Germany

For information on changes in the organizational structure, please refer to the section “Group organization, strategy, and management”  and to the disclosures under segment reporting in the interim consolidated financial statements.

CUSTOMER DEVELOPMENT

thousands
  June 30, 2018 Mar. 31, 2018 Change
June 30, 2018/
Mar. 31, 2018
 %
Dec. 31, 2017 Change
June 30, 2018/
Dec. 31, 2017
 %
June 30, 2017 Change
June 30, 2018/
June 30, 2017
 %
Mobile customers 43,023 42,730 0.7 43,125 (0.2) 42,011 2.4
Contract customers 24,965 25,102 (0.5) 25,887 (3.6) 25,084 (0.5)
Prepay customers 18,058 17,628 2.4 17,238 4.8 16,927 6.7
Fixed-network lines a 18,989 19,149 (0.8) 19,239 (1.3) 19,477 (2.5)
Of which: retail IP-based 13,629 12,843 6.1 11,996 13.6 10,351 31.7
Retail broadband lines b 13,437 13,357 0.6 13,209 1.7 13,035 3.1
Of which: optical fiber 6,559 6,232 5.2 5,803 13.0 5,033 30.3
Television (IPTV, satellite) 3,240 3,193 1.5 3,139 3.2 3,024 7.1
Unbundled local loop lines (ULLs) 5,587 5,846 (4.4) 6,138 (9.0) 6,723 (16.9)
Wholesale broadband lines 6,277 5,993 4.7 5,638 11.3 4,980 26.0
Of which: optical fiber 4,432 4,135 7.2 3,783 17.2 3,169 39.9
a The baseline as of January 1, 2018 increased (by 62 thousand) due to the inclusion of new products launched in the Business Customer portfolio. Prior-year comparatives were not adjusted.
b The baseline as of January 1, 2018 increased (by 53 thousand) due to the inclusion of new products launched in the Business Customer portfolio. Prior-year comparatives were not adjusted.

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 – in the fixed network and in mobile communications – and with a broad product portfolio. Growing demand for our integrated product MagentaEins drove up the number of new customers by 265 thousand compared with the end of 2017, bringing the total number of customers added in the first half of 2018 since the product was launched to 3.9 million.

Compared with year-end 2017, we lost a total of 102 thousand mobile communications customers in the first half of 2018, primarily due to seasonal business fluctuations at one of our service providers (resellers). 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. We also recorded growth in the number of prepay customers.

By the end of the first half of 2018, we had migrated 19.6 million retail and wholesale lines to IP, which corresponds to an overall migration rate of 77 percent.

We continued to see strong demand for our fiber-optic products. As of the end of the first half of 2018, the number of lines had increased to 11.0 million overall. In other words, we connected another 1.4 million lines to our fiber-optic network in Germany in the first six months of 2018. With the progress in fiber-optic rollout and innovative vectoring technology, we also successfully drove forward the marketing of higher bandwidths.

Mobile communications

Compared with year-end 2017, we won a total of 197 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 820 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 228 thousand between year-end 2017 and the end of the first half of 2018, while the number of TV customers increased by 101 thousand. The number of lines in our traditional fixed-network portfolio decreased by 312 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, 408 thousand customers, primarily based in rural areas, have selected this innovative product.

Wholesale

At the end of the first half of 2018, fiber-optic lines accounted for 37.4 percent of all lines – 5.3 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 551 thousand or 9.0 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 second quarter of 2018.

DEVELOPMENT OF OPERATIONS

millions of €
  Q1 2018 Q2 2018 Q2 2017 Change % H1 2018 H1 2017 Change % FY 2017
TOTAL REVENUE   5,325 5,322 5,371 (0.9) 10,648 10,768 (1.1) 21,931
Consumers   2,813 2,820 2,878 (2.0) 5,633 5,796 (2.8) 11,797
Business Customers a   1,491 1,492 1,473 1.3 2,983 2,937 1.6 6,017
Wholesale   932 926 928 (0.2) 1,858 1,854 0.2 3,747
Other a   90 84 92 (8.7) 173 181 (4.4) 370
Profit from operations                  
(EBIT)   935 954 1,028 (7.2) 1,889 2,099 (10.0) 4,276
EBIT margin % 17.6 17.9 19.1   17.7 19.5   19.5
Depreciation, amortization and impairment losses   (980) (988) (953) (3.7) (1,968) (1,888) (4.2) (3,828)
EBITDA   1,915 1,941 1,981 (2.0) 3,857 3,987 (3.3) 8,104
Special factors affecting EBITDA   (167) (185) (105) (76.2) (352) (154) n. a. (308)
EBITDA
(ADJUSTED FOR SPECIAL FACTORS)
  2,082 2,126 2,086 1.9 4,209 4,141 1.6 8,412
EBITDA margin (adjusted for special factors) % 39.1 39.9 38.8   39.5 38.5   38.4
CASH CAPEX   (1,145) (963) (1,052) 8.5 (2,108) (2,057) (2.5) (4,214)
a As of July 1, 2017, a share of revenue previously recognized under “Other” was assigned to Business Customers on account of a reorganization. Prior-year comparatives were not adjusted.

Total revenue

Total revenue decreased by 1.1 percent compared with the first half of the prior year. 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 2.7 percent year-on-year; excluding the effects of IFRS 15, revenue increased slightly 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 decline in fixed-network revenues compared with the first half of 2017.

Revenue from Consumers declined by 2.8 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 by 3.3 percent.

Revenue from Business Customers grew by 1.6 percent; this growth was even stronger once adjusted for the effects of IFRS 15. Mobile revenues increased by 3.6 percent and IT revenues by 21.5 percent compared with the first half of the prior 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 six months of 2018 remained on a par with the prior-year period. Adjusted for the effects of IFRS 15, revenue would have grown substantially.

EBITDA, adjusted EBITDA

EBITDA amounted to EUR 3.9 billion in the first half of 2018, a year-on-year decrease of 3.3 percent due mainly to higher special factors for expenses in connection with our staff restructuring. EBITDA adjusted for special factors totaled EUR 4.2 billion at the end of the first half of 2018, up 1.6 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. The adjusted EBITDA margin was up from 38.5 percent in the first half of 2017 to 39.5 percent in the first half of 2018.

EBIT

Profit from operations decreased by 10.0 percent compared with the first half of the prior year to EUR 1.9 billion. Depreciation, amortization and impairment losses increased on account of sustained high investments in our network infrastructure.

Cash capex

Cash capex increased by 2.5 percent compared with the first half 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.