Germany

Customer development

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. We offer best customer experience with award-winning network quality – in the fixed network as in mobile communications – and with a broad product portfolio and excellent service. We want to offer our customers a seamless and technology-neutral telecommunications experience. To this end we market not only fixed-network and mobile products, but also convergence products such as our brand-new MagentaEINS Plus rate plan, introduced in September 2020. This new offering bundles our connectivity services for home and on the move in a single contract. Our MagentaEINS convergence product remains very popular among customers, with some 5.1 million customers having opted for MagentaEINS by the end of 2020. That corresponds to an increase of 7.5 % against year-end 2019.

We continued to see strong demand for our fiber-optic-based lines. As of the end of December 2020, the total number of lines had increased to over 15.9 million. In other words, we connected a further 1.6 million lines to our fiber-optic network in Germany in 2020. With the progress made in fiber-optic rollout and vectoring technology, we also successfully drove forward the marketing of higher bandwidths.

Mobile communications

We won a total of 2.3 million mobile customers in 2020. Of these, 649 thousand were high-value contract customers under our Telekom and congstar brands. Sustained high demand for mobile rate plans with included data volumes alongside our multiple award-winning network quality continues to drive this trend. The number of mobile contract customers with resellers (service providers) increased, primarily due to the volatile developments at some of our service providers. We have added 1.6 million prepaid customers since the start of the year, largely on the back of our automotive offerings targeted specifically at business customers.

For further information on our awarding-winning network quality, please refer to the section “Highlights in the 2020 financial year.”

The StreamOn option, with which customers can stream certain music, gaming, or video services without reducing their included data allowance, remains very popular. At the end of 2020, almost 4 million customers were using this option, up by around 30 % year-on-year.

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 convergence offerings and further development of such products: We offer MagentaTV with exclusive access to a wide range of additional content in the Megathek library and via popular streaming services, and with TV lines and fiber-optic-based lines and, since September 2020, our MagentaEINS Plus rate plan. Our brand-new convergence product offers customers Germany-wide unlimited data plus added benefits for the community and no minimum contract term.

The number of broadband lines increased by 388 thousand to over 14.1 million in 2020. After completing the IP migration, broadband customer additions were up significantly compared with 170 thousand additions in 2019. We added 246 thousand TV customers in 2020, increasing the customer base by 6.8 % compared with the end of the prior year. In traditional fixed-network business, the number of lines declined by 234 thousand. This marked a considerable reduction in line losses compared with the prior-year period, which had been affected in particular by the migration of consumers to IP. As expected, the number of fixed-network lines therefore declined slightly to around 17.6 million lines.

Wholesale

As of December 31, 2020, fiber-optic-based lines accounted for 54.4 % of all lines – 5.5 percentage points higher than at the end of 2019. This growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 537 thousand compared with the end of the prior year, partly as a result of the shift to higher-value fiber-optic-based lines and partly from consumers switching to cable providers. In addition, our wholesale customers are migrating their retail customers to their own fiber-optic-based lines. The total number of wholesale lines at the end of 2020 was around 11.8 million.

Development of operations

Total revenue

In 2020 we generated total revenue of EUR 23.8 billion, which was up slightly by 0.2 % year-on-year. Growth in fixed-network business, driven largely by broadband revenue growth of 5.7 % and a 2.3 % rise in revenue from variable call charges, offset declining revenues in mobile communications business. Overall, revenue was affected by the effects of the coronavirus pandemic, such as temporary travel restrictions, lockdowns, and the deteriorated economic situation. This had a negative impact on roaming, visitor, and terminal equipment revenues, and resulted in delays or postponements to current orders in B2B telecommunications business.

Revenue from Consumers grew by 1.0 % year-on-year. Volume-driven declines in revenue from voice components continue to strongly impact on traditional fixed-network business. By contrast, revenue from broadband business grew by 4.8 % while revenue from fixed-network terminal equipment increased by 5.6 % on the back of strong terminal equipment leasing business. Mobile business declined by 1.1 % primarily due to lower revenues from mobile terminal equipment business. In addition, negative trends in roaming and visitor revenues in consequence of the coronavirus pandemic had an impact.

Revenue from Business Customers declined by 1.0 %. IT revenues increased by 3.4 % and mobile revenues declined by 0.9 % compared with the prior-year period. Business customer operations were also affected by the aforementioned negative impact of the coronavirus crisis, particularly in mobile business. The B2B telecommunications business, which was integrated into the Germany operating segment effective July 1, 2020, reported a decline in revenue at the end of 2020 of 3.2 % year-on-year. This is attributable to the deteriorated economic situation in consequence of the coronavirus pandemic and to market-related factors such as price erosion and competitive pressure in solutions business.

For further information on the realignment of the B2B telecommunications business, please refer to the section “Group organization.”

Wholesale revenue was up at the end of 2020 by 1.3 % year-on-year. The positive trend in the number of fiber-optic-based lines, driven mainly by the contingency model, continued in 2020 with an increase of 9.7 % compared with the end of 2019 and partially offset the decrease in revenues from declining volumes of unbundled local loop lines. The coronavirus pandemic had positive effects on voice revenues in the second and fourth quarter of 2020.

Adjusted EBITDA AL, EBITDA AL

EBITDA AL adjusted for special factors increased by EUR 148 million or 1.6 % year-on-year to EUR 9.2 billion. Our adjusted EBITDA AL margin increased to 38.8 %, up from 38.3 % in the prior year. The main reasons for this increase are a sound operational development, driven by high-value revenue growth and enhanced cost efficiency. Lower personnel costs resulting, among other factors, from the smaller headcount and the ongoing implementation of efficiency enhancement and digitalization measures reduced costs. Higher expenses recognized as special factors for socially responsible instruments in connection with the staff restructuring, in particular the dedicated retirement program, had an offsetting effect. EBITDA AL decreased in 2020 by 1.7 % year-on-year to EUR 8.5 billion.

EBIT

Profit from operations was down 5.6 % year-on-year to around EUR 4.1 billion, partly as a result of the slightly lower EBITDA level together with higher depreciation, amortization and impairment losses year-on-year, mainly on account of higher depreciation of property, plant and equipment.

Cash capex

Cash capex decreased by EUR 242 million or 5.5 % compared with the prior-year period. This is mainly due to the fact that cash outflows in connection with the acquisition of 5G mobile spectrum licenses in the 2019 financial year were shown in cash capex and, since 2020, have been presented in net cash from/used in financing activities on account of the payment plan agreed with the Federal Republic of Germany. Cash capex also declined as a result of the changed accounting treatment of grants receivable from funding projects for the broadband build-out as of the start of the third quarter of 2019. Capital expenditure totaled around EUR 4.2 billion in 2020, with much of this figure going towards the build-out of our 5G and fiber-optic networks. The number of households connected by pure fiber-optic lines increased to over 2 million at the end of 2020. In mobile communications, our customers benefit from greater LTE network coverage. As of December 31, 2020, we supplied 98.7 % of households in Germany with LTE. More than two thirds of the German population can already use 5G.