Germany

For information on changes resulting from the first-time application of the IFRS 16 “Leases” accounting standard, please refer to the section “Group organization, strategy, and management.”

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 multi-award-winning network quality – in the fixed network as in mobile communications – and with a broad product portfolio and excellent service. Thanks to the sustained popularity of our convergent MagentaEINS offering, our MagentaEINS customer base totaled 4.5 million at the end of the first half of 2019.

High demand for mobile rate plans with included data volumes resulted in an increase in the number of branded contract customers under the Telekom and congstar brands. Our initiatives in the automotive sector drove growth in the number of prepay customers.

We made further headway with our IP transformation program, and by the end of the first half of 2019 had migrated 23.7 million retail and wholesale lines to IP, bringing the total migration level to 93 percent of all lines.

We continued to see strong demand for our fiber-optic products. As of the end of the first half of 2019, the number of lines had increased to 13.4 million overall. In other words, we connected 1,209 thousand lines to our fiber-optic network in Germany in the first six months of 2019. With the progress made in fiber-optic rollout and vectoring technology, we also drove the marketing of higher bandwidths.

Mobile communications

We won a further 625 thousand mobile customers in the first half of 2019 compared with year-end 2018. Of these, a total of 271 thousand were contract customers under our Telekom and congstar brands. The number of mobile contract customers with resellers (service providers) decreased, primarily due to the volatile developments at some of our service providers. The number of prepay customers increased by 1,086 thousand.

Fixed network

Due to the persistently challenging development in the fixed-network market, primarily owing to aggressive pricing offers of competitors, we are pursuing new paths in marketing. Our focus is on convergent offerings and their further development – for instance, MagentaTV with exclusive access to a wide range of additional content – as well as TV lines and fiber-optic lines. We continue to see growth in our broadband lines. The number of TV customers increased by 124 thousand. In the traditional fixed network, the number of lines decreased by 397 thousand.

Our MagentaZuhause rate plans offer a comprehensive product portfolio for the fixed network based on IP technology and rate plan-specific bandwidths.

Wholesale

At the end of the first half of 2019, fiber-optic lines accounted for 45.7 percent of all lines – 4.1 percentage points higher than at the end of 2018. This accelerated growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 323 thousand or 6.2 percent compared with the end of the prior year. This is due first to the move to higher-quality fiber-optic lines, and second to retail customers switching to cable operators. In addition, wholesale customers are migrating their retail customers to their own fiber-optic lines. In wholesale, the number of lines stood at 12.0 million as of June 30, 2019.

Development of operations

Total revenue

Total revenue was up slightly year-on-year by 0.9 percent, mainly due to an increase of 3.2 percent in mobile business thanks to higher service and terminal equipment revenues. Higher IT and broadband revenues had a positive effect on fixed-network business. This was sufficient to almost completely offset the decrease in fixed-network revenue compared with the first half of 2018 (primarily from voice components).

Revenue from Consumers grew by 1.1 percent year-on-year. Volume-driven declines in revenue from voice components continue to strongly impact on traditional fixed-network business. By contrast, revenue from broadband business increased. Mobile business also grew by 3.8 percent.

Revenue from Business Customers increased by 1.4 percent. Mobile revenues increased by 2.1 percent and IT revenues by 25.2 percent compared with the first half of the prior year. In the fixed network, by contrast, a decline was recorded in traditional voice telephony, due largely to the increasing number of customers moving to flat-rate plans in connection with the migration to IP.

Wholesale revenue remained on a par with the prior-year level in the first six months of 2019 due to the positive contributions to revenue from our contingent model, which offset the decline in revenue from ULLs/voice.

EBITDA AL, adjusted EBITDA AL

EBITDA AL amounted to EUR 4.0 billion in the first half of 2019, an increase of 4.2 percent against the prior-year period. In addition to the positive contributions from the development of revenue, this increase was also primarily due to lower personnel costs, mainly as a result of a lower headcount and a decline in expenses for socially responsible instruments in connection with the staff restructuring. The successful implementation of efficiency and digitalization measures also had a positive impact. Adjusted EBITDA AL increased by 2.4 percent to EUR 4.3 billion year-on-year due to the same reasons. Our adjusted EBITDA AL margin increased to 39.7 percent, up from 39.1 percent in the first half of 2018.

EBIT

Profit from operations decreased by 7.1 percent compared with the first half of the prior year to EUR 1.8 billion due to higher depreciation, amortization and impairment losses on account of sustained high investments in our network infrastructure.

Cash capex

Cash capex increased by 8.3 percent compared with the first half of 2018. As part of our integrated network strategy, we again made significant investments in the broadband and fiber-optic rollout, our IP transformation, and our mobile infrastructure.