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. At the end of May 2021, we launched MagentaEINS Unlimited with unlimited data across Germany. Our MagentaEINS family of FMC products remains very popular among customers, with over 5 million customers having opted for these products by the end of June 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 June 2021, the total number of lines had increased to over 16.6 million. In other words, we connected a further 659 thousand lines to our fiber-optic network in Germany in the first six 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 around 2.1 million mobile customers in the first half of 2021. Of these, 328 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 around 1.7 million 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 June 2021, almost 4.3 million customers were using this option, up by around 24.9 % 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 186 thousand to over 14.3 million in the first half of 2021. Demand for our retail fiber-optic-based lines was the biggest driver here, accounting for 456 thousand lines. We recorded an increase of 69 thousand in the number of TV customers compared with year-end 2020. In traditional fixed-network business, the number of lines declined slightly by 35 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 17.6 million lines.

Wholesale

As of June 30, 2021, fiber-optic-based lines accounted for 56.7 % of all lines – 2.3 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 248 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 June 2021 was around 11.7 million.

Development of operations

Total revenue

In the first six months of 2021, we generated total revenue of EUR 11.8 billion, which was up by 1.4 % 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 8.9 % and in mobile communications by 8.2 %. Although the effects of the pandemic on our revenue began to level off in the second quarter as the coronavirus situation eased, factors including temporary travel restrictions, lockdowns, and the deteriorated economic situation had an overall impact on our top line. This had a negative effect on roaming and visitor revenues. It also resulted in delays or postponements to current orders in B2B telecommunications business.

Revenue from Consumers increased by 3.3 % 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 6.8 %, due in part to the positive effects from increased customer appreciation for stable data lines. Fixed-network terminal equipment business posted growth of 10.4 % on the back of strong terminal equipment rental business. Mobile business increased by 3.1 %, primarily due to higher revenues from mobile terminal equipment business and a positive trend in the number of subscribers to our secondary brand, congstar.

Revenue from Business Customers was up 0.8 % year-on-year. IT revenue grew by 5.6 % against the prior-year period, mainly due to concerted efforts to drive forward digitalization in the SME sector. Overall, mobile revenue was up 1.1 % year-on-year, partly on the back of positive revenues from terminal equipment business and sustained growth of the customer base. 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 2.6 % year-on-year.

Wholesale revenue was down at the end of June 2021 by 6.9 % year-on-year. The positive trend in the number of fiber-optic-based lines continued, with an increase of 7.8 % compared with the prior-year period. However, this was not enough to offset the decrease in revenues of 11.6 % from declining volumes of unbundled local loop lines. The positive contribution in the prior-year period 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, no longer applied in the reporting period and thus had an additional negative impact. On April 1, 2021, the transition to the new commitment agreements to replace the former quota-based agreements under what has become known as the “contingent model” led to sharper declines in revenue in the second quarter than in the first quarter. This is primarily due to the fact that under the new commitment model the one-time payments are initially lower compared to the up-front payments that had been made under the quota-based agreements under the contingent model. The annual commitment payments will rise over the course of subsequent years. Voice revenue was down against the prior-year period, which had contained coronavirus-induced higher revenues.

For further information on the entry into force of the commitment agreements, please refer to the section “The economic environment – Regulation.”

Adjusted EBITDA AL, EBITDA AL

EBITDA AL adjusted for special factors increased by EUR 159 million or 3.5 % year-on-year to EUR 4.7 billion. Our adjusted EBITDA AL margin increased to 39.3 %, up from 38.5 % 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.

In contrast to the effects described under EBITDA AL, 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 six months of 2021 to EUR 4.4 billion or 5.3 % above the prior-year level.

EBIT

Profit from operations was up 21.1 % year-on-year to around EUR 2.4 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 265 million or 13.5 % 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, the share of 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 1.7 billion in the first six months of 2021, in particular for the build-out of the 5G and fiber-optic networks. The number of households passed by our fiber-optic network increased to around 2.5 million by the end of June 2021. In mobile communications, our customers benefit from greater LTE network coverage. As of June 30, 2021, we covered 98.9 % of households in Germany with LTE. 82.4 % of German households can already use 5G.