Comparison of the Group's expectations with actual figures

In the 2016 Annual Report, we outlined expectations for the 2017 financial year for our financial and non-financial key performance indicators anchored in our management system. The following tables summarize the pro-forma figures for 2016, the results expected for the reporting year, and the actual results achieved in 2017. The performance indicators that we also forecast in the 2016 Annual Report and their development are presented in the individual sections.

Comparison of the expected financial key performance indicators with actual figures
    Pro-forma figures
for 2016
Expectations
for 2017
Results
in 2017
ROCE % 5.7 strong decrease 5.8
Net revenue billions of € 73.2 increase 74.9
Profit (loss) from operations (EBIT) billions of € 9.2 decrease 9.4
EBITDA (adjusted for special factors) billions of € 21.4 22.4 to 22.5 c 22.2
Free cash flow (before dividend payments and spectrum investment) billions of € 4.9 5.5 5.5
Cash capex a billions of € 11.0 12.0 12.1
Rating (Standard & Poor’s, Fitch)   BBB+ from A- to BBB BBB+
Rating (Moody’s)   Baa1 from A3 to Baa2 Baa1
 
a Before spectrum investment.
c Contrary to the forecasts published in the 2016 combined management report ( 2016 Annual Report), we adjusted the forecast figures for 2017 during the course of the year ( Interim Group Report as of June 30, 2017, and Interim Group Report as of September 30, 2017).
Comparison of the expected non-financial key performance indicators with actual figures
    Pro-forma figures
for 2016
Expectations
for 2017
Results
in 2017
Customer satisfaction (TRI*M index)   70.2 slight increase 68.6
Employment satisfaction (commitment index) b   4.1 stable trend 4.1
Fixed-network and mobile customers        
Germany        
Mobile customers millions 41.8 increase 43.1
Fixed-network lines millions 19.8 slight decrease 19.2
Broadband lines millions 12.9 increase 13.2
United States        
Branded postpaid millions 34.4 strong increase 38.0
Branded prepay millions 19.8 increase 20.7
Europe        
Mobile customers millions 48.0 slight decrease 48.8
Fixed-network lines millions 8.5 stable trend 8.4
Retail broadband lines millions 5.4 increase 5.6
Systems Solutions        
Order entry billions of € 7.1 decrease c 5.2
  
b Commitment index according to the most recent employee surveys in 2017 and 2015.
c Contrary to the forecasts published in the 2016 combined management report (2016 Annual Report), we adjusted the forecast figures for 2017 during the course of the year (Interim Group Report as of June 30, 2017, and Interim Group Report as of September 30, 2017).

We once again look back on a successful financial year. Our performance in 2017 was dominated by substantial growth in revenue and adjusted EBITDA. Net revenue grew in line with expectations to total EUR 74.9 billion at the year-end. We also met expectations with regard to adjusted EBITDA, which amounted to EUR 22.2 billion. Adjusted for exchange rate effects and changes to the composition of the Group, this put us exactly within the target corridor of EUR 22.4 to EUR 22.5 billion communicated most recently. Free cash flow of EUR 5.5 billion was also right on target. At EUR 12.1 billion, cash capex (before spectrum investments) was slightly higher than the communicated figure of around EUR 12.0 billion, representing yet another substantial increase to the already extremely high level of investment in the prior year.

Our key performance indicator ROCE (return on capital employed) improved by 0.1 percentage points in the reporting period to reach 5.8 percent. This moderately positive trend was due to an increase in net operating profit after taxes (NOPAT) while the average amount of net operating assets (NOA) remained virtually stable over the year. NOPAT increased in 2017 as a result of a substantial improvement in adjusted EBITDA, as well as positive special factors — mainly attributable to the partial reversal of impairment losses recognized on spectrum licenses at T-Mobile US (EUR 1.7 billion), to the sale of Strato (EUR 0.5 billion) and of further shares in Scout24 AG (EUR 0.2 billion), and to a settlement agreement concluded with BT (EUR 0.2 billion). NOPAT was negatively affected by impairment losses totaling EUR 2.2 billion recognized in the reporting year on goodwill and property, plant and equipment, in particular in the Systems Solutions and Europe operating segments (prior year: EUR 0.7 billion in the Europe operating segment). In the prior year, proceeds from the sale of our stake in the EE joint venture (EUR 2.5 billion) and proceeds from the exchange of mobile spectrum licenses at T-Mobile US (EUR 0.5 billion) had a positive effect on NOPAT. Despite the acquisition of spectrum in the United States and a consistently high level of investment in connection with our integrated network strategy, average NOA remained virtually unchanged in 2017 due to lower cash and cash equivalents on average and lower carrying amounts of goodwill, among other effects.

EBIT defied expectations of a decline and increased by EUR 0.2 billion to EUR 9.4 billion, primarily as a result of the same special factors that also had a positive effect on net operating profit after taxes (NOPAT).

We are also very well on track with our non-financial key performance indicators, especially with regard to the development of fixed-network and mobile customer numbers. In our United States operating segment, in particular, we again recorded continued strong mobile customer additions, both in the postpaid and prepay segments. At the end of the reporting year, customer satisfaction came in at 68.6 points versus 69.6 points at the start of the year (measured on a comparable basis). This slight decline is due in part to the trend in the Systems Solutions operating segment, which was not able to fully match its high prior-year level. Our goal for the coming years is to achieve a steady overall improvement in customer satisfaction. Order entry at our Systems Solutions operating segment declined markedly year-on-year and was well below our expectations for the reporting year. Although we concluded new deals in 2017, the level achieved was lower than expected. One reason for the decline in order entry was the market trend away from traditional IT business and toward cloud computing and digitalization, which resulted in shorter terms of contract. Details on the trends in our financial and non-financial key performance indicators can be found in this section as well as in the section “Development of business in the operating segments.”