Statement by the Board of Management on the expected development of the Group

We successfully continued our growth course again in 2017. We already set ourselves apart by having the best and most modern networks and we want to continue building on this technology leadership. Over the coming years, we will also focus more on integrated offers, in line with the expectations of our customers. This goes hand in hand with our “Leading European Telco” strategy – with the aim of becoming Europe’s leading telecommunications provider. This is closely related to our financial targets for the period up to 2018: As communicated at our Capital Markets Day in February 2015, we are aiming for the following compound annual growth rates (CAGR) for the period from 2014 to 2018:

  • Revenue: 1 to 2 percent
  • Adjusted EBITDA: 2 to 4 percent
  • Free cash flow: approx. 10 percent

For 2018, we expect to post the following year-on-year growth trends, assuming a comparable consolidated group and constant exchange rates:

  • Revenue is likely to increase again slightly in 2018.
  • Adjusted EBITDA is expected to reach some EUR 23.2 billion in 2018, up from EUR 22.2 billion in the reporting period.
  • Free cash flow is expected to grow to around EUR 6.2 billion in 2018, up from EUR 5.5 billion in the reporting period.

The new accounting standards IFRS 9 and IFRS 15 took effect as of January 1, 2018. This will have a net impact going forward on the revenue and EBITDA of our Germany, United States, and Europe operating segments, and hence on the Group. The planning for the coming years, and thus the statements made in this section, already take these new financial reporting standards into account. As the figures for the 2017 financial year have been prepared in accordance with IAS 18, while the forecasts for 2018 and beyond already take the new accounting standards into consideration, a direct comparison of the two years is only possible to a limited extent. For more details on the new standards, please refer to the section “Summary of accounting policies” in the notes to the consolidated financial statements.