Media

Andreas Fuchs

2 Comments

Record investments in Germany drive growth at Deutsche Telekom

  • Share
    Two clicks for more data privacy: click here to activate the button and send your recommendation. Data will be transfered as soon as the activation occurs.
  • Print
  • Read out
  • Group meets all financial targets for 2017
  • Revenue up 2.5 percent in 2017 to 74.9 billion euros; organic growth of 3.6 percent
  • Adjusted EBITDA up by 3.8 percent; organic growth of 4.9 percent to 22.45 billion euros
  • Free cash flow up 11.3 percent to 5.5 billion euros
  • Net profit up by 29.4 percent to 3.5 billion euros; growth of 46.8 percent to 6.0 billion euros on an adjusted basis
  • Record-level investments worldwide of over 12 billion euros, of which 5.4 billion euros in Germany
  • Peak year for optical fiber in Germany
  • Another successful year for the Un-carrier
  • Growth across Europe in broadband, mobile communications, TV, and convergence products
  • Dividend expected to rise for the third time in succession; proposal of 65 eurocents per share to the shareholders’ meeting
  • 2018 forecast: adjusted EBITDA to grow 4 percent to around 23.2 billion euros, free cash flow to increase 12 percent to around 6.2 billion euros

In 2017, Deutsche Telekom again met all of its financial targets. Assuming the same composition of the Group and constant exchange rates, adjusted EBITDA increased by 4.9 percent to 22.45 billion euros. This put it exactly at the mid-point of the 22.4- to 22.5-billion-euro target range for the full year set by the Group in two successive upwards adjustments made over the course of 2017. Reported adjusted EBITDA rose by 3.8 percent to 22.2 billion euros. Free cash flow increased by 11.3 percent to 5.5 billion euros.

“Deutsche Telekom continues to grow in its global markets,” says CEO Tim Höttges. “In 2017, we once again kept our promises. We also want our shareholders to profit from our success, which is why we are planning to increase the dividend for the third time in succession.”

At the Capital Markets Day in 2015, the Group had announced that its dividend would track development in free cash flow. Consequently, the Supervisory Board and the Board of Management will propose to the shareholders' meeting on May 17 a dividend of 65 eurocents per share. This increases the dividend by another 5 eurocents per share following rises from 50 eurocents for the 2014 financial year to 55 eurocents for 2015 and 60 eurocents for 2016. All in all, this represents a 30-percent increase over three years.

With record-level investments of 12.1 billion euros excluding expenses for mobile spectrum, Deutsche Telekom continued to focus on building out its networks in 2017. Capital expenditure thus grew year-on-year by 10.4 percent. Including spectrum investment, this level grows to 19.5 billion euros – an increase of 42.9 percent.

Net profit rose last year by 29.4 percent to 3.5 billion euros. Several factors contributed to this growth, including a positive non-recurring effect from the tax reform in the United States totaling 1.7 billion euros in the fourth quarter. Growth on an adjusted basis was even more marked, up by 46.8 percent to 6.0 billion euros.

Deutsche Telekom plans to continue its growth course in 2018. Together with a moderate increase in revenue, adjusted EBITDA is set to rise by over 4 percent to around 23.2 billion euros in the current financial year. At the same time, free cash flow is expected to grow by more than 12 percent to around 6.2 billion euros. As always, this forecast assumes constant exchange rates.

Taking this forecast as the basis, the Group expects to see high growth rates across all key financial performance indicators for the four years from 2015 through 2018. Adjusted EBITDA is set to grow on average by some 5 percent a year on this basis. The increase in free cash flow averages around 11 percent a year.

Germany – strong year for fiber-optic and convergence products

In Germany, 2017 was marked by efforts to build out fiber-optic infrastructure. Deutsche Telekom laid 40,000 kilometers of new fiber-optic cable in the year just ended, with plans to up this figure to 60,000 kilometers in 2018. The customer base grew sharply on the back of the improved availability of fiber-optic lines (FTTH, FTTC/vectoring). The number of lines totaled 9.6 million at the year-end, up 2.8 million or 41 percent year-on-year. Over 30 million households now have access to Deutsche Telekom's fiber-optic network. The number of new broadband customers grew by 104,000 in the fourth quarter alone, bringing the net add market share to almost 33 percent, a good 6 percentage points higher than in the prior quarter.

Deutsche Telekom once again reinforced its market leadership in service revenues, which increased by 1.7 percent in the last quarter of 2017 compared with the same period of the prior year. Adjusted for regulatory effects, the increase grew to as much as 3.6 percent. The number of consumers choosing one of the MagentaEINS fixed-mobile package products increased by almost 20 percent to 3.6 million in just one year.

Revenue in the Germany operating segment increased by 0.7 percent to 21.9 billion euros, with adjusted EBITDA rising by 2.8 percent to 8.5 billion euros. Revenue and adjusted EBITDA saw particularly marked growth in the final quarter of 2.0 percent and 4.7 percent respectively.

United States – success continues unabated even after five years

T-Mobile US has been revolutionizing the wireless industry in the United States with its Un-carrier initiatives for five years. The latest changes, such as the abolition of fixed-term contracts and the removal of all extra taxes and fees for customers, are taking the company from strength to strength. In the full-year 2017, T-Mobile US added 5.7 million new customers. It was the fourth year in succession in which the company acquired more than 5 million new customers.

The company’s financial figures also showed a clear uptrend. In 2017, revenue increased by 8.1 percent to 40.3 billion U.S. dollars. At the same time, adjusted EBITDA increased by 10.7 percent to 10.5 billion U.S. dollars. T-Mobile US also reinforced its sales channels in order to further drive customer growth, opening 2,800 new shops nationwide last year.

Europe – success with convergence

The Europe operating segment posted virtually stable revenues and earnings for 2017. Following the downtrends of previous years, this positive development was reflected in revenue growth of 1.2 percent to 11.6 billion euros. In organic terms, revenue grew slightly by 0.5 percent. At the same time, adjusted EBITDA fell 3.0 percent to 3.7 billion euros; in organic terms, it decreased by 1.0 percent.

Fixed-mobile product bundles continued to grow in popularity across Europe throughout 2017. The number of customers choosing these convergent services increased by 58.5 percent year-on-year to 2.2 million. Key decisions made in December of last year will drive expansion into further markets for convergent products: T-Mobile Austria announced plans to acquire the cable network operator UPC Austria, while T-Mobile Polska signed a letter of intent with its competitor Orange Polska on a partnership that will open up access to Orange’s fiber-optic network.

Consistent uptrends were also seen in other relevant customer numbers in the year just ended. The number of mobile contract customers increased by 4.8 percent to 25.5 million, the national companies in Europe recorded growth in (retail) broadband lines of 4.7 percent to 5.6 million, and the number of TV customers grew 4.8 percent to 4.2 million.

The network build-out across Europe also continued unabated. In just one year, coverage with fiber-optic technology increased by 1.3 million to reach 6.2 million households. The current LTE mobile standard now reaches 106 million people or 94 percent of the population, up 13 million from the end of 2016.

Systems Solutions – order entry down as expected

T-Systems closed 2017 with a slight decline in revenue of 1.1 percent to 6.9 billion euros. Although positive trends were reported in the growth areas of cloud computing and security, lower order entry and intensifying global competition for corporate customers across the industry continued to be felt clearly. In the year just ended, adjusted EBITDA declined by 4.0 percent to 509 million euros, in part due to the start-up costs associated with digitalization topics such as the Internet of Things. The adjusted EBIT margin was 1.7 percent, 0.1 percentage points below the 2016 level.

As announced in the third quarter, order entry for 2017 was substantially lower than in the prior year. Deals were closed totaling 5.2 billion euros, a minus of 23.5 percent. Major deals concluded in the fourth quarter of 2016 were not matched in the year just ended. The decline in order entry had already triggered recognition of an impairment loss in the Systems Solutions operating segment in the third quarter of 2017.

The Deutsche Telekom Group at a glance:

 

 

Q4

2017

millions of

Q4

2016

millions of

Change

%

FY 2017

millions of

FY 2016

millions of

Change

%

Revenue

19,160

19,543

(2.0)

74,947

73,095

2.5

Proportion generated internationally (%)

67.0

67.6

(0.6p)

67.2

66.3

0.9p

EBITDA

4,703

4,846

(3.0)

23,969

22,544

6.3

Adjusted EBITDA

5,015

5,265

(4.7)

22,230

21,420

3.8

Net profit
(loss)

1,332

(2,124)

n.a.

3,461

2,675

29.4

Adjusted net profit

2,657

973

n.a.

6,039

4,114

46.8

Free cash flowa

1,094

893

22.5

5,497

4,939

11.3

Cash capexb

2,954

3,156

(6.4)

19,494

13,640

42.9

Cash capexb

(before spectrum)

2,860

2,724

5.0

12,099

10,958

10.4

Net debt

50,791

49,959

1.7

50,791

49,959

1.7

Number of employeesc

217,349

218,341

(0.5)

217,349

218,341

(0.5)

Comments on the table:
a  Before dividend payments and spectrum investment.
b  Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill).
c  At the reporting date.

Operating segments:

 

 

Q4

2017

millions of

Q4

2016

millions of

Change

%

FY 2017

millions of

FY 2016

millions of

Change

%

Germany

 

 

 

 

 

 

Total revenue

5,676

5,565

2.0

21,931

21,774

0.7

EBITDA

2,029

1,763

15.1

8,162

7,327

11.4

Adjusted EBITDA

2,107

2,013

4.7

8,468

8,237

2.8

Number of employeesa

63,928

65,452

(2.3)

63,928

65,452

(2.3)

United States

 

 

 

 

 

 

Total revenue

9,052

9,445

(4.2)

35,736

33,738

5.9

EBITDA

1,989

2,335

(14.8)

10,949

8,967

22.1

Adjusted EBITDA

2,003

2,325

(13.8)

9,316

8,561

8.8

Europe

 

 

 

 

 

 

Total revenue

3,002

2,996

0.2

11,589

11,454

1.2

EBITDA

870

894

(2.7)

3,619

3,773

(4.1)

Adjusted EBITDA

906

930

(2.6)

3,749

3,866

(3.0)

Systems Solutions

 

 

 

 

 

 

Order entry

1,305

2,495

(47.7)

5,241

6,851

(23.5)

Total revenue

1,819

1,741

4.5

6,918

6,993

(1.1)

Adjusted EBIT margin
(%)

2.5

(1.5)

4.0p

1.7

1.8

(0.1p)

EBITDA

66

11

n.a.

280

278

0.7

Adjusted EBITDA

147

84

75.0

509

530

(4.0)

Comment on the table:
a  At the reporting date.

Development of customer numbers
Operating segments: Development of customer numbers in the fourth quarter of 2017

 

Dec. 31, 2017

thousands

Sept. 30, 2017

thousands

Change

thousands

Change

%

Germany

 

 

 

 

Mobile customers

43,125

42,534

591

1.4

Of which contract customers

25,887

25,452

435

1.7

Fixed-network lines

19,239

19,352

(113)

(0.6)

Of which retail IP-based

11,996

11,177

819

7.3

Broadband lines

13,209

13,105

104

0.8

Of which optical fibera

5,803

5,417

386

7.1

Television (IPTV, satellite)

3,139

3,089

50

1.6

Unbundled local loop lines (ULLs)

6,138

6,417

(279)

(4.3)

United States

 

 

 

 

Mobile customersb

72,585

70,731

1,854

2.6

Of which branded postpaid customers

38,047

36,975

1,072

2.9

Of which branded prepay customers

20,668

20,519

149

0.7

Europe

 

 

 

 

Mobile customers

48,842

48,205

637

1.3

Of which contract customers

25,483

25,119

364

1.4

Fixed-network lines

8,439

8,422

17

0.2

Of which IP-based

5,734

5,555

179

3.2

Retail broadband lines

5,647

5,558

89

1.6

Television (IPTV, satellite, cable)

4,244

4,200

44

1.0

Comments on the table:
a  Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).
b  As of Q2/17, 4.368 million wholesale customers from the Lifeline program are no longer included in the figures.

Operating segments: Development of customer numbers in a year-on-year comparison

 

Dec. 31, 2017
thousands

Dec. 31, 2016
thousands

Change

thousands

Change

%

Germany

 

 

 

 

Mobile customers

43,125

41,849

1,276

3.0

Of which contract customers

25,887

25,219

668

2.6

Fixed-network lines

19,239

19,786

(547)

(2.8)

Of which retail IP-based

11,996

9,042

2,954

32.7

Broadband lines

13,209

12,922

287

2.2

Of which optical fibera

5,803

4,250

1,553

36.5

Television (IPTV, satellite)

3,139

2,879

260

9.0

Unbundled local loop lines (ULLs)

6,138

7,195

(1,057)

(14.7)

United States

 

 

 

 

Mobile customersb

72,585

71,455

1,130

1.6

Of which branded postpaid customers

38,047

34,427

3,620

10.5

Of which branded prepay customers

20,668

19,813

855

4.3

Europe

 

 

 

 

Mobile customers

48,842

47,952

890

1.9

Of which contract customers

25,483

24,315

1,168

4.8

Fixed-network lines

8,439

8,531

(92)

(1.1)

Of which IP-based

5,734

5,016

718

14.3

Retail broadband lines

5,647

5,393

254

4.7

Television (IPTV, satellite, cable)

4,244

4,049

195

4.8

Comments on the table:
a  Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH).
b  As of Q2/17, 4.368 million wholesale customers from the Lifeline program are no longer included in the figures.

This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows, and personnel-related measures. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. Among the factors that might influence Deutsche Telekom's ability to achieve its objectives are the progress of its staff restructuring initiatives and other cost-saving measures, and the impact of other significant strategic, labor, or business initiatives, including acquisitions, dispositions, business combinations, and network upgrade and build-out initiatives. In addition, stronger than expected competition, technological change, legal proceedings, and regulatory developments, among other factors, may have a material adverse effect on cost and revenue development. Further, an economic downturn in the markets, and changes in interest and currency exchange rates, may also have an impact on Deutsche Telekom's business development and the availability of financing on favorable conditions. Changes to Deutsche Telekom's expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect the results at the Group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, the actual performance may materially differ from the performance expressed or implied by forward-looking statements. There is no assurance that the estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.
In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents alternative performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net profit, free cash flow, gross debt, and net debt. These performance measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Alternative performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.

About Deutsche Telekom: Company profile

Picture results Deutsche Telekom AG

Financial figures of 2017

Media kit concerning the financial figures of 2017.

FAQ