Strategic areas of operation
One connectivity & perfect service
We want to offer our customers a seamless and technology-neutral telecommunications experience. That’s why we market fixed-network and mobile communications in convergent products (fixed-mobile convergence (FMC)). By the end of the reporting year, some 5.0 million customers in Germany had opted for MagentaEINS; that is over 0.36 million more than in the prior year. The national companies of our Europe operating segment won more than 0.9 million new customers for MagentaOne and similar FMC offerings in 2020. Because we want to continue on this path of growth, we work continuously to improve and expand our convergent portfolio. We took another step in this direction with our new MagentaEINS Plus offering, which bundles all connectivity services for home and on the move in a single contract – with flexible terms, unlimited data, and the option to add family, friends, or acquaintances to the contract via Community Cards.
While having the best networks is essential for us as Europe’s Leading Telco, it is not the only prerequisite. We want to go beyond the pure technical line: the customer’s network experience is decisive for us. For this reason we offer our customers additional services that provide genuine added value and turn our “Lead in technology” aspiration into a first-hand experience. We reached some key milestones in this regard in the reporting year. Our MagentaTV product has been repositioned to aggregate linear TV, including extensive features, with access to content from the biggest video-on-demand providers, and exclusive content. In 2020 we enhanced its appeal further: in Germany, for instance, with new partnerships with key content providers (including Disney+, RTL TVNOW) and the launch of the MagentaTV stick for a provider-independent TV experience, and in our European subsidiaries with a new user interface to add even more personalization to the user experience. The addition of around 0.25 million TV customers in Germany and 0.1 million in our European subsidiaries shows that we are on the right track. We also revamped our TVision television offering in the United States with new content packages, a new streaming device, and new price structures. Our digital voice assistant, Hallo Magenta, is enhancing the customer experience in interactions with our services while safeguarding data security and personal privacy in compliance with European data privacy standards. We work together with our customers to continually develop and test new services and further strengthen our entertainment portfolio. That includes MagentaGaming, for example, which we released as a beta version in Germany in 2019 and launched commercially just twelve months later.
Our aspiration to deliver perfect customer service is yet another powerful tool to help set us apart from the competition. For this reason, we launched several initiatives in the reporting year that aim to enhance the quality of our customer service. In Germany these include a Concierge Service (where a dedicated personal advisor looks after customers seeking to switch to Telekom from a competitor, move house, or build their own home) and the promise of assistance for customers struggling to set up and optimize their Wi-Fi at home. Awards such as the Connect hotline test’s prize for best-in-test of the German fixed-network providers (issue 9/2020) validate our efforts. We will continue our efforts in 2021 to offer customers the best service; for example, by further improving our first-call resolution rate for customer queries. In the United States, too, we are reaping the rewards of measures such as the new Team of Experts approach: Several surveys on service quality place T‑Mobile US ahead of its competitors (including being rated best for postpaid customer satisfaction for the sixth time in succession in the J.D. Power test), while the Net Promoter Score in Customer Service stands at 79 % – putting it at an all-time high. At our national companies in Europe, we are currently focusing on increasing the level of digitalization in customer interaction; for example, using our updated service app. Following successful international rollout, this app improves the customer experience (e.g., with setting up and managing their routers via the app, plus an option to chat with an employee or service bot) and enables us to monetize our offerings (e.g., with customer-specific approaches).
We measure customer satisfaction using the globally recognized TRI*M method. We use the results of this performance indicator to improve our customer contact processes, and our products and services. At the same time, we determine the loyalty of our customers towards Deutsche Telekom. The results are presented as a performance indicator, the TRI*M index, which ranges between minus 66 and plus 134 points. At the end of the reporting year, the indicator for the Group (excluding T‑Mobile US) came in at 72.2 points versus an adjusted value of 67.9 points at the start of the year (determined on a comparable basis). Our goal for the coming years is to again achieve an improvement in customer satisfaction.
Integrated gigabit networks
Convergent products require integrated networks. That is why we are systematically building out and interlinking our fixed and mobile networks so that we can offer our customers the fastest possible connection at top quality, anytime, anyplace. We invested around EUR 17 billion (not including spectrum investment) primarily in building and operating networks in Europe and the United States, with around EUR 5.5 billion of this figure earmarked for Germany alone. This makes us the biggest investor among all of our German competitors. In pursuit of outstanding quality, we are also striking out in new directions, for example, with innovative technologies like fixed-network substitution using wireless technology, or the use of artificial intelligence to ensure infrastructure is built out in line with demand, as well as exploring partnerships and joint ventures. Integrated management improves the capacity utilization of our infrastructure and increases efficiency in operations and maintenance.
Fiber optic-based fixed networks are the basis for an integrated network experience. In virtually all of our European national companies, we are leading the build-out of fiber-optic lines to over 9 million households. In Hungary, for example, we can now offer fiber-optic lines to 2.6 million households – that’s over 50 %. In the Germany operating segment, we have now laid more than 590,000 kilometers of fiber-optic cable. Since the start of 2020, we have made fiber-optic lines available to around 600,000 more households. Looking ahead, we are set to substantially increase the pace of the fiber-optic build-out further.
In mobile communications, we set ourselves apart from our competitors with the outstanding quality of our network. We have regularly come out on top in independent network tests. Our German network once again won the “big three” network tests in 2020 (Connect, issue 1/2021; CHIP, issue 01/2021, 11th time in succession; and Computer Bild, issue 25/2020). The network experts from Umlaut tested four of our European national companies (Austria, the Netherlands, Poland, and Croatia) in the reporting year and rated them all “best in test overall.” We intend to achieve these results on a regular basis in future, and hence are further building out our LTE networks: In our European national companies, we already covered 97.6 % of the population with LTE as of December 31, 2020; in Germany, household coverage stood at 98.7 %.
With the fifth-generation mobile communications standard (5G), we will create a highly reliable mobile network with extremely low latency and high data throughput. To this end, network functions will be decoupled from the access medium (e.g., optical fiber, copper, or air). By distributing computing power in the network (mobile edge computing) and creating dedicated network layers for individual applications (network slicing), 5G creates the basis for future technologies such as virtual reality, autonomous driving, and the Internet of Things. With our clear goal of also leading in 5G, we intend to work closely with policy-makers and industry to build the most powerful digital infrastructure across our footprint. And we are moving closer to achieving this goal: With the largest 5G campaign in Germany, two thirds of the population can now experience the new mobile communications standard – in both rural and urban areas. In the United States, too, we have the largest 5G network nationwide covering some 280 million people via the 600 MHz band and 106 million people with Ultra Capacity 5G in the 2.5 GHz band. This is thanks in large part to our superior spectrum position from the business combination with Sprint (effective from April 1, 2020). In Austria, not only do we have the largest 5G network nationwide but we were also the first telecommunications company to offer 5G there. Magenta Telekom is deploying innovative network technology to expedite the build-out of 5G in Austria and offers unlimited 5G internet at over 1,200 locations country-wide (reaching more than 40 % of Austrian households). At the Netherlands’ first-ever 5G spectrum auction, which ended on July 21, 2020, T‑Mobile Netherlands purchased total spectrum of 70 MHz for which it paid EUR 400 million. Going forward, we will continue to invest heavily in building out 5G infrastructure. For this, we need conditions to be in place that are both fair and reliable.
Secure ICT solutions & big IoT
In the reporting year, we once again maintained our market-leading position (in terms of revenue) as a provider of telecommunications services for business customers in Germany and based growth on the level reached in recent years. Secure, reliable global connectivity is essential to the advancing digitalization of critical processes in companies and industry associations. We remain a dependable partner to German industry thanks to our product portfolio of international communications solutions that combine the strengths of our national network infrastructure with our international networks. We also continued to post growth in IT revenue from business customers in our Germany operating segment (up 3.4 % compared with 2019).
We again demonstrated our strengths and expertise throughout the coronavirus pandemic. With our products and services, we made an important contribution to maintaining normal operations as far as possible for our society and economy: Over 50 % of businesses in Germany work on the Telekom network and during the first wave of coronavirus from March through June 2020 we sold 69,000 remote-working solutions to help maintain business as usual when working from home. During lockdown our networks were put to the test and they all coped well. Compared with pre-crisis levels, mobile voice traffic jumped by up to 70 % in the first week and in the fixed network by up to 100 % on specific days. Yet the coronavirus pandemic is not leaving our B2B business unscathed. Our core business is feeling the strain of lower roaming revenues, and IT business is impacted by IT budget cuts and project delays, for example. At the same time, as a catalyst for the digital transformation, the coronavirus crisis represents an opportunity. At Deutsche Telekom, we want to be the preferred partner for digitalization and to grow our business with business customers. With our IT solutions, we help our customers – from microenterprises, SMEs, major corporations through to public authorities – to profitably deploy the technologies of the future. The Internet of Things and cybersecurity are just two of the focus topics gaining relevance in this context.
Our business with “traditional” IT outsourcing services for international corporate customers has been in decline for a number of years now, mainly due to persistent intense competition. It is for this reason our Systems Solutions operating segment is currently undergoing a profound transformation. For our corporate customers, we are pursuing a “Digital enabler” strategy. In concrete terms, this means we are bridging the gap between known platforms (Microsoft Office, SAP Hana, etc.) and the individual demands of complex organizations. To achieve this, we have expanded the software development, software integration, and digitalization process units in particular and will continue to further strengthen them. The focus here is on profitable growth. We are redoubling our efforts to implement existing transformation initiatives, such as reducing indirect costs, strengthening the offshoring rate, and transforming the revenue mix, despite some minor delays in the reporting year due to the coronavirus pandemic and other factors.
As part of our ongoing efforts to consistently implement the Group’s strategy pillar “Lead in business productivity” and continue building on the positive trend, in 2020 we implemented several more structural measures:
- We plan to offer our business customers “connectivity from a single source” (one connectivity) and established a dedicated integrated unit for this purpose in the reporting year: TC Services and Classified ICT, portfolio units previously assigned to the Systems Solutions operating segment, were combined in the business customer unit of the Germany operating segment effective July 1, 2020. The transition to the new structure will affect T‑Systems’ telecommunications operations both on a national and international level. It not only establishes end-to-end responsibility – from production and product development to service delivery management and technical sales – within one unit, which reduces the number of interfaces, but also enables us to even better orient our services to the customer. We also expect greater scalability and improved competitiveness from the resulting economies of scale alongside the benefit of being able to zero in even more closely on our growth areas (e.g., software-defined network solutions (SD-x) and data-driven business models) on the basis of standardized production processes.
- At the same time, we want to ensure we stay flexible and agile in the fast-moving IoT and security growth markets. To this end, effective July 1, 2020 the Security and IoT portfolio units were spun off into independent legal entities (limited liability companies under German law (GmbHs)) under the Deutsche Telekom AG umbrella. The spin-off move gives them greater entrepreneurial freedom, more speed and innovation, and strengthens the mandate for IoT in the Group. We see the most growth potential for IoT business in the digitalization of the SME sector and in the global scaling of IoT platforms.
These structural changes mark an important milestone in the transformation of T‑Systems, and will continue to be pursued systematically in 2021.