9 Development of business in the operating segments. Germany. Customer development. G 27 Mobile customers. G 29 Fixed-network lines. 4, 36,568 37,5 37,492 37,936 38,625 24, 22,384 22,113 21,88 21,625 21,417 3, 18, 2, 19,57 2,11 2,445 2,915 21,553 12, 1, 6, Dec. 31, 212 Mar. 31, 213 June 3, 213 Sept. 3, 213 Dec. 31, 213 Dec. 31, 212 Mar. 31, 213 June 3, 213 Sept. 3, 213 Dec. 31, 213 Contract customers G 28 Broadband lines. G 3 TV customers (IPTV, satellite). a 16, 3, 12, 12,427 12,443 12,43 12,383 12,36 2, 1,966 2,36 2,78 2,121 2,177 8, 1, 4, Dec. 31, 212 Mar. 31, 213 June 3, 213 Sept. 3, 213 Dec. 31, 213 Dec. 31, 212 Mar. 31, 213 June 3, 213 Sept. 3, 213 Dec. 31, 213 a Customers connected. Deutsche Telekom. The 213 financial year.
Combined management report 54 Overview of the 213 financial year 58 Highlights in the 213 financial year 62 Group organization 65 Group strategy 69 Management of the Group 73 The economic environment 78 Development of business in the Group 9 Development of business in the operating segments 17 Development of business at Deutsche Telekom AG 11 Corporate responsibility 116 Innovation and product development 121 Employees 127 Significant events after the reporting period 127 Forecast 137 Risk and opportunity management 154 Accounting-related internal control system 154 Other disclosures 91 T 26 Dec. 31, 213 Dec. 31, 212 Change Change % Dec. 31, 211 Total Mobile customers 38,625 36,568 2,57 5.6 % 35,43 Contract customers 21,553 19,57 1,983 1.1 % 18,221 Prepay customers 17,72 16,997 75.4 % 17,182 Fixed-network lines 21,417 22,384 (967) (4.3) % 23,399 Of which: IP-based 2,141 937 1,24 n. a. 514 Broadband lines 12,36 12,427 (67) (.5) % 12,265 TV (IPTV, satellite) 2,177 1,966 211 1.7 % 1,553 Unbundled local loop lines (ULLs) 9,257 9,436 (179) (1.9) % 9,598 Wholesale unbundled lines 1,564 1,33 261 2. % 1,222 Wholesale bundled lines 39 518 (128) (24.7) % 74 Of which: consumers Mobile customers 29,943 28,811 1,132 3.9 % 28,382 Contract customers 15,669 13,99 1,679 12. % 12,874 Prepay customers a 14,275 14,821 (546) (3.7) % 15,58 Fixed-network lines 16,923 17,789 (866) (4.9) % 18,763 Of which: IP-based 1,96 856 1,14 n. a. 488 Broadband lines 9,963 1,39 (76) (.8) % 9,959 TV (IPTV, satellite) 2,1 1,84 197 1.9 % 1,434 Of which: business customers Mobile customers 8,682 7,757 925 11.9 % 7,21 Contract customers 5,885 5,581 34 5.4 % 5,347 Prepay customers (M2M) a 2,797 2,176 621 28.5 % 1,675 Fixed-network lines 3,445 3,51 (65) (1.9) % 3,55 Of which: IP-based 164 55 19 n. a. 21 Broadband lines 2,72 2,62 1.5 % 1,973 TV (IPTV, satellite) 174 161 13 8.1 % 117 a Since January 1, 213, M2M (machine-to-machine) has been reported exclusively under prepay business customers in mobile communications. Prior-year figures have been adjusted accordingly. Total. In our home market of Germany, we are the market leader in fixednetwork and mobile communications and we plan to remain so in the future. We are also ahead of the competition in terms of quality of service and technology. We have the best network quality, confirmed by the fact that we won all major network tests in 213. For this reason, customers perceive us as better than our competitors. Several positive trends continued in the 213 financial year. Compared with the end of 212, we recorded a total of 2,57 thousand mobile customer additions by the end of 213. Smartphone sales increased to 4.3 million in 213. In the fixed network, our fiber-optic products are growing increasingly important: The total number of lines VDSL and FTTH increased by 534 thousand to 1.5 million, in particular due to existing customers switching to higher-quality products with higher bandwidth. We had also migrated 2.1 million customers to IPbased lines by the end of 213. In broadband business, we recorded an almost stable development of lines in the 213 financial year, with the total number of lines reaching 12.4 million. We are still competing with cable operators. With the progress in fiberoptic roll-out and innovative vectoring technology, we will also drive forward the marketing of substantially higher bandwidths. At the end of 213, we had rolled out vectoring-enabled VDSL lines to the first cities as part of our network upgrade initiative, and, from the second half of 214, we will double the maximum download speed from 5 Mbit/s to up to 1 Mbit/s. With our contingent model and its future further development, we create incentives for migration from traditional wholesale products, such as bundled wholesale lines or unbundled local loop lines to higher-quality VDSL wholesale lines. Under partnerships with network operators that are based on increased usage of our VDSL and vectoring wholesale products, we can share investment risks and drive forward further roll-out. Our partnerships in the housing sector also proved successful: In total, 68 thousand apartments were connected to our network. For more information on awards, please refer to the section Highlights in the 213 financial year, page 58 et seq. For more information on our wholesale agreements, please refer to the section Highlights in the 213 financial year, page 58 et seq. Deutsche Telekom. The 213 financial year.
92 Mobile communications. Mobile telephony and data services. In mobile communications, we stepped up our efforts to attract and win back customers in 213, for example with the new mobile rate plans launched in May 213. As of the end of 213, the number of mobile customers increased to 38.6 million, up 2.1 million or 5.6 percent compared with the end of the prior year. The mobile contract customer base grew by 1,983 thousand in 213. 746 thousand of these new customers were added in branded business under the Deutsche Telekom brand and our second brand congstar. The remainder were added in the fast-growing, but much lower-revenue reseller segment (service providers). The positive trend in the area of machine-to-machine solutions and our Call & Surf Comfort via Funk rate plan continued. By the end of 213, 229 thousand customers had already subscribed to Call & Surf Comfort via Funk. This is part of our integrated network strategy: Thanks to our LTE and 3G roll-out, we can offer these customers a high-quality and faster broadband connection via our mobile network. We sold 6.3 million mobile phones in the 213 financial year. The proportion of smartphones, especially Android devices and iphones, totaled 68.3 percent. Fixed network. Telephony, Internet, and television. A total of 17.6 percent of our broadband customers use our television service Entertain. By the end of 213, the number of TV customers had increased by 1.7 percent compared with 212; Entertain Sat grew by 34.8 percent. In the traditional fixed network, the number of lines decreased by 4.3 percent compared with the prior year. Customers switched primarily to cable operators, but increasingly also to mobile products. Consumers. Connected life across all screens. We increased the number of mobile contract customers by 12. percent in the reporting year compared with 212. Above all, rate plans with integrated data flat rates for mobile Internet (Complete Comfort, special rate plans like Special Allnet), pure data rates, e.g., for tablets, LTE add-on options, and Travel & Surf, and SpeedOn passes developed positively. Call & Surf Comfort via Funk also performed very well, with customer growth of 85.1 percent yearon-year. The number of prepay customers decreased by 3.7 percent in the reporting year, mainly due to the decline in the reseller segment, which was partially offset by customer additions through congstar. In the fixed network, we won another 197 thousand customers for Entertain in 213, up 1.9 percent against the prior year. The marketing of the Sky Deutschland program packages from June 213 was also successful. The line losses in the fixed network totaled 866 thousand, which was less than in the prior year. In the broadband market, we won 288 thousand customers for fiber-optic lines. Business Customers. Connected work with innovative solutions. Growth in mobile communications is attributable to contract additions and the 621 thousand cards sold for our machine-to-machine solutions in 213. In mobile Internet, customers are increasingly opting for plans with higher bandwidths, such as Complete Comfort and BusinessProfi, including highquality handsets. The number of fixed-network lines in the Business Customer area decreased only slightly by 1.9 percent against 212. Products in the area of connected work developed positively. Accordingly, we recorded a higher number of Company Connect dedicated Internet connections. In data communications, we significantly increased the number of networks and connections, especially with Internet-based data networks (IP VPNs) and high-bandwidth location networking. Demand for cloud products grew in particular. Wholesale. The number of unbundled wholesale lines increased by 261 thousand in the reporting year, due to the growth in VDSL lines. The contingent model, which was launched successfully in the second half of 212, contributed substantially to this trend. The number of bundled wholesale lines, however, declined by 128 thousand. We expect this trend to continue for the next few years, due in particular to the fact that our competitors are switching from bundled to unbundled wholesale products or to their own infrastructure. The number of unbundled local loop lines (ULLs) decreased by 179 thousand compared with the end of 212. This decrease is attributable both to the trend towards higher-quality VDSL wholesale lines and to the market situation, since competitors migrate their customers to mobile-based lines or the customers switch to cable companies. Deutsche Telekom. The 213 financial year.
Combined management report 54 Overview of the 213 financial year 58 Highlights in the 213 financial year 62 Group organization 65 Group strategy 69 Management of the Group 73 The economic environment 78 Development of business in the Group 9 Development of business in the operating segments 17 Development of business at Deutsche Telekom AG 11 Corporate responsibility 116 Innovation and product development 121 Employees 127 Significant events after the reporting period 127 Forecast 137 Risk and opportunity management 154 Accounting-related internal control system 154 Other disclosures 93 Development of operations. T 27 millions of 213 212 Change Change % 211 Total revenue 22,435 22,736 (31) (1.3) % 23,26 Consumers 12,122 12,197 (75) (.6) % 12,497 Business Customers 5,676 5,68 (4) (.1) % 5,615 Wholesale 3,811 4,35 (224) (5.6) % 4,29 Value-Added Services 288 367 (79) (21.5) % 425 Other 538 457 81 17.7 % 46 Profit from operations (EBIT) 4,435 4,213 222 5.3 % 4,597 EBIT margin % 19.8 18.5 19.8 Depreciation, amortization and impairment losses (3,966) (4,393) 427 9.7 % (4,344) EBITDA 8,41 8,66 (25) (2.4) % 8,941 Special factors affecting EBITDA (535) (56) 25 4.5 % (612) EBITDA (adjusted for special factors) 8,936 9,166 (23) (2.5) % 9,553 EBITDA margin (adjusted for special factors) % 39.7 4.3 41.1 Cash Capex (3,411) (3,418) 7.2 % (3,56) The operations of Regional Services and Solutions (RSS) have been managed by the Germany operating segment since January 1, 213 and no longer by the Systems Solutions operating segment to allow a more focused market approach. Total revenue. The revenue decline totaled 1.3 percent in 213, an improvement of.7 percentage points compared with the prior year. This ongoing revenue decline was primarily attributable to intensified price cuts imposed by regulation, lower revenue from the traditional fixed network, as well as a downward trend in voice telephony and mobile text messaging. The decline was partially offset by growing demand for complete packages with mobile data and/or TV rate plans and by increased revenue from the sale of attractive handsets, in particular smartphones. In mobile communications, revenue increased by 1.3 percent compared with 212. Our market share of mobile service revenue in Germany exceeded market level in 213. However, mobile service revenue decreased by 1.9 percent, due to prices being impacted by high competitive pressure in particular. Other reasons for the decrease were regulation-imposed reductions in mobile termination rates in December 212 and roaming fees as of July 1, 212 and July 1, 213. Revenue from text messaging decreased by 27 percent or EUR 193 million, due in part to a shift in consumer behavior toward IP messaging services. By contrast, data and mobile equipment revenue increased. The marketing of Entertain and add-on options as well as revenue from the terminal equipment lease model had a positive impact on our fixed-network business, although this was not sufficient to offset the revenue decrease in traditional voice telephony due to line losses. Revenue from Consumers decreased slightly by.6 percent. Revenue from mobile communications grew by.9 percent thanks to the positive development in the marketing of mobile devices. By contrast, mobile service revenues decreased by 2.7 percent, mainly due to the decline in mobile voice telephony, intensified regulatory price cuts, and lower text messaging revenue. These negative effects were partially offset by the positive trend in data revenue, due in particular to strong smartphone sales. Fixed-network revenue declined by 2.9 percent in the core business due to the downward trend in voice telephony. Year-on-year growth in TV revenue including add-on options of 14.5 percent and in terminal equipment revenue of 18.7 percent had an offsetting effect. In the Business Customers area, total revenue remained more or less on a par with the prior-year level, down by.1 percent. Growth in mobile communications was attributable to the increase in revenue from mobile devices of 27. percent, as well as an almost stable trend in service revenues with a focus on data revenues. This almost offset the decline in revenue from traditional fixed-network voice telephony. The decline in Wholesale revenue down 5.6 percent to EUR 3.8 billion was primarily attributable to the following factors: regulatory price cuts for services such as interconnection calls (from December 1, 212) and unbundled local loop lines due to new rulings in earlier proceedings, the declining use of interconnection calls, and a volumeand price-related revenue decrease. Deutsche Telekom. The 213 financial year.
94 The decline in revenues from Value-Added Services of 21.5 percent mainly resulted from the amended regulations concerning free-ofcharge queuing, which came into effect as of September 1, 212 and June 1, 213, and from weaker use of premium rate call numbers, such as directory assistance services, and of public telephones. To focus more on our core business, we abandoned business with digital out-of-home advertising in the fourth quarter of 213, with a resultant loss of revenue. EBITDA, adjusted EBITDA. EBITDA totaled EUR 8.4 billion in the reporting year. This includes EUR.5 billion in expenses for special factors, mainly for responsible staff restructuring. Adjusted for special factors, EBITDA decreased by 2.5 percent year-on-year. The revenue decrease was not fully offset by cost savings, for example, in call center services and services rendered by third parties as well as IT cost cuts. Significant factors contributing to this trend were mobile market investments, which were on a par with the prior-year level, and personnel costs, for example, due to collective salary increases. With an adjusted EBITDA margin of 39.7 percent, we are already within our target corridor of over 4 percent, despite high market investments. EBIT. Profit from operations for our Germany operating segment increased by 5.3 percent to EUR 4.4 billion year-on-year. This was primarily attributable to lower depreciation and amortization, due, among other factors, to the expiry of the economic useful lives of parts of outside plant. Cash capex. Cash capex remained on a par with the prior-year level in 213, with our investments still focused on the networks of the future, such as the fiber-optic and LTE infrastructure. The delayed award of contracts in the first quarter of 213 due in part to the cold weather, was compensated by increased investments as the year progressed. United States. Customer development. G 31 Branded postpaid customers. G 32 Branded prepay customers. 28, 15, 14,935 a 14,96 15,72 21, 2,293 2,94 2,783 21,43 22,299 1, 14, 7, 5, 5,826 6,28 Dec. 31, 212 Mar. 31, 213 June 3, 213 Sept. 3, 213 Dec. 31, 213 Dec. 31, 212 Mar. 31, 213 June 3, 213 Sept. 3, 213 Dec. 31, 213 a On May 1, 213, the number of prepay customers increased by 8,918 thousand in connection with the acquisition of MetroPCS. T 28 Dec. 31, 213 Dec. 31, 212 Change Change % Dec. 31, 211 United States Mobile customers 46,684 33,389 13,295 39.8 % 33,186 Branded customers 37,371 26,119 11,252 43.1 % 27,186 Branded postpaid 22,299 2,293 2,6 9.9 % 22,367 Branded prepay 15,72 5,826 9,246 n. a. 4,819 Wholesale customers 9,313 7,27 2,43 28.1 % 6, M2M a 3,62 3,9 512 16.6 % 2,43 MVNOs 5,711 4,18 1,531 36.6 % 3,57 a M2M: machine-to-machine. Deutsche Telekom. The 213 financial year.