Business activities and organization
Business activities. With 168 million mobile customers, around 28 million fixed-network and around 19 million broadband lines, we are one of the leading integrated telecommunications companies worldwide. We offer our consumers fixed-network/broadband, mobile, Internet, and Internet-based TV products and services, as well as ICT solutions for our business and corporate customers. We have an international focus and are represented in more than 50 countries. For information on our footprint, please visit www.telekom.com/worldwide. In the 2017 financial year, we generated around 67.2 percent of net revenue, i.e., EUR 50.4 billion, outside Germany. Overall, we employ some 217,300 people (December 31, 2017).
Fixed-network business includes all voice and data communications activities based on fixed-network and broadband technology. This includes the sale of terminal equipment and other hardware, as well as the sale of services to resellers. Our mobile communications business offers mobile voice and data services to consumers and business customers; in addition, we sell mobile devices and other hardware. We also sell mobile services to resellers and to companies that buy network services and market them to third parties (mobile virtual network operator, or MVNOs). Drawing on a global infrastructure of data centers and networks, our corporate customer arm, T-Systems, operates information and communication technology (ICT) systems for multinational corporations and public-sector institutions.
We believe that economic, social, and ecological aspects can be reconciled; sustainability is the guiding principle behind all our actions. A range of sector-specific and general conditions are crucial to the success of business activities. These include first-rate quality at reasonable costs – in data privacy and security, in customer service, in network build-out, and in materials procurement – as well as qualified staff and good working conditions within our own Group, but also at our suppliers. It is also important to consider the potential consequences of climate change for our business activities: for example, to construct our network infrastructure in such a way that it is protected from severe weather conditions, changes in temperatures, and higher wind speeds. We also help our customers to reduce their carbon footprint with innovative products and services. Furthermore, we want to reduce the Group’s CO2 emissions despite rapid growth in data traffic and the network build-out that this requires. Also beyond our core business, we do everything we can to ensure that our actions are socially acceptable. For us, this means conducting ourselves in a way that is ethical and compliant with the law and informing and involving our stakeholders in a transparent way. 12
Our responsible corporate governance and business success are based on our shared corporate values and our Guiding Principles, which are as follows:
- Customer delight and simplicity drive our action
- Respect and integrity guide our behavior
- Team together – Team apart
- Best place to perform and grow
- I am T – count on me
We want to be a sustainably growing company that delights its customers, creates value for its investors, and in which employees enjoy their work.
Organization. Our financial reporting conforms with our Group strategy and is based on the following organizational structure.
Our Group is divided into five operating segments, which we describe in detail below.
Our Germany operating segment comprises all fixed-network and mobile activities for consumers and business customers in Germany. In addition, it provides wholesale telecommunications services for our Group’s other operating segments. The organization for consumers and business customers and for customer services were restructured as part of a reorganization as of July 1, 2017 with the aim of enabling a customer-centric sales approach for consumers and business customers with separate sales companies for each. Since then, network build-out has been managed entirely by the Technology business unit in the Germany operating segment. In addition to consumer and business customer business, the segment focuses on wholesale business. As a pioneer of digitalization, the Germany operating segment offers its customers an individual service and product portfolio that is innovative while at the same time secure and simple.
Our United States operating segment combines all mobile activities in the U.S. market. T-Mobile US is the third largest provider in the United States and its mobile network offers the highest transmission speeds as well as high network coverage. T-Mobile’s success on the U.S. mobile market has been built on the back of the various Un-carrier initiatives launched in the last few years. The company continues to build out its network with the 600 MHz spectrum acquired in April 2017 and the previously acquired A-block spectrum, thereby substantially further increasing capacity and quality. In addition to the network build-out, the company has also significantly expanded its sales network.
Our Europe operating segment comprises all fixed-network and mobile operations of the national companies in Greece, Romania, Hungary, Poland, the Czech Republic, Croatia, Slovakia, Austria, Albania, the F.Y.R.O. Macedonia, and Montenegro. The agreed acquisition of cable network operator UPC Austria will help us transform our subsidiary in Austria into a fully integrated provider. In addition to consumer business, most of our national companies also offer ICT solutions for business customers. On January 1, 2017, management of the Netherlands subsidiary was transferred to our Group Development operating segment. The new Technology and Innovation Board department is now responsible for the GNF (Global Network Factory) and Group Technology units as well as the Pan-Net companies; this new Board department is part of the Group Headquarters & Group Services segment. The International Carrier Sales & Solutions unit (ICSS) – the main part of our international wholesale business – remains within our Europe operating segment. As part of our international wholesale business, we sell wholesale telecommunications services to our operating segments as well as to third parties.
As a leading ICT service provider, our Systems Solutions operating segment offers business customers integrated solutions for fixed and mobile networks, highly secure data centers, and a comprehensive cloud ecosystem made up of standardized platforms and global partnerships. The offering primarily includes services from the cloud, M2M, and security solutions, complementary, standardized mobile and fixed-network products, as well as solutions for virtual collaboration and IT platforms. They form the basis for the digital business models of our corporate customers. The business of T-Systems is mapped by four business areas: the IT Division, the TC Division (Telecommunications), the Digital Division, and Telekom Security.
Since January 1, 2017, we have reported on the new Group Development operating segment: This includes T-Mobile Netherlands (previously part of our Europe operating segment), Deutsche Funkturm (DFMG, previously part of our Germany operating segment), Deutsche Telekom Capital Partners (DTCP), and our equity investments in BT and Ströer SE & Co. KGaA, as well as Strato AG, which was sold in March 2017, and the stake in Scout24 AG, which was sold in June 2017 (all previously part of our Group Headquarters & Group Services segment). We want to actively manage these units and subsidiaries and increase their value, with the aim of giving them the level of entrepreneurial freedom they need and thus promoting their strategic further development. The management teams maintain an intensive dialog with the segment management and the relevant supervisory and advisory boards. The Group functions of Mergers & Acquisitions and Strategic Portfolio Management have also been assigned to Group Development.
Group Headquarters & Group Services comprises all Group units that cannot be allocated directly to one of the operating segments. Since January 1, 2017, the segment also reports on our new Technology and Innovation Board department. As the organization that sets the direction and provides momentum, it defines strategic aims for the Group, ensures they are met, and becomes directly involved in selected Group projects. Group Services provides services to the entire Group; in addition to typical services such as financial accounting, human resources services, and operational procurement, Group Services also includes agency services, which are provided by our personnel service provider, Vivento. On the one hand, it is in charge of securing external employment opportunities for employees, mainly civil servants, predominantly in the public sector. On the other, Vivento also seeks to strategically place them internally, with the aim of retaining professional expertise within the Group, so as to reduce the use of external staff. Further units are Group Supply Services (GSUS) for our real estate management and our strategic procurement, and MobilitySolutions, which is a full-service provider for fleet management and mobility services.
Our Technology and Innovation Board department unites the cross-segment network, innovation and IT activities of our Germany, Europe and Systems Solutions operating segments. These include Deutsche Telekom IT, which focuses on the Group’s internal national IT projects, and our central innovation unit, Product Innovation, which works closely with our operating segments to develop new business areas and create products. Furthermore, there are the units Global Network Factory (GNF), Group Technology and Pan-Net: GNF manages and operates a global network for providing wholesale customers with voice and data communication. Group Technology ensures efficient and customized provision of technologies, platforms, and services for mobile and fixed-network communications. Pan-Net is responsible for the shared pan-European network and for developing and providing services for our European national companies.
The prior-year comparative figures for the organizational measures in connection with the new Technology and Innovation Board department and the Group Development operating segment have been adjusted retrospectively. For more information, please refer to the notes to the consolidated financial statements, Note 31 “Segment reporting.”
Changes in the organizational structure from January 1, 2018. We integrated Vivento Customer Services GmbH, a provider of call center services, into our Germany operating segment as of January 1, 2018; previously it was part of our Group Headquarters & Group Services segment. For more information, please refer to the section “Forecast.”