Germany Customer development (XLSX:) Download thousands Sept. 30, 2020 June 30, 2020 ChangeSept. 30, 2020/June 30, 2020% Dec. 31, 2019 ChangeSept. 30, 2020/Dec. 31, 2019% Sept. 30, 2019 ChangeSept. 30, 2020/Sept. 30, 2019% Mobile customers 47,844 47,395 0.9 46,189 3.6 45,598 4.9 Contract customers 25,744 25,505 0.9 25,291 1.8 25,138 2.4 Prepaid customers 22,100 21,889 1.0 20,898 5.8 20,460 8.0 Fixed-network lines 17,602 17,649 (0.3) 17,824 (1.2) 17,996 (2.2) Of which: retail IP-based 17,509 17,509 0.0 17,479 0.2 17,158 2.0 Retail broadband lines 13,997 13,900 0.7 13,730 1.9 13,683 2.3 Of which: optical fiber 9,246 9,012 2.6 8,529 8.4 8,231 12.3 Television (IPTV, satellite) 3,787 3,724 1.7 3,618 4.7 3,544 6.9 Unbundled local loop lines (ULLs) 4,235 4,361 (2.9) 4,638 (8.7) 4,770 (11.2) Wholesale broadband lines 7,633 7,552 1.1 7,372 3.5 7,282 4.8 Of which: optical fiber 6,287 6,155 2.1 5,863 7.2 5,719 9.9 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. To this end we market not only fixed-network and mobile products, but also convergence products such as our brand-new MagentaEINS Plus rate plan, introduced on September 22, 2020. This new offering bundles our connectivity services for home and on the move in a single contract. Our MagentaEINS convergence product remains very popular among customers, with more than 4.9 million subscribers at the end of the third quarter of 2020. That’s an increase of 4.5 percent against year-end 2019. We continued to see strong demand for our fiber-optic-based lines. As of the end of September 2020, the total number of lines had increased to over 15.5 million. In other words, we connected a further 1.1 million lines to our fiber-optic network in Germany in the first nine months of 2020. 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 further 1.7 million mobile customers in the first nine months of 2020. Of these, a total of 453 thousand were high-value contract customers under our Telekom and congstar brands. Sustained high demand for mobile rate plans with included data volumes continues to drive this trend. The number of mobile contract customers with resellers (service providers) increased slightly, primarily due to the volatile developments at some of our service providers. We have added 1.2 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 the third quarter of 2020, more than 3.7 million customers were using this option, up by 34 percent year-on-year. 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. Our focus is on convergence offerings and further development of such products: We offer MagentaTV with exclusive access to a wide range of additional content in the Megathek library and via popular streaming services, and with TV lines and fiber-optic-based lines and, since September 2020, our MagentaEINS Plus rate plan. Our brand-new convergence product offers customers Germany-wide unlimited data volume plus added benefits for the community and no minimum contract term. The number of broadband lines increased by 267 thousand or 1.9 percent compared with year-end 2019. After completing the IP migration for all consumers in Germany, broadband customer additions were up significantly compared with 123 thousand additions in the first three quarters of 2019. We added 169 thousand TV customers in the first nine months of 2020, increasing the customer base by 4.7 percent compared with the end of the prior year. In traditional fixed-network business, the number of lines declined by 222 thousand. This marked a considerable reduction in line losses compared with the prior-year period, which had been affected in particular by the migration of consumers to IP. Wholesale At the end of September 2020, fiber-optic-based lines accounted for 53.0 percent of all lines – 4.2 percentage points higher than at the end of 2019. This growth was driven largely by high demand for our contingent model. The number of unbundled local loop lines decreased by 403 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 the third quarter of 2020 was around 11.9 million. Development of operations (XLSX:) Download millions of € Q1 2020 Q2 2020 Q3 2020 Q3 2019 Change % Q1-Q3 2020 Q1-Q3 2019 Change % FY 2019 TOTAL REVENUE 5,830 5,850 5,839 5,905 (1.1) 17,520 17,507 0.1 23,730 Consumers 2,869 2,897 2,875 2,903 (1.0) 8,642 8,589 0.6 11,602 Business Customers 2,170 2,154 2,168 2,203 (1.6) 6,492 6,547 (0.8) 8,954 Wholesale 742 749 744 742 0.3 2,235 2,202 1.5 2,944 Other 49 51 52 56 (7.1) 152 169 (10.1) 230 Profit from operations (EBIT) 952 1,067 1,075 1,304 (17.6) 3,093 3,178 (2.7) 4,327 EBIT margin % 16.3 18.2 18.4 22.1 17.7 18.2 18.2 Depreciation, amortization and impairment losses (1,091) (1,102) (1,109) (982) (12.9) (3,303) (3,252) (1.6) (4,341) EBITDA 2,043 2,169 2,184 2,286 (4.5) 6,396 6,430 (0.5) 8,668 Special factors affecting EBITDA (207) (124) (203) (67) n.a. (534) (375) (42.4) (453) EBITDA (adjusted for special factors) 2,250 2,293 2,387 2,352 1.5 6,930 6,805 1.8 9,121 EBITDA AL 2,034 2,160 2,170 2,277 (4.7) 6,364 6,400 (0.6) 8,630 Special factors affecting EBITDA AL (207) (124) (203) (67) n.a. (534) (375) (42.4) (453) EBITDA AL (ADJUSTED FOR SPECIAL FACTORS) 2,241 2,284 2,373 2,343 1.3 6,898 6,774 1.8 9,083 EBITDA AL margin (adjusted for special factors) % 38.4 39.0 40.6 39.7 39.4 38.7 38.3 CASH CAPEX (1,043) (910) (961) (1,080) 11.0 (2,914) (3,391) 14.1 (4,414) Total revenue In the first nine months of 2020, we generated total revenue of EUR 17.5 billion, which was up by 0.1 percent year-on-year and thus virtually on a par with the prior-year level. This increase was mainly due to the positive trend in our fixed-network business on the back of growth in broadband revenues of 5.5 percent and in wholesale products of 2.0 percent. Overall, revenue was affected during the year by the effects of the coronavirus pandemic, such as temporary travel restrictions and the deteriorated economic situation. This had a negative impact on roaming, visitor, and terminal equipment revenues, and resulted in delays or postponements to current orders in B2B telecommunications business. By contrast, variable revenue components developed positively. The growth in fixed-network business was sufficient to offset the overall decline in revenues. Revenue from Consumers grew by 0.6 percent year-on-year. Volume-driven declines in revenue from voice components continue to strongly impact on traditional fixed-network business. By contrast, revenue from broadband business increased by 4.5 percent. The growth in mobile business of 1.5 percent reflected the effects of the negative trends in roaming and visitor revenues in consequence of the coronavirus pandemic. Revenue from Business Customers declined by 0.8 percent. IT revenues increased by 3.7 percent and mobile revenues declined by 1.3 percent compared with the prior-year period. Business customer operations were also affected by the aforementioned negative impact of the coronavirus crisis, particularly in mobile business. Volume losses, primarily from the migration of fixed-network lines to IP, had a further negative effect, continuing to drive the decline in traditional voice telephony. The B2B telecommunications business, which was integrated into the Germany operating segment effective July 1, 2020, reported a decline in revenue as of the end of the third quarter of 1.9 percent year-on-year. This is attributable to the deteriorated economic situation in consequence of the coronavirus pandemic and to market-related factors such as price erosion and competitive pressure in solutions business. For further information on the realignment of the B2B telecommunications business, please refer to the section “Group organization, strategy, and management.” Wholesale revenue was up at the end of the third quarter of 2020 by 1.5 percent year-on-year. The positive trend in the number of fiber-optic-based lines, driven mainly by the contingency model, continued in 2020 with an increase of 9.9 percent compared with the end of September 2019 and partially offset the decrease in revenues from declining volumes of unbundled local loop lines. The positive effect of the coronavirus pandemic on voice revenue in the first half of 2020 was not sustained throughout the third quarter of 2020. Adjusted EBITDA AL, EBITDA AL EBITDA AL adjusted for special factors increased by EUR 124 million or 1.8 percent year-on-year to EUR 6.9 billion. Our adjusted EBITDA AL margin increased to 39.4 percent, up from 38.7 percent in the prior-year period. 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 mainly from the smaller headcount and the ongoing implementation of efficiency enhancement and digitalization measures reduced costs. Higher 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 remained more or less stable in the first nine months of 2020 at EUR 6.4 billion or 0.6 percent below the prior-year level. EBIT Profit from operations was down 2.7 percent year-on-year to EUR 3.1 billion, partly as a result of the slightly lower EBITDA level together with higher depreciation, amortization and impairment losses year-on-year, mainly on account of higher depreciation of property, plant and equipment. Cash capex Cash capex decreased by 14.1 percent year-on-year, mainly as a result of the changed accounting treatment of grants receivable from funding projects for the broadband build-out as of the start of the third quarter of 2019. As part of our integrated network strategy, we continue to invest in the broadband and fiber-optic rollout, and in our mobile infrastructure. The number of households connected by pure fiber-optic lines increased to 1.9 million in the third quarter of 2020. In addition, thanks to our integrated network strategy our customers benefited from greater coverage with fast mobile broadband. As of September 30, 2020, we supplied 98.4 percent of households in Germany with LTE. schließen Vectoring Vectoring is a noise-canceling technology that removes the electro-magnetic interference between lines, enabling higher bit rates. However, in order to cancel noise, the operator must have control over all lines. This means that other operators cannot install their own technology at the cable distribution boxes. schließen Mobile customers In the combined management report, one mobile communications card corresponds to one customer. The totals were calculated on the basis of precise figures and rounded to millions or thousands. Percentages were calculated on the basis of the figures shown (see also SIM card). schließen Prepay/prepaid In contrast to postpay contracts, prepay communication services are services for which credit has been purchased in advance with no fixed-term contractual obligations. schließen IP - Internet Protocol Non-proprietary transport protocol in Layer 3 of the OSI reference model for inter-network communications. schließen Contingent model Contract concluded over a long period of time with defined advance payment and minimum purchase requirement. In return, the resellers pay a reduced monthly charge for VDSL. This allows them to put together interesting offers for their own consumers without having to invest in fiber-optic lines of their own. This improves the utilization of Telekom Deutschland GmbH’s existing VDSL network. The current “contingent model” is being developed further to reflect the network build-out in terms of availability and bandwidth. schließen ULL - Unbundled Local Loop Competitors whose own networks do not reach into customers’ premises can rent unbundled local loop lines from Deutsche Telekom. Their networks end at the local exchanges. The ULL bridges the distance between the local exchange and the termination point on the customer’s premises or in their home, so it is also known as the “last mile.” schließen Wholesale Refers to the business of selling services to third parties who sell them to their own retail customers either directly or after further processing. schließen Retail The sale of goods and services to end users, as opposed to resale or wholesale. schließen Roaming Refers to the use of a communication device or just a subscriber identity in a visited network rather than one’s home network. This requires the operators of both networks to have reached a roaming agreement and switched the necessary signaling and data connections between their networks. Roaming comes into play when cell phones and smartphones are used across national boundaries. schließen Fixed-network lines Lines in operation excluding internal use and public telecommunications, including IP-based lines. The totals reported in the combined management report were calculated on the basis of precise figures and rounded to millions or thousands. Percentages were calculated on the basis of the figures shown. schließen Fiber-optic lines Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH). schließen LTE - Long-Term Evolution New generation of 4G mobile communications technology using, for example, wireless spectrum on the 800 MHz band freed up by the digitization of television. Powerful TV frequencies enable large areas to be covered with far fewer radio masts. LTE supports speeds of over 100 Mbit/s downstream and 50 Mbit/s upstream, and facilitates new services for cell phones, smartphones, and tablets.