Strategic areas of operation
Lead in digital life & work: Best convergent networks+ & perfect service
Our aspiration is to offer customers the best network experience, anytime, anyplace – whether at home or at work, our network should work seamlessly and across all technologies. 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 5.6 million customers in Germany had opted for MagentaEins; that is around 300 thousand more than in the prior year. The national companies of our Europe operating segment won over 790 thousand new customers for MagentaOne and similar FMC offerings in 2022. To continue on this path of growth, we work continuously to improve our convergent portfolio. A key component for this in the 2022 financial year was also the further enhancement of our mobile offering to additionally provide mobile communications to customers who have previously only had a fixed-network product with us. The new MagentaMobil portfolio offers larger data volumes as well as attractive price benefits through an offer of additional cards (MagentaMobil PlusKarte). The more SIM cards are added onto the main contract, e.g., for family members or friends, the lower the average price per person. But it is not just in Europe, but also in the United States that we are offering more broadband products for the home, based on our mobile network. In the 2022 financial year, we won 2.0 million new customers with our high-speed internet offering.
In pursuit of our goal to become the Leading Digital Telco, we want to offer more than simply the best connectivity: what really counts for us is the network experience. For this reason we offer our customers additional services that turn our network leadership aspiration into a first-hand experience. We reached some key milestones in this regard in the reporting year. Our MagentaTV product has been repositioned throughout our entire European footprint to aggregate linear television, including extensive features, with access to content from the biggest video-on-demand providers, and exclusive content. In 2022, we further enhanced the TV experience: In Germany, for example, we were the only provider with the broadcast rights to all the matches of the 2022 Soccer World Cup. In addition, we brought a new rate plan to market with MagentaTV MegaStream, which integrates linear television and the Megathek library with Disney+, Netflix, and RTL+. Our national companies in Europe further rolled out the Android-based TV platform with a Deutsche Telekom-specific user interface to deliver an even more personalized user experience (2022: Austria, Croatia, and Poland). The addition of 121 thousand TV customers in Germany and around 112 thousand in our European subsidiaries shows that we are on the right track.
Of equally high priority for us is ensuring seamless product integration across our portfolio. To this end we launched our own operating system HomeOS in 2021, as a “linking element” for the digital household. In the reporting year alone, we developed 12 new use cases (e.g., integration of weather and news applets, the digital voice assistant Frag Magenta, or the configuration of smart-home routines via MagentaTV).
Perfect customer service, supported by digitalization, continues to be another powerful lever to help set us apart from the competition. That is why we offer our customers a huge array of service tools, such as a digital home service (phone or on-site advice on all home network issues), our callback service, or switching advice. In addition, we place great importance on finding a quick solution to our customers’ issues. In 2022, we increased our first-call resolution rate again, that is the customer issues we resolve directly at the first point of contact (56.1 %, up +0.1 percentage points against 2021). In addition, we further developed the OneApp platform for a digital sales and service experience in our European national companies and in Germany. The OneApp platform not only improves the customer experience (e.g., by setting up and managing the router or monitoring internet usage behavior in the home network via the app), it also enables us to monetize our offerings (e.g., Magenta Moments as a new section for our loyalty program and in-app coupons, upselling of fixed-network/fiber-optic contracts). Our ratings validate our efforts in this regard, including the Connect service tests (overall score of “very good” in the hotline and service app tests in Germany and Austria, issue 10/2022). What’s more, according to Computer Bild (issue 24/2022), with Frag Magenta we “employ” the best digital assistant in Germany – not just in the telecommunications industry, but across all industries. In the United States, too, we are reaping the rewards of our focus on customer-centricity: numerous surveys rank T‑Mobile US ahead of its competitors for service quality (e.g., the J.D. Power study “Wireless Customer Care Mobile Network Operator Performance” rated T‑Mobile US the mobile carrier with the best customer service in the United States for the 10th time in succession).
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, this indicator (excluding T‑Mobile US) came in at 76.0 points versus an adjusted value of 72.6 points at the start of the year (both determined on a comparable basis). For the Germany and Systems Solutions operating segments in particular, the values achieved put us in a leading position compared to the relevant benchmark and we intend to maintain this position in 2023. We are aiming for a slight improvement in the Europe operating segment.
Lead in business productivity: Software-defined, secure, global networks, IoT & digitalization
In the reporting year, we maintained our market-leading position (in terms of revenue) as a provider of telecommunications services for business customers in the Germany operating segment and posted growth slightly above the prior-year level. As a trusted partner, we drive forward the digitalization of our customers based on global, secure connectivity, flexible software-based networks, and end-to-end security solutions. And in future, these activities will increasingly be based on integrated offerings (combining fixed network, mobile communications, and IT) and further strengthen our portfolio in the IT environment. The MagentaBusiness Collaboration product family, for example, already combines flexible communications solutions and tools for collaborative work in a seamless overall solution. In 2022, we introduced, among other products, the Microsoft Teams | X solution and we will further enhance our offering going forward. However, integrated offerings also require digitalization expertise beyond connectivity (e.g., presales, integration), since small and medium-sized enterprises in particular are increasingly looking for solutions from a single source. In the reporting year, we continued to post organic growth in IT revenue from business customers in our Germany operating segment. In our national companies in Europe, too, revenue with business customers remained stable, primarily on the back of a stable development in mobile communications. The IT business, which had declined in the prior year, recorded growth in 2022. Demand for our productivity, cloud, smart cities, and security solution portfolio continued to grow again in 2022.
Going forward, we want to remain the partner of choice for multinational corporations with cross-border connectivity needs, and to this end are investing in robust, global fixed-network and mobile connectivity and providing a one-stop shop for connectivity through the orchestration of our own networks and those of our partners. In 2022, we entered into a strategic partnership with the software company Teridion, which enables us to offer our business customers secure connectivity to network their locations across the globe. The partnership and related investment in Teridion by Deutsche Telekom underlines how important the issue of software-based networks is for us. In the medium term, we want to respond to changing customer needs with fully cloud-based, modular network services and dynamically adapt our networks. APIs will even make it possible in future to automatically manage individual network parameters in real time. To this end, over the coming years we plan to radically overhaul our own network and IT landscape, transforming it into a modular, software-defined production environment with integration capabilities for customized app and IT landscapes.
As major topics like the Internet of Things (IoT) and cybersecurity become more relevant, security and network solutions (network, IT, and cloud computing) are beginning to merge into highly secure, end-to-end solutions. Security functions which were once purchased separately are increasingly becoming part of the connectivity product or of security solutions, like new-generation firewalls that are already integrated into some SD-WAN solutions, and Secure Access Service Edge (SASE) suites that deliver SD-WAN in combination with cloud and application security from a single source. We will continue to develop the core elements of our B2B portfolio, comprising our Multiprotocol Label Switching (MPLS) solutions and SD-WAN products, holistically, taking account of network and security aspects. Security is an integral component of every one of our products and services (e.g., campus networks, IoT) – and that goes for every link in the communication chain: from the user via the terminal equipment, Wi-Fi/mobile communications/LAN, through to access and corporate networks, transport networks, and data centers. “Security by Design” is our goal here – from development and operation to management of the network services by us and our customers. In order to implement this consistently, 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 effective July 1, 2022.
The business with “traditional” IT outsourcing services for corporate customers has been in decline for the last few years now, mainly due to intense competition on the market driven by new cloud-based services and providers. The strategy of our Systems Solutions operating segment is to become the “leading European vertical full-service IT player.” The strategy concentrates in particular on the DACH region, where we already lead the markets (in terms of revenue). We focus on the core customer requirements of digitalization: advisory, cloud services, and digital solutions. For selected industries (automotive, healthcare, public sector, and public transport), we additionally offer vertical, industry-specific solutions. The newly established entrepreneurial set-up for the portfolio units aims to make the business scalable in an even shorter time frame and to accelerate growth. We are also relying more and more on partnerships. In particular, we plan to build up near- and offshore capacities.
Magenta Advantage: New business models based on DT capabilities
In our core business, we create special assets and capabilities, including, for example, more than 245 million mobile customers, more than 8 million TV customers, and access to the largest companies in the world across industries. We call the edge we can achieve through these assets and capabilities Magenta Advantage. Going forward, we want to use this advantage in a targeted way to develop new, digital business models to complement our core business. For example, we would like to harness our “digital reach” to make exclusive offers from partners available to our customers, to reward their loyalty and – where possible – to generate additional revenue. We laid the foundations for this in 2022. We built up our network of partner companies, incorporated them into our new app section Magenta Moments, and so far, we have released 37 exclusive partner offers (e.g., Disney+, GetYourGuide, Rituals) for our app users. In the future, we want to build up further capabilities for data analysis and segmentation and continuously improve the personalization of our offers. The core of our brand promise, “Reliability, security, and trust,” remains the same and protecting our customers’ data and privacy is our top priority. On top of this, we also use our Magenta Advantage to invest locally in digital business models. Examples of these are the online delivery service Box and the payment service Payzyz in Greece.
Our growth areas are based on our networks and our technology, which together form the core of our value creation. That is why we are systematically building out and interlinking our fixed and mobile networks because we want to offer our customers the fastest possible connection at top quality, anytime, anyplace. Group-wide, in 2022, we invested EUR 21 billion (not including spectrum investment) primarily in building and operating networks, with EUR 5.7 billion of this figure spent in Germany alone. This makes us the biggest single investor among all of our German competitors. In pursuit of outstanding quality and an even quicker and more efficient network build-out, we are also striking out in new directions, for example, with the use of artificial intelligence (AI) to ensure infrastructure is built out in line with demand. 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 integrated network experiences. We are working flat out to build our fixed-network infrastructure with state-of-the-art optical fiber. As a consequence, we increased the number of broadband customers in the Europe operating segment by 4.8 % compared with the end of 2022 to 6.7 million. A total of around 8.1 million households (coverage of 32.0 %) were provided with the option by our national companies to subscribe to a direct connection to our fiber-optic network with speeds reaching up to 1 Gbit/s. In Germany, we made fiber-optic lines (FTTH) available to around 2 million more households and companies by the end of 2022. Looking ahead, we are set to substantially increase the pace of the fiber-optic build-out further. By 2030, every household and every business in Germany is to have a fiber-optic line. Our aspiration is for Telekom Deutschland to build the majority of these. By the end of 2024, we are set to make more than 10 million fiber-optic lines available. To this end we will strengthen our team, employing 1,000 additional fiber-optic experts and fitters. In addition, we have agreed partnerships with other companies that will contribute to our objectives (e.g., collaboration with Glasfaser Ruhr, with the city of Münster’s public utility company Stadtwerke Münster, and with 175 municipalities in the gigabit region of Stuttgart). But urban centers are not the only ones to benefit from the network build-out: we also plan to cover a total of 8 million households in rural areas with optical fiber by 2030. Together with the Australian investor IFM, the fiber-optic build-out company GlasfaserPlus is to add a further 4 million households in rural areas to this target by 2028. But our competitors also need to play their part. Deutsche Telekom is building out the network on the basis of open access. The new networks are open for use by competitors.
The positive response shows that our efforts are paying off. In Germany, we took the #1 spot again in 2022 for the best fixed-network offering (Connect, issue 08/2022) and the best fixed-network internet provider (Chip, issue 06/2022). In addition, Magenta Telekom won best in test in Austria for its “outstanding” internet services (Connect, issue 10/2022).
In mobile communications, we set ourselves apart from our competitors with the multi-network-test-winning quality of our network. We operate over 100,000 mobile communications antennas across Germany with LTE coverage of 99 %. Our national companies in Europe cover 98.2 % of the population, or around 110 million people, with LTE. With the fifth-generation mobile communications standard (5G), we are creating a highly reliable mobile network with extremely low latency and high data throughput. Over 80,000 antennas now transmit 5G across Germany. As of the end of 2022, around 7,700 of these antennas were using the fast 5G spectrum in the 3.6 GHz band. By the end of 2022, 94.8 % of the population of Germany was already covered by our 5G network. By the end of 2025, 5G is set to cover 90 % of Germany, reaching 99 % of the population. As of the end of 2022, our national companies covered 47.4 % of the population in our European footprint with 5G. In the United States, at year-end we covered 325 million people via the 600 MHz band, 263 million of whom can use Ultra Capacity 5G in the 2.5 GHz band and millimeter wave spectrum.
For this reason, we regularly come out on top in independent network tests: Our German network once again won the “big three” network tests in 2022: by Connect (issue 01/2023 – winner for 12th time in succession), Chip (issue 01/2023), and Computer Bild (issue 25/2022). Magenta Telekom (Austria) won the Connect mobile network test for the fifth time in succession (issue 1/2023), receiving the top rating of “outstanding” for the fourth time in succession. In the Chip mobile network test, Magenta Telekom won again, gaining the top rating of “very good” in the categories Internet, Telephony, and 5G. We also won awards for the mobile networks of our national companies in Greece (Ookla® Speedtest and Umlaut “Best in Test”) and once again in Croatia (Umlaut). In the United States, we have the fastest and most reliable 5G network with the most constant speed and greatest availability (Ookla® Speedtest, Umlaut 5G Network Performance Audit Report, Umlaut 5G network test).
Our goal is to use the best-in-class integrated network infrastructure for our products and services. That is why we are complementing our own infrastructure with that of strategic partners, while also considering alternative access networks (e.g., satellites or high-altitude platform systems, HAPS). In August 2022, for instance, T‑Mobile US and SpaceX announced joint plans that will enable our U.S. subsidiary in future to bring cell phone connectivity to its customers in parts of the United States previously without cell tower coverage using SpaceX’s Starlink satellites. With this technology, T‑Mobile US is planning to provide coverage for text messages and participating messaging apps, practically everywhere in the United States, Puerto Rico, and territorial waters. The next step for the two companies will be to drive forward the build-out of voice and data coverage.
The delivery of connectivity and services based on our own and our partners’ infrastructure is reliant on technology- and domain-agnostic orchestration capabilities. These are found in a separate technical control layer above the actual infrastructure, which allows us to manage the “network of networks.” We are modernizing our NT/IT architecture to ensure the necessary orchestration capabilities are in place. Our focus is on leveraging the full potential of network automation, cloudification, and disaggregation to make our production considerably faster, more flexible, and more cost-efficient. Disaggregation, or the separation of hardware and software, makes it possible to add new suppliers. Today, around 80 to 90 % of all suppliers in our infrastructure are large, traditional companies. Going forward, we want to take into consideration even more smaller, innovative suppliers, enabling us to integrate innovations into our networks more quickly and flexibly and thus also making them available to our customers.
We are adapting our production platform to meet the customer needs of the future, by building cloud-based, scalable, modular platforms and opening up access to selected parts of these platforms to third parties (e.g., service providers and app developers) via open interfaces (APIs). Our goal is to make connectivity, services, and data (e.g., location data, connection conditions, and user behavior) combinable with new applications as needed. The benefits of this architecture include shorter development cycles, faster exploitation of revenue potential, more automated and significantly more cost-effective production, scalability across business units and borders, and a substantially better customer experience by virtue of personalized digital interactions.