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Performance management system

We use a specific set of performance indicators to reliably and transparently measure success. The following tables and information provide an overview of our key financial and non-financial performance indicators.

Financial performance indicators

 

 

 

 

 

 

 

 

 

2023

2022

2021

2020

2019

Net revenuea

billions of €

112.0

114.4

107.8

100.1

80.5

Service revenuea

billions of €

92.9

92.0

83.2

78.1

n.a.

EBITDA AL (adjusted for special factors)

billions of €

40.5

40.2

37.3

35.0

24.7

Profit (loss) from operations (EBIT)

billions of €

33.8

16.2

13.1

12.8

9.5

Earnings per share (adjusted for special factors)

1.60

1.83

1.22

1.20

1.04

ROCE

%

9.0

4.5

4.1

4.6

5.1

Free cash flow AL (before dividend payments and spectrum investment)b

billions of €

16.1

11.5

8.8

6.3

7.0

Cash capex (before spectrum investment)

billions of €

(16.6)

(21.0)

(18.0)

(17.0)

(13.1)

Rating (Standard & Poor’s, Fitch)

 

BBB+, BBB+

BBB, BBB+

BBB, BBB+

BBB, BBB+

BBB+

Rating (Moody’s)

 

Baa1

Baa1

Baa1

Baa1

Baa1

a

The prior-year comparatives up to and including 2020 were adjusted retrospectively to take account of changes to the principal/agent policy regarding the recognition of gross and net revenues as of the third quarter of 2022.

b

Before interest payments for zero-coupon bonds and before termination of forward-payer swaps at T-Mobile US (both in 2020).

Broader definition of service revenue. Since January 1, 2023, service revenue additionally includes certain software revenues generated with ICT business in the Systems Solutions and Europe operating segments, as well as in the Group Headquarters & Group Services segment. Comparative figures for the prior years were adjusted retrospectively up to and including 2021.

Presentation of GD Towers according to the management approach. 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. Please refer to the following table for a breakdown of these performance indicators according to the management approach into the amounts recognized in the consolidated income statement:

millions of €

 

 

 

 

 

 

 

 

 

 

 

 

2023

Of which: continuing operations

Of which: discontinued operation

2022

Of which: continuing operations

Of which: discontinued operation

2021

Of which: continuing operations

Of which: discontinued operation

Net revenue

 

111,985

111,970

15

114,413

114,197

216

107,811

107,610

201

Service revenue

 

92,919

92,923

(4)

91,988

92,006

(18)

83,201

83,218

(18)

EBITDA

 

57,777

44,772

13,004

43,986

43,049

937

40,539

39,671

868

Depreciation of right-of-use assets

 

(4,810)

(4,810)

0

(6,507)

(6,406)

(101)

(5,547)

(5,348)

(199)

Interest expenses on recognized lease liabilities

 

(1,806)

(1,801)

(5)

(1,489)

(1,452)

(37)

(1,099)

(1,074)

(25)

EBITDA AL

 

51,160

38,161

12,999

35,989

35,191

798

33,893

33,249

644

Special factors affecting EBITDA AL

 

10,663

(2,264)

12,927

(4,219)

(4,213)

(6)

(3,437)

(3,432)

(5)

EBITDA AL (adjusted for special factors)

 

40,497

40,424

73

40,208

39,404

804

37,330

36,681

649

Depreciation, amortization and impairment losses

 

(23,975)

(23,975)

0

(27,827)

(27,635)

(192)

(27,482)

(27,091)

(391)

Profit (loss) from operations (EBIT)

 

33,802

20,798

13,004

16,159

15,414

745

13,057

12,580

477

Profit (loss) from financial activities

 

(8,845)

(8,829)

(16)

(4,455)

(4,437)

(18)

(5,139)

(4,953)

(186)

Profit before income taxes

 

24,957

11,968

12,989

11,703

10,977

727

7,918

7,628

290

Earnings per share (basic and diluted)

3.57

0.82

2.75

1.61

1.52

0.09

0.87

0.82

0.04

Adjusted earnings per share (basic and diluted)

1.60

1.59

0.01

1.83

1.72

0.10

1.22

1.17

0.04

The gain on deconsolidation resulting from the sale of GD Towers amounted to EUR 12.9 billion and is included in EBITDA and the associated performance indicators. In the consolidated income statement, the amount is recognized under profit/loss from discontinued operation as other operating income.

For further information on the sale of GD Towers, please refer to the section “Group organization.”

Revenue and earnings

Revenue corresponds to the value of our operating activities. Absolute revenue depends on how well we are able to sell our products and services on the market. The development of our revenue is an essential indicator for measuring the Company’s success. New products and services as well as additional sales activities are only successful if they increase revenue. Service revenue essentially comprises high-value – i.e., predictable and/or recurring – revenues from Deutsche Telekom’s core activities. Service revenue is the revenues that are generated by services (i.e., revenue from fixed and mobile network voice calls – incoming and outgoing calls – as well as data services) plus roaming revenue, monthly basic charges and visitor revenue, as well as revenue generated from the ICT business. Service revenue also includes revenues earned in connection with premium services for customers, such as reinsurance for device insurance policies and extended warranties. Service revenue is an important indicator for the successful implementation of the growth strategy of the Group.

We measure our operating earnings performance on the basis of adjusted EBITDA AL, i.e., EBITDA adjusted for depreciation of right-of-use assets, for interest expenses on recognized lease liabilities, and for special factors. And EBITDA is calculated as EBIT (profit/loss from operations) before depreciation, amortization and impairment losses on intangible assets, property, plant and equipment, and right-of-use assets. Both metrics indicate the short-term operational performance and the success of individual business areas. Special factors have an impact on the presentation of operations, making it more difficult to compare performance indicators with corresponding figures for prior periods. For this reason, we adjust our performance indicators to provide transparency. Without this adjustment, statements about the future development of earnings are only possible to a limited extent. The further inclusion of unadjusted EBIT/EBITDA AL as performance indicators means special factors are also taken into account. This promotes a holistic view of our expenses. In addition to these absolute indicators, we also use the EBIT and EBITDA AL margins to show how these indicators develop in relation to revenue. This makes it possible to compare the earnings performance of profit-oriented units of different sizes.

For the calculation of EBITDA AL, EBIT, and net profit/loss adjusted for special factors, please refer to the section “Development of business in the Group.”

Adjusted earnings per share is calculated as adjusted net profit divided by the time-weighted number of all ordinary shares outstanding, which is determined by deducting the weighted average number of treasury shares held by Deutsche Telekom AG.

Profitability

We have incorporated sustainable growth in enterprise value into our medium-term aims and implemented it as a separate key performance indicator (KPI) for the entire Group. Return on capital employed (ROCE) is a key performance indicator at Group level. ROCE is the ratio of operating result after depreciation, amortization and impairment losses plus imputed taxes (net operating profit after taxes, NOPAT) to the average value of the assets tied up in the course of the year (net operating assets, NOA).

Our goal is to achieve or exceed the return targets imposed on us by providers of debt capital and equity on the basis of capital market requirements. We measure return targets using the weighted average cost of capital (WACC).

NOPAT is an earnings indicator derived from the consolidated income statement, taking an imputed tax expense into consideration. It does not include cost of capital.

NOA includes all assets that make a direct contribution to revenue generation. These include all elements on the asset side of the consolidated statement of financial position that are essential to the rendering of services. To this is added operating working capital, calculated from trade receivables, inventories, and trade and other payables. The figure for other provisions is deducted as no return target exists for this.

Financial flexibility

Free cash flow AL (before dividend payments and spectrum investment) is calculated as net cash from operating activities less net cash outflows for investments in intangible assets (excluding goodwill) and property, plant and equipment, as well as the principal portion of repayment of lease liabilities – excluding finance leases at T‑Mobile US. Free cash flow AL is a key yardstick for providers of debt capital and equity. It measures the potential for further developing our Company, for generating organic growth, and for the ability to pay dividends and repay debt.

Cash capex (before spectrum investment) relates to cash outflows for investments in intangible assets (excluding goodwill) and property, plant and equipment, which are relevant for cash outflows as a component of free cash flow.

A rating is an assessment or classification of the creditworthiness of debt securities and their issuer according to uniform criteria. The assessment of creditworthiness by ratings agencies affects access to the capital markets and to the international finance markets, and refinancing costs. As part of our finance policy, we have defined a target range for our ratings. We believe that with a rating between A- and BBB (Standard & Poor’s, Fitch) or between A3 and Baa2 (Moody’s) we essentially have the necessary entry to the capital markets to generate the required financing.

Non-financial performance indicators

 

 

 

 

 

 

 

 

 

2023

2022

2021

2020

2019

Customer satisfaction (TRI*M index)a

 

76.2

76.0

73.4

72.2

67.3

Employee satisfaction (engagement score)b

 

76

78

77

4.0

4.0

Energy consumptionc, d

GWh

12,241

13,253

13,323

12,843

9,324

Of which: excluding T‑Mobile US

GWh

4,567

4,704

n.a.

n.a.

n.a.

CO2 emissions (Scope 1 and 2)d, e

kt CO2e

217

233

247

2,512

1,797

Of which: excluding T‑Mobile US

kt CO2e

171

179

n.a.

n.a.

n.a.

Fixed-network and mobile customers

 

 

 

 

 

 

Mobile customersf

millions

252.2

245.4

248.2

241.5

184.0

Fixed-network lines

millions

25.4

25.3

26.1

27.4

27.5

Broadband customersg

millions

22.0

21.4

21.6

21.7

21.0

Systems Solutions

 

 

 

 

 

 

Order entryh, i

millions of €

3,628

3,952

3,876

4,564

4,740

a

Excluding T-Mobile US.

b

In 2021, we changed from a scale of 1 to 5 for the engagement score (previously the “commitment index”) to a scale of 0 to 100.

c

Energy consumption, mainly: electricity, fuel, other fossil fuels, district heating for buildings.

d

Information for 2019 and 2020 was taken from the non-financial statements for the years in question, which were reviewed in the form of a limited assurance engagement. At the time, this information was not part of the statutory audit of Deutsche Telekom’s combined management report and consolidated financial statements.

e

Calculated according to the market-based method of the Greenhouse Gas Protocol.

f

Including T-Mobile US wholesale customers.

g

Excluding wholesale.

h

Order entry for the 2019 financial year was adjusted retrospectively in connection with the realignment of the B2B telecommunications business.

i

Order entry for the 2021 financial year was adjusted retrospectively in connection with the reassignment of the security business.

We believe that satisfied customers act as multipliers for our Company’s success. As a responsible, service-oriented company, the needs and opinions of our customers are of great importance to us, and we want them to stay with our Company in the long term. For this reason, we measure customer satisfaction in our companies using the globally recognized TRI*M method. The results of systematic surveys are expressed by an indicator known as the TRI*M index. To underscore the significance of customer retention/satisfaction for our operating business, the performance of Board of Management members and eligible managers is now also being tracked and incentivized by means of the long-term variable remuneration (Long-Term Incentive Plan). This KPI, as one of four target parameters, has been relevant for Variable II since 2010, as well as for the Long-Term Incentive Plan which was launched in 2015, and in which the Board of Management has participated since 2021. We take the TRI*M indexes calculated for the operating entities (excluding T‑Mobile US) as an approximation of the respective entities’ percentage of total revenue to create an aggregate TRI*M value. This allows Board members and eligible managers to benefit from the development of customer retention/satisfaction.

For further information on customer satisfaction, please refer to the section “Group strategy.”

Our employees want to contribute to the further development of the Company and identify with it. We want to pursue open dialog and productive exchange with our employees. New working models and state-of-the-art communication options, as well as regular employee surveys, help us to accomplish this. The main feedback tools which the Group uses to assess employee satisfaction are the employee survey, as of late carried out every two years, and the half-yearly pulse survey (both excluding T‑Mobile US). The employee survey was not carried out in the reporting year on account of a change in service provider, and has instead been rescheduled for 2024. In our Company, we measure the employee satisfaction performance indicator using the engagement score – derived from the results of the last survey. In view of the major significance of employee satisfaction for the success of the Company, the performance of Board of Management members and eligible managers is now also being tracked and incentivized by means of the long-term variable remuneration (Long-Term Incentive Plan). Employee feedback, as one of four target parameters, has been relevant for Variable II since 2010, as well as for the Long-Term Incentive Plan which was launched in 2015, and in which the Board of Management has participated since 2021. This allows Board of Management members and eligible managers to benefit from the development of employee satisfaction.

For further information about employee satisfaction, please refer to the section “Employees.”

Climate change and the destruction of the environment are existential threats to the world. Companies must therefore significantly increase their energy and resource efficiency and restrict their absolute energy consumption. This issue is ever more relevant for providers of information and communications technology (ICT). There is a general expectation on the ICT sector to continue building out the telecommunications network while, at the very least, keeping basic consumption stable in the medium term or even reducing it going forward. Deutsche Telekom records ESG data and performance indicators (environmental, social, and governance), which are used first and foremost to calculate our Group-wide ESG KPIs, on the basis of which we measure and manage our CR performance. Given the major significance of two ESG targets, the performance of Board of Management members has also been tracked and incentivized by means of the annual variable remuneration since 2021. Since 2022, this has also applied for our managers (excluding T‑Mobile US) and all employees not covered by collective agreements in Germany. The non-financial performance indicator energy consumption is a record of the energy consumed in connection with the operation of our actual business model. We constantly monitor progress regarding our medium-term goal to reduce energy consumption (by 2024 compared with 2020, excluding T‑Mobile US), and can make adjustments where necessary. To this end, we invest in measures and programs to conserve energy from all sources. At the same time, this goal plays into how we optimize and innovate for our future infrastructure, and calls for the use of innovative technology components. In living up to our responsibility to conserve resources and protect the climate, we also run various initiatives that aim to reduce the CO2 emissions generated as part of our business activities. These initiatives include the sustained use of 100 % green electricity since 2021, optimizing power consumption in our buildings, and gradually transitioning our Group fleet vehicles from fossil fuels to zero- or low-emission power sources. We started gradually transitioning all company cars in Germany to these power sources in 2023. We measure our progress with reducing our carbon footprint on the basis of the CO2 emissions (Scope 1 and 2) non-financial performance indicator. In the United States, we are forging ahead with the highly intensive build-out of our 5G network, in particular in rural areas. This initially drives up power consumption. T‑Mobile US, like the Group as a whole, has covered 100 % of its electricity requirements from renewable energy sources since 2021. There are fluctuations in T‑Mobile US’ Scope 1 carbon footprint owing to unforeseeable natural disasters and the associated temporary use of equipment such as diesel generators to restore and back up damaged network infrastructure. Consideration must be given to the special national situation in this key market, which is why the decision was taken not to include T‑Mobile US in these two non-financial performance indicators in respect of short-term variable remuneration. This step ensures that the right incentives are set for the Board of Management toward the sustainable development of the business, while at the same time safeguarding the stability of network operations. The same applies for our Board members, executives, and all employees in Germany not covered by collective agreements. The annual ambition for the performance indicators “energy consumption” and “CO2 emissions” will continue to be set, managed, and reported for the entire Group as before, including a target value for T‑Mobile US.

For further information on these and other ESG KPIs, please refer to the section “Combined non-financial statement.”

As one of the leading providers of telecommunications and information technology worldwide, the development of our Group – and thus also our financial performance indicators – is closely linked to the development of customer figures. Acquiring and retaining customers is thus essential to the success of our Company. We have different ways of measuring the development of our customer figures according to the business activity in our operating segments: Depending on the activities of each segment, we measure the number of mobile customers (one SIM card equals one customer) and/or the number of broadband customers and fixed-network lines.

In our Systems Solutions operating segment, we use order entry as a non-financial performance indicator. We define and calculate order entry as the total of all amounts resulting from customer orders received in the financial year. Order entry in the form of long-term contracts is of great significance to the Group in order to estimate revenue potential. In other words, order entry is an indicator that provides a high degree of planning reliability.

Performance indicators at Deutsche Telekom AG

Net income is the financial performance indicator of greatest relevance for Deutsche Telekom AG and is used to pay out the dividend to shareholders.

5G
Refers to the mobile communications standard launched in 2020, which offers data rates in the gigabit range, mainly over the 3.6 GHz and 2.1 GHz bands, converges fixed-network and mobile communications, and supports the Internet of Things.
Glossary
AL – After Leases
Since the start of the 2019 financial year, we have taken the effects of the first-time application of IFRS 16 “Leases” into account when determining our financial performance indicators. “EBITDA after leases” (EBITDA AL) is calculated by adjusting EBITDA for depreciation of the right-of-use assets and for interest expenses on recognized lease liabilities. When determining “free cash flow after leases” (free cash flow AL), free cash flow is adjusted for the repayment of lease liabilities.
Glossary
Fixed-network lines
Lines in operation excluding internal use and public telecommunications, including IP-based lines. The totals reported in the combined management report were calculated on the basis of precise figures and rounded to millions or thousands. Percentages were calculated on the basis of the figures shown.
Glossary
ICT – Information and Communication Technology
Information and Communication Technology
Glossary
Mobile customers
In the combined management report, one mobile communications card corresponds to one customer. The totals were calculated on the basis of precise figures and rounded to millions or thousands. Percentages were calculated on the basis of the figures shown (see also SIM card).
Glossary
Roaming
Refers to the use of a communication device or just a subscriber identity in a visited network rather than one’s home network. This requires the operators of both networks to have reached a roaming agreement and switched the necessary signaling and data connections between their networks. Roaming comes into play, for example, when cell phones and smartphones are used across national boundaries.
Glossary
SIM card – Subscriber Identification Module card
Chip card that is inserted into a cell phone to identify it in the mobile network. Deutsche Telekom counts its customers by the number of SIM cards activated and not churned. Customer totals also include the SIM cards with which machines can communicate automatically with one another (M2M cards). The churn rate is determined and reported based on the local markets of the respective countries.
Glossary