value experience in the U.S. wireless industry. Key elements of the Un-carrier promise include delivering distinctive value for consumers in all customer segments by eliminating customer pain points and providing excellent 4G/LTE services as well as continuing to build out its 5G network. Additionally, the Un-carrier initiatives focus on attracting and retaining a loyal customer base by offering devices when and how customers want them, and plans that are simple, affordable, and without unnecessary restrictions to deliver the best value in wireless.

Please note that the below expectations are on a stand-alone basis, and do not consider impacts of completing the proposed merger with Sprint. T‑Mobile US expects continued increases in branded postpaid customers in 2020 and 2021 while expecting slight increases in branded prepay customers in 2020 and 2021. However, competitive pressures and unforeseen changes in the wireless communications industry in the United States may significantly affect the expected ability to attract and retain branded postpaid and prepay customers.

T‑Mobile US expects an increase in total revenues in U.S. dollars in 2020 and 2021, primarily as a result of branded postpaid customer growth momentum. However, significant competitive pressures and the adoption of lower-ARPU customer segments will continue to put pressure on ARPU.

For 2020 and 2021, T‑Mobile US expects a sustained increase – in U.S. dollars – in adjusted EBITDA AL. Revenue growth is expected to outpace increases in expense as T‑Mobile US is focused on driving operating cost efficiencies to take advantage of improved scale effects. However, continued investment in building out the 5G network will likely impact adjusted EBITDA AL. Competitive pressures may also significantly affect expected revenues and adjusted EBITDA AL.

Excluding expenditures relating to spectrum, T‑Mobile US expects a stable development in cash capex in 2020 in U.S. dollars as it continues to build out its 5G network.

Europe

Overall, we expect the traditional communications markets in the Europe operating segment to remain stable over the next two years, for both mobile and fixed-network business (including traditional TV services). Continuing declines in voice services can be offset by data services in both submarkets, as well as by traditional TV services (excluding OTT) in the fixed network.

For fixed-network business, Analysys Mason expects to see annual growth of around 3 percent in the broadband market in both 2020 and 2021, while voice services are likely to shrink by more than 4 percent per year. Traditional TV services are forecast to grow by around 1 percent in each of the next two years. In the mobile markets, data services are expected to grow by 5 percent in 2020 and 4 percent in 2021, driven mainly by the use of mobile video services. Analysys Mason expects overall data volume in the countries of the Europe operating segment to grow by 34 percent in 2020 and by another 28 percent the year after. We are already seeing investments in 5G networks in almost all the markets of our Europe operating segment, and initial commercial services have already been launched in Austria and Hungary, for example. This will further improve coverage of large parts of the population with high-speed mobile internet. By contrast, the relevance of traditional voice services also continues to wane in mobile communications, and analysts are forecasting a revenue decline of around 5 percent per annum in this area.

According to the European Union’s economic forecast, real GDP will continue to rise in all our footprint countries in 2020 by between 1 and 4 percent per annum. This ongoing positive economic environment should also have an impact on IT markets. EITO forecasts growth of around 3 percent in 2020 for the countries of our Europe operating segment.

We aspire to remain Europe’s leading telecommunications provider in the coming years. We are convinced that a country-wide integrated fixed-network and mobile network infrastructure will be a key success factor, which is why we are positioning FMC offerings across all our subsidiaries. In addition, we plan to play a decisive role in shaping the digital transformation, leveraging our smart network infrastructure, which comprises a range of technologies, to offer innovative solutions for households, business customers, and municipalities.

The Europe operating segment is characterized by its strong portfolio of companies. All of our national companies are noted for being integrated providers of telecommunications services. This, and their high brand recognition levels, make them very significant players in their respective home markets. We want to actively continue the transformation of these companies – which are still predominantly active in mobile communications business (e.g., in Poland and the Czech Republic) – into integrated enterprises, either using their own resources (through the rollout of fiber-optic network infrastructure) or by means of partnerships with other service providers. In the reporting year, for instance, we were already able to provide our customers in Poland with comprehensive convergent services by utilizing Orange’s fiber-optic network.

Our goal is to deliver the best customer experience. Our successful convergent product portfolios MagentaOne and MagentaOne Business provide strong offerings with which we can help shape developments in the European markets. Almost half of all customers in our segment already have a MagentaOne contract, and we want to increase this share successively over the next two years. We believe the redesigned product portfolio – which we launched in a number of countries in the reporting year and which is based on the more-for-more principle – will help achieve this. We intend to carry out this relaunch in further countries over the next two years. As a result, we expect FMC revenues to increase by around 25 percent per annum until 2021. By offering additional services, we aim to lower the churn rate and create a stable customer base. This stability will have a positive influence on the value we have in the markets of our operating segment. If we look at the trends in the markets of our Europe operating segment, it is evident that demand for convergent products remains high. That is why we expect the number of households with convergent products to rise by about 20 percent over the next two years.

We are convinced that only top customer service will enable us to take the next step toward achieving the best customer experience. Digitalization can make a major contribution in this regard. The service app for consumers enables us to largely digitalize our interaction with customers, meaning we can meet customer needs in a more personalized and efficient way, and position products and innovative services in the market more quickly. We successfully launched this service app in the market across all our subsidiaries at the end of 2019, reaching an overall penetration rate of over 50 percent. Hence, we have already met our target figure of over 50 percent, which we originally planned for 2021. A further aspect in terms of enhancing the customer experience is our aim to structure things so that they are easier for customers to handle. In Poland, we have reduced the number of rate plans, for example, and ensured that our invoices fit onto a single page. As a result, we have already been able to reduce the number of calls to our customer center by one-third. We are firmly convinced that our customers will recognize the advantages of this approach, e.g., considerably improved service and fast, flexible handling. Thus, we believe we can achieve first or second place in customer satisfaction rankings of telecommunications companies in the respective national companies by 2021, as measured by the TRI*M index which is based on empirical research (customer surveys).

One of the main factors for the success of FMC is TV business. A key focus is the seamless experience of TV and entertainment services, in particular exclusive, high-quality proprietary content. Going forward, we will continue negotiations to acquire (co-)exclusive rights to broadcast sports events, such as the Champions League, or the rights to TV movies/series. In addition, we are focusing on offering high-quality content at local level. We are also working together with what are known as OTT players, like Netflix or Amazon Prime Video, and gradually expanding our range of OTT services to all screens – especially to our Android-TV-based terminals. Overall, we expect to continue growing our revenues from TV business over the next two years.

The broadband build-out will remain a key focus of activities in the coming years. Our state-of-the-art network infrastructure supports the digital transformation and enables us to leverage our technology leadership. We therefore plan to take part in further spectrum auctions – particularly for 5G. The rollout of 5G has already begun, and our national company in Austria started marketing it in 2019. Further countries in our Europe operating segment will gradually follow suit over the next few years, depending on their local market needs and on the results of spectrum auctions. Initial pilot projects for 5G are up and running in almost all countries. In the mobile communications market, we continue to invest in expanding LTE reach and implementing additional LTE frequency layers in order to increase network capacity. In 2019, we already achieved 98 percent coverage of the population in the countries of our Europe operating segment with LTE and are thus well on track to reach our target. Our ultimate aim is to achieve network coverage of 99 percent in our European footprint by 2021. One aim of our integrated network strategy is to make further advances in the fiber-optic rollout. In Hungary, Romania, Slovakia, Croatia, North Macedonia, and Montenegro, we have been investing in FTTH rollout for a number of years now, and plan to continue doing so. The goal is to supply around 750,000 million new households per year with optical fiber by 2021. Overall, we want 30 percent of all households in the markets of our major national companies (Hungary, Greece, Croatia, and Slovakia) to have access to optical fiber by 2021.

Over the next two years, we will deliver the benefits of digitalization to our business customers, e.g., via new B2B contact options in our Telekom Shops and on our websites. In addition to that, we will support cities and municipalities across Europe in their quest to implement smart solutions in areas such as traffic and waste management. Whether they are large or small, our business customers will experience our best 4G, 5G, and fiber-optic networks in their everyday business. Among other things, we expect this to generate constant growth in our revenues and margins for both mobile and fixed-network business. We are working on standardized software and IoT solutions for faster and more secure networks to help us become Europe’s market leader in cloud computing. One thing we did to achieve our target was to establish a partnership with Microsoft in the reporting year that will allow us to secure an ever-larger share of this growing market.

In our Europe operating segment, we expect to win more customers over the next two years, mainly thanks to the good performance of MagentaOne, our convergence brand. Consequently, we expect the number of TV and broadband customers to increase in 2020 and 2021. In 2020, the number of mobile customers is likely to remain stable compared with the previous year on a like-for-like basis and to rise again slightly in 2021. We expect the number of fixed-network lines to remain stable in 2020 and 2021.

We expect revenues for our Europe operating segment to increase slightly in 2020, measured on a comparable basis, i.e., at constant exchange rates and market conditions, and given an unchanged organizational structure. 2021 should then see a return to moderate revenue growth.

Vigorous competition in the markets of our operating segment could potentially put pressure on our margins. To be ready for such an eventuality, we want to increase our productivity and exploit the benefits of digitalization, for instance by automating processes in order to realize cost-cutting potential. We expect adjusted EBITDA AL to increase again in 2020 and to come in at around EUR 4.1 billion year-on-year in 2020. It should then grow slightly in 2021.

In order to expand our technology leadership, we continue to invest in our integrated networks and plan to maintain our high level of investments over the next few years. Cash capex will remain stable in 2020 year-on-year, and we are assuming it will decline slightly in 2021.

Systems Solutions

Overall, growth in the ICT market is expected to continue apace over the next two years, while cost pressure and intense competition are likely to persist. At the same time, we expect the digital transformation to stoke demand for solutions for cloud services, big data, smart network services such as Industry 4.0, the Internet of Things, and M2M, as well as for the mobilization of business processes and ICT security (cybersecurity).

We expect the two main segments of the ICT markets to develop along divergent paths:

• Telecommunications (TC): The highly competitive fixed-network market for large business customers remains challenging. Innovative change, intense competition, constant price erosion, and the interventions of national regulators are all likely to slow market growth, even though business with both mobile data services and the Internet of Things will continue to grow in the coming years. 5G, Wi-Fi 6, and software-defined networks are the standout trends in the TC market. With networks becoming smarter and mobile capacities rising, companies enjoy new options for their business activities. These will become evident, for example, in campus networks. TC services remain a key cornerstone of the ongoing digitalization trend.
• IT services: The strong growth in the market for IT services posted in the reporting year is likely to continue into 2020 and 2021. At the same time, this market is undergoing a radical transformation, e.g., due to ongoing standardization and automation, demand for smart services, and the changes being wrought by cloud services in outsourcing business. Further challenges have arisen in the shape of digitalization, the growing importance of cybersecurity, big data, and increasing mobility. Traditional IT business is likely to decline due to price competition, while cloud services, mobility, and cybersecurity may reach double-digit growth. In view of all this, our plan is to continue investing heavily in growth markets – especially in digitalization (e.g., EDGE and blockchain), multi- & hybrid cloud services, cybersecurity, and smart network solutions.

Part of our Group strategy is the ambition to be a leading partner for business customer productivity. We give our customers help and guidance in implementing digital business models with our offerings for connectivity, digital business, cloud and infrastructure, and security, as well as through our strategic partnerships. Our horizontal platforms and vertical solutions facilitate continuous operation of traditional systems as well as the transformation to digital business applications, which can be operated in accordance with specific requirements. Partner products and services are an integral part of our portfolio, which offers our customers vendor-independent managed services.

Under the program launched at the start of 2018 to transform our Systems Solutions business, we have realigned our organization and processes, developed a new strategy for our portfolio, and created three product clusters:

• TC Services cluster: Fixed-network services and mobile services are a key component of our business customer segment. We are investing in new technologies and spearheading the technology revolution so as to guarantee our customers corresponding added value and global availability.
• Classic IT cluster: Dedicated SI solutions, managed infrastructure services, and private cloud offerings secure our customers’ existing infrastructure and form the starting point for the transformation into new business areas. Measures to enhance efficiency are helping us shore up our margins in these business areas, where price pressure remains high.
• Growth cluster: The focus here is on public cloud managed services, the Internet of Things (IoT), digital solutions, security, SAP, classified ICT, health, and road charging – and our investments in all these growth areas offer our customers the best solutions on future-proof platforms. A focus on scalable business models and global partnerships with specialized vendors enables attractive margins and our continued investment in these areas.

After another increase in order entry in 2019, we are continuing to push the expansion of growth business, while at the same time stabilizing traditional IT business, with the aim of achieving a significant shift in the revenue mix toward our growth areas by 2022.

We are among the top providers in the European IT market. Our very high levels of customer satisfaction are a core element in maintaining this position in the long term as well as in playing a leading role in digitalization.

Overall, we forecast a stable trend in order entry for the Systems Solutions operating segment in 2020 and stable revenue. Adjusted EBITDA AL is expected to increase again, reaching around EUR 0.6 billion. Due to ongoing investments in growth areas, we expect cash capex to remain stable. For 2021, we expect to see a slight year-on-year increase in order entry and revenues, a strong increase in adjusted EBITDA AL, and stable cash capex.

Changes to the organizational structure in 2020. Business-to-business (B2B) telecommunications business is to be realigned throughout 2020. The changes include setting up a new B2B unit within the Germany operating segment. The new unit will incorporate the TC Services and Classified ICT units which are currently assigned to the Systems Solutions operating segment – with the exception of a number of activities assigned to Classified IT project business. Our expectations for 2020 and 2021 do not include the effects of these changes.

Group Development

Our companies T‑Mobile Netherlands and Deutsche Funkturm (DFMG) dominate the performance of our Group Development operating segment.

Strong price and competitive pressure in the Dutch mobile market should continue over the coming years. One of the main trends contributing toward this is the growing bundling of fixed-network and mobile products into convergent products (FMC). What is more, both the strong discount segment, comprising mobile providers’ secondary brands, and MVNOs will continue to make for lively competition. GD Towers comprises two equity investments: DFMG and T‑Mobile Infra B.V. With some 31,200 sites, DFMG is the biggest provider of passive wireless infrastructure for mobile communications and broadcasting in Germany. We expect demand for cell sites to rise steadily over the next few years, given that network operators plan both to close gaps in coverage and to increase the density of mobile networks to meet the growing demand for mobile data services. With around 3,200 sites, T‑Mobile Infra B.V. is one of three providers of passive wireless infrastructure in the Netherlands.

We expect the revenues of our Group Development operating segment to increase in 2020, as well as in 2021. Adjusted EBITDA AL is set to increase in 2020 to around EUR 1.1 billion and we expect to see a further increase in 2021.

T‑Mobile Netherlands’ acquisition of Tele2 Netherlands as of January 2, 2019 was in line with our long-term strategy and is strengthening our position in the Dutch market as a sustainable provider of FMC products. We are tackling the difficult competitive situation in the Netherlands with a strategy that has enabled us to stabilize our EBITDA in recent years, and we intend to continue pursuing this strategy in 2020. Its main components are integration of Tele2 Netherlands, repositioning of the T‑Mobile core brand, expansion of our portfolio of convergent products, and efficient cost management.

We expect investments in our Group Development operating segment to continue growing strongly in 2020, with a further increase projected for 2021. This is due to sustained high network investments to safeguard T‑Mobile Netherlands’ strategy, as well as the continued build-out of DFMG cell sites in Germany.

Group Headquarters & Group Services

At Group Headquarters & Group Services, we will stay focused over the next two years on our ongoing efficiency enhancement measures, with which we are further optimizing our structures, especially within Group Services. We will also continue to focus on implementing our cost-cutting measures. This will primarily involve reallocating human resources, bundling standardized processes and activities, and enhancing the value of our real estate portfolio by means of innovative space and workplace concepts. As these cost cuts will put us in a position to offer our services more cost-effectively, the operating segments stand to benefit from them as well.

In the coming years, too, our Board of Management department Technology and Innovation will drive not only the development of innovative technologies, products, and services, but also IT standardization and the ongoing establishment of centralized production platforms. Major areas of capital expenditure in the years 2020 and 2021 will include technology development and the implementation of our IT strategy as well as the establishment of centralized production platforms as part of the Pan-Net program. We expect this to reduce overheads and capital expenditure, driven by IT operating costs and by the ongoing standardization of IT infrastructure and platforms.

In the long term, these savings will help the Group as a whole finance its innovation endeavors. We are focusing innovation topics, such as development of the new 5G mobile communications standard, evolution of a proprietary smart system for the control of Deutsche Telekom products and services, and introduction of a uniform operating system for the routers marketed by the Group. Technological innovations will serve to safeguard the network and technology leadership of our Germany and Europe operating segments in the long term and to evolve the campus networks, which are designed to improve the integrated automation of our international industrial customers’ production processes. Ultimately, every one of our investment projects revolves around enhancing the customer experience.