Results of operations of the Group

The sale of the GD Towers business entity was consummated on February 1, 2023, and GD Towers has not been part of the Group since that date. The GD Towers business entity had been recognized in the consolidated financial statements as a discontinued operation from the third quarter of 2022 until its sale. By contrast, we use the management approach for the presentation in the combined management report, i.e., the financial performance indicators presented in the results of operations still include the value contributions from GD Towers up to and including January 2023. For a breakdown of these performance indicators according to the management approach into the amounts recognized in the consolidated income statement, please refer to the relevant table in the section “Management of the Group.”

In order to increase the informative value of the prior-year comparatives based on changes to the Company’s structure or exchange rate effects, we also describe selected figures in organic terms, by adjusting the figures for the prior year for changes in the composition of the Group, exchange rate effects, and other effects. Due to changes in the composition of the Group, the figures for the prior year presented on an organic basis were reduced primarily in the Group Development operating segment in connection with the sale of T‑Mobile Netherlands as of March 31, 2022 and of GD Towers as of February 1, 2023, and in the United States operating segment in connection with the sale of the Wireline Business at T‑Mobile US as of May 1, 2023. The net negative exchange rate effects were primarily attributable to the translation of U.S. dollars to euros.

Revenue, service revenue

In the reporting year, we generated net revenue of EUR 112.0 billion, which was 2.1 % or EUR 2.4 billion down on the prior-year level. In organic terms, revenue increased by 0.6 % against the prior-year level, including negative net exchange rate effects of EUR 1.9 billion, with the changes in the composition of the Group having the net reducing effect of EUR 1.1 billion. High-value service revenue in the Group increased by EUR 0.9 billion or 1.0 % year-on-year to EUR 92.9 billion. In organic terms, service revenue increased by EUR 3.2 billion or 3.6 %.

In our United States operating segment, revenue was down 4.0 % against the prior-year level, due in part to exchange rate effects. In organic terms, it declined by 0.8 %. This was attributable to lower terminal equipment revenue. First of all, the migration of former Sprint customers to the T‑Mobile US network is complete, such that fewer devices compatible with the T‑Mobile US network were sold to these customers. Furthermore, customers use their devices longer. In addition, T‑Mobile US continued its strategic withdrawal from the terminal equipment lease business. The decline in terminal equipment revenues was only partially offset by an increase in service revenue. In the Group Development operating segment, revenue development was dominated by the loss of the value contributions of the sold entities T‑Mobile Netherlands and GD Towers. In organic terms, revenue increased by 3.2 %. The other operating segments recorded positive revenue trends. Revenue in our domestic market of Germany was up on the prior-year level, increasing by 2.8 %. In organic terms, revenue increased by 2.1 %. This was mainly driven by growth in service revenues in the fixed-network core business and in mobile communications. Build-out services for our cooperation partners also had a positive impact on revenue. In our Europe operating segment, revenue increased by 5.7 % year-on-year. In organic terms, revenue increased by 4.8 %, primarily attributable to the increase in high-margin service revenues in the mobile business. Contract customer additions also had positive effects on terminal equipment revenues. Revenue in our Systems Solutions operating segment was up 2.2 % year-on-year; in organic terms, it was up 5.3 %. This positive revenue trend was mainly driven by growth in the Road Charging, Digital, Advisory, and Cloud portfolio areas.

For further information on revenue development in our segments, please refer to the section “Development of business in the operating segments.”

For information on the extension of the definition of service revenue, please refer to the section “Management of the Group.”

Contribution of the segments to net revenue^a

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Breakdown of revenue by region

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Breakdown of revenue by region

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At 64.7 %, our United States operating segment again provided by far the largest contribution to net revenue of the Group, down 1.2 percentage points against the prior-year level. The proportion of net revenue generated internationally also decreased from 77.9 % to 77.0 %.

Adjusted EBITDA AL, EBITDA AL

Adjusted EBITDA AL increased year-on-year by EUR 0.3 billion or 0.7 % to EUR 40.5 billion in the reporting year. In organic terms, adjusted EBITDA AL increased by EUR 1.6 billion or 4.0 %, including negative net exchange rate effects of EUR 0.7 billion, and with changes in the composition of the Group having a net reducing effect of EUR 0.6 billion. Adjusted core EBITDA AL, i.e., adjusted EBITDA AL excluding revenue from terminal equipment leases in the United States, thereby presenting operational development undistorted by the strategic withdrawal from the terminal equipment lease business, increased by EUR 1.3 billion or 3.5 % to EUR 40.2 billion.

All operating segments – with the exception of Group Development, due to the aforementioned loss of the value contributions of the sold units – made a positive contribution to the development of adjusted EBITDA AL. Our Germany operating segment contributed to the increase thanks to high-value revenue growth and improved cost efficiency with 4.1 % higher adjusted EBITDA AL; in organic terms, it increased by 3.0 %. Adjusted EBITDA AL in our United States operating segment increased by 3.1 %. In organic terms, adjusted EBITDA AL grew by 5.2 % year-on-year, mainly due to lower costs. Adjusted core EBITDA AL at T‑Mobile US increased by EUR 1.9 billion or 7.6 % to EUR 26.1 billion. Adjusted EBITDA AL in our Europe operating segment increased by 3.8 %. In organic terms, it increased by 2.8 %, with a positive net margin more than sufficient to offset the higher indirect costs. In our Systems Solutions operating segment, adjusted EBITDA AL increased by 13.0 % or, in organic terms, by 10.0 %, mainly due to revenue growth in the Road Charging and Digital areas.

EBITDA AL increased by EUR 15.2 billion year-on-year to EUR 51.2 billion, with special factors affecting EBITDA AL increasing by EUR 14.9 billion to EUR 10.7 billion. Net income of EUR 12.2 billion was recorded as special factors under effects of deconsolidations, disposals, and acquisitions. The deconsolidation of GD Towers as of February 1, 2023 gave rise to income of EUR 12.9 billion. Another EUR 0.2 billion came from the sale of a subsidiary by Deutsche Telekom Capital Partners. Net expenses of EUR 1.0 billion, mainly in connection with integration costs as a result of the merger of T‑Mobile US and Sprint, had an offsetting effect. In the prior year, net expenses of EUR 2.3 billion had been recorded as special factors under effects of deconsolidations, disposals, and acquisitions. This included expenses of EUR 5.0 billion incurred mainly in connection with integration costs arising as a result of the merger of T‑Mobile US and Sprint and in connection with payment obligations relating to the agreement concluded at that time to sell the fiber-optic-based wireline network. In the prior year, by contrast, these effects included income of EUR 1.7 billion from the deconsolidation of GlasfaserPlus and a further EUR 0.9 billion from the sale of T‑Mobile Netherlands. Expenses incurred in connection with staff restructuring totaled EUR 1.5 billion, up EUR 0.3 billion against the prior-year level. In the third quarter of 2023, T‑Mobile US implemented a workforce reduction program. The expenses recognized as special factors in this connection amounted to EUR 0.4 billion. No significant impairment losses on right-of-use assets or other special factors affecting EBITDA AL were recognized in the reporting year. In the prior year, the impairment losses classified as special factors amounted to EUR 0.3 billion and mainly related to right-of-use assets used in connection with the former Sprint’s fiber-optic-based wireline network. Other special factors affecting EBITDA AL amounted to EUR ‑0.3 billion in the prior year and included expenses (including insurance compensation) of EUR 0.4 billion in connection with the proceedings pending in consequence of the cyberattack on T‑Mobile US in August 2021, as well as insurance compensation of EUR 0.2 billion in connection with damage sustained in the catastrophic flooding in July 2021.

For further information on the development of (adjusted) EBITDA AL in the segments, please refer to the section “Development of business in the operating segments.”

Profit/loss from operations (EBIT)

Group EBIT increased to EUR 33.8 billion, up EUR 17.6 billion against the level of the prior-year period. This change was primarily due to the deconsolidation gain from the sale of GD Towers.

At EUR 24.0 billion, depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets were EUR 3.9 billion lower in 2023 than in the prior year, with the decrease being mainly attributable to the United States and Group Development operating segments. Depreciation and amortization decreased by EUR 2.9 billion. In the United States operating segment, they declined due to the ongoing strategic withdrawal from the terminal equipment lease business. Depreciation and amortization also decreased due to the complete write-off of certain 4G network components, including assets affected by the decommissioning of the former Sprint’s legacy CDMA and LTE networks in 2022. The decrease was offset by increased depreciation and amortization in connection with the further build-out of the nationwide 5G network in the United States. In the Group Development operating segment, depreciation and amortization were down on the prior-year level in connection with the fact that GD Towers had been held for sale until it was sold and accordingly the related depreciation and amortization had been suspended, and in connection with its subsequent sale. By contrast, a further reduction in the useful life of leased network technology for cell sites following the business combination of T‑Mobile US and Sprint increased depreciation of the corresponding right-of-use assets by EUR 0.2 billion. In the Germany operating segment, depreciation and amortization increased, partly as a result of the sale and leaseback of passive network infrastructure in Germany and Austria in connection with the sale of GD Towers and the associated recognition of retained right-of-use assets.

The impairment losses recognized in the reporting year amounted to EUR 0.2 billion and largely related to the Systems Solutions operating segment and the Group Headquarters & Group Services segment. These related primarily to follow-up investments in connection with assets previously impaired in the 2020, 2021, and 2022 financial years. Furthermore, despite the business outlook remaining positive, the increase in the cost of capital in the reporting year prompted further impairment losses to be recognized on non-current assets at the end of 2023. The impairment losses recorded in the prior year of EUR 1.2 billion were mainly attributable to the former Sprint’s fiber-optic-based wireline assets in the United States operating segment.

For further information on depreciation, amortization and impairment losses, please refer to Note 27 “Depreciation, amortization and impairment losses” in the notes to the consolidated financial statements.

For information on the sale and the presentation of GD Towers according to the management approach, including a reconciliation for the consolidated income statement, please refer to the section “Management of the Group.”

Profit before income taxes

Profit before income taxes increased by EUR 13.3 billion to EUR 25.0 billion. Loss from financial activities increased year-on-year by EUR 4.4 billion to EUR 8.8 billion, mainly driven by an increase in loss of associates and joint ventures included in the consolidated financial statements using the equity method from EUR 0.5 billion to EUR 2.8 billion. The main factor in this was impairment losses recognized in the reporting year of EUR 2.6 billion and EUR 0.1 billion, respectively, on the carrying amounts of the investments in GD Towers and in GlasfaserPlus. These impairment losses were due entirely to higher discount rates due to macroeconomic developments in the reporting year. By contrast, the business outlook for GD Towers improved slightly. The prior year included an interest rate-based impairment loss of EUR 0.5 billion recognized on the carrying amount of the stake in GlasfaserPlus. Other financial income declined from EUR 1.4 billion to a financial expense of EUR 0.3 billion, in particular in connection with the interest component from the measurement of provisions and liabilities. This decrease was mainly attributable to the subsequent measurement using actuarial principles of the present value of the provision recognized for the Civil Service Health Insurance Fund. In the prior year, the measurement was affected by the significant increase in the interest rate level in that period. Gains/losses from financial instruments also declined, partly due to less pronounced positive measurement effects from derivatives compared with the prior year. Finance costs increased from EUR 5.3 billion to EUR 5.7 billion, partly due to the sale and leaseback of passive network infrastructure in Germany and Austria in connection with the sale of GD Towers, which resulted in an increase in the carrying amounts of the lease liabilities, and due to the measurement of interest rate derivatives concluded to hedge changes in market interest rates.

Net profit, adjusted net profit

Net profit increased year-on-year by EUR 9.8 billion to EUR 17.8 billion. Tax expense increased by EUR 0.7 billion to EUR 3.0 billion. The tax rate was significantly reduced in 2023 by the realization of non-taxable income from the sale of GD Towers. Taxes were furthermore reduced by deferred tax effects arising in connection with the sale-and-leaseback transaction concluded. Profit attributable to non-controlling interests increased by EUR 2.7 billion to EUR 4.2 billion. This increase was almost entirely attributable to our United States operating segment. Excluding special factors, which had a positive overall effect of EUR 9.8 billion on net profit, adjusted net profit amounted to EUR 7.9 billion, compared with EUR 9.1 billion in the prior year. The increase in loss from financial activities in particular had a decreasing effect.

For further information on tax expense, please refer to Note 32 “Income taxes” in the notes to the consolidated financial statements.

Earnings per share, adjusted earnings per share

Earnings per share is calculated as net profit divided by the weighted average number of ordinary shares outstanding, which totaled 4,976 million as of December 31, 2023. This resulted in earnings per share of EUR 3.57, which was mainly affected by the gain on the sale of GD Towers. In the prior year, earnings per share was EUR 1.61. Earnings per share adjusted for special factors affecting net profit amounted to EUR 1.60 compared with EUR 1.83 in the prior year. This decrease was mainly related to the aforementioned effects in other financial income/expense.

Reconciliations of financial performance indicators from the IFRS consolidated financial statements

A reconciliation of the definition of EBITDA to the “after leases” indicator (EBITDA AL) can be found in the following table:

The following table presents the reconciliation of net profit to net profit adjusted for special factors:

The following table presents a reconciliation of EBITDA AL, EBIT, and net profit to the respective figures adjusted for special factors: