Highlights in the third quarter of 2018 Forecast for 2018 revised again In view of strong business performance in our United States operating segment, we are again revising upward our forecast for adjusted Group EBITDA – having already adjusted it in the first and second quarters of 2018 – and are also raising our guidance for the Group’s free cash flow for the 2018 financial year. Instead of the most recent forecast figure of around EUR 23.4 billion, we now expect to post adjusted EBITDA of around EUR 23.6 billion. We are raising our forecast for free cash flow from the previous figure of around EUR 6.2 billion to around EUR 6.3 billion. Board of Management Birgit Bohle has been appointed as the new Board of Management member responsible for Human Resources (CHRO) and as Labor Director of Deutsche Telekom AG, and will succeed Christian P. Illek effective January 1, 2019. Christian P. Illek will move to his new position as Deutsche Telekom AG’s Chief Financial Officer on the same date. For more details, please refer to our media information. Thorsten Langheim will become a member of the Board of Management at Deutsche Telekom AG as of January 1, 2019. He will take up the role of head of the newly created “USA and Corporate Development” Board department. The Supervisory Board intends the new Board department to better reflect the importance of U.S. business to the Group, in addition to placing a stronger emphasis on evolving the portfolio. Deutsche Telekom AG will thus have nine Board departments as of this date. For more details, please refer to our media information. Acquisition of UPC Austria In December 2017, T-Mobile Austria agreed to acquire Austria’s leading cable operator, UPC Austria. The European Commission approved the deal on July 9, 2018 and the transaction was consummated on July 31, 2018. A purchase price of EUR 1.8 billion was paid in cash. The UPC Austria group has been fully included in our consolidated financial statements since the acquisition date. In line with our strategy, this acquisition will allow us to offer convergent product bundles to our customers on the European market. Investments in networks 5G network for Germany. At our Network Day in Berlin in October, we presented an eight-point plan for a fast, successful 5G rollout. By 2025, we plan to cover 99 percent of the population nationwide and 90 percent of the country with 5G. We intend to invest an additional EUR 20 billion in Germany by 2021. To ensure that business, industry, and the general public get the most powerful 5G network, we will also team up with partners. With over 500,000 kilometers of cable now laid, our fiber-optic network forms the basis for high-performance fixed and mobile infrastructure. It currently serves 24.4 million households with surfing speeds of up to 100 Mbit/s and more over the fixed network. Following the market launch of supervectoring in August 2018, maximum speeds of up to 250 Mbit/s became available to 6 million households. As of the end of September, 8.5 million households were benefiting from such transmission rates. Our aim is to offer speeds of up to 250 Mbit/s to 28 million households in 2019. For more details, please refer to our media information. Mobile communications pact in Bavaria: 1,000 new cell sites. We have reasserted our extensive build-out plans to further improve the mobile communications network in Bavaria. We intend to build 1,000 new cell sites here by the end of 2020. In addition, we will upgrade 1,200 existing sites with extra services. We will also continue to modernize our network in Bavaria, equipping the majority of cell sites with state-of-the-art Single RAN and LTE 900 technology by the end of 2018. For more details, please refer to our media information. Additionally, the state of Hesse will benefit from 530 new cell sites by the end of 2020. For more details, please refer to our media information. We plan to increase the total number of sites across Germany to 36,000 by 2021. This build-out will help fill mobile coverage gaps and increase bandwidths. Nationwide, some 97.6 percent of the population can currently use our LTE network. This percentage is set to increase to 98 percent by 2019. German data fortress continues to grow: New cloud data center opens. The next phase of our expansion activities at the high-performance data center in Biere, near Magdeburg, went live in September 2018. Biere now has a capacity of 150 petabytes for processing and storing cloud data. Since the commissioning of this high-tech Fort Knox in 2014, global demand for cloud services has continued to increase substantially. In response, T-Systems has systematically developed into a multi-cloud provider that collaborates with leading international providers of cloud solutions. The Open Telekom Cloud, our public cloud offering, is the only cloud available in Germany that has received the Trusted Cloud certificate issued by the Federal Ministry for Economic Affairs and Energy. For more details, please refer to our media information. T-Mobile Polska signs wholesale FTTH agreement with Orange. In July 2018 an agreement was signed under which T-Mobile Polska will provide services on Orange’s fiber-optic lines. Under the agreement, T-Mobile Polska will gain access to the partner’s fiber-optic infrastructure and will use it to provide services based on data transmissions in non-regulated areas. The contract will guarantee T-Mobile Polska access to 1.7 million households. Together with the partner’s plans to invest in the deregulated area by the end of 2020 and in the fiber-optic network in regulated areas, this will enable T-Mobile Polska to potentially reach over 4 million households. T-Mobile Polska aims to provide initial individual customers and small and medium-sized enterprises with the full range of fixed-network services based on fiber-optic infrastructure in the first quarter of 2019 at the latest. The agreement is to run for 20 years. In addition to the agreement with Orange, T-Mobile Polska signed another wholesale FTTH agreement with network operator Nexera, covering more than 450 thousand further households, which will be connected by the end of 2020. Innovations and partnerships “Magenta connects.” This was the motto at our booth at IFA 2018 in Berlin, where we brought our entire world of Magenta products to life for trade fair visitors. The main focus was on Magenta Entertainment, “In the best network,” Magenta Connected Life, MagentaEINS, and MagentaSERVICE. Selected highlights: An interactive multi-player drone race on a 5G LED big screen demonstrated the capabilities of the network of the future. The booth also featured an e-sport arena where experts from SK Gaming invited visitors to try out e-sport games including League of Legends and FIFA, as well as mobile gaming. In the MagentaSERVICE zone, the new SprachID service took center stage. In the future, customers won’t need to remember account numbers and passwords – when they phone up they’ ll be recognized by their voice alone thanks to a unique digital system. For more details, please refer to our media information. Global initiative for sustainable cities. In September 2018, we announced a far-reaching collaboration with United Smart Cities (USC) to help cities become smarter and more sustainable. The United Smart Cities program is a global initiative established and coordinated by the United Nations Economic Commission for Europe (UNECE) in cooperation with the Organization for International Economic Relations (OiER). As part of the partnership, we have also taken on a board position in USC’s Global Industry Advisory Board (GIAB). The GIAB consists of 12 members who provide strategic counsel to all UN organizations on smart city issues across the globe. For more details, please refer to our media information. 5G for connected mobility. In just a few years, cars, traffic signals, and street lights will all share information via the 5G communication standard. And these are just three examples for traffic in the future. The systems involved will have to be secure. Together with DEKRA, we are working to equip the Lausitzring test and race track with 5G technology to create an intelligent mobility test site. Multiple scenarios will be played out at the site: Connected cars and autonomous vehicles will communicate in real time with each other, with road infrastructure, and with cyclists and pedestrians. This creates the perfect environment for car manufacturers, suppliers, and telecommunications component manufacturers to test intelligent mobility in a real-world environment. For more details, please refer to our media information. Digital Cities and Regions initiative. In July 2018, we joined forces with the German Association of Towns and Municipalities (DStGB) to launch a new initiative called the Executive Program Digital Cities and Regions. The partners develop intelligent, tailor-made solutions with the aim of promoting digitalization in cities and communities and preparing the regions for the digital future. Improving citizens quality of life takes top priority. The defined success factors are common platforms, a good digital infrastructure, and courage for cultural change. As a digital partner, we provide the necessary expertise and help the towns and municipalities to launch initial projects. 23 cities from across Germany with very different expectations of the program have now joined the initiative. Towards the end of the year, cities and municipalities will implement their first pilot projects. For more details, please refer to our media information. Strategic partnership for better road safety. In August 2018, we launched a strategic partnership with the automobile association ADAC, with plans to offer products and attractive benefits to our customers and ADAC members. To this end, we intend to leverage the opportunities of traffic digitalization and are working with ADAC, for example, to expand our CarConnect offerings. In the future, drivers will be able to report a breakdown to ADAC with just a few clicks in the CarConnect app. The location of the damaged vehicle is transmitted automatically, allowing CarConnect customers to quickly and easily benefit from ADAC’s breakdown service. For more details, please refer to our media information. Cyber-security for banks. The number of cyber-attacks on banks worldwide is on the rise. Industry regulators are continually tightening up IT security requirements for banks. That is why Fiducia & GAD IT AG (the IT service provider for all 900 Volksbank and Raiffeisenbank branches in Germany) and the German DZ Bank Group have joined forces with Telekom Security to improve cyber-security for the credit unions over the long term. In the first phase, the partners established a Security Operation Center (SOC) to handle specific IT security incidents for DZ Bank. The SOC, which is managed jointly by Telekom Security and Fiducia & GAD IT AG, is already operating 24/7. New products “Hallo Magenta” – the magic words to make sure your home obeys your every command. In August 2018, we presented our very own Smart Speaker featuring intelligent voice assistance. The voice assistant allows customers to operate Deutsche Telekom’s Magenta SmartHome, MagentaTV, and audio control services using simple spoken commands. The Smart Speaker will comprise a wide range of offers from renowned partners. For more details, please refer to our media information. New IoT solutions for consumers and business customers. We have further extended our Smart Connect portfolio of IoT services for consumers. Combi Protect lets users keep track of pets, purses, luggage, and more on their smartphone using a GPS tracker and app. Customers can choose to track movements in real time and set digital boundaries that trigger an alarm on the smartphone if crossed. We also plan to expand our range of IoT solutions for business customers to include our Building Monitoring & Analytics IoT bundle. The building management solution could be used to optimize building services, energy efficiency, and much more. For more details, please refer to our media information. In August 2018, T-Mobile US introduced “Un-carrier Next,” a new initiative that changes the structure of their customer service department and solves several significant pain points for customers: Postpaid customers will get directly through to a human when they call customer support, and that human will be one member of a team of experts devoted to that customer and other customers in their geographic region. In September 2018, T-Mobile US announced that MetroPCS is becoming MetroTM by T-Mobile (Metro) and Metro introduced new unlimited rate plans with tiers that include added benefits. Metro will offer Amazon Prime, expanded cloud storage, and mobile backup through Google One, as well as the latest smartphones. Awards The illustration below shows the main awards received in the third quarter of 2018. For details on more awards, please go to www.telekom.com/media. Major awards in the third quarter of 2018
