Systems Solutions

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.”

Order entry

Development of business

The first nine months of 2019 were dominated by efforts to establish our realigned Systems Solutions business. Investments in growth areas and innovation fields (such as the public cloud, the Internet of Things (IoT), digital solutions, security) create the basis for us to continue to focus our segment strategy on a sustainable shift into strategic growth areas. In parallel, we are working to strengthen our telecommunications operations and successfully manage the decline in traditional IT business.

With this in mind, we are executing a comprehensive transformation program, launched in 2018, under which we realigned our organization and workflows, adjusted capacities, developed a new strategy for our portfolio, and created three offering clusters. Ten portfolio units and one emerging business unit look after not only our traditional IT and telecommunications businesses, but also our growth areas (public cloud, Internet of Things (IoT), digital solutions, security, SAP, classified ICT, health, and road charging). Consistent with our efforts to implement the Group’s strategy pillar “Lead in business productivity,” in 2020 the next step will be to combine our telecommunications business with the telecommunications business of our Germany operating segment.

Order entry in our Systems Solutions operating segment was up by 9.8 percent in the first nine months of 2019, marking a consistently positive development compared with the already strong prior year. This growth is primarily due to a positive trend in our growth areas, in particular classified ICT, digital solutions, and public cloud.

Development of operations

Total revenue

Total revenue in our Systems Solutions operating segment in the first nine months of 2019 amounted to EUR 5.0 billion, slightly lower than the prior-year level. The upward revenue trend in our growth areas public cloud and health was not sufficient to offset the declines in traditional IT operations and in telecommunications business. The general downward trend in traditional IT operations was primarily a result of the decline in our international corporate customer operations and the falling market trend in our core market of Western Europe, as well as of deliberate portfolio decisions (such as the termination of desktop services).

EBITDA AL, adjusted EBITDA AL

In the first nine months of 2019, adjusted EBITDA AL at our Systems Solutions operating segment increased by EUR 36 million year-on-year to EUR 363 million, mainly due to effects from our transformation program, a positive development in the Open Telekom Cloud, and enhanced efficiency in traditional IT operations. EBITDA AL decreased by EUR 57 million year-on-year to EUR 127 million, mainly due to portfolio streamlining activities. As a result of both this and ongoing restructuring measures, special factors were up EUR 93 million year-on-year.

EBIT, adjusted EBIT

Adjusted EBIT in our Systems Solutions operating segment in the first nine months of 2019 increased by EUR 53 million year-on-year, coming in at EUR 78 million. The effects described under adjusted EBITDA AL were the main drivers of this increase. Whereas previously expenses had been recognized in connection with operating leases, the right-of-use assets recognized in this context since the application of accounting standard IFRS 16 as of January 1, 2019 result in particular in higher depreciation charges. EBIT decreased by EUR 64 million in the reporting period to EUR -185 million, also due to the effects described under EBITDA AL.

Cash capex

Cash capex in the Systems Solutions operating segment stood at EUR 233 million in the first nine months of 2019, compared with EUR 352 million in the prior-year period. This decrease was a result of high investments in a new ERP system in 2018. Capital expenditures remain focused on developing our operations in growth areas, such as digital solutions, the Internet of Things (IoT), and road charging.