Germany

Customer development

Total

In Germany we continue to be market leader both in terms of fixed-network and mobile revenues. This success is attributable to our high-performance networks. We offer best customer experience with award-winning network quality – in the fixed network as in mobile communications – and with a broad product portfolio and excellent service. We want to offer our customers a seamless and technology-neutral telecommunications experience. To this end we market not only fixed-network and mobile products, but also convergence products such as our MagentaEINS Plus rate plan, introduced in September 2020. This offering bundles our connectivity services for home and on the move in a single contract. While the number of customers using our convergence products MagentaEINS and MagentaEINS Plus ebbed slightly, these products continue to enjoy sustained popularity with over 5 million customers in total having opted for these products by the end of March 2021. The customer base is thus stable compared with the end of the prior year.

We continued to see strong demand for our fiber-optic-based lines. As of the end of March 2021, the total number of lines had increased to over 16.3 million. In other words, we connected a further 368 thousand lines to our fiber-optic network in Germany in the first three months of 2021. With the progress made in fiber-optic rollout and vectoring technology, we also successfully drove forward the marketing of higher bandwidths.

Mobile communications

We won a total of 878 thousand mobile customers in the first quarter of 2021. Of these, 167 thousand were high-value contract customers under our Telekom and congstar brands. Sustained high demand for mobile rate plans with included data volumes alongside our multiple award-winning network quality continues to drive this trend. Since January 1, 2021, the customers of a service provider previously reported under contract customers have been reported under prepaid customers. Allowing for this change in disclosure, we have added 727 thousand prepaid customers since the start of the year, largely on the back of our automotive offerings targeted specifically at business customers.

The StreamOn option, with which customers can stream certain music, gaming, or video services without reducing their included data allowance, remains very popular. At the end of March 2021, almost 4.2 million customers were using this option, up by around 26 % year-on-year.

Fixed network

The fixed-network broadband market hosts a large number of players with differing infrastructures – from national through to regional providers. In order to consolidate our position on the market as Germany’s leading telecommunications provider, we continue to add new offerings to our portfolio.

The number of broadband lines increased by 93 thousand to over 14.2 million in the first quarter of 2021. Demand for our retail fiber-optic-based lines was the biggest driver here, accounting for 243 thousand lines. We added 32 thousand TV customers since the end of 2020, increasing the customer base by 0.8 % in the first three months of 2021. In traditional fixed-network business, the number of lines declined slightly by 28 thousand. This marked a considerable reduction in line losses compared with the prior-year period. As expected, the number of fixed-network lines remained stable at around 17.6 million lines.

Wholesale

As of March 31, 2021, fiber-optic-based lines accounted for 55.7 % of all lines – 1.3 percentage points higher than at the end of 2020. This growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 133 thousand compared with the end of the prior year, partly as a result of the shift to higher-value fiber-optic-based lines and partly from consumers switching to cable providers. In addition, our wholesale customers are migrating their retail customers to their own fiber-optic-based lines. The total number of wholesale lines at the end of March 2021 was around 11.8 million.

Development of operations

Total revenue

In the first three months of 2021, we generated total revenue of EUR 5.9 billion, which was up by 1.9 % year-on-year. This was mainly driven by broadband revenue growth of 6.5 % and a rise in terminal equipment revenue both in the fixed network by 7.0 % and in mobile communications by 14.0 %. Overall, revenue was affected by the effects of the coronavirus pandemic, such as temporary travel restrictions, lockdowns, and the deteriorated economic situation. This had a negative impact on roaming and visitor revenues. It also resulted in delays or postponements to current orders in B2B telecommunications business.

Revenue from Consumers increased by 3.9 % compared with the prior-year period. Volume-driven declines in revenue from voice components continued to impact on traditional fixed-network business. By contrast, revenue from broadband business grew by 6.6 %, due in part to the positive effects from increased customer appreciation for stable data lines. Fixed-network terminal equipment business posted growth of 11.5 % on the back of strong terminal equipment rental business. Mobile business increased by 4.4 %, primarily due to higher revenues from mobile terminal equipment business. Service revenues were at around the same level as in the prior year, impacted by the decline in roaming and visitor revenues as a result of the coronavirus pandemic.

Revenue from Business Customers was up 0.9 % year-on-year. IT revenue grew by 7.8 % against the prior-year period, mainly due to concerted efforts to drive forward digitalization in the SME sector. Mobile revenue decreased by 0.3 % overall. Sustained additions to our mobile customer base were not sufficient to offset the coronavirus-induced decline in roaming revenues. In organic terms, i.e., assuming constant exchange rates and adjusted for the reassignment of Deutsche Telekom IT (DT IT) Russia, DT IT Slovakia, and DT IT Hungary to the Group Headquarters & Group Services segment, revenue increased markedly by 2.8 % year-on-year.

Wholesale revenue was down at the end of March 2021 by 4.4 % year-on-year. The positive trend in the number of fiber-optic-based lines, driven mainly by the contingent model, continued with an increase of 9.4 % compared with the prior-year period. However, this was not enough to offset the decrease in revenues of 11.9 % from declining volumes of unbundled local loop lines. In addition, the prior-year period included a positive contribution – not repeated in the first quarter of 2021 – from the application of the IFRS 16 Leases accounting standard, which reduced the customer retention period in connection with the lease of unbundled local loop lines. Voice revenue was down against the prior-year period, which had contained coronavirus-induced higher revenues.

Adjusted EBITDA AL, EBITDA AL

EBITDA AL adjusted for special factors increased by EUR 75 million or 3.4 % year-on-year to EUR 2.3 billion. Our adjusted EBITDA AL margin increased to 38.8 %, up from 38.3 % in the prior year. The main reasons for this increase are a sound operational development, driven by high-value revenue growth and enhanced cost efficiency. Lower personnel costs resulting, among other factors, from the smaller headcount and the ongoing implementation of efficiency enhancement and digitalization measures reduced costs.

Lower expenses recognized as special factors for socially responsible instruments in connection with the staff restructuring, in particular the dedicated retirement program, had an offsetting effect. EBITDA AL grew in the first three months of 2021 to EUR 2.2 billion or 9.0 % above the prior-year level.

EBIT

Profit from operations was up 30.1 % year-on-year to around EUR 1.2 billion driven by the positive EBITDA trend together with lower depreciation, amortization and impairment losses year-on-year, mainly on account of lower amortization of intangible assets.

Cash capex

Cash capex decreased by EUR 189 million or 18.0 % compared with the prior-year period with two key factors at play here: Firstly, front-loaded investment in the fourth quarter of 2020 resulted in lower cash outflows year-on-year. Secondly, book capex with an impact on cash flows was below the prior-year level due to lower fiber-optic investments as a result of bad weather conditions.

Capital expenditure totaled around EUR 860 million in the first three months of 2021, in particular for the build-out of the 5G and fiber-optic networks. The number of households connected by pure fiber-optic lines increased to around 2.3 million by the end of March 2021. In mobile communications, our customers benefit from greater LTE network coverage. As of March 31, 2021, we supplied 98.8 % of households in Germany with LTE. Some 66 million people Germany-wide can already use 5G.