Our financial reporting aligns with our Group strategy and 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 a tailored service and product portfolio that is designed to be innovative while at the same time secure and simple. Furthermore, the security business in Germany, Austria, Switzerland, Hungary, and Slovakia has been merged in this segment since the reporting year. Another focus is on the wholesale business to provide telecommunications services for carriers. 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. T‑Mobile US provides service, devices and accessories across our flagship brands. In addition, we sell devices to dealers and other third-party distributors for resale. The positive business development has been built on the back of the Un-carrier strategy, disrupting the wireless communications services industry. They provide wireless communications services through a variety of service plan options to U.S. domestic customers, including plans marketed to businesses. T‑Mobile US also offers a wide selection of wireless devices, including smartphones, wearables, tablets, home broadband routers and other mobile communication devices that are manufactured by various suppliers. In addition to their wireless communications services, they offer High Speed Internet utilizing their nationwide 5G network. They also provide products that are complementary to our wireless communications services, including device protection and wireline communication services. In September 2022, T‑Mobile US entered into an agreement for the sale of the Wireline Business.
Our 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. In these countries, we are an integrated provider of telecommunications services. In Romania, we are focused on mobile activities since the sale of OTE’s 54 % stake in Telekom Romania Communications in the prior year. Besides traditional B2C fixed-network and mobile business, most of our national companies also offer ICT solutions for business customers.
As a leading provider of IT services to businesses in German-speaking countries, our Systems Solutions operating segment offers a focused B2B product and solution portfolio under the T‑Systems brand. With its horizontal offerings for advisory, cloud services, and digitalization solutions, T‑Systems addresses the most attractive 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). We have been implementing a comprehensive transformation program since 2018, part of which has been to realign both our organization and our workflows, and make adjustments to our capacities. We now have four portfolio units: Cloud Services (Public Cloud, SAP AO, Managed Infrastructure Services & Private Cloud), Digital Solutions (including SAP SI), Security (in close cooperation with Deutsche Telekom Security), and Advisory (with Detecon as an integrated consulting provider). In addition, our Road User Services business unit offers road toll systems.
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. In this context, we sold our subsidiary T‑Mobile Netherlands on March 31, 2022. Within the segment, the GD Towers business entity comprises the German and Austrian cell tower businesses. On July 13, 2022, we signed an agreement for the sale of 51.0 % of the shares in this entity. The transaction was consummated on February 1, 2023. The investment management group Deutsche Telekom Capital Partners; 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.
Group Headquarters & Group Services comprises all Group units that cannot be allocated directly to one of the operating segments, and also reports on our Board of Management department for Technology and Innovation. As the organization that sets the direction and provides impetus, 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. Vivento is in charge of securing external employment opportunities for employees, predominantly in the public sector. Further units are Group Supply Services (GSUS) for our real estate management and our strategic procurement, and Telekom 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 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 to ensure we stay flexible and innovative. In the Technology Delivery International (TDI) unit, we pool expertise to position ourselves as a strong partner to the technology units in our national companies and develop, produce, operate, and scale platforms and services across borders from a single source. TDI also harmonizes the planning, development, and operation of products, services, and platforms at the national companies in Europe, taking technological and commercial aspects into account. Strategy & Technology Innovation (S&TI) ensures efficient and customer-centric research and innovation with a focus on mobile and fixed-network communications. Group Security (GSC) is responsible for developing and transforming the Group-wide security strategy.
Changes to the segment and organizational structure in 2022
New limited partners admitted to infrastructure fund DIV II. In August and September 2022, Digital Transformation Capital Partners admitted new investors to the investment company Digital Infrastructure Vehicle II (DIV II). As a result, Deutsche Telekom’s share in DIV II decreased from 66.67 % to 41.25 % and the entity was deconsolidated in the third quarter of 2022. Since the deconsolidation, the stake retained by the Group has been included in the consolidated financial statements as an associate using the equity method.
Sale of T‑Mobile Netherlands. On September 6, 2021, Deutsche Telekom and Tele2 signed an agreement with WP/AP Telecom Holdings IV, a private equity consortium advised by Apax Partners and Warburg Pincus, on the sale of our subsidiary T‑Mobile Netherlands. The transaction was consummated on March 31, 2022 after obtaining the necessary approvals from the authorities and satisfying the other closing conditions. The sale price is based on an enterprise value of EUR 5.1 billion. The cash proceeds – based on our shareholding of 75 % – amounted to EUR 3.6 billion. In financial terms, excluding the partial settlement of intragroup shareholder loans and other intragroup transactions, the transaction resulted in value added of EUR 4.0 billion. The gain on deconsolidation resulting from the sale amounted to EUR 0.9 billion. Until the transaction was closed, the entity had been assigned to the Group Development operating segment.
Increase of the stake in T‑Mobile US. As announced, Deutsche Telekom used part of the cash proceeds from the sale of T‑Mobile Netherlands to further increase its stake in T‑Mobile US and, on April 12, 2022, acquired around 21.2 million shares in T‑Mobile US from SoftBank for a purchase price of USD 2.4 billion (EUR 2.2 billion). To this end, Deutsche Telekom exercised a further portion of the stock options it had received from SoftBank in June 2020 to purchase shares in T‑Mobile US. This gives a weighted average price of around USD 113 per T‑Mobile US share. Upon its completion, the transaction increased Deutsche Telekom’s stake in T‑Mobile US by 1.7 percentage points.
Share buy-back program at T‑Mobile US. On September 8, 2022, T‑Mobile US announced that its Board of Directors has authorized a share buy-back program for up to USD 14.0 billion of the company’s common stock through September 30, 2023. Repurchases are expected to be made from available cash on hand and proceeds of one or more debt issuances or other borrowings, based on the company’s evaluation of market conditions and other factors. The specific timing, price, and size of repurchases will depend on prevailing stock prices, general economic and market conditions, and other considerations. By December 31, 2022, T‑Mobile US had bought back approximately 21.4 million own shares with a total volume of USD 3.0 billion (EUR 3.0 billion) under this program.
Joint venture GlasfaserPlus with IFM. On November 5, 2021, Deutsche Telekom had announced that IFM Global Infrastructure Fund – advised by IFM Investors – would acquire a stake of 50 % in GlasfaserPlus, a fiber-optic build-out entity. The sale of a 50 % stake in GlasfaserPlus was consummated on February 28, 2022, after the EU Commission had approved the transaction on January 25, 2022 and the other closing conditions had been satisfied. The sale price came to EUR 0.9 billion, half of which was paid upon completion of the transaction and the other half of which will follow in stages upon achieving certain build-out milestones. The resulting joint venture is to build out an additional 4 million gigabit-capable FTTH lines in rural and development areas by 2028. Following the loss of control pursuant to the IFRSs as a result of the transaction, the GlasfaserPlus entities were deconsolidated as of February 28, 2022. The resulting gain on deconsolidation amounted to EUR 1.7 billion. Until the transaction was closed, the entities had been assigned to the Germany operating segment. The stakes in the joint venture are included in the consolidated financial statements under the Germany operating segment using the equity method.
Reassignment of the security business. Effective July 1, 2022, Deutsche Telekom reassigned its subsidiary Deutsche Telekom Security and the security business in Germany, Austria, Switzerland, Hungary, and Slovakia from the Systems Solutions operating segment to the Germany operating segment in order to maintain a consistent focus on implementing our Group strategy pillar “Lead in business productivity.” Prior-year comparatives in both of the segments affected concerning the development of operations, customer development, headcount development, and order entry were adjusted retrospectively.
(Expected) changes to the segment and organizational structure in 2023
Agreement with DigitalBridge and Brookfield on GD Towers. On July 13, 2022, Deutsche Telekom agreed to sell a 51.0 % stake in GD Towers, comprising its tower assets in Germany and Austria, assigned to the Group Development operating segment, to DigitalBridge and Brookfield. The preliminary sale price is based on an enterprise value of EUR 17.5 billion. The estimated cash proceeds from the transaction are expected to be EUR 10.7 billion. Deutsche Telekom will retain a 49.0 % stake, benefiting from future value upside at GD Towers. Assets and the directly associated liabilities are shown as “held for sale” in the consolidated statement of financial position. The transaction was consummated on February 1, 2023. All necessary regulatory approvals had been duly granted and all other closing conditions met. Deutsche Telekom has largely leased back the sold passive network infrastructure in Germany and Austria, enabling Telekom Deutschland and T‑Mobile Austria to continue improving their network leadership.
For further information on the agreement with DigitalBridge and Brookfield on the Group’s cell tower business in Germany and Austria, and on the disclosure of GD Towers as a discontinued operation, please refer to the section “Changes in the composition of the Group and other transactions” in the consolidated financial statements.
Agreement with Cogent to sell the U.S. wireline business. On September 6, 2022, T‑Mobile US reached an agreement with Cogent Infrastructure (Cogent) on the sale of T‑Mobile US’ fiber-optic-based wireline business. Under the agreement, Cogent will take over all shares in the entity that holds all of the assets and liabilities related to the former Sprint’s fiber-optic-based wireline network. The sale price is USD 1 and is subject to customary adjustments laid down in the purchase agreement. In addition, upon completion of the transaction, T‑Mobile US undertakes to enter into a separate agreement on IP transit services, according to which T‑Mobile US will pay a total of USD 700 million to Cogent. The transaction is subject to regulatory approval as well as other closing conditions. The assets and liabilities of the wireline business have been reported in the consolidated statement of financial position as “held for sale” since September 30, 2022. The transaction is expected to be completed by mid-2023.