Europe For information on changes resulting from the first-time application of the IFRS 16 “Leases” accounting standard and changes in the organizational structure, please refer to the section “Group organization, strategy, and management.” Customer development (XLS:) Download thousands Mar. 31, 2019 Dec. 31, 2018 ChangeMar. 31, 2019/Dec. 31, 2018% Mar. 31, 2018 ChangeMar. 31, 2019/Mar. 31, 2018% a As of January 1, 2019, the portfolio of M2M SIM cards in Austria was streamlined. 2.4 million customers were deactivated. Prior-year comparatives were not adjusted. b Following the acquisition of UPC Austria, we have reported fixed-network lines and broadband customers since the third quarter of 2018. The comparatives for fixed-network lines were adjusted to exclude TV-only customers. c “Other”: national companies of Albania, North Macedonia, and Montenegro, as well as the lines of the GTS Central Europe group in Romania. EUROPE, TOTAL Mobile customersa 47,800 50,542 (5.4) 49,254 (3.0) Contract customers 26,844 26,665 0.7 25,686 4.5 Prepay customersa 20,956 23,877 (12.2) 23,567 (11.1) Fixed-network linesb 8,977 9,020 (0.5) 8,409 6.8 Of which: IP-based 7,663 7,371 4.0 5,947 28.9 Broadband customers 6,478 6,405 1.1 5,598 15.7 Television (IPTV, satellite, cable) 4,904 4,835 1.4 4,271 14.8 Unbundled local loop lines (ULLs)/wholesale PSTN 2,278 2,275 0.1 2,270 0.4 Wholesale broadband lines 417 411 1.5 389 7.2 GREECE Mobile customers 7,682 7,893 (2.7) 8,053 (4.6) Fixed-network lines 2,581 2,566 0.6 2,551 1.2 Broadband customers 1,938 1,893 2.4 1,800 7.7 ROMANIA Mobile customers 5,421 5,360 1.1 5,236 3.5 Fixed-network lines 1,697 1,741 (2.5) 1,823 (6.9) Broadband customers 1,078 1,101 (2.1) 1,124 (4.1) HUNGARY Mobile customers 5,305 5,330 (0.5) 5,298 0.1 Fixed-network lines 1,673 1,663 0.6 1,634 2.4 Broadband customers 1,170 1,148 1.9 1,088 7.5 POLAND Mobile customers 10,823 10,787 0.3 10,509 3.0 Fixed-network lines 18 18 0.0 27 (33.3) Broadband customers 11 18 (38.9) 23 (52.2) CZECH REPUBLIC Mobile customers 6,186 6,188 0.0 6,156 0.5 Fixed-network lines 355 318 11.6 220 61.4 Broadband customers 274 251 9.2 189 45.0 CROATIA Mobile customers 2,262 2,273 (0.5) 2,229 1.5 Fixed-network lines 922 931 (1.0) 959 (3.9) Broadband customers 617 618 (0.2) 620 (0.5) SLOVAKIA Mobile customers 2,391 2,369 0.9 2,282 4.8 Fixed-network lines 854 853 0.1 860 (0.7) Broadband customers 550 543 1.3 525 4.8 AUSTRIA Mobile customersa 4,765 7,194 (33.8) 6,071 (21.5) Fixed-network linesb 544 595 (8.6) 0 0.0 Broadband customers 601 594 1.2 0 0.0 OTHERc Mobile customers 2,967 3,149 (5.8) 3,419 (13.2) Fixed-network lines 334 333 0.3 334 0.0 Broadband customers 239 238 0.4 229 4.4 Total The markets in our segment remained intensely competitive in the first quarter of 2019. We continue to rise to this challenge in the current financial year, achieving an increase of 13.5 percent in the number of FMC customers as of March 31, 2019, thanks in particular to our convergent product portfolio, MagentaOne. We took important steps in 2018 to develop our segment comprehensively into an integrated provider of mobile communications and fixed-network products: The acquisition of UPC Austria will allow us to offer convergent products in Austria, too. The agreement concluded in Poland concerning the use of Orange’s fiber-optic network will allow us to offer comprehensive convergent services there in future. In addition to the agreement with Orange, T-Mobile Polska signed a wholesale FTTH agreement with network operator Nexera, covering more than 450 thousand households, which are expected to be connected by the end of 2020. Our broadband/TV operations are making progress consistently, not least thanks to the large-scale build-out of the network with state-of-the-art fiber-optic-based lines (FTTH, FTTB, and FTTC), in particular in the national companies of Greece and Hungary. As a result, the number of IP lines increased by 4.0 percent to 7.7 million as of March 31, 2019, primarily thanks to the migration from traditional PSTN lines to IP technology. In our mobile business, we recorded moderate growth in the number of high-value contract customers. The number of prepay customers decreased sharply, mainly due to the streamlining of the portfolio in Austria. In addition, the national companies in Greece and Albania recorded reductions in their prepay customer bases, due in part to the deactivation of inactive prepaid SIM cards. Mobile communications The number of mobile customers totaled 47.8 million in the first quarter of 2019, down by 5.4 percent or 2.7 million customers compared with the end of 2018. This decline is primarily attributable to the streamlining of the prepay portfolio at our Austrian subsidiary, which removed 2.4 million cross-border M2M SIM cards from our customer base, which we had provided internally to the Germany segment. Excluding this effect, this figure would have been stable compared with the prior year. The number of contract customers increased slightly by 0.7 percent against December 31, 2018. Overall, our national companies reported positive trends in their contract customer base, especially in Poland, Hungary, and the Czech Republic. Contract customers accounted for 56.2 percent of the total customer base. Our customers benefited not only from our innovative services/rate plans, but also from greater coverage with fast mobile broadband – a result of our integrated network strategy. As of March 31, 2019, we already covered 97 percent of the population in the countries of our operating segment with LTE, reaching around 109 million people in total. Customer demand for high data volumes has risen sharply due to the explosion in data traffic driven by video streaming services, for example. Fixed network Our TV and entertainment services saw moderate customer growth of 1.4 percent as of March 31, 2019, primarily due to new business in Croatia. Adjusted for this effect, the number of customers remained stable compared with the end of the prior year. Gains at our national companies in Hungary and the Czech Republic offset customer losses in Romania. With both telecommunication providers and OTT players offering TV services, the TV market is already saturated in many countries of our segment. The broadband business also recorded slight growth of 1.1 percent compared with the end of the prior year to 6.5 million customers. In particular, the customer bases of our national companies in Greece, the Czech Republic, and Hungary saw growth, partly on the back of increased investment in innovative fiber-optic-based technologies. For example, we increased household coverage with optical fiber at our four biggest integrated national companies to 2.7 million households as of March 31, 2019 (December 31, 2018: 2.6 million). Consistent growth in IP-based lines as a percentage of all fixed-network lines confirms that we are making good progress: At the end of March 2019, this share amounted to 85.4 percent. At 9.0 million, the number of fixed-network lines in our Europe operating segment remained on a par with the high prior-year level, also thanks to the acquisition of UPC Austria. FMC – fixed-mobile convergence Our portfolio of convergent products, MagentaOne, remained highly popular with consumers across all of our integrated national companies. As of March 31, 2019, we had 3.8 million FMC customers; this corresponds to significant growth of 13.5 percent or 445 thousand net additions compared with the end of the prior year. The main driver of this trend was our national company in Greece, which since fall 2018 also offers its convergent product portfolio to prepay customers. We have also been increasingly successful in marketing our MagentaOne Business product to business customers. Development of operations (XLS:) Download millions of € Q1 2019 Q1 2018 Change Change % FY 2018 The contributions of the national companies correspond to their respective unconsolidated financial statements and do not take consolidation effects at operating segment level into account. a “Other”: national companies of Albania, North Macedonia, and Montenegro, as well as IWS (International Wholesale), consisting of ICSS (International Carrier Sales & Solutions) and its national companies, the GTS Central Europe group in Romania, and the Europe Headquarters. b Prior-year comparatives were calculated on a pro-forma basis for the redefined key performance indicators resulting from the introduction of the IFRS 16 accounting standard. TOTAL REVENUE 2,891 2,811 80 2.8 11,885 Greece 697 686 11 1.6 2,888 Romania 217 226 (9) (4.0) 933 Hungary 459 443 16 3.6 1,889 Poland 348 375 (27) (7.2) 1,526 Czech Republic 257 254 3 1.2 1,047 Croatia 220 222 (2) (0.9) 966 Slovakia 185 181 4 2.2 761 Austria 306 218 88 40.4 1,055 Othera 244 253 (9) (3.6) 1,031 Profit from operations (EBIT) 339 345 (6) (1.7) 744 EBIT margin % 11.7 12.3 6.3 Depreciation, amortization and impairment losses (696) (559) (137) (24.5) (3,013) EBITDA 1,035 905 130 14.4 3,757 EBITDA ALb 921 891 30 3.4 3,691 Special factors affecting EBITDA (24) (7) (17) n.a. (122) EBITDA (adjusted for special factors) 1,059 911 148 16.2 3,880 EBITDA AL (ADJUSTED FOR SPECIAL FACTORS)b 945 898 47 5.2 3,813 Greece 283 280 3 1.1 1,173 Romania 26 33 (7) (21.2) 135 Hungary 121 120 1 0.8 540 Poland 92 95 (3) (3.2) 382 Czech Republic 107 108 (1) (0.9) 432 Croatia 83 81 2 2.5 374 Slovakia 82 80 2 2.5 320 Austria 118 74 44 59.5 336 Othera 33 27 6 22.2 121 EBITDA AL margin (adjusted for special factors)b % 32.7 31.9 32.1 CASH CAPEX (446) (438) (8) (1.8) (1,887) Total revenue Our Europe operating segment generated total revenue of EUR 2.9 billion in the first quarter of 2019, a year-on-year increase of 2.8 percent. In organic terms, i.e., assuming constant exchange rates and without the inclusion of UPC Austria as of July 31, 2018, revenue increased slightly by 0.4 percent. Our business customer operations made the biggest contribution to organic growth, mainly due to the good development of ICT business in Hungary. Fixed-network revenue at segment level also increased slightly against the prior-year period in the core business, mainly due to the positive revenue effect from broadband and TV business, especially in Greece, the Czech Republic, and Slovakia. Wholesale business remained on a par with the prior-year level. Mobile revenues remained constant, with increased, higher-margin service revenues – especially in Hungary, Poland, the Czech Republic, and Greece – being offset by lower revenues from terminal equipment business. Intense competition on the telecommunications markets had a negative impact on our revenue in some countries of our operating segment. Revenue from Consumers increased by 4.5 percent compared with the prior year, mainly driven by fixed-network operations. Here revenue increased on the back of the positive trend in TV and broadband business thanks to our innovative TV and program management activities as well as the continuous rollout of fiber-optic technology in most of our national companies. In addition, strong growth in the number of FMC customers had a positive impact on revenue. This offset moderately declining voice telephony revenues. Mobile revenues remained stable against the prior-year quarter. Revenue from Business Customers, especially in ICT, increased again in the first quarter of 2019, up 1.6 percent year-on-year. Core business with fixed-network and mobile communications remained stable as a result of our convergent SME solutions (MagentaOne Business), which we sell on the markets. We generated double-digit percentage figures compared with the prior year with our corporate customers in key ICT/cloud computing business as well as in the innovative smart city/IoT fields. Wholesale revenue remained stable year-on-year. Falling revenues from voice business were offset by rising revenues from IP data business with OTT players. Looking at the development by country, our national companies in Hungary, Greece, the Czech Republic, and Slovakia made the largest contributions to the organic development of revenue in the reporting period. This offset the decline in revenue in Romania in particular, where the negative trend is attributable to lower mobile revenues – with the positive effect of the increase in customer numbers being offset by lower prices. Higher wholesale revenue in the fixed-network business offset revenue declines in broadband and TV business. The B2B/ICT business with business customers made a positive contribution to revenue. EBITDA AL, adjusted EBITDA AL Our Europe operating segment generated adjusted EBITDA AL of EUR 945 million in the first quarter of 2019, an increase of 5.2 percent year-on-year. In organic terms, i.e., assuming constant exchange rates and without the inclusion of UPC Austria, adjusted EBITDA AL increased by 1.5 percent compared with the prior-year period, thus continuing the positive trend in 2019. The positive trend in adjusted organic EBITDA AL comes on the back of the slight increase in revenue and positive one-time effects, in particular in Poland and Croatia. Looking at the development by country, the increase in adjusted organic EBITDA AL was largely attributable to the positive trends at our national companies in Greece, Hungary, Croatia, Slovakia, and Austria. A contrasting development was reported primarily at the national company in Romania. In Romania, adjusted EBITDA AL was down 21.2 percent year-on-year, mainly as a result of the lower revenue contribution. Our EBITDA AL increased by 3.4 percent year-on-year to EUR 921 million, due primarily to higher adjusted EBITDA AL. At EUR -24 million, special factors were EUR 17 million higher than in the prior-year period. In organic terms, EBITDA AL remained stable. Development of operations in selected countries Greece. In Greece, revenue stood at EUR 697 million in the first quarter of 2019, up 1.6 percent year-on-year. This was driven primarily by higher mobile revenue and consistently high fixed-network revenue. Broadband business posted particularly strong growth as a result of the marketing of fiber-optic and vectored lines. The growth trends continued in our B2B/ICT business customer operations and wholesale business. TV revenues also increased compared with the first quarter of the prior year. The FMC offering developed positively, with rising customer numbers and corresponding revenues. In the first quarter of 2019, adjusted EBITDA AL in Greece increased by 1.1 percent year-on-year to EUR 283 million. The increase in revenue was partially offset by higher personnel costs. Savings in direct costs had a positive impact on adjusted EBITDA AL. Hungary. In Hungary, revenue grew substantially in the first quarter of 2019 by 3.6 percent compared with the prior-year period to EUR 459 million. In organic terms, it increased by 5.8 percent. This growth was driven by rising service and terminal equipment revenues in the mobile business. The fixed-network business also recorded a positive trend with sustained revenue growth in the B2B/ICT business customer operations. Broadband and terminal equipment business also made a positive contribution to revenue. Our MagentaOne portfolio of FMC products is enjoying success among consumers and business customers alike. Adjusted EBITDA AL increased slightly against the prior-year quarter to EUR 121 million. In organic terms, adjusted EBITDA AL increased by 3.0 percent. Austria. Our national company in Austria generated revenue of EUR 306 million in the first quarter of 2019, up 40.4 percent year-on-year. This increase is attributable to the effects of the acquisition of UPC Austria, which now allows us to offer fixed-network technology in addition to the mobile broadband internet services already being successfully marketed to our customers. In organic terms, i.e., excluding UPC Austria, revenue would remain on a par with the prior-year level. The increase in revenue also impacted adjusted EBITDA AL, which increased by 59.5 percent year-on-year to EUR 118 million. Adjusted for the acquisition of UPC Austria, adjusted EBITDA would have been 4.8 percent higher year-on-year. Poland. Revenue at our national company in Poland decreased by 7.2 percent compared with the prior-year quarter to EUR 348 million; in organic terms, it decreased by 4.7 percent. This decrease is mainly due to lower revenue from mobile terminal equipment business, which could not be offset by the 2.8 percent increase in service revenues. B2B/ICT business customer operations recorded higher revenues as a result of the integration of the systems solutions business in 2017. The traditional fixed-network business recorded a decline overall. Adjusted EBITDA AL stood at EUR 92 million, down 3.2 percent year-on- year. In organic terms, adjusted EBITDA AL grew slightly by 0.4 percent. The downward trend in revenue was offset by an even larger reduction in direct costs; indirect costs also declined slightly compared with the prior-year period. Overall, the revenue trend, especially in the sale of terminal equipment and in fixed-network business, as well as a need for increased investment due to technological development and requirements, resulted in a lowering of revenue and earnings expectations in Poland. EBIT EBIT in our Europe operating segment decreased by 1.7 percent in the first quarter of 2019 to EUR 339 million. Whereas previously expenses had been recognized in connection with operating leases, the right-of- use assets recognized in this context since the application of accounting standard IFRS 16 as of January 1, 2019 result in particular in higher depreciation charges. The decline in EBIT was driven by the increase in other depreciation, amortization and impairment losses compared with the prior-year period. Cash capex In the first quarter of 2019, our Europe operating segment reported cash capex of EUR 446 million, up 1.8 percent year-on-year. Alongside more subdued investments at some national companies, our capital expenditures were focused primarily on building out our broadband and fiber-optic technology in Greece, Romania, Hungary, and Croatia as part of our integrated network strategy. Limited payments were made in the first quarter of 2019 for the acquisition of spectrum licenses, primarily in Hungary. schließen FMC - Fixed-Mobile Convergence The merger of fixed-network and mobile rate plans for customers that have fixed-network and mobile contracts with Deutsche Telekom. schließen FTTH - Fiber To The Home In telecommunications, FTTH means that the fiber-optic cable is terminated right in the user’s home or apartment. schließen FTTB - Fiber To The Building or Fiber To The Basement In telecommunications, FTTB means that the fiber-optic cable is terminated in the user’s house (basement). schließen FTTC - Fiber To The Curb In the FTTC architecture the fiber-optic cable is not terminated inside users’ homes (see FTTH) but in a cable distribution box (gray street cabinet). Existing copper technology is used for the last section of the connection to the user. schließen IP - Internet Protocol Non-proprietary transport protocol in Layer 3 of the OSI reference model for inter-network communications. schließen PSTN - Public Switched Telephone Network Global public telephone network comprising elements such as telephones, connecting cables, and exchanges. schließen Prepay/prepaid In contrast to postpay contracts, prepay communication services are services for which credit has been purchased in advance with no fixed-term contractual obligations. schließen 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. schließen 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). schließen Prepay/prepaid In contrast to postpay contracts, prepay communication services are services for which credit has been purchased in advance with no fixed-term contractual obligations. schließen M2M - Machine to Machine Communication between machines. The information is automatically sent to the recipient. For example, in an emergency, alarm systems automatically send a signal to security or the police. schließen LTE - Long Term Evolution New generation of 4G mobile communications technology using, for example, wireless spectrum on the 800 MHz band freed up by the digitization of television. Powerful TV frequencies enable large areas to be covered with far fewer radio masts. LTE supports speeds of over 100 Mbit/s downstream and 50 Mbit/s upstream, and facilitates new services for cell phones, smartphones, and tablets. schließen OTT Player - Over-The-Top Player Provider of IP-based, platform-independent services, such as WhatsApp. schließen Optical fiber Channel for optical data transmission. schließen 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. schließen ICT Information and Communication Technology schließen Wholesale Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing. schließen Service revenues Revenues generated with mobile customers from services (i.e., revenues from voice services – incoming and outgoing calls – and data services), plus roaming revenues, monthly charges, and visitor revenues. schließen Cloud computing Refers to the dynamic provision of infrastructure, software, or platform services online. Apart from a high level of automation and virtualization, the services provided have to be multi-client-capable and include standardized hardware and software. Customers source these services on demand and pay based on actual usage. The communication infrastructure may be the internet (public cloud), a corporate network (private cloud), or a mix of the two (hybrid cloud). Dynamic Services is a T-Systems product for the flexible procurement of ICT resources and services. schließen IOT - Internet of Things The IoT enables the intelligent networking of things like sensors, devices, machines, vehicles, etc., with the aim of automating applications and decision-making processes. Deutsche Telekom’s IoT portfolio ranges from SIM cards and flexible data rate plans to IoT platforms in the cloud and complete solutions from a single source. schließen IP - Internet Protocol Non-proprietary transport protocol in Layer 3 of the OSI reference model for inter-network communications. schließen ICT Information and Communication Technology schließen FMC - Fixed-Mobile Convergence The merger of fixed-network and mobile rate plans for customers that have fixed-network and mobile contracts with Deutsche Telekom.