36 Segment reporting

Deutsche Telekom reports on five operating segments, as well as on the Group Headquarters & Group Services segment. Three operating segments are distinguished by region (Germany, United States, Europe), one by customers and products (Systems Solutions), and another by tasks (Group Development). For three operating segments, business activities are assigned by customer and product (Germany, Systems Solutions, United States), while one operating segment allocates its activities on a regional basis (Europe) and another allocates them by equity investment (Group Development).

The 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. Another focus is on the wholesale business to provide telecommunications services for carriers. Build-out of the mobile and fixed networks is managed by the Technology business unit in this segment. Consistent with our efforts to implement our Group strategy pillar “Lead in business productivity,” the business-to-business (B2B) telecommunications services were realigned in the course of 2020. To this end, TC Services and Classified ICT (with the exception of a few activities in the area of Classified IT project business), portfolio units previously assigned to the Systems Solutions operating segment, as well as Telekom Global Carrier (TGC) and Network Infrastructure, (NWI) – which were previously reported under the Europe operating segment and the Group Headquarters & Group Services segment and which together form the business area designated as Deutsche Telekom Global Carrier (DTGC) – have been combined under the Germany operating segment. Since the start of the third quarter of 2020, the management of the Deutsche Telekom Group and hence also the reporting structure have both been based on this new segment allocation. Prior-year comparatives in the segments affected have been adjusted retrospectively in segment reporting.

The United States operating segment combines all mobile activities in the U.S. market. T‑Mobile US offers services, terminal equipment, and accessories for consumers. In addition, the company sells devices to dealers and other third-party distributors for resale. In addition to wireless communications services, T‑Mobile US also provides complementary products, including device protection, high-speed internet, and wireline communication services. The business combination of T‑Mobile US and Sprint was completed on April 1, 2020, forming the all-new, larger T‑Mobile US. On July 1, 2021, T‑Mobile US acquired assets and liabilities from Shentel that are directly associated with the wireless telecommunications operation of Shentel.

The Europe operating segment comprises all fixed-network and mobile operations of the national companies in Greece, Hungary, Poland, the Czech Republic, Croatia, Slovakia, Austria, North Macedonia, and Montenegro. With the approval of the responsible authorities, on September 30, 2021 OTE consummated the sale of its 54 % stake in Telekom Romania Communications to Orange Romania. Thus Deutsche Telekom is focusing on mobile operations in Romania. The national company in Albania was sold as of May 7, 2019. In addition to consumer business, most of the national companies also offer ICT solutions for business customers.

The Systems Solutions operating segment offers business customers a focused product and solution portfolio under the T‑Systems brand. With its horizontal offerings for advisory services, cloud computing, and digitalization solutions, T‑Systems addresses the growth areas in the information technology market. Data sovereignty and security solutions are at the core of the product options, supplemented with strategic partnerships. Focused vertical offerings penetrate deep into the value chains of selected industries (automotive, healthcare, public sector, and transportation).

The goal of the Group Development operating segment is to actively manage entities and equity investments to grow their value. This approach led to the creation of GD Towers within the Group Development segment. Following the sale of the Dutch cell tower business in the reporting year, GD Towers has exclusively looked after the German and Austrian cell tower businesses since the second quarter of 2021. 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. The investment management group DTCP; Comfort Charge, which is a provider of e-mobility charging infrastructure; and the Group functions of Mergers & Acquisitions and Strategic Portfolio Management are also assigned to Group Development. The stake in Ströer SE & Co. KGaA was transferred to Deutsche Telekom Trust e.V. in August 2019 as plan assets to cover Deutsche Telekom’s existing pension obligations.

The Group Headquarters & Group Services segment comprises all Group units that cannot be allocated directly to one of the operating segments and also reports on the Board of Management department Technology and Innovation. It unites the cross-segment functions of technology, innovation, IT, and Security of the Germany, Europe, and Systems Solutions operating segments. Group Headquarters 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 the placement services of personnel services provider Vivento. Further units are Group Supply Services (GSUS) for real estate management and strategic procurement, and MobilitySolutions, which is a full-service provider for fleet management and mobility services.

Changes to the segment and organizational structure in 2021. Effective January 1, 2021, Deutsche Telekom reassigned 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 subsidiary Deutsche Telekom IoT GmbH is responsible for the IoT business of Deutsche Telekom. Prior-year comparatives in both segments were adjusted retrospectively. As of January 1, 2021, Deutsche Telekom transferred the Austrian cell tower business from the Europe operating segment to GD Towers in the Group Development operating segment. Prior-year comparatives in both of the segments affected have not been adjusted retrospectively. As of January 1, 2021, DT IT Russia, DT IT Slovakia, and DT IT Hungary were reassigned from the Germany operating segment to the Group Headquarters & Group Services segment. Prior-year comparatives in both of the segments affected have not been adjusted retrospectively.

For further information, please refer to the section “Changes in the composition of the Group and other transactions” under “Summary of accounting policies.”

The business segments presented are reviewed at regular intervals by the Deutsche Telekom Board of Management in terms of the allocation of resources and their earnings performance.

The measurement principles for Deutsche Telekom’s segment reporting structure are based primarily on the IFRSs adopted in the consolidated financial statements. Deutsche Telekom evaluates the segments’ performance based on revenue and profit or loss from operations (EBIT), among other factors. Revenue generated and goods and services exchanged between segments are calculated on the basis of market prices. Services provided by Deutsche Telekom IT are generally charged at cost. Development services are not charged, but capitalized at segment level in accordance with the internal control logic. In accordance with the segments’ control logic, intragroup leases are not capitalized by the lessee, but instead recognized as periodic expenses. Segment assets and liabilities include all assets and liabilities that are carried in the financial statements prepared by the segments and included in the consolidated financial statements. Segment investments include additions to intangible assets, property, plant and equipment, and right-of-use assets. Where entities accounted for using the equity method are directly allocable to a segment, their shares of profit or loss after income taxes and their carrying amounts are reported in that segment’s accounts. All of the performance indicators shown in the following tables are presented exclusively from the segments’ perspective: The effects of intersegment transactions are eliminated and presented in aggregate form in the reconciliation line. The following table shows the performance indicators used by Deutsche Telekom to evaluate the operating segments’ performance as well as additional segment-related indicators:

Information on geographic areas. The Group’s non-current assets and net revenue are shown by region: Germany, Europe (excluding Germany), North America, and other countries. The North America region comprises the United States and Canada. The Europe (excluding Germany) region covers the entire European Union (excluding Germany) and the other countries in Europe. Other countries include all countries that are not Germany or in Europe (excluding Germany) or North America. Non-current assets are allocated to the regions according to the location of the assets in question. Non-current assets encompass intangible assets; property, plant and equipment; right-of-use assets; capitalized contract costs; investments accounted for using the equity method; as well as other non-current assets. Net revenue is allocated according to the location of the respective customers’ operations.

Information on products and services. Revenue generated with external customers for groups of comparable products and services developed as follows: