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. Hence, alongside fixed-network and mobile communications products, we also market convergence products. Our MagentaEINS convergence product remains very popular among customers, with more than 4.8 million subscribers at the end of the first half of 2020.

We continued to see strong demand for our fiber-optic-based lines. As of the end of June 2020, the total number of lines had increased to around 15.2 million. In other words, we connected a further 775 thousand lines to our fiber-optic network in Germany in the first six months of 2020. 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 further 1.2 million mobile customers in the first six months of 2020. Of these, a total of 251 thousand were contract customers under our Telekom and congstar brands. Sustained high demand for mobile rate plans with included data volumes continues to drive this trend. The number of mobile contract customers with resellers (service providers) decreased slightly, primarily due to the volatile developments at some of our service providers. We have added 991 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 extremely popular. At the end of the first half of 2020, 3.5 million customers were using this option, up by 54 percent year-on-year.

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 further development of such products – for instance, MagentaTV with exclusive access to a wide range of additional content in the Megathek library and via popular streaming services – as well as TV lines and fiber-optic-based lines.

The number of broadband lines increased by 170 thousand compared with year-end 2019, while the number of TV customers increased by 106 thousand in the first six months of 2020. In traditional fixed-network business, the number of lines declined by 175 thousand. This marked a sharp drop in line losses compared with the prior-year period, which had been affected in particular by the migration of consumers to IP.

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 June 2020, fiber-optic-based lines accounted for 51.7 percent of all lines – 2.8 percentage points higher than at the end of 2019. This growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 277 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 the first half of 2020 was around 11.9 million.

Development of operations

Total revenue

In the first six months of 2020, we generated total revenue of EUR 10.9 billion, which was up by 1.0 percent year-on-year. This increase was mainly due to the positive trend in our fixed-network business on the back of growth in broadband revenues of 5.1 percent, as well as to stable mobile revenues. Overall, the coronavirus pandemic was the main factor affecting revenue in the second quarter of 2020 (e.g., as a result of travel restrictions, temporary shop closures, the large-scale transition to working from home, and the cancellation of events). These effects had a negative impact on roaming and visitor revenues, as well as on terminal equipment revenue. By contrast, variable revenue components developed positively. The growth in fixed-network business was sufficient to offset the overall decline in revenues.

Revenue from Consumers grew by 1.4 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 by 4.1 percent. Mobile business grew by just 0.3 percent, largely due to the negative development in roaming and visitor revenues as a consequence of the coronavirus pandemic.

Revenue from Business Customers increased by 0.5 percent. IT revenues increased by 7.9 percent and mobile revenues by 0.4 percent compared with the prior-year period. Business customer operations were also affected by the aforementioned negative impact of the coronavirus crisis, particularly in mobile business. While volume losses – primarily from the migration of fixed-network lines to IP – continued to drive declines in traditional voice telephony, this effect was softened to some extent by lower losses from call charges.

Wholesale revenue was up in the first half of 2020 by 1.7 percent year-on-year, primarily due to the sustained positive revenue contributions from our contingent model. The coronavirus crisis drove a year-on-year increase in voice revenues from call minutes. This more than offset the general decline in revenues from declining volumes of unbundled local loop lines.

EBITDA AL, adjusted EBITDA AL

In the first half of 2020, we increased EBITDA AL by around EUR 100 million or 2.5 percent to around EUR 4.1 billion compared with the prior-year period. The main reasons for this increase are a sound operational development, driven by revenue growth and enhanced cost efficiency. Lower personnel costs resulting mainly from the smaller headcount and the ongoing implementation of efficiency enhancement and digitalization measures reduced costs. Higher expenses recognized as special factors for socially responsible instruments in connection with the staff restructuring had an offsetting effect. Adjusted EBITDA AL therefore increased by EUR 121 million or 2.8 percent year-on-year to EUR 4.4 billion. Our adjusted EBITDA AL margin increased to 40.4 percent, up from 39.7 percent in the prior-year period.

EBIT

Profit from operations was up 9.9 percent year-on-year to EUR 1.9 billion, partly as a result of the higher EBITDA level together with lower depreciation, amortization and impairment losses year-on-year, mainly on account of lower depreciation of property, plant and equipment.

Cash capex

Cash capex decreased by 15.3 percent year-on-year, mainly as a result of the changed accounting treatment of grants receivable from funding projects for the broadband build-out as of the start of the third quarter of 2019. As part of our integrated network strategy, we continue to invest in the broadband and fiber-optic rollout, and in our mobile infrastructure. The number of households connected by pure fiber-optic lines (FTTH/FTTB) increased by over 104 thousand in the second quarter of 2020 and now stands at 1.8 million. These lines enable speeds of up to one gigabit per second.