n
n Net revenue increased by 3.4 percent. n
n The United States operating segment in particular contributed to this revenue trend as a result of the inclusion of MetroPCS since May 1, 2013 and continued strong customer additions.
n
n Revenue in the Europe operating segment continues to be negatively affected by a persistently difficult economic environment, significant regulation-induced price adjust- ments and high competitive pressure.
n
n Adjusted for changes in the composition of the Group and negative exchange rate effects, net revenue increased by EUR 0.3 billion year-on-year.
adjuSted eBitda.a
n
n Adjusted EBITDA decreased by 3.1 percent. n
n Positive impact: the focus on high-value revenue in connection with TV services and mobile data revenues.
n
n Negative impact: negative exchange rate effects of EUR 0.2 billion, higher market investments in the United States, fixed-network lines lost to competitors, price changes imposed by regulatory authorities, special levies, and national austerity programs. The negative effects were only partially offset by our comprehensive cost management.
net profit/loSS.a
n
n Net profit increased by EUR 6.3 billion. n
n Net profit was increased by lower depreciation, amortization and impairment losses, attributable in particular to the impairment loss of around EUR 7.4 billion after taxes recognized on goodwill, other intangible assets and property, plant and equipment at T-Mobile USA in the third quarter of 2012 and lower depreciation due to the expiry of the economic useful life of parts of the outside plant in the Germany operating segment. n
n Adjusted net profit increased from EUR 2.5 billion to EUR 2.8 billion.
equity ratio.a
n
n Total assets increased by 9.5 percent, in particular due to the first-time inclusion of MetroPCS.
n
n Shareholders’ equity increased by 5.0 percent to EUR 32.1 billion. This increase was primarily attributable to the first-time inclusion of MetroPCS (EUR 2.0 billion), net profit (EUR 0.9 billion) and the capital increase (EUR 1.1 billion) carried out to grant shareholders the possibility of exchanging their dividend entitlements for shares (divi- dend in kind). Dividend payments for the 2012 financial year to Deutsche Telekom AG shareholders (EUR 3.0 billion), in particular, had an offsetting effect.
n
n The equity ratio decreased to 27.1 percent, thus remaining within our target range of 25 to 35 percent. 2011 2012 2013 2011 2012 2013 0 10 20 30 40 50 60 70 G 05 G 09 Net revenue. billions of € 60.1 58.7 58.2 Cash capex. billions of € 11.1 8.4 8.4 G 06 G 10 2011 2012 2013 2011 2012 2013 0 10 20 30 40 50 60 70 Adjusted EBITDA.a billions of € 17.4 18.7 18.0
Free cash flow (before dividend payments, spectrum investment).b
billions of € 4.6 6.4 6.2 2011 2012 2013 0 10 20 30 40 50 60 70 –4 –6 –2 0 2 4 6 8 G 08 G 12 ROCE.a % (2.4) 3.8 3.8 Equity ratio.a % 32.7 28.3 27.1
Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013
2011 2012 2013 G 07 G 11 –10 0 10 20 30 40 50 60 Net profit/loss.a billions of € 0.9 0.5 (5.4) Net debt. billions of € 39.1 40.1 36.9
Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013 54
caSh capeX. n
n Cash capex increased by 31.3 percent and mainly related to further rolling out broad- band and expanding capacities in existing networks.
n
n The increase was due to capital expenditure for the LTE roll-out in our United States and Europe operating segments. In our home market of Germany, our investments focused on “networks of the future,” like optical fiber and LTE infrastructure.
n
n We acquired mobile spectrum for EUR 2.2 billion, primarily in the Netherlands, Austria, and the United States.
free caSh flow (Before dividend payMentS, SpectruM inveStMent).b
n
n Free cash flow decreased by 26.2 percent. n
n This is mainly a consequence of our strategy of investing more in the build-out and modernization of our network infrastructure and, as a result, of higher cash capex. n
n Net cash from operating activities decreased by EUR 0.6 billion. The dividends received from the EE joint venture, which were down EUR 0.2 billion year-on-year, and a EUR 0.2 billion increase in severance payments, among other factors, had a negative impact.
net deBt. n
n Net debt increased by 6.1 percent. n
n This increase is mainly attributable to the first-time inclusion of MetroPCS (EUR 3.4 billion), dividend payments – including to non-controlling interests – (EUR 2.2 billion), the acquisition of spectrum (EUR 2.2 billion), and payments to external pension funds (allocation under CTA; EUR 0.3 billion).
n
n Net debt was reduced by free cash flow (EUR 4.6 billion), the capital increase at T-Mobile US (EUR 1.3 billion), the sale of the stakes in Globul and Germanos (EUR 0.7 billion), and the sale of the stake in Hellas Sat (EUR 0.2 billion).
roce.a
n
n At 3.8 percent, ROCE substantially recovered from the negative value in the prior year. n
n Both the improvement in the operating result, due in particular to the non-recurrence of the impairment loss recognized on goodwill, other intangible assets and property, plant and equipment at T-Mobile USA in the prior year, and the reduction in the average level of tied up assets over the course of the year contributed to this recovery.
For a more detailed explanation, please refer to the section “Development of business in the Group,” page 78 et seq.
2011 2012 2013 2011 2012 2013 0 10 20 30 40 50 60 70 G 05 G 09 Net revenue. billions of € 60.1 58.7 58.2 Cash capex. billions of € 11.1 8.4 8.4 G 06 G 10 2011 2012 2013 2011 2012 2013 0 10 20 30 40 50 60 70 Adjusted EBITDA.a billions of € 17.4 18.7 18.0
Free cash flow (before dividend payments, spectrum investment).b
billions of € 4.6 6.4 6.2 2011 2012 2013 0 10 20 30 40 50 60 70 –4 –6 –2 0 2 4 6 8 G 08 G 12 ROCE.a % (2.4) 3.8 3.8 Equity ratio.a % 32.7 28.3 27.1
Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013
2011 2012 2013 G 07 G 11 –10 0 10 20 30 40 50 60 Net profit/loss.a billions of € 0.9 0.5 (5.4) Net debt. billions of € 39.1 40.1 36.9
Dec. 31, 2011 Dec. 31, 2012 Dec. 31, 2013
55 CoMBINeD MaNaGeMeNT reporT
Deutsche Telekom. The 2013 financial year.
a The prior-year comparatives were adjusted retrospectively due to the application of IAS 19
(amended) as of January 1, 2013. ROCE was only adjusted for 2012.
b And before AT&T transaction and compensation payments for MetroPCS employees.
54 Overview of the 2013 financial year 58 Highlights in the 2013 financial year 62 Group organization
65 Group strategy 69 Management of the Group 73 The economic environment 78 Development of business in the Group 90 Development of business in the operating segments 107 Development of business at Deutsche Telekom AG
110 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
deutSche telekoM at a glance.
In 2013, we were once again in line with all of our key financial targets, with adjusted EBITDA at EUR 17.4 billion and free cash flow even slightly over target at EUR 4.6 billion. Net revenue increased by 3.4 per- cent to EUR 60.1 billion, largely due to encouragingly strong revenue growth in the United States. While revenue in Germany decreased only slightly, the sustained difficult economic environment, intense competition, and massive regulatory intervention had a negative im- pact on revenue at our European subsidiaries. As expected, adjusted EBITDA declined by 3.1 percent. Although we recorded slight growth in adjusted EBITDA in the United States and only a moderate decline in Germany, cost-cutting measures only partially offset the decline in revenues in the Europe operating segment.
Following the net loss of EUR 5.4 billion we recorded in 2012 due mainly to the impairment loss recognized in our United States operating segment, we generated net profit of EUR 0.9 billion in the reporting year. Net profit adjusted for special factors also increased from EUR 2.5 bil- lion to EUR 2.8 billion as a result of lower depreciation, amortization and impairment losses, which more than offset the decline in adjusted EBITDA.
The business combination of T-Mobile USA and MetroPCS in May 2013 had a lasting impact on the development of earnings, contributing as much as EUR 2.5 billion to the Group’s net revenue in the reporting year. By contrast, sales of companies such as Globul and Germanos in Bulgaria and Hellas Sat in Greece had a negative effect of around EUR 0.25 billion on the development of revenue. The impact of these transactions on net profit was only minor, however.
Net debt increased over the course of the year from EUR 36.9 billion to EUR 39.1 billion. Free cash flow (EUR 4.6 billion), proceeds from the sale of stakes (EUR 0.9 billion), and the capital increase at T-Mobile US (EUR 1.3 billion) in particular had a positive impact. This was offset primarily by an effect of EUR 3.4 billion from the first-time inclusion of MetroPCS, the payment of dividends, including to non-controlling interests, totaling EUR 2.2 billion, and the acquisition of mobile spec- trum for a total amount of EUR 2.2 billion, mainly in the Netherlands (EUR 0.9 billion), Austria (EUR 0.7 billion) and the United States (EUR 0.3 billion).
Cash capex (before spectrum investments) totaled EUR 8.9 billion in the reporting year and mainly related to further rolling out broad- band and expanding capacities in existing networks. In mobile com- munications, we invested in LTE, increased network coverage, and upgraded capacity to meet increasing demand for data volumes. In the fixed-network area, priority was given to expanding the fiber-optic infrastructure, to IPTV, and to the continued migration of the existing telephone network to an IP-based network. Investments in our home market in Germany remained at a consistently high level. In the United States operating segment, our investment activities continued to focus on modernizing the mobile communications network, and capital expenditure increased overall as a result of acquiring MetroPCS in 2013. Cash capex in our Europe operating segment increased slightly as a result of the intensified LTE roll-out. Capital expenditure in our Systems Solutions operating segment focused on the Group’s internal
IT systems as well as on investments in connection with customer orders and the continued roll-out of new multi-purpose platforms, e.g., for cloud services, De-Mail, and intelligent networks.
At 3.8 percent, our key performance indicator “return on capital em- ployed” (ROCE) substantially recovered in 2013 from the negative value in the prior year. The improvement in the operating result after depreciation, amortization and impairment losses and tax (net oper- ating profit after taxes, or NOPAT) and the reduction in the average value of assets tied up in the course of the year (net operating assets, or NOA) contributed to this development. Examples of measures we have implemented to date to improve our ROCE include network partnerships, our “contingent” model, joint ventures we have entered into, the changes we have made to our portfolio, cell tower sales in the United States, and the realignment of our central management and service functions.
2013 was also a good year for our shareholders: They benefited not only from the dividend of EUR 0.70 per share paid out for the 2012 financial year, but also from an increase of 42 percent in our share price. Glossary,
page 257 et seq.
56
coMpariSon of the group’S eXpectationS with actual figureS.
Table 010 below summarizes the results in 2012, the results expected for the reporting year, and the actual results achieved in 2013.
T 010
comparison of the group’s expectations with actual figures.
results in 2012 a expectations for 2013 results in 2013
ROCE % (2.4) target for 2015: around 5.5 3.8
Revenue (excluding MetroPCS) billions of € 58.2 slight decrease
Revenue (including MetroPCS) billions of € slight decrease 60.1 EBITDA (adjusted for special factors) (excluding MetroPCS) billions of € 18.0 approx. 17.4
EBITDA (adjusted for special factors) (including MetroPCS) billions of € approx. 17.5 17.4 Free cash flow (before dividend payments, spectrum investment) b billions of € 6.2 approx. 4.5 4.6
Cash capex (excluding MetroPCS) c billions of € 8.0 approx. 8.6
Cash capex (including MetroPCS) c billions of € approx. 9.8 d 8.9
Rating (Standard & Poor’s, Fitch) BBB+ A–/BBB BBB+
Rating (Moody’s) Baa1 Baa1 Baa1
a The prior-year comparatives were adjusted retrospectively due to the application of IAS 19 (amended) as of January 1, 2013. b And before AT&T transaction and compensation payments for MetroPCS employees.
c Before spectrum investments.
d Based on the assumption of the inclusion of MetroPCS for twelve months.
coMpariSon of our StakeholderS’ eXpectationS with actual figureS.
The following measures and achieved targets serve to ensure that the different expectations which the four groups of stakeholders (share- holders, providers of debt capital, employees, and the “entrepreneurs within the enterprise”) have of the Group are fulfilled.
G 13
results and comparison of our stakeholders’ expectations with actual figures.
Shareholders providers of debt capital
aMBition level for 2015 Around 5.5 %
roce level 2013: 3.8 % (2012: – 2.4 %, 2011: 3.8 %, 2010: 3.5 %)
employees “enterpreneurs within the enterprise”
roce
return on
capital
employed
2013 guidance 2013 delivery rating A–/BBB BBB+ relative debt 2 to 2.5 x 2.2 x equity ratio 25 to 35 % 27.1 % liquidity ratio covers maturitiesof the next 24 months covers maturities > 24 months
staff restructuring and staff reduction
Expenses arising from staff restructuring in 2013 € 1.5 billion 2013 guidance 2013 delivery shareholder
remuneration policy a Dividend for the 2013 financial year: € 0.50
per share Option to have the dividend entitlement fulfilled in the form of shares
Proposed dividend for the 2013 financial year of € 0.50 per share (€ 2.2 billion); cash dividend or, as an option, dividend converted into shares
Before spectrum For spectrum Cash capex € 8.9 billion € 2.2 billion
a Subject to approval by the relevant bodies and the fulfillment of other legal requirements.
Glossary,
page 257 et seq.
For further explanations and details on our finance strategy, please refer to the section “Management of the Group,” page 69 et seq.
57 CoMBINeD MaNaGeMeNT reporT
54 Overview of the 2013 financial year 58 Highlights in the 2013 financial year 62 Group organization
65 Group strategy 69 Management of the Group 73 The economic environment 78 Development of business in the Group 90 Development of business in the operating segments 107 Development of business at Deutsche Telekom AG
110 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