Highlights in the third quarter of 2020

Increase in guidance for the 2020 financial year

On account of the positive business trends both in our United States operating segment and outside of the United States – despite the challenging economic environment as a result of the coronavirus pandemic – we are raising our updated guidance from the second quarter of 2020 for the Group’s adjusted EBITDA AL and free cash flow AL for the 2020 financial year. Instead of the most recent forecast figure of around EUR 34 billion, we now expect to post adjusted EBITDA AL of at least EUR 35 billion. We are raising our forecast for free cash flow AL from the previous figure of at least EUR 5.5 billion to at least EUR 6.0 billion.

For more information, please refer to the section “Forecast” in the interim Group management report.

Business and other transactions

Realignment of the B2B telecommunications business in the Germany operating segment. Consistent with our efforts to systematically implement the Group strategy pillar “Lead in business productivity,” with effect from July 1, 2020, TC Services and Classified ICT, portfolio units previously assigned to the Systems Solutions operating segment, as well as Telekom Global Carrier (TGC) and Network Infrastructure (NWI), which had formerly been disclosed under the Europe operating segment and the Group Headquarters & Group Services segment respectively, have been combined in the Germany operating segment. As part of these transactions, the assets and liabilities assigned to the business areas were transferred to the Germany operating segment. In the Systems Solutions operating segment, the realignment of the B2B telecommunications business in combination with the effects of the coronavirus pandemic triggered ad hoc impairment testing, which identified a reduction in the business outlook for IT operations. The result was the recognition of a non-cash impairment loss of EUR 0.5 billion on non-current assets of the Systems Solutions cash-generating unit.

For further information on the realignment of the B2B telecommunications business and the different consummation dates required under company law, please refer to the section “Group organization, strategy, and management” in the interim Group management report and the section “Segment reporting” in the interim consolidated financial statements.

For further information on the ad hoc impairment testing, please refer to the section “Selected notes to the consolidated statement of financial position” in the interim consolidated financial statements.

Business combination of T‑Mobile US and Sprint. T‑Mobile US and Sprint combined their two businesses effective April 1, 2020 to form the “all-new,” larger T‑Mobile US. The transaction had previously worked its way through various approval processes involving numerous national and regional courts and authorities in the United States. As of July 1, 2020 a major prerequisite of the U.S. Department of Justice (DoJ) for approving the merger was duly fulfilled: the sale of Sprint’s prepaid business to U.S. satellite TV operator DISH Network. A deal was also signed to sell spectrum to DISH.

For further information on the business combination of T‑Mobile US and Sprint, please refer to the section “Group organization, strategy, and management” in the interim Group management report and the section “Changes in the composition of the Group” in the interim consolidated financial statements.

T‑Mobile US and American Tower expand agreement to rent and use cell sites. On September 14, 2020, T‑Mobile US and American Tower signed an agreement on the lease and use of cell sites. The agreement updates the existing agreements with American Tower to give T‑Mobile US greater flexibility to combine the T‑Mobile US and Sprint mobile networks and continue building out the 5G network.

Board of management

At the start of this year, Dr. Dirk Wössner, the Board of Management member for Germany, notified the Supervisory Board of Deutsche Telekom AG that he does not intend to extend his service contract beyond its expiration date of December 31, 2020. On June 18, 2020, the Supervisory Board of Deutsche Telekom AG appointed the current Board member for Europe, Srini Gopalan, as the new Board member for Germany effective November 1, 2020. Dr. Wössner resigned from his position effective midnight on October 31, 2020. On September 7, 2020, the Supervisory Board of Deutsche Telekom AG appointed Dominique Leroy to succeed Srini Gopalan as the Board member for Europe effective November 1, 2020.

Investments in networks

5G spectrum auctions. At the Netherlands’ first-ever 5G spectrum auction, which ended on July 21, 2020, T‑Mobile Netherlands purchased total spectrum of 70 MHz for which it paid EUR 400 million. T‑Mobile US secured eight regional spectrum licenses for USD 6 million at a CBRS auction for 5G in the United States that ended on August 25, 2020. In Austria, T‑Mobile Austria acquired total spectrum of 100 MHz for EUR 89 million at a further 5G auction that ended on September 11, 2020.

For more information on the spectrum auctions, please refer to the section “The economic environment” in the interim Group management report.

5G build-out in Germany. In the quarter just ended, we upgraded around 18 thousand further antennas with 5G technology and integrated them into our network as part of Germany’s largest 5G campaign. Deutsche Telekom now offers 5G in over 3,000 towns, cities, and municipalities covering some 40 million people Germany-wide. That applies not only to major cities such as Frankfurt/Main or Munich, but also to smaller communities like Wallgau in Upper Bavaria, or Lampertswalde in Saxony. Even the antennas on top of Germany’s highest peak, the Zugspitze, are now transmitting in 5G technology. In addition, at the Allianz Arena in Munich the first indoor 5G network is now offering high-speed internet throughout the subterranean areas and the FC Bayern Erlebniswelt museum.

For more details, please refer to our media information.

International network build-out. T‑Mobile US covers some 25 million people across the United States with 5G over the 2.5 GHz band and plans to increase this number to 100 million by the end of 2020. The company is also working in parallel to expand the network using 600 MHz spectrum as quickly as possible. T‑Mobile Austria is deploying innovative network technology to expedite the build-out of 5G in Austria and offers unlimited 5G internet at over 600 locations country-wide. In other words, T‑Mobile Austria now reaches around 25 percent of Austrian households and businesses. In August 2020, Magyar Telekom in Hungary marked a further milestone with its 5G service, activating dozens of new cell towers and offering gigabit download speeds in 23 municipalities.

European campus networks. T‑Mobile Polska has put Poland’s first 5G- and LTE-based campus network into operation for the hub4industry consortium. Meanwhile, T‑Mobile Czech Republic and VŠB – Technical University of Ostrava have completed work on the first 5G-ready private campus network.

Expansion of our LTE network. A total of 1,154 LTE sites across Germany have either been built from scratch or upgraded with LTE antennas since the start of 2020. Our LTE network covers 98.4 percent of German households as of the end of the third quarter of 2020. In the footprint countries of our Europe operating segment, we covered 97.3 percent of the population – around 107 million people – with LTE as of September 30, 2020.

Broadband build-out in Germany. Since the start of the year, some 3.4 million households in Germany have gained from Deutsche Telekom’s broadband build-out. In the third quarter of 2020 alone, we increased internet speeds for around 890 thousand households. 33.2 million households can subscribe to a rate plan with up to 100 Mbit/s, and 24.5 million households can purchase a rate plan with speeds of up to 250 Mbit/s or higher. The number of households that can be connected by pure fiber-optic lines (FTTH/FTTB) increased by over 106 thousand in the third quarter of 2020 and now stands at 1.9 million.

Cooperations and partnerships

Digital pact with the federal state of Saxony-Anhalt. Under the agreement, Deutsche Telekom will continue to build out the region’s broadband and mobile networks, connect all schools to the fiber-optic network, participate in innovative projects as a partner to universities, support municipal digitalization projects, and focus in particular on bringing 5G to the region. In return, Saxony-Anhalt will improve the framework conditions for all telecommunications companies by ensuring the availability of potential cell site locations, raising funds, and simplifying grant and approval processes.

Fiber-optic joint venture in Münster. Partners Telekom Deutschland and the city of Münster’s public utility company Stadtwerke Münster signed a memorandum of understanding in July 2020 to make high-speed fiber-optic internet (FTTH) available to some 160 thousand households in Münster by 2030. This will involve connecting around 40 thousand buildings to the fiber-optic network. The agreement is a major innovation project for both parties that will combine our products and services with Stadtwerke Münster’s strengths as a municipal utility company with longstanding experience in infrastructure realization.

5G labs open in Germany and the United States. Together with the Cologne University of Applied Sciences (TH Köln) and the University of Cologne’s GATEWAY Excellenz Start-up Center, we opened the 5G Co:Creation Lab at TH Köln’s Mülheim location. At the Lab, university-based start-up founders will have exclusive opportunities to cooperate with industry partners in testing and refining their ideas within a new, state-of-the-art 5G network. It is open both to the students at Cologne’s universities and to start-up founders throughout the federal state of North Rhine-Westphalia. In the United States, partners T‑Mobile US, Intel, and NASA founded the 5G Open Innovation Lab (5G OI Lab) in May of this year to provide developers access to platforms, businesses, and markets for testing new 5G use cases. In September 2020, 16 further companies were selected as the 5G OI Lab’s second cohort. T‑Mobile US is also running its 2020 Accelerator program, which offers companies the opportunity to work directly with the provider to develop and market 5G products.

For more details, please refer to our media information.

Cooperation for Gaia-X. OVHcloud and T‑Systems have agreed to cooperate following the Gaia-X European cloud initiative’s principles and to develop a joint Openstack public cloud platform. Their goal is to create a trusted public cloud offering for European markets and all sectors for which data sovereignty and GDPR compliance are key, including the public sector, essential infrastructure operators, and companies operating in strategic or sensitive areas of public interest.

For more details, please refer to our media information.

Products, rate plans, and services

MagentaEINS Plus: fixed network and mobile communications in a single contract. With our MagentaEINS Plus offering, we are the first provider in the German market to bundle connectivity for home and on the move in a single contract with no minimum term. Customers and their communities nationwide can benefit from unlimited data volumes at home over their domestic internet connection and enjoy mobile surfing including 5G with up to 100 or 250 Mbit/s. EU roaming including Switzerland also comes bundled as well as one gigabyte of data outside the EU.

For more details, please refer to our media information.

For more details, please refer to our media information.

Innovations in the cloud. The MagentaGaming cloud service combines network, software, and innovation: Our high-performance servers stream games directly from the cloud to the customer’s computer or device. This service signals the end of long download times or the purchase of additional hardware. Voice telephony is also undergoing cloudification: In future, we will manage our customer lines centrally from cloud data centers based in Germany. Virtualizing these network functions both speeds up the fixed network and makes it much more efficient. For developers, we now offer the Cloud Topology Designer: A new tool for building applications for the Open Telekom Cloud, Google Cloud, and AWS using drag and drop.

Full-service packages for even more personalized service. Our new service packages make it easy for customers to optimize their at-home connectivity. The Concierge Service assigns a dedicated personal advisor offering professional home-networking support on the spot for consumers switching to Deutsche Telekom from another provider, moving house, or building their own home. After initial set-up, our Digital Home Service assists with all questions relating to remote working, home schooling, and the smart home.

Awards

The illustration below shows the main awards received in the third quarter of 2020.

For more information on the aforementioned highlights in the third quarter of 2020, please refer to www.telekom.com/en/media/media-information