Germany

For information on changes in the organizational structure, 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 – like in the connect readers’ choice awards where we came top of the fixed and mobile provider categories – and a broad portfolio of products. Growing demand for our integrated product MagentaEINS drove up the number of new customers by 381 thousand compared with the end of 2017, bringing the total number of customers added in the first three quarters of 2018 since the product was launched to 4.0 million.

Compared with year-end 2017, we won another 521 thousand mobile communications customers in the first three quarters of 2018. 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. Seasonal business fluctuations at one of our service providers continued to have a negative effect overall on customer development. We recorded growth in the number of prepay customers.

By the end of the third quarter of 2018, we had migrated 20.7 million retail and wholesale lines to IP, which corresponds to an overall migration rate of 82 percent.

We continued to see strong demand for our fiber-optic products. As of the end of the third quarter of 2018, the number of lines had increased to 11.6 million overall. In other words, we connected another 2.0 million lines to our fiber-optic network in Germany in the first nine months of 2018. With the progress made in fiber-optic rollout and innovative vectoring technology, we also drove the marketing of higher bandwidths.

Mobile communications

Compared with year-end 2017, we won a total of 247 thousand branded contract customers under the Telekom and congstar brands and at Telekom Deutschland Multibrand GmbH. The number of mobile contract customers with service providers decreased, primarily due to seasonal business fluctuations at one of our service providers. The number of prepay customers increased by 1,228 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, focusing on integrated offers and on TV and fiber-optic lines. For example, if we take into account the new products launched for business customers since the start of 2018, the number of broadband lines in our portfolio rose by 295 thousand between year-end 2017 and the end of the third quarter of 2018. The number of TV customers increased by 152 thousand. In the traditional fixed network, the number of lines decreased by 492 thousand.

Our MagentaZuhause rate plans offer a comprehensive product portfolio for the fixed network based on IP technology and rate plan-specific bandwidths. MagentaZuhause Hybrid bundles fixed-network and mobile technology in a single router. To date, 434 thousand customers, primarily based in rural areas, have selected this innovative product.

Wholesale

At the end of the third quarter of 2018, fiber-optic lines accounted for 39.4 percent of all lines – 7.3 percentage points higher than at the end of 2017. This accelerated growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 736 thousand or 12.0 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. The total number of wholesale lines stood at 11.9 million at the end of the third quarter of 2018.

Development of operations

Total revenue

Total revenue decreased by 1.0 percent compared with the first three quarters of 2017. Adjusted for the effects of the IFRS 15 accounting standard, the application of which is mandatory from January 1, 2018, total revenue developed on a par with the prior year. In mobile business, revenue declined by 2.3 percent year-on-year; excluding the effects of IFRS 15, revenue increased compared with the prior-year period. Higher IT and broadband revenues had a positive impact on fixed-network revenue. This was sufficient to almost completely offset the year-on-year decline in fixed-network revenues.

Revenue from Consumers declined by 2.3 percent year-on-year; adjusted for the effects of IFRS 15, the decline was only marginal. Volume-related revenue decreases continued to affect traditional fixed-network business. By contrast, revenue from broadband business increased.

Revenue from Business Customers grew by 1.2 percent; this growth was even stronger once adjusted for the effects of IFRS 15. Mobile revenues increased by 2.7 percent and IT revenues by 25.5 percent compared with the same period of last 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.

Revenue from Wholesale business in the first three quarters of 2018 was slightly below the prior-year period. Adjusted for the effects of IFRS 15, revenue would have grown.

EBITDA, adjusted EBITDA

EBITDA amounted to EUR 5.9 billion at the end of the third quarter of 2018, down 2.3 percent year-on-year due mainly to higher special factors for expenses in connection with our staff restructuring. Adjusted for special factors, EBITDA totaled EUR 6.4 billion at the end of the third quarter of 2018, up 1.8 percent compared with the same period of last year. This year-on-year increase was attributable largely to the lower headcount, lower revenue-dependent costs, and the successful implementation of our efficiency and digitalization initiatives. Our adjusted EBITDA margin increased to 40.0 percent, up from 38.9 percent in the prior-year period.

EBIT

Profit from operations decreased by 7.8 percent year-on-year to EUR 3.0 billion. In addition to the effects described under EBITDA, depreciation, amortization and impairment losses increased on account of sustained high investments in our network infrastructure.

Cash capex

Cash capex increased by 4.3 percent compared with the third quarter of 2017. 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.

For further details, please refer to our (PDF:) IR Backup (PDF).