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Expectations for the operating segments

Below, we explain the market expectations and the expectations for the financial and non-financial performance indicators of our operating segments. We assume a comparable consolidated group and constant exchange rates for the development of our performance indicators.

We presented more detailed information at our Capital Markets Day in May 2021.

Germany

Following an increase in revenue from telecommunications services in Germany in the reporting year compared with the prior year, further revenue growth is expected for 2022. The negative impact of the coronavirus pandemic on revenue in the mobile market will decline. Negative regulatory effects from reduced mobile termination rates (MTR) and the decline in traditional fixed-network telephony will be more than offset by still growing demand for mobile data volumes and faster connectivity in the consumer and business customer area. In the German mobile market, revenue is expected to increase by 0.9 % in 2022. In the fixed-network business, the number of broadband lines will continue to grow. Revenue is expected to grow by 1.2 % (source: Analysys Mason).

Innovative, attractive rate plans and 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 technology leadership and our broad range of products and services. Rate plan innovations like our convergent offering MagentaEINS Unlimited or innovative fixed-network products like the 5G hybrid router, are just two examples of our commitment to staying at the cutting edge. We are the first telecommunications company in Germany to have tackled the topic of sustainability head on in the form of our two sustainability labels, #GreenMagenta and #GoodMagenta, which we launched to improve the transparency of our products.

The mobile communications market in Germany is currently dominated by three providers, each with its own network infrastructure, deploying 4G/LTE and 5G technology to ensure that the majority of the population has access to high-speed mobile internet. In 2019, Drillisch Netz AG, a subsidiary of United Internet AG, acquired mobile spectrum and has announced its intention to set up a fourth mobile network. On May 21, 2021, Drillisch Netz AG signed a national roaming agreement with Telefónica, which Drillisch will use to serve its customers until it has set up its own mobile network. This will further increase infrastructure competition.

In mobile communications, we are keeping our promise to build out the network and are therefore the leader in terms of network coverage, speeds, and customer experience. In total, as of the end of 2021, more than 90 % of the population in Germany can use the state-of-the-art mobile technology on the Telekom network. The 5G network is being built out with a combination of two spectrum bands. The 2.1 GHz band, which has wide reach, will provide high mobile bandwidths in rural areas in particular. The 3.6 GHz band offers high-speed 5G in densely populated areas like big 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.

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 fiber-optic networks will increase.

In the fixed network, we want to offer fiber-optic-based products to more and more customers, creating the best customer experience for them. Our Germany-wide IP-based network achieves high transmission bandwidths of up to one gigabit per second. In order to always offer our customers competitive high-speed lines, we increasingly invest in digital infrastructure. Over the next years, we plan to roll out fiber to the home (FTTH) to up to 2.5 million households per year, such that by 2024, we can provide around 10 million households and business locations with fiber-optic lines. We already doubled our FTTH rollout in the reporting year and enabled 1.2 million households to directly connect to our fiber-optic network. Our build-out will benefit both people in towns and cities and those in rural areas. Partnerships are a key component of our fiber-optic build-out. In addition to established partnerships, the fiber-optic build-out entity GlasfaserPlus GmbH was set up in 2021, in which IFM Global Infrastructure Fund will hold a 50 % stake. The joint venture is to build out an additional four million gigabit-capable FTTH lines in (subsidized) rural and development areas by 2028. With our wide-ranging partnership models, we aim to set standards for sustainable broadband infrastructure. In the process, we ensure capacity utilization of our platform through our own retail business as well as by extending long-term partnerships with wholesale providers in broadband marketing.

We want to continue growing in the TV market, with a focus on our entertainment and exclusive streaming offers on MagentaTV, i.e., providing a wide array of entertainment from a single platform. In order to offer our customers the best possible user experience, we are engaging in strong partnerships, for example with RTL+, Disney+, Netflix, Prime Video, Sky, DAZN, and AppleTV+. In this way, MagentaTV combines multiple entertainment worlds in one.

In our Germany operating segment, we are accelerating 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. To this end, we aim to further reduce the complexity of our products and processes through automation and digitalization initiatives. Our goal is to deliver the best customer experience with perfect service. To this end, we continue to invest systematically in our networks and the brand experience. We improve the service and shopping experience through our digital channels by creating more opportunities to offer customized and contextualized products and services. For our business customers, we position ourselves as the preferred partner for digitalization. We offer integrated portfolios for both small and large business customers as well as multinational corporations. From fixed network and mobile communications through to IT, we offer one-stop integrated solutions professionally and fast to provide our customers with optimum, sustainable support in a digital world.

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, digital transformation, 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 2022. We will improve customer satisfaction by actively evolving our mobile services (e.g., MeinMagenta app) and ensuring seamless service across all channels (e.g., web, hotline, shop).

In our Germany operating segment, we expect slight revenue growth in 2022 and an increase in revenue in 2023. Our value drivers are growing mobile and broadband revenues (a result of the increased attractiveness of our own mobile brand), rising numbers of customers with high-speed lines, and B2B revenue growth, 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 commitment agreements) 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 next two years in the number of mobile customers as well as growth in our broadband products, fueled by demand for TV and high-speed lines. Our initiatives to digitalize IT solutions business for our business customers will continue enhancing revenues from IT and cloud services, and from M2M/IoT business. In wholesale business, we expect sales volumes to fall overall, mainly due to the fact that our wholesale customers are migrating their retail customers to alternative cable and fiber-optic-based infrastructure. We nevertheless expect demand to remain high as a result of our commitment agreements.

In each of the next two years, we expect to post year-on-year increases in earnings in our Germany operating segment. For 2022, we expect adjusted EBITDA AL to increase to around EUR 9.8 billion, driven in particular by high-value revenue growth and a simultaneous reduction in indirect costs, mainly through digitalization and automation. Our adjusted EBITDA AL is likely to rise again slightly in 2023. We are forecasting a stable adjusted EBITDA AL margin through 2023.

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 will wind down legacy systems, cutting costs in the process. Over the coming years, we will focus our investments on building out a forward-looking fixed-network and mobile infrastructure (e.g., FTTH and 5G). Our aim here will be to close gaps in the network in rural areas and provide urban centers with the high bandwidth they require. We want to continue this rollout efficiently and, to this end, are participating in funding programs. We expect our cash capex to increase year-on-year in 2022 and then again in 2023.

United States

The overall U.S. ICT market swung back upward in 2021, after having declined in 2020. Growth returned to nearly all ICT sectors, including IT equipment and services, and total telecommunications infrastructure and services. Mobile voice and data services showed strong increase over 2020 levels, and total market growth, as well as individual sector growth, is expected at a steady clip through 2026.

Overall mobile revenues are expected to increase annually with continued subscriber growth, data consumption increases, and growth in the device market. Plan rates remain competitive. As anticipated, the MVNO offerings from cable companies Altice, Charter, and Comcast increased in competitive prominence in 2021, with the latter two growing to over three million subs each. Cable can present an even greater competitive threat if they are able to leverage its mid-band spectrum won in 2020. DISH has yet to make a concerted push with its Boost Mobile prepaid asset.

Leading industry associations such as GSMA expect the United States to lead global migration to 5G. The United States’ 5G is expected to accelerate in 2022 and beyond, with providers expanding their capacity and coverage in complementary bands. The Federal Communications Commission conducted an auction in the 3.45 GHz band in 2021, is planning rules for the 2.5 GHz band auction, and is working to deploy C-band spectrum, all in support of 5G. GSMA expects almost half of all mobile connections to be running on 5G networks by 2025, and Ericsson forecasts 90 % by 2027. T‑Mobile US expanded its 5G network leadership, by reaching 310 million people, utilizing the 600 MHz spectrum holdings, and covering over 210 million people with Ultra Capacity 5G by the end of 2021, utilizing the 2.5 GHz spectrum holdings it acquired in the merger with Sprint.

T‑Mobile US delivered several company-best results in 2021, and built further momentum in its growth initiatives and network leadership that positions the company for another strong year in 2022. T‑Mobile US will continue to focus on creating shareholder value and providing the best value proposition on the best 5G network with award-winning experiences in the U.S. wireless industry. Key elements of the company’s focus include continuing to consistently and profitably outgrow the competition, unlocking the value of synergies faster and bigger than anticipated, and making the necessary investments in the near term to position the company for long term success. T‑Mobile US continues to keep this winning formula through providing this best value proposition in the market, while providing winning customer service married with its leading 5G network to deliver significant and sustainable long-term growth and margin implications.

T‑Mobile US expects continued increases in postpaid and prepaid customers in 2022 and 2023 (albeit with more of a slight increase in prepaid customers) with expansion in underpenetrated growth vectors such as smaller markets and rural areas and enterprise to fuel future growth. Military, 55+, family plans, and previous greenfield retail expansion have all helped fuel industry-leading growth over the last few years while allowing T‑Mobile US to deliver great financial returns along with industry-leading subscriber growth. In addition, continued growth of the upper and lower age demographics as well as new product category growth of the high-speed internet base is expected in the U.S. wireless market. 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 prepaid customers.

T‑Mobile US expects a stable growth trend in total revenues in U.S. dollars in 2022 and a slight increase in 2023 driven by slightly increasing service revenue growth expected in 2022 and further increased growth in 2023 primarily from postpaid account and ARPA growth. Further adoption of 5G devices is anticipated to lead to equipment revenue growth and increases in installment device financing, but partially offset by lower lease revenues from a declining lease base and lower revenues in the wholesale business.

For 2022, T‑Mobile US expects adjusted EBITDA AL of USD 26.4 billion and an increase in 2023. The development of adjusted EBITDA AL will be affected by the continued exit from handset leasing in the upcoming years. Sprint had a higher focus on handset leasing, which is being replaced by an increased focus on equipment installment plans. Revenue growth is expected to outpace increases in expense as T‑Mobile US is focused on customer growth and delivering synergies of the merger with Sprint by driving operating cost efficiencies and site decommissioning as the network is integrated and customers are migrated to the destination network. However, investments to unlock growth vectors such as the growth in digitalization and supporting smaller markets and rural areas as well as enterprise growth; coupled with the expectation of increased switching activity from network migrations will impact adjusted EBITDA AL. Adjusted core EBITDA AL, i.e., adjusted EBITDA AL excluding revenues from handset leasing, is expected to increase in 2022 and to increase strongly in 2023.

Excluding expenditures relating to spectrum, T‑Mobile US expects a strong increase in cash capex in 2022 in U.S. dollars as capex remains elevated and the company accelerates network integration and the rapid pace of deployments to continue building out the 5G network that then results in a strong decrease in capex in 2023.

Europe

In 2021, the coronavirus pandemic again had a substantial negative impact on economic development in the countries of our Europe operating segment, although the economy did substantially recover from the downturn in the prior year. Private consumption gained significant momentum over the course of 2021. In 2022, real GDP will rise in our segment’s footprint countries by between 4.4 and 5.6 % per annum. However, the ongoing economic uncertainty could have a negative impact on household and business expenditure for telecommunications services and thus reduce in particular revenues from business customer operations, roaming, and the prepaid segment. Analysys Mason forecasts total revenue growth for telecommunications services of 1.4 % for the countries of our Europe operating segment for 2022; for 2023 growth will be more modest. Customer demand for a fast and reliable broadband connection is also expected to lead to growth in broadband revenues of around 3 % for the next two years. The trend towards increased data usage will also continue, especially in households that have not previously had a sufficiently fast broadband line. Demand has also grown as a result of the coronavirus-induced shift towards working from home. On top of this, the fiber-optic build-out is being accelerated. In most Central and Eastern European countries, there is still the possibility of increasing broadband network coverage. Additional regulatory-induced measures will likely further boost investments in network infrastructure. This growth is being bolstered by the growing number of companies offering convergent products. According to Analysys Mason, TV revenues will also increase in traditional pay TV business over the next two years, by around 3 % in both 2022 and 2023. Mobile revenues will increase again slightly in 2022 according to the Analysys Mason forecast. The analysts rather expect revenue to again develop stably in 2023.

We aspire to become Europe’s leading digital telecommunications provider in the coming years. We firmly believe that we can only generate long-term and sustainable growth if we put our customers at the heart of everything we do. In the consumer segment, we want, for example, to create the best customer experience by offering our FMC product portfolio to customers across all national companies in a segment-specific way. We are able to do this because we use our network infrastructure intelligently based on different technologies. With our fast fiber-optic networks and the accelerated rollout of 5G, we are making huge strides in digitalization and we want to serve private households, business customers, and municipalities with our fully integrated products.

The Europe operating segment is distinguished by its strong investment portfolio: All of our national companies, except for Romania, are integrated providers of telecommunications services and, as well as having a high brand recognition value, are substantially relevant in their respective home markets. In Romania, we have transformed ourselves from an integrated to a mobile-only provider though the sale of our stake in Telekom Romania Communications. Our strong international positioning in the Europe operating segment gives us the advantage of synergies: The national companies support each other through training and knowledge sharing. In particular this transnational cooperation gives us an edge over regional providers in the challenges posed by digitalization and cloudification.

Our successful convergent product portfolio, MagentaOne, means we offer strong, integrated fixed-network and mobile offerings for our customers with which we have successfully shaped developments on the European markets. In the reporting year, we made further significant strides: On the one hand, our national companies continue to generate strong growth, such that the majority of our customers often have signed corresponding bundle contracts and we were therefore able to increase FMC revenues as a percentage of total revenues. On the other, we profit from a resulting increase in customer satisfaction combined with a lower churn rate. Over the next few years, we will further develop our convergent bundled products to address specific target groups, thereby continuously increasing the value per household. With MagentaOne, we are creating an outstanding connection, in particular for families, for at home and on the move, combined with attractive add-on services. Our goal remains to deliver the best integrated customer experience.

Our TV business remains key to the success of FMC. The basis for this is the combination of excellent network, an outstanding customer experience, and a wide array of content (super aggregation). In terms of content, we continue to attach importance to high-quality and – where it makes sense – exclusive proprietary content. Going forward, we will continue negotiations, depending on local market conditions, to acquire (co‑)exclusive rights to broadcast sports events, such as the UEFA Champions League and the Europa League, or the rights to TV movies/series. However, we also still believe high-quality local content to be very relevant in our markets. This is why we would like to offer our customers a wide range of such content. By implementing a new TV platform, we can improve the customer experience on the one hand, and rapidly roll out new services and content on the other. We are also working together with what are known as OTT players, like Netflix or Prime Video, and gradually expanding our range of OTT services – both national and international – 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.

In order to bring us a step closer to achieving the best customer experience, we want to focus even more rigorously on our customers and their needs. In particular, we are looking at the end-to-end customer experience across all channels. Digitalization can make a major contribution in this regard. We will further expand digital interaction with our 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. At the same time, we want to continue to ensure that, in addition to digital contact, human contact also remains a key factor in our interaction with customers. Thus, we believe we can achieve first place in customer satisfaction rankings of telecommunications companies in the respective national companies by 2024, as measured by the TRI*M index which is based on empirical research.

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. The 5G rollout is gaining further momentum following the successful spectrum auctions. As of the end of 2021, our national companies covered 28.9 % of the population in our European footprint with 5G. In Greece, Croatia, and Austria, at least 50 % of the population and in some cases even more benefit from the advantages of the 5G technology. LTE remains the backbone for mobile data services and with network coverage of almost 98.2 %, it is becoming the new standard technology. We have begun decommissioning of the 3G technology in some countries. In all our footprint countries, we will gradually re-use the technology that is currently still used for 3G and refarm the released spectrum to increase LTE and 5G capacity. The build-out of fiber-optic technology also progresses further. In the reporting year, we accelerated our build-out again, making fiber-optic lines available to another 1.4 million households. By 2023, we will add around 2 million more households, increasing fiber-optic coverage from the current level of 7.0 million households (27.9 % coverage) to a level of 36 % network coverage. In addition to the fiber-optic build-out, we have launched the first pilots in the fixed network for decommissioning the legacy copper infrastructure. We will systematically continue this process over the next few years.

With our service app, we have successfully revolutionized our digital approach in recent years. We produce the app centrally, on award-winning architecture, for all national companies as a state-of-the-art digital tool for interacting with our customers. More than two thirds of our customers use the service app and we make use of this for monetization (up- and cross-selling) and to cut costs by significantly reducing customer service cases through self-service and predictive maintenance. This production model is so successful that it is now being used for more and more products. The current focus is on a centralized OneShop (already live in four markets), centrally produced TV products (two markets with newly developed TV app are currently in the final stages of development), and centrally developed broadband and router products. In addition, this centralized digitalization approach offers numerous possibilities for customer experience across products, e.g., managing your router in the service app.

When it comes to the success of their business, our business customers in Europe will have a strong and reliable partner by their side in Deutsche Telekom over the coming years. We have made ourselves faster and more precise than ever in order to offer solutions for productivity, digitalization, and continuity from a single source. After all, the ongoing coronavirus pandemic and the ever more complex requirements in the digital economy continue to place additional pressure to act on small companies, big companies, and the public sector alike. We have understood this remit, and we will combine our 5G network and our fiber-optic offering with productivity solutions from strong, proven partners such as Microsoft and Cisco, but also from younger companies like Zoom, to support hybrid working. We also include here state-of-the-art cloud data storage solutions with automatic back-up functions. In addition, our business customers can further strengthen their digital business with us and our partners. And ultimately, security remains one of our major focal areas. In this regard, in several markets, we have already secured the data traffic on our mobile and fixed networks for business customers, entirely automatically and without the need for installations on the part of customers. We will continue to expand these features, as well as to constantly add to our portfolio for all sizes of business and optimize our consultancy approach with teams of experts (e.g., live demonstrations of attacks on companies from the internet, or live hacking events).

In our Europe operating segment, we expect a positive customer trend in the next two years, primarily thanks to the stronger focus on the convergence brand MagentaOne. We expect the number of TV and broadband customers to increase in both 2022 and 2023. We expect the number of mobile customers to increase slightly in 2022 and again in 2023. We expect the number of fixed-network lines to decline slightly in 2022 and remain stable in 2023.

Despite the negative impact of decisions made by regulators, we expect revenues for our Europe operating segment to increase slightly in 2022 and then remain stable in 2023 – measured on a like-for-like basis, i.e., at constant exchange rates and market conditions, and given an unchanged organizational structure. Looking at the future development of service revenues, we expect them to grow slightly in 2022 followed by a stable trend in 2023.

Vigorous competition in the markets of our operating segment could potentially put pressure on our margins. In order to be prepared for such a trend, we realize cost-cutting potential and intend to increase our productivity and exploit the benefits of digitalization, for instance by automating processes. Accordingly, we anticipate adjusted EBITDA AL to develop positively. We expect adjusted EBITDA AL to increase to around EUR 4.0 billion in 2022 and then to increase slightly in 2023.

To maintain our technology leadership, we continue to invest in our integrated networks and plan to maintain the high overall level of investments over the next few years. We expect a stable trend for cash capex in 2022 and 2023.

Systems Solutions

Overall, growth in the IT market is expected to continue apace over the next two years, while cost pressure and intense competition are likely to persist. The impact of the coronavirus pandemic has accelerated digitalization in many areas. For this reason, we expect further growth in demand for solutions from the areas of cloud services, big data, and digitalization of business processes, as well as IT security (cybersecurity).

The market for IT services is expected to continue growing over the coming years. 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 will continue to decline, while cloud services, mobility, and cybersecurity may achieve double-digit growth rates. In view of all this, our plan is to continue investing increasingly in growth markets – especially in digitalization (e.g., edge computing, artificial intelligence (AI), and blockchain), multi- and hybrid cloud services, and cybersecurity.

Part of our Group strategy is the ambition to be a leading partner for business productivity. We give our customers help and guidance in implementing digital business models with our offerings for consulting, cloud services, and digitalization solutions, including data sovereignty and security, as well as through our strategic partnerships.

Under the program to transform our systems solutions business, we realigned our organization and workflows on a portfolio basis, thereby creating the basis for business transparency and dedicated portfolio management and strategy. We are continuing to drive forward expansion of the growth business (e.g., public cloud, sovereign cloud, cloud migration) while at the same time stabilizing and making further cost savings in established IT business (e.g., infrastructure solutions), with the aim of bringing about a significant shift in the revenue mix towards our growth areas.

In terms of revenue and market share, we are among the top providers in the European IT market and are market leader in Germany. Our very high levels of customer satisfaction – with a TRI*M score of 90 – 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 slight year-on-year growth in order entry for the Systems Solutions operating segment in 2022 and again in 2023. Revenue is projected to initially remain stable in 2022 and to increase slightly in 2023. Revenue primarily comprises service revenue. The trend in service revenue thus essentially mirrors that of total revenue. Adjusted EBITDA AL is expected to increase in 2022, reaching around EUR 0.3 billion. We expect adjusted EBITDA AL to increase again in 2023. With ongoing investments in growth areas, we expect cash capex to remain stable in 2022 and 2023.

Group Development

The development of the financial performance indicators for our Group Development operating segment will in future be driven primarily by the cell towers operated as part of GD Towers.

GD Towers comprises the equity investments Deutsche Funkturm (DFMG) and Magenta Telekom Infra (MTI). With some 33,600 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. MTI, which bundles the Austrian cell tower business, is the second largest provider of passive wireless infrastructure for mobile communications and broadcasting in Austria, operating around 7,000 sites. Demand for cell sites is expected to rise here too over the next few years, which is why the first 5G upgrades were carried out in 2021. The pace of these upgrades will be stepped up going forward and more new sites will be built, too.

We expect the revenues of our Group Development operating segment to increase in 2022, as well as in 2023. Adjusted EBITDA AL is set to increase in 2022 to around EUR 0.6 billion and we expect to see a further increase in 2023. The positive revenue trend is mainly driven by the continued build-out of sites at DFMG and the 5G upgrades by MTI. The positive development of adjusted EBITDA AL and the EBITDA AL margin is driven by revenue growth and cost efficiencies.

We expect investments in our Group Development operating segment to grow strongly in 2022, with a stable development projected for 2023. This is primarily down to the further build-out of cell sites, the build-out of 5G, and modernization measures undertaken by DFMG in Germany, as well as the 700 MHz rollout in Austria.

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 for the Group, and enhancing the value of our real estate portfolio by means of innovative space and workplace concepts. In this context, we are constantly working to optimize office space and capacities in the Group, benefiting from existing technical solutions that make it easier for our employees to organize their own place of work flexibly between home or the office. In this way, the same desks can be used by multiple employees at different times. In addition, this flexibility has also worked in our favor throughout the current pandemic, where the situation with workstations has had to be adapted frequently and at short notice. 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 2022 and 2023 will include technology development, the implementation of our IT strategy, and security. We expect this to reduce overheads and capital expenditure, driven by IT operating costs and by the ongoing standardization of IT infrastructure and platforms, mainly through cloudification, automation, and retiring.

In the long term, these savings will help the Group finance its innovation endeavors. We are focusing innovation topics, such as network slicing, Open Radio Access Network (O-RAN), applications based on the new 5G mobile communications standard, evolution of a proprietary smart system for the voice control of Deutsche Telekom products and services, and introduction of a uniform operating system for 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.

4G
Refers to the fourth-generation mobile communications standard that supports higher transmission rates (see LTE).
Glossary
5G
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.
Glossary
AL – After Leases
Since the start of the 2019 financial year, we have taken the effects of the first-time application of IFRS 16 “Leases” into account when determining our financial performance indicators. “EBITDA after leases” (EBITDA AL) is calculated by adjusting EBITDA for depreciation of the right-of-use assets and for interest expenses on recognized lease liabilities. When determining “free cash flow after leases” (free cash flow AL), free cash flow is adjusted for the repayment of lease liabilities.
Glossary
Cybersecurity
Protection against internet crime.
Glossary
Edge Computing
Computing at the edge of the mobile communications network – not in remote data centers, but close to the customer, in the edge cloud. Edge computing opens up new applications: Anything that requires the rapid processing of large amounts of data, low latency and particularly strong security, such as augmented reality games.
Glossary
FMC – Fixed-Mobile Convergence
The merging of fixed-network and mobile rate plans for customers that have both fixed-network and mobile contracts with Deutsche Telekom.
Glossary
FTTH – Fiber To The Home
In telecommunications FTTH means that the fiber-optic cable is terminated right in the user’s home or apartment.
Glossary
Fiber-optic lines
Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).
Glossary
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.
Glossary
Hybrid router
Routers that are able to combine the customer’s fixed and mobile bandwidths.
Glossary
ICT – Information and Communication Technology
Information and Communication Technology
Glossary
IP – Internet Protocol
Non-proprietary transport protocol in Layer 3 of the OSI reference model for inter-network communications.
Glossary
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.
Glossary
LTE – Long-Term Evolution
4G mobile communications technology that uses, for example, wireless spectrum on the 800 MHz band freed up by the digitalization of television. Powerful TV frequencies enable large areas to be covered with far fewer radio masts. LTE supports speeds of over 100 Mbit/s downstream and 50 Mbit/s upstream.
Glossary
M2M – Machine to Machine
Communication between machines. The information is automatically sent to the recipient. For example, in an emergency, alarm systems automatically send a signal to security or the police.
Glossary
MTR – Mobile Termination Rate
Termination refers to the transportation of a call, for example, from the competitor’s network to the Deutsche Telekom network. When a call is transported to the mobile communications network, this is referred to as mobile termination. If the call is transported to the fixed network, this is called fixed-network termination, or simply interconnection (IC). Termination rates are the fee a telephone company must pay for network interconnection when a call is terminated in a third-party network.
Glossary
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.
Glossary
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).
Glossary
Postpaid
Customers who pay for communication services after receiving them (usually on a monthly basis).
Glossary
Prepaid
In contrast to postpaid contracts, prepaid communication services are services for which credit has been purchased in advance with no fixed-term contractual obligations.
Glossary
Retail
The sale of goods and services to end users, as opposed to resale or wholesale.
Glossary
Roaming
Refers to the use of a communication device or just a subscriber identity in a visited network rather than one’s home network. This requires the operators of both networks to have reached a roaming agreement and switched the necessary signaling and data connections between their networks. Roaming comes into play, for example, when cell phones and smartphones are used across national boundaries.
Glossary
Router
A coupling element that connects two or more sub-networks. Routers can also extend the boundaries of a network, monitor data traffic, and block any faulty data packets.
Glossary
Wholesale
Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing.
Glossary