31 Segment reporting

Deutsche Telekom reports on five operating segments, as well as on the Group Headquarters & Group Services segment. Three operating segments are distinguished by region (Germany, United States, Europe), one by customers and products (System Solutions), and another by tasks (Group Development). For three operating segments, business activities are assigned by customer and product (Germany, Systems Solutions, United States), while one operating segment allocates its activities on a regional basis (Europe) and another allocates them by equity investment (Group Development).

The 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 the Group’s other ­operating segments. The United States operating segment comprises all ­mobile activities in the U.S. market. The Europe operating segment ­encompasses 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. In addition to consumer business, most of the national companies also offer ICT solutions for business customers. On January 1, 2017, management of the Netherlands subsidiary was transferred to the Group Development operating segment. Also, 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. International Carrier Sales & Solutions (ICSS) will remain in the Europe operating segment. As part of the international wholesale business, the Europe operating segment sells wholesale telecommunications ­services to the operating segments as well as to third parties. On January 1, 2016, the business customer operations at Magyar Telekom, which had ­previously been assigned to the Systems Solutions operating segment, was ­integrated into the Europe operating segment. The Systems Solutions operating ­segment offers business customers integrated solutions for fixed and mobile networks, highly secure data centers, and a unique ­comprehensive cloud ecosystem made up of standardized platforms and global partnerships. Since January 1, 2017, Deutsche Telekom has reported on the Group Development operating segment: This includes T-Mobile Netherlands (previously in the Europe operating segment), Deutsche Funkturm (DFMG, previously in the Germany operating segment), Deutsche Telekom Capital Partners (DTCP), and the equity investments in BT plc 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 in the Group Headquarters & Group Services segment). The Group functions of Mergers & Acquisitions and Strategic Portfolio Management have also been assigned to Group Development. The Group Headquarters & Group Services segment comprises all Group units that cannot be allocated directly to one of the operating segments. Since January 1, 2017, the segment also reports on the new Technology and Innovation Board department. 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 provided by the Group’s personnel service provider, Vivento. Further units are Group Supply Services (GSUS) for real estate management and strategic procurement, and MobilitySolutions, which is a full-service provider for fleet management and mobility services. The EE joint venture was sold to the UK company BT on January 29, 2016.

Comparative figures have been adjusted retrospectively in segment reporting.

The business segments shown are reviewed at regular intervals by the Deutsche Telekom Board of Management in terms of the allocation of resources and their earnings performance.

The measurement principles for Deutsche Telekom’s segment reporting structure are primarily based on the IFRSs adopted in the consolidated financial statements. Deutsche Telekom evaluates the segments’ performance based on revenue and profit or loss from operations (EBIT), among other factors. Revenue generated and goods and services exchanged between segments are calculated on the basis of market prices. Services provided by Deutsche Telekom IT are generally charged at cost. ­Development ­services commissioned after January 1, 2016 are not charged but capitalized at segment level in accordance with the internal control logic. Segment assets and liabilities include all assets and liabilities that are carried in the financial statements prepared by the segments and included in the consolidated financial statements. Segment investments include additions to intangible assets and property, plant and equipment. Where entities accounted for using the equity method are directly allocable to a segment, their shares of profit or loss after income taxes and their carrying amounts are reported in this segment’s accounts. The performance indicators are exclusively presented from the segments’ perspective: The effects of intersegment transactions are eliminated and presented in aggregate form in the ­reconciliation line. The following table shows the performance indicators used by Deutsche Telekom to evaluate the operating segments’ performance as well as additional segment-related indicators:

millions of €
    Net revenue Intersegment revenue Total revenue Profit (loss) from operations (EBIT) Depreciation and amortization Impairment losses Interest income Interest expense Share of profit (loss) of associates and joint ventures accounted for using the equity method Income taxes Segment assets a Segment liabilities a Segment investments Investments accounted for using the equity method a Net cash from operating activities Net cash
(used in) from investing activities
Of which:
cash capex b
Net cash
(used in) from financing activities a
Average number of employees
Germany 2017 20,552 1,379 21,931 4,334 (3,822) (6) 6 (142) 6 0 33,667 26,566 4,786 12 8,520 (4,246) (4,214) (4,041) 64,569
  2016 20,405 1,369 21,774 3,624 (3,690) (13) 4 (166) 2 0 32,017 25,594 4,830 20 8,043 (4,106) (4,031) (5,253) 67,276
  2015 20,801 1,384 22,185 4,081 (3,637) (9) 13 (221) 3 0 32,301 25,494 6,136 20 7,572 (5,579) (5,459) (4,445) 68,734
United States 2017 35,735 1 35,736 5,930 (5,015) (4) 14 (1,434) (1) 1,444 64,931 42,003 14,811 189 6,847 (9,948) (11,932) (966) 43,935
  2016 33,736 2 33,738 3,685 (5,282) 0 11 (1,367) (6) (1,109) 68,349 49,791 9,970 216 5,586 (5,174) (5,855) 354 43,699
  2015 28,924 1 28,925 2,454 (3,774) (1) 5 (1,284) (12) (360) 62,534 46,087 10,164 215 5,327 (8,624) (6,381) 2,935 41,669
Europe 2017 11,218 371 11,589 462 (2,283) (874) 6 (260) 2 (281) 25,746 10,206 2,052 62 2,863 (1,761) (1,874) (1,067) 47,416
  2016 11,111 343 11,454 1,184 (2,352) (237) 10 (284) (2) 18 26,600 10,991 3,077 59 3,038 (2,640) (2,600) (482) 47,220
  2015 11,395 279 11,674 1,342 (2,347) (48) 18 (302) 2 (248) 25,470 10,279 1,862 61 3,070 (1,329) (1,469) (2,199) 49,986
Systems Solutions 2017 5,504 1,414 6,918 (1,356) (394) (1,242) 13 (10) 14 (28) 6,408 5,061 471 31 326 (422) (383) 253 37,745
  2016 5,678 1,315 6,993 (150) (428) 0 12 (10) 2 (59) 7,462 5,243 419 21 400 (687) (402) 298 37,312
  2015 5,826 1,011 6,837 (373) (450) (23) 16 (9) 5 (34) 7,312 5,135 455 21 70 (556) (432) 740 37,984
Group Development 2017 1,660 603 2,263 1,504 (304) 0 0 (11) 57 (36) 9,997 5,549 335 346 1,000 673 (290) (4,656) 2,127
  2016 1,744 603 2,347 2,730 (345) (415) 0 (17) (48) (27) 11,221 2,417 385 397 1,041 (168) (271) (999) 2,704
  2015 1,857 571 2,428 1,264 (342) 0 1 (19) 28 (68) 12,667 2,657 420 488 1,488 521 (373) (1,442) 2,725
Group Headquarters & 2017 278 2,665 2,943 (1,495) (626) (31) 1,150 (1,526) (1) (541) 46,956 55,867 1,018 11 6,651 (10,016) (1,005) 5,750 20,663
Group Services 2016 421 3,046 3,467 (1,919) (648) (28) 836 (1,545) (1) (261) 37,702 50,483 956 12 2,525 (879) (936) (320) 22,372
  2015 426 2,929 3,355 (1,750) (699) (81) 1,041 (1,620) (2) (565) 38,111 50,585 1,068 16 3,701 (607) (983) (2,276) 25,234
Total 2017 74,947 6,433 81,380 9,379 (12,444) (2,157) 1,189 (3,383) 77 558 187,705 145,252 23,473 651 26,207 (25,720) (19,698) (4,727) 216,454
  2016 73,095 6,678 79,773 9,154 (12,745) (693) 873 (3,389) (53) (1,438) 183,351 144,519 19,637 725 20,633 (13,654) (14,095) (6,402) 220,582
Reconciliation 2015 69,228 6,175 75,404 7,018 (11,249) (162) 1,094 (3,455) 24 (1,275) 178,395 140,237 20,105 821 21,228 (16,174) (15,097) (6,687) 226,332
  2017 (6,433) (6,433) 4 16 (1) (869) 866 (1) (46,371) (46,388) (332) (9,011) 8,906 204 133
  2016 (6,678) (6,678) 10 58 (650) 674 (5) (34,866) (34,879) (742) (5,100) 46 455 5,080
Group 2015 (6,176) (6,176) 10 51 (848) 846 (1) (34,475) (34,467) (738) 1 (6,231) 1,159 484 5,811
  2017 74,947 74,947 9,383 (12,428) (2,158) 320 (2,517) 76 558 141,334 98,864 23,141 651 17,196 (16,814) (19,494) (4,594) 216,454
  2016 73,095 73,095 9,164 (12,687) (693) 223 (2,715) (53) (1,443) 148,485 109,640 18,895 725 15,533 (13,608) (13,640) (1,322) 220,582
  2015 69,228 69,228 7,028 (11,198) (162) 246 (2,609) 24 (1,276) 143,920 105,770 19,367 822 14,997 (15,015) (14,613) (876) 226,332
                                         
a Group Headquarters & Group Services segment: Deutsche Telekom AG shareholders made use of the option of receiving part of their dividend entitlement for the financial years 2015 and 2016 in the form of shares in Deutsche Telekom AG. As a result, this dividend in kind had no impact on cash flows (see Note 15 “Shareholders’ equity”).
b Cash outflows for investments in intangible assets (excluding goodwill) and property, plant and equipment as shown in the statement of cash flows.

Information on geographic areas. The Group’s non-current assets and net revenue are shown by region: Germany, Europe (excluding Germany), North America, and Other countries. The North America region comprises the United States and Canada. The Europe (excluding Germany) region covers the entire European Union (excluding Germany) and the other countries in Europe. Other countries include all countries that are not Germany or in Europe (excluding Germany) or North America. Non-current assets are allocated to the regions according to the location of the assets in question. Non-current assets encompass intangible assets; property, plant and equipment; investments accounted for using the equity method; as well as other non-current assets. Net revenue is allocated according to the location of the respective customers’ operations.

millions of €
  Non-current assets Net revenue
  Dec. 31, 2017 Dec. 31, 2016 Dec. 31, 2015 2017 2016 2015
Germany 37,248 37,756 37,280 24,556 24,657 25,078
International 73,965 70,995 65,678 50,391 48,438 44,150
Of which: Europe (excluding Germany) 20,172 20,961 21,099 13,913 13,910 14,431
North America 53,724 49,948 44,505 35,897 33,915 29,224
Other countries 69 86 74 580 613 495
Group 111,213 108,751 102,958 74,947 73,095 69,228

Information on products and services. Revenue generated with external customers for groups of comparable products and services developed as follows:

millions of €
  Net revenue
  2017 2016 2015
Telecommunications 67,688 66,048 61,769
ICT solutions 6,735 6,501 6,833
Other 524 546 626
  74,947 73,095 69,228