Business activities and segment structure

Business activities. With 242 million mobile customers, 27 million fixed-network lines, and 22 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 226,291 employees worldwide (as of December 31, 2020), we generated revenue of EUR 101.0 billion in the 2020 financial year, despite the negative effects of the coronavirus pandemic. The successful business combination of T‑Mobile US and Sprint raised the proportion of net revenue generated internationally to 75.5 %.

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, we operate information and communication technology (ICT) systems for multinational corporations and public-sector institutions.

Our responsible corporate governance and business success are based on our shared corporate values and our Guiding Principles revised in February 2020.

For further information on our Guiding Principles, please refer to the section “Employees” and online at www.telekom.com/en/blog/group/article/our-new-purpose-and-revised-guiding-principles-594406

Our identity describes the mission of Deutsche Telekom: Why are we here, what does our Company stand for, and what is our purpose? It defines our corporate purpose and describes what we at Deutsche Telekom stand for: We want to be a sustainably growing company that delights its customers, creates value for its investors, and in which employees enjoy their work. Our network is fast, reliable, secure, and should be easily accessible for everyone. At the same time, we are more than just another company that provides society with infrastructure. We want to connect people and make their lives permanently easier and more enriched. This is our mission. We are a close and trusted companion to the customer; transparent, fair, and open to dialog. We identify innovative products at an early stage and develop them in collaboration with our partners. It is our contribution to social togetherness. Our identity reflects all of this and is summarized in one short purpose statement: We won’t stop until everyone is connected.

Segment structure. Our financial reporting conforms with our Group strategy and is organized according to the following structure:

Segment structure (graphic)

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 business activities for consumers and business customers, including separate sales entities in Germany to allow a customer-centric sales approach. As a pioneer of digitalization, the segment offers its customers an individual service and product portfolio that is designed to be innovative while at the same time secure and simple.

Consistent with our efforts to implement our Group strategy pillar “Lead in business productivity,” we realigned our business-to-business (B2B) telecommunications services in the course of the year. To this end, TC Services and Classified ICT, portfolio units previously assigned to the Systems Solutions operating segment, as well as Telekom Global Carrier (TGC) and Network Infrastructure (NWI), which had formerly been reported under the Europe operating segment and the Group Headquarters & Group Services segment respectively, and which together form the business area designated as Deutsche Telekom Global Carrier (DTGC), have been combined in the Germany operating segment. Effective the start of the third quarter of 2020, the management of the Deutsche Telekom Group and hence also the reporting structure were both based on this new segment allocation. As part of these transactions, the assets and liabilities assigned to the business areas were transferred to the Germany operating segment. Prior-year comparatives in these segments (development of operations, customer development, headcount development, and order entry) were adjusted retrospectively. The transactions were consummated under company law on July 1, 2020 (TC Services and Classified ICT) and on October 1, 2020 (DTGC).

The Germany operating segment also focuses on the wholesale business to provide telecommunications services for carriers and, up until the realignment of our B2B telecommunications business, also for our Group’s other operating segments. 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 this segment.

Our United States operating segment combines all mobile activities in the U.S. market. The business combination of T‑Mobile US and Sprint was completed on April 1, 2020, forming the all-new, larger T‑Mobile US. The transaction had previously passed through various approval processes involving numerous national and regional courts and authorities in the United States. Business in the United States developed extremely positively on the back of the various Un-carrier initiatives of the last few years. The new business combination serves to further strengthen this trend. T‑Mobile US has the largest 5G network in the United States.

The business combination of T‑Mobile US and Sprint took the form of an all-stock transaction. At the completion of the transaction, Deutsche Telekom held around 43.6 % of the shares in T‑Mobile US. However, under a proxy agreement reached with SoftBank, at the time the business combination took effect Deutsche Telekom controlled a majority of the voting power of around 68.3 % of shares in the new T‑Mobile US. On June 22, 2020, Deutsche Telekom received call options from SoftBank to buy around 101 million T‑Mobile US shares, thus securing itself long-term access to the majority shareholding in T‑Mobile US. In return, we granted SoftBank the option to immediately sell around 198 million T‑Mobile US shares. The sale of the shares held by SoftBank reduced the proportion of T‑Mobile US shares for which we can exercise voting rights to around 52.5 % as of August 5, 2020.

The structure of the new T‑Mobile US factors in the agreement reached with the U.S. Department of Justice (DoJ), one condition of which was that Sprint divested its prepaid business to satellite TV operator DISH. The agreement also includes the sale of part of the 800 MHz spectrum held by Sprint to DISH. As of July 1, 2020, the U.S. authorities’ requirements regarding the divestiture of Sprint’s prepaid business were duly met and the agreement to sell spectrum to DISH duly confirmed.

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, North Macedonia, and Montenegro. We are now an integrated provider of telecommunications services in all of our national companies. On November 6, 2020, OTE concluded an agreement with Orange Romania concerning the sale of the 54 % stake in Telekom Romania Communications, which operates the Romanian fixed-network business. The transaction is subject to approval by the authorities. In addition to consumer business, most of the national companies also offer ICT solutions for business customers.

As a leading ICT service provider, our Systems Solutions operating segment offers business customers a portfolio of integrated products and solutions. With offerings for connectivity, digital solutions, cloud and infrastructure, and security, in addition to strategic partnerships, we offer our customers help and guidance to implement digital business models. We have been implementing a comprehensive transformation program since 2018, under which we realigned our organization and workflows, adjusted capacities, and developed a new strategy for our portfolio. The portfolio-oriented approach now focuses on six portfolio areas: Managed Infrastructure Services & Private Cloud, Public Cloud Managed Services, SAP, Digital Solutions (including Dedicated System Integration and Health), Road Charging, and Security – comprising both established IT business areas and growth areas. For information on the realignment of the B2B telecommunications business, please refer to the information provided above in connection with the Germany operating segment.

Our Group Development operating segment actively manages entities, subsidiaries, and equity investments to grow their value while giving them the entrepreneurial freedom they need to promote their continued strategic development. This approach led to the creation of GD Towers – comprising Deutsche Funkturm (DFMG) and the Dutch cell tower business – within the Group Development segment. Following the integration of Tele2 Netherlands as of the start of 2019, the Dutch MVNO and SIM provider, Simpel, was taken over effective December 1, 2020. This acquisition secures mobile market shares, creates synergies, and makes the Company more competitive in the consumer market. Deutsche Telekom Capital Partners (DTCP) and the Group functions of Mergers & Acquisitions and Strategic Portfolio Management have also been assigned to Group Development.

Group Headquarters & Group Services comprises all Group units that cannot be allocated directly to one of the operating segments, and reports on our Board of Management department for Technology and Innovation. 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 provided by Deutsche Telekom Services Europe, such as financial accounting, human resources services, and operational procurement, Group Services also includes placement services provided by our personnel service provider, Vivento. It is in charge of securing external employment opportunities for employees, mainly civil servants, predominantly in the public sector. 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 of Management department unites the cross-segment technology, innovation, IT, and security functions 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 drive topics such as digitalization, big data, software-defined networks, voicification, virtualization, and cloud services. Our Innovation Hub (IHUB) pools all of the expertise required for future innovation projects in an agile working environment to ensure we stay flexible and innovative. Additional units are Strategy & Technology Innovation (S&TI) and International Technology and Service Delivery (ITS). ITS harmonizes the planning, development, and operation of products, services, and platforms at the national companies in Europe, taking technological and commercial aspects into account. S&TI ensures efficient and customized research and innovation with a focus on mobile and fixed-network communications.

Changes to the organizational structure in 2021

Transfer of the Internet of Things (IoT) growth area. Effective January 1, 2021, Deutsche Telekom assigned the responsibility for business and profit and loss for Deutsche Telekom IoT GmbH from the Systems Solutions operating segment to the business customer unit in the Germany operating segment. The Group subsidiary established in summer 2020 is responsible for the IoT business of Deutsche Telekom. This reassignment puts us in a position to serve the IoT market more quickly and thus to strengthen Deutsche Telekom’s position on this growth market.

Transfer of the Austrian cell tower business. As of January 1, 2021, Deutsche Telekom transferred its Austrian cell tower business from the Europe operating segment to GD Towers in the Group Development operating segment to enhance the management efficiency in cell tower business. In addition, GD Towers will increase its efforts to expand third-party business, increase profitability, and develop growth areas.

Combination of the cell tower business in the Netherlands and creation of an infrastructure fund. On January 21, 2021, Deutsche Telekom, Cellnex Telecom S.A., the newly established, independently managed investment company Digital Infrastructure Vehicle I SCSp (DIV), and others signed an agreement to merge Deutsche Telekom’s and Cellnex’s respective Dutch subsidiaries for mobile infrastructure. Under the deal, the Dutch cell tower company T‑Mobile Infra B.V. will be sold to DIV and subsequently merged into Cellnex Netherlands B.V.

New communications standard (launched from 2020), which offers data rates in the gigabit range, converges fixed-network and mobile communications, and supports the Internet of Things.
A telecommunications network operator.
Fixed-network lines
Lines in operation excluding internal use and public telecommunications, including IP-based lines. The totals reported in the combined management report were calculated on the basis of precise figures and rounded to millions or thousands. Percentages were calculated on the basis of the figures shown.
ICT – Information and Communication Technology
Information and Communication Technology
IoT – Internet of Things
The IoT enables the intelligent networking of things like sensors, devices, machines, vehicles, etc., with the aim of automating applications and decision-making processes. Deutsche Telekom’s IoT portfolio ranges from SIM cards and flexible data rate plans to IoT platforms in the cloud and complete solutions from a single source.
MVNO – Mobile Virtual Network Operator
Company that offers mobile minutes at relatively low prices without subsidized handsets. A mobile virtual network operator does not have its own wireless network, but uses the infrastructure of another mobile operator to provide its services.
Mobile customers
In the combined management report, one mobile communications card corresponds to one customer. The totals were calculated on the basis of precise figures and rounded to millions or thousands. Percentages were calculated on the basis of the figures shown (see also SIM card).
In contrast to postpaid contracts, prepaid communication services are services for which credit has been purchased in advance with no fixed-term contractual obligations.
SIM card – Subscriber Identification Module card
Chip card that is inserted into a cell phone to identify it in the mobile network. Deutsche Telekom counts its customers by the number of SIM cards activated and not churned. Customer totals also include the SIM cards with which machines can communicate automatically with one another (M2M cards). The churn rate is determined and reported based on the local markets of the respective countries.
Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing.