Segment structure
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 a tailored service and product portfolio that is designed to be innovative while at the same time secure and simple. The bundling of our sales and service business within Sales & Service places a further focus on customer experience and on customer satisfaction. The Wholesale business delivers wholesale telecommunication services for third-party telecommunications companies. The build-out of the mobile and fixed networks in Germany is managed by the Technology business unit.
Our United States operating segment combines all mobile activities in the U.S. market. T‑Mobile US provides service, devices, and accessories across its flagship brands. In addition, it sells devices to dealers and other third-party distributors for resale. It provides 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 its wireless communications services, it offers High Speed Internet utilizing its nationwide 5G network. It also provides products that are complementary to its wireless communications services, including device protection and wireline communication services. On May 1, 2023, T‑Mobile US closed the sale of its 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, our focus is on mobile communications. Besides traditional B2C fixed-network and mobile business, most of our national companies also offer ICT solutions for business customers.
Our Systems Solutions operating segment offers B2B IT services in the core market of Western Europe under the T‑Systems brand. T‑Systems primarily addresses the IT growth areas of advisory, cloud services, and digitalization with a corresponding portfolio of products and solutions. We consider data sovereignty and security solutions to be the most attractive growth areas in the IT market, which is why we include them as integral components of our portfolio, enhanced by strategic partnerships. The services penetrate deep into the value chains of selected industries (automotive, healthcare, public sector, and transportation). As part of our transformation program, we have been working since 2018 to realign both our organization and our workflows, and make adjustments to our capacities. We now comprise four portfolio areas: Cloud, Digital, Security (in close collaboration with Deutsche Telekom Security), and Advisory (together with Detecon as an advisory partner). 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 51.0 % of the shares in the cell tower business companies in Germany and Austria (GD Towers) 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, as well as our Board of Management department Technology and Innovation, which unites the cross-segment technology, innovation, IT, and security functions of our Germany, Europe, and Systems Solutions operating segments. 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 for our real estate management and our strategic procurement, and Telekom MobilitySolutions, which is a full-service provider for fleet management and mobility services.
Changes to the segment and organizational structure in 2023
Sale of GD Towers. On July 13, 2022, Deutsche Telekom agreed to sell a 51.0 % stake in the cell tower business companies in Germany and Austria (GD Towers), which were assigned to the Group Development operating segment, to DigitalBridge and Brookfield. After all necessary regulatory approvals had been duly granted and all other closing conditions met, the transaction was closed on February 1, 2023. The sale price is based on an enterprise value of EUR 17.5 billion. The total gain on deconsolidation resulting from the sale amounts to EUR 15.9 billion, of which EUR 12.9 billion is included in profit/loss from discontinued operation as other operating income in the consolidated income statement as of the deconsolidation date. As Deutsche Telekom has largely leased back the sold passive network infrastructure in Germany and Austria under a sale and leaseback transaction, a further EUR 3.0 billion will be recognized pro rata in subsequent periods. Overall, right-of-use assets were recognized in the amount of EUR 2.0 billion and lease liabilities in the amount of EUR 5.0 billion. The transaction resulted in cash proceeds of EUR 10.7 billion. The stake retained by Deutsche Telekom of 49.0 % has been included in the consolidated financial statements using the equity method since February 1, 2023.
For further information on the sale of the GD tower companies, please refer to the section “Changes in the composition of the Group and other transactions” in the consolidated financial statements.
Sale of 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 transaction was consummated on May 1, 2023. All necessary regulatory approvals had been duly granted and all other closing conditions met. The sale price was USD 1 and was subject to customary adjustments laid down in the purchase agreement. The cash proceeds received upon completion of the transaction amounted to USD 14 million (EUR 13 million). The loss on deconsolidation resulting from the sale amounted to EUR 4 million. In addition, upon completion of the transaction, T‑Mobile US undertook to enter into a separate agreement on IP transit services, according to which T‑Mobile US will pay a total of USD 0.7 billion (around EUR 0.6 billion) to Cogent in agreed installments over subsequent periods. In connection with the payment obligations entered into as part of the transaction, total liabilities of EUR 0.7 billion had already been recognized in the 2022 financial year. As a result of the concluded sales agreement, the assets and liabilities of the Wireline Business were reported in the consolidated statement of financial position as “held for sale” from September 30, 2022 up until their sale on May 1, 2023.
(Expected) changes to the segment and organizational structure in 2024
Agreement on the acquisition of Ka’ena in the United States. On March 9, 2023, T‑Mobile US entered into a Merger and Unit Purchase Agreement for the acquisition of 100 % of the outstanding equity of Ka’ena Corporation and its subsidiaries including, among others, Mint Mobile, for a maximum purchase price of USD 1.35 billion to be paid out 39 % in cash and 61 % in shares of T‑Mobile US common stock. Ka’ena Corporation is one of the wholesale partners of T‑Mobile US, offering wireless telecommunications services to customers. The purchase price is variable dependent upon specified performance indicators of Ka’ena during certain periods before and after closing and consists of an upfront payment at deal close, subject to certain agreed-upon adjustments, and a variable earnout payable 24 months after the close of the transaction. The upfront payment is expected to be a revised amount of around USD 1.2 billion (before working capital adjustments). The transaction is subject to approval by the authorities as well as other customary closing conditions and is expected to close around the end of the first quarter of 2024.
Transactions with no changes to the segment and organizational structure
Transfer of T‑Mobile US shares to SoftBank. On December 28, 2023, in accordance with the supplementary agreement from February 20, 2020 (Letter Agreement) closed between T‑Mobile US, SoftBank, and Deutsche Telekom in the course of the Sprint Merger, T‑Mobile US issued 48,751,557 shares of common stock in T‑Mobile US to SoftBank. The condition of the Letter Agreement that the volume-weighted price of T‑Mobile US ordinary shares reach or exceed USD 149.35 (after adjusting for the first cash dividend by T‑Mobile US) for 45 days was satisfied on December 22, 2023. The issue of the shares to SoftBank reduced Deutsche Telekom’s ownership stake in T‑Mobile US to 50.6 % as of December 31, 2023. The shares issued to SoftBank are subject to the proxy agreement between SoftBank and Deutsche Telekom.
End of T-Mobile US’ share buy-back program from September 2022. T‑Mobile US repurchased a total of around 98.8 million shares under the 2022 share buy-back program at a price of USD 14.0 billion (EUR 13.2 billion). The budget was therefore fully exhausted by the end of September 2023.
T-Mobile US’ shareholder return program from September 2023. On September 6, 2023, T‑Mobile US announced a shareholder return program of up to USD 19 billion that will run from October 1, 2023 through December 31, 2024. The program consists of further share buy-backs totaling around USD 15.25 billion, as well as dividends totaling around USD 3.75 billion to be paid out on a quarterly basis. The amount available for share buy-backs will be reduced by the amount of any dividends approved. On September 25, 2023, the T‑Mobile US Board of Directors declared an initial cash dividend of USD 0.65 per share, which was paid out on December 15, 2023 to the shareholders registered as of close of business on December 1, 2023. EUR 0.4 billion of the cash dividend was attributable to Deutsche Telekom’s stake and EUR 0.3 billion to non-controlling interests in T‑Mobile US. In the 2023 financial year, T‑Mobile US bought back 15.5 million shares with a total volume of USD 2.2 billion (EUR 2.0 billion) under its share buy-back program.