Germany

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 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. Hence, alongside fixed-network and mobile communications products, we also market convergence products. At the end of May 2021, we launched MagentaEINS Unlimited with unlimited data across Germany. Our MagentaEINS family of FMC products remains very popular among customers, with over 5.1 million customers having opted for these products by the end of September 2021. The customer base is thus higher compared with the end of the prior year.

We continued to see strong demand for our fiber-optic-based lines. As of the end of September 2021, the total number of lines had increased to around 16.9 million. In other words, we connected a further 935 thousand lines to our fiber-optic network in Germany in the first nine months of 2021. 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 total of around 4.0 million mobile customers in the first nine months of 2021. Of these, 464 thousand were high-value contract customers under our Telekom and congstar brands. Steady demand for mobile rate plans with included data volumes alongside our multiple award-winning network quality continues to drive this trend. Since January 1, 2021, the customers of a service provider previously reported under contract customers have been reported under prepaid customers. Allowing for this change in disclosure, we have added around 3.4 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 September 2021, almost 4.4 million customers were using this option, up by around 17.6 % year-on-year.

Fixed network

The fixed-network broadband market hosts a large number of players with differing infrastructures – from national through to regional providers. In order to consolidate our position on the market as Germany’s leading telecommunications provider, we continue to add new offerings to our portfolio.

The number of broadband lines increased by 276 thousand to around 14.4 million in the first nine months of 2021. Demand for our retail fiber-optic-based lines was the biggest driver here, accounting for 660 thousand lines. We recorded an increase of 102 thousand in the number of TV customers compared with year-end 2020. In traditional fixed-network business, the number of lines declined slightly by 47 thousand. This marked a considerable reduction in line losses compared with the prior-year period. As expected, the number of fixed-network lines remained virtually stable at 17.5 million lines.

Wholesale

As of September 30, 2021, fiber-optic-based lines accounted for 57.6 % of all lines – 3.2 percentage points more than at the end of 2020. This growth was driven largely by demand for our “contingent model.” The number of unbundled local loop lines decreased by 357 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 September 2021 was around 11.6 million.

Development of operations

Total revenue

In the first nine months of 2021, we generated total revenue of EUR 17.8 billion, which was up by 1.8 % year-on-year. This was mainly driven by broadband revenue growth of 6.1 % and a rise in terminal equipment revenue both in mobile communications by 14.9 % and in the fixed network by 6.6 %. Overall, revenue was affected by the effects of the coronavirus pandemic, such as temporary travel restrictions, lockdowns, and the deteriorated economic situation. This had a negative effect on roaming and visitor revenues. It also resulted in delays or postponements to current orders in B2B telecommunications business. With the coronavirus situation easing somewhat, especially in the summer months, these factors had less of an impact in the second and third quarter.

Revenue from Consumers increased by 4.4 % compared with the prior-year period. Volume-driven declines in revenue from voice components continued to impact on traditional fixed-network business. By contrast, revenue from broadband business grew by 6.7 %, due in part to the positive effects from increased customer appreciation for stable data lines. Fixed-network terminal equipment business posted growth of 9.5 % on the back of strong terminal equipment rental business. Mobile business increased by 5.5 %, primarily due to higher revenues from mobile terminal equipment business and a positive trend in the number of subscribers to our secondary brand, congstar.

Revenue from Business Customers was up 0.4 % year-on-year. IT revenue grew by 6.1 % against the prior-year period, mainly due to concerted efforts to drive forward digitalization in the SME sector. Overall, mobile revenue was up 1.3 % year-on-year, partly on the back of positive revenues from terminal equipment business and sustained growth of the customer base. In organic terms, i.e., assuming constant exchange rates and adjusted for the reassignment of Deutsche Telekom IT (DT IT) Russia, DT IT Slovakia, and DT IT Hungary to the Group Headquarters & Group Services segment, revenue increased markedly by 2.2 % year-on-year.

Wholesale revenue was down at the end of September 2021 by 7.2 % year-on-year. The positive trend in the number of fiber-optic-based lines continued, with an increase of 6.7 % compared with the prior-year period. However, this was not enough to offset the decrease in revenues of 11.6 % from declining volumes of unbundled local loop lines. In addition, the positive contribution in the prior-year period from the transition to the IFRS 16 Leases accounting standard, which reduced the customer retention period in connection with the lease of unbundled local loop lines, no longer applied in the reporting period. On April 1, 2021, the transition to the new commitment agreements to replace the former quota-based agreements under what has become known as the “contingent model” led to sharper declines in revenue in the second and third quarters of 2021. This is primarily due to the fact that under the new commitment model the annual payments are initially lower compared to the up-front payments that had been made under the quota-based agreements under the contingent model. The annual commitment payments will rise over the course of subsequent years. Voice revenue was down against the prior-year period, which had contained higher, largely coronavirus-induced, revenues.

For further information on the entry into force of the commitment agreements, please refer to the section “The economic environment – Regulation.”

Adjusted EBITDA AL, EBITDA AL

EBITDA AL adjusted for special factors increased by EUR 251 million or 3.7 % year-on-year to EUR 7.1 billion. Our adjusted EBITDA AL margin increased to 39.9 %, up from 39.2 % in the prior year. 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, among other factors, from the smaller headcount and the ongoing implementation of efficiency enhancement and digitalization measures reduced costs.

In contrast to the effects described under EBITDA AL, lower 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 grew in the first nine months of 2021 to EUR 6.7 billion or 6.3 % above the prior-year level.

EBIT

Profit from operations was up 25.3 % year-on-year to around EUR 3.7 billion, driven by the positive EBITDA trend together with lower depreciation, amortization and impairment losses year-on-year, mainly on account of lower amortization of intangible assets.

Cash capex

Cash capex decreased by EUR 236 million or 8.1 % compared with the prior-year period with two key factors at play here: Firstly, front-loaded investment in the fourth quarter of 2020 resulted in lower cash outflows year-on-year. Secondly, the share of book capex with an impact on cash flows was below the prior-year level due to lower fiber-optic investments in the first and second quarters of 2021 as a result of bad weather conditions. In the third quarter, it was possible to step up investments again, thus partially making up for the decline. We expect to connect a further 1.2 million households to our fiber-optic network in the current financial year as planned.

Capital expenditure totaled around EUR 2.7 billion in the first nine months of 2021, in particular for the build-out of the 5G and fiber-optic networks. The number of households passed by our fiber-optic network increased to around 2.9 million by the end of September 2021. In mobile communications, our customers benefit from greater LTE network coverage. As of September 30, 2021, we covered 98.9 % of households in Germany with LTE. 87.3 % of German households can already use 5G.