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Andreas Fuchs

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Deutsche Telekom increases earnings in all areas of the Group in record year 2019

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  • Revenue of 80.5 billion euros – up 6.4 percent
  • Adjusted EBITDA AL up 7.2 percent to 24.7 billion euros
  • Free cash flow AL at 7.0 billion euros, up 15.9 percent compared with 2018
  • Net profit up by almost 80 percent to 3.9 billion euros
  • Guidance for 2020: adjusted EBITDA AL of around 25.5 billion euros and free cash flow AL of around 8.0 billion euros
  • Figures for Germany driven by fiber-optic build-out
  • Customer boom in the United States delivers record results
  • Europe accelerates growth trend
  • T-Systems transformation bears fruit

Record revenue, profit growth in all operating segments, and a further increase in investments: Deutsche Telekom looks back on the most successful year in the history of the company. Revenue grew by 6.4 percent in 2019 compared with the prior year to 80.5 billion euros. Adjusted EBITDA AL increased by 7.2 percent to 24.7 billion euros. Free cash flow AL increased by 15.9 percent to 7.0 billion euros. Thus, Deutsche Telekom achieved its guidance for 2019, as raised in November.

“This is a historic day for Deutsche Telekom,” said Tim Höttges, CEO of Deutsche Telekom. “We have confirmed our position as the clear number one in our industry in Europe with these record results.”

Cash capex before spectrum investment stood at 13.1 billion euros in 2019, 7.6 percent above the prior-year level. This increase was due to the accelerated 5G build-out in the United States. Net profit increased by 78.5 percent to 3.9 billion euros. Negative special factors like the settlement agreement in the toll arbitration proceedings and impairment losses in the prior year compared with a range of much smaller effects in 2019. Adjusted for special factors, net profit increased by 8.9 percent to 4.9 billion euros.

For the 2020 financial year, Deutsche Telekom expects another increase in revenue. Adjusted EBITDA AL is expected to grow to around 25.5 billion euros, of which around 13.9 billion euros will come from business outside of the United States. As in 2019, growth is expected in all operating segments. The Group expects free cash flow of around 8.0 billion euros. All these figures are based on constant exchange rates and exclude changes in the composition of the Group.

Germany – networks and customer base continue to grow

The focus in Germany in the reporting year was on building out superfast internet connections, with some 28 million households and business locations now being able to use super vectoring with bandwidths of at least 250 Mbit/s. There were 14.4 million fiber-optic-based lines in the Telekom network at the end of 2019, 2.2 million more than a year earlier. More than 3.6 million customers use the internet-based MagentaTV service. 74,000 new customers signed up in the fourth quarter of 2019 alone. 4.7 million customers have opted for the MagentaEINS product package. Consequently, the share of mobile contract customers with MagentaEINS increased from 51 percent to 57 percent.

Mobile service revenues increased by 1.4 percent in the quarter, clearly confirming Deutsche Telekom’s market leadership. In the Germany operating segment as a whole, revenue rose by 0.9 percent in 2019 to 21.9 billion euros. Adjusted EBITDA AL for the full year increased by 2.4 percent compared with 2018 to 8.7 billion euros.

United States – triumphant success story continues

T-Mobile US ended the year with 86 million customers, 6.4 million more than a year earlier. 2019 was the sixth year in succession with more than five million customer additions. The company recorded more than a million net additions to branded postpaid phone customers in the fourth quarter. Thus, T-Mobile US led the U.S. mobile market in this most important customer metric for the 24th quarter in a row.

The huge number of new customers is paying off. T-Mobile US increased total revenue by 5.0 percent in 2019 to 45.2 billion U.S. dollars. Adjusted EBITDA AL increased by 4.7 percent compared with the prior year to 12.5 billion U.S. dollars.

Europe – growth accelerates 

Revenue and earnings growth has been gaining pace for two years now in the Europe operating segment. In organic terms, revenue increased by 1.4 percent year-on-year in 2019 to 12.2 billion euros. Adjusted EBITDA AL rose 3.1 percent to 4.0 billion euros, driven by cost reductions and improved margins. In the fourth quarter, the organic growth rates were even higher, at 3.8 percent for revenue and 5.7 percent for adjusted EBITDA AL.

One of the success factors of the past year was fixed-mobile convergence products. Nearly 4.8 million customers now use such offers, 45.3 percent more than a year earlier. The percentage of broadband households that have opted for a product bundle also increased in this period from 39.9 percent to 49.1 percent. Product bundles lead to lower churn rates and higher revenues per household. Other customer figures also went up. The number of broadband lines grew 4.2 percent during the year to 6.7 million, the number of mobile contract customers increased by 3.4 percent to 27.6 million.

Systems Solutions – strong in new orders

T-Systems ended the year with a strong trend in order entry. The order volume was up 8.2 percent in 2019 at 7.3 billion euros, also largely driven by the growth areas.

Revenue declined slightly by 1.9 percent in the full year to 6.8 billion euros. Business in growth areas such as public cloud or security, each posting double-digit growth rates, was not sufficient to fully offset declines in traditional IT. At 0.5 billion euros, the annual target for adjusted EBITDA AL was achieved. The growth of 17.4 percent was primarily attributable to the ongoing transformation of the company. A further increase is expected for 2020.

Group Development – T-Mobile Netherlands continues to grow

Business developed very positively in the Netherlands over the past year. Revenue increased by 44.5 percent compared with 2018 to 1.9 billion euros. Adjusted EBITDA AL rose by 21.5 percent to 0.5 billion euros. This increase was mainly driven by the takeover of Tele2. But even without this effect, T-Mobile Netherlands recorded growth of 1.6 percent in revenue and of 19.4 percent in adjusted EBITDA AL. The company’s outstanding market position was underlined by the addition of 83,000 new mobile customers and 18,000 broadband customers in the fourth quarter alone.

With 34,300 sites at the end of 2019, the number of sites in Germany in the cell tower business rose by 1,800 year-on-year. Revenue in this business area increased by 2.5 percent on a like-for-like basis compared with 2018 to 0.9 billion euros.

The Deutsche Telekom Group at a glance



Q4

2019

millions of

Q4

2018

millions of

Change

%

FY
2019

millions of

FY
2018

millions of

Change

%

Net revenue

21,361

20,261

5.4

80,531

75,656

6.4

Proportion generated internationally

%

69.8

68.7

1.1p

69.5

67.8

1.7p

EBITDA

6,643

5,138

29.3

27,120

21,836

24.2

Adjusted EBITDA

7,054

5,649

24.9

28,708

23,333

23.0

Adjusted EBITDA AL

6,030

5,573

8.2

24,731

23,074

7.2

Net profit

654

-431

n.a.

3,867

2,166

78.5

Adjusted net profit

1,016

796

27.6

4,948

4,545

8.9

Free cash flowa

2,537

1,471

72.5

10,133

6,250

62.1

Free cash flow ALa

1,763

1,438

22.6

7,013

6,051

15.9

Cash capexb

3,150

3,141

0.3

14,357

12,492

14.9

Cash capexb

(before spectrum)

3,075

3,079

-0.1

13,118

12,223

7.3

Net debtc

76,031

55,425

37.2

Number of employeesd

210,533

215,675

-2.4

Comments on the table:
The new IFRS 16 “Leases” accounting standard has been applied since January 1, 2019. This led to a change in the definition of some of our financial performance indicators. The published prior-year figures were not adjusted; however, we show prior-year comparatives calculated on a pro forma basis for the redefined key performance indicators “adjusted EBITDA after leases (adjusted EBITDA AL)” and “free cash flow after leases (free cash flow AL)”.
a  Before dividend payments and spectrum investment.
b  Cash outflows for investments in property, plant and equipment, and intangible assets (excluding goodwill).
c  First-time application of IFRS 16 “Leases” as of January 1, 2019: The new standard results in a mathematical increase in net debt of 15.6 billion euros. The Company’s financial position remains unchanged by this.
d  At the reporting date.


Operating segments: development of operations



Q4

2019

millions of

Q4

2018

millions of

Change

%

FY
2019

millions of

FY
2018

millions of

Change

%

Germany

Total revenue

5,669

5,612

1.0

21,886

21,700

0.9

EBITDA

2,138

2,062

3.7

8,319

8,012

3.8

Adjusted EBITDA

2,209

2,179

1.4

8,744

8,610

1.6

Adjusted EBITDA AL

2,205

2,154

2.4

8,720

8,516

2.4

Number of employeesa

60,501

62,621

-3.4

United States

Total revenue

10,791

10,018

7.7

40,420

36,522

10.7

US-$

11,950

11,428

4.6

45,236

43,063

5.0

EBITDA

3,300

2,436

35.5

13,265

9,928

33.6

Adjusted EBITDA

3,403

2,537

34.1

13,809

10,088

36.9

Adjusted EBITDA AL

2,710

2,536

6.9

11,134

10,084

10.4

US-$

3,001

2,893

3.7

12,463

11,901

4.7

Europeb

Total revenue

3,225

3,132

3.0

12,168

11,885

2.4

EBITDA

1,069

904

18.3

4,313

3,757

14.8

Adjusted EBITDA

1,105

953

15.9

4,460

3,880

14.9

Adjusted EBITDA AL

982

935

5.0

4,005

3,813

5.0

Systems Solutions

Order entry

2,198

2,104

4.5

7,329

6,776

8.2

Total revenue

1,845

1,842

0.2

6,805

6,936

-1.9

Adj. EBIT margin (%)

3.4

0.3

3.1p

2.1

0.5

1.6p

EBITDA

91

-13

n.a.

314

163

92.6

Adjusted EBITDA

186

111

67.6

645

429

50.3

Adjusted EBITDA AL

156

115

35.7

519

442

17.4




Q4

2019

millions of

Q4

2018

millions of

Change

%

FY
2019

millions of

FY
2018

millions of

Change

%

Group Developmentc

Total revenue

729

578

26.1

2,797

2,185

28.0

EBITDA

322

218

47.7

1,427

893

59.8

Adjusted EBITDA

335

230

45.7

1,330

921

44.4

Adjusted EBITDA AL

259

218

18.8

1,033

892

15.8

Comments on the table:
The new IFRS 16 “Leases” accounting standard has been applied since January 1, 2019. This led to a change in the definition of some of our financial performance indicators. The published prior-year figures were not adjusted; however, we show prior-year comparatives calculated on a pro forma basis for the redefined key performance indicators “adjusted EBITDA after leases (adjusted EBITDA AL)” and “free cash flow after leases (free cash flow AL)”.
a At the reporting date.
b Inclusion of UPC Austria as of July 31, 2018. Prior-year comparatives were not adjusted.
c  Inclusion of Tele2 Netherlands as of January 2, 2019. Prior-year comparatives were not adjusted.


Operating segments: development of customer numbers in the fourth quarter of 2019

Dec. 31,
2019

thousands

Sept. 30, 2019

thousands

Change

thousands

Change

%

Germany

Mobile customers

46,189

45,598

591

1.3

Of which contract customers

25,291

25,138

153

0.6

Fixed-network lines

17,824

17,996

-172

-1.0

Of which retail IP-based

17,479

17,158

321

1.9

Broadband lines

13,730

13,683

47

0.3

Of which optical fibera

8,529

8,231

298

3.6

Television (IPTV, satellite)

3,618

3,544

74

2.1

Unbundled local loop lines (ULLs)

4,638

4,770

-132

-2.8

United States

Mobile customers

86,046

84,183

1,863

2.2

Of which branded postpaid customers

47,034

45,720

1,314

2.9

Of which branded prepay customers

20,860

20,783

77

0.4

Europeb

Mobile customersc

46,165

46,501

-336

-0.7

Of which contract customers

27,566

27,310

256

0.9

Fixed-network lines

9,105

9,069

36

0.4

Of which IP-basedd

8,311

8,208

103

1.3

Broadband customers

6,672

6,599

73

1.1

Television (IPTV, satellite, cable)

4,945

4,919

26

0.5

Group Developmente

Mobile customers

5,610

5,528

82

1.5

Fixed-network lines

619

601

18

3.0

Broadband lines

619

601

18

3.0

Comments on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
b Inclusion of UPC Austria as of July 31, 2018. Prior-year comparatives were not adjusted.
c As of January 1, 2019, the portfolio of M2M SIM cards in Austria was streamlined. 2.4 million customers were deactivated. Prior-year comparatives were not adjusted.
d Prior-quarter comparative for IP-based fixed-network lines in the Czech Republic was adjusted as part of the standardization of the underlying customer definition.
e Customer numbers at T-Mobile Netherlands. Inclusion of Tele2 Netherlands as of January 2, 2019. Prior-year comparatives were not adjusted.



Operating segments: development of customer numbers in year-on-year comparison

Dec. 31, 2019
thousands

Dec. 31, 2018
thousands

Change

thousands

Change

%

Germany

Mobile customers

46,189

44,202

1,987

4.5

Of which contract customers

25,291

25,435

-144

-0.6

Fixed-network lines

17,824

18,625

-801

-4.3

Of which retail IP-based

17,479

15,356

2,123

13.8

Broadband lines

13,730

13,561

169

1.2

Of which optical fibera

8,529

7,236

1,293

17.9

Television (IPTV, satellite)

3,618

3,353

265

7.9

Unbundled local loop lines (ULLs)

4,638

5,236

-598

-11.4

United States

Mobile customers

86,046

79,651

6,395

8.0

Of which branded postpaid customers

47,034

42,519

4,515

10.6

Of which branded prepay customers

20,860

21,137

-277

-1.3

Europeb

Mobile customersc

46,165

50,542

-4,377

-8.7

Of which contract customers

27,566

26,665

901

3.4

Fixed-network lines

9,105

9,039

66

0.7

Of which IP-basedd

8,311

7,391

920

12.4

Broadband customers

6,672

6,405

267

4.2

Television (IPTV, satellite, cable)

4,945

4,835

110

2.3

Group Developmente

Mobile customers

5,610

4,021

1,589

39.5

Fixed-network lines

619

241

378

n.a.

Broadband lines

619

241

378

n.a.

Comments on the table:
a Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
b Inclusion of UPC Austria as of July 31, 2018. Prior-year comparatives were not adjusted.
c As of January 1, 2019, the portfolio of M2M SIM cards in Austria was streamlined. 2.4 million customers were deactivated. Prior-year comparatives were not adjusted.
d Prior-quarter comparative for IP-based fixed-network lines in the Czech Republic was adjusted as part of the standardization of the underlying customer definition.
e Customer numbers at T-Mobile Netherlands. Inclusion of Tele2 Netherlands as of January 2, 2019. Prior-year comparatives were not adjusted.

This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” “outlook,” or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA, or other performance measures. Forward-looking statements are based on current plans, estimates, and projections, and 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. They include, for instance, the progress of Deutsche Telekom's staff-related restructuring measures and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, and business combinations. In addition, movements in exchange rates and interest rates, regulatory rulings, stronger than expected competition, technological change, litigation and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom's actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets 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 account for new information or future events or anything else. In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents alternative performance measures, e.g., EBITDA, EBITDA AL, EBITDA margin, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin, adjusted EBIT, adjusted EBIT margin, adjusted net profit/loss, free cash flow, free cash flow AL, gross debt, and net debt. These 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.

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