Development of business in the operating segments.
Germany.

Since January 1, 2012, Deutsche Telekom has pooled the tasks and functions of the Digital Services growth business as well as the Internet service provider STRATO, which as of December 31, 2011 were still largely part of the Germany operating segment, as the Digital Business Unit (DBU) under Group Headquarters & Shared Service.

As of July 1, 2012, Deutsche Telekom reorganized the Group’s IT structure and pooled all internal IT units from the Germany and Systems Solutions operating segments as well as Group Headquarters & Shared Services into the new Telekom IT unit within the Systems Solutions operating segment.
The prior-year figures have been adjusted for better comparability. For more information, please refer to the disclosures under segment reporting in the interim consolidated financial statements.

Customer development.

Fixed-network linesInfo. (’000)
Fixed-network lines. (’000)
TV customers (including satellite).* (’000)
TV customers (including satellite).* (’000)
Retail broadband lines. (’000)
Retail broadband lines. (’000)
Mobile customersInfo. (’000)
Mobile customers. (’000)
  Sept. 30,
2012

thousands
June 30,
2012

thousands
Change
Sept. 30, 2012/
June 30, 2012
%
Dec. 31,
2011

thousands
Change
Sept. 30, 2012/
Dec. 31, 2011
%
Sept. 30,
2011

thousands
Change
Sept. 30, 2012/
Sept. 30, 2011
%
 
a Stationary wireless solutions have been reported under mobile contract customers since October 1, 2011.
b M2M: machine-to-machine.
Total              
Fixed-network lines 22,620 22,904 (1.2) 23,399 (3.3) 23,694 (4.5)
Retail broadband linesa 12,424 12,414 0.1 12,265 1.3 12,201 1.8
TV (including satellite) 1,906 1,830 4.2 1,553 22.7 1,375 38.6
Mobile customers 35,994 35,470 1.5 35,403 1.7 34,905 3.1
Contract customersa 19,133 18,578 3.0 18,221 5.0 17,834 7.3
Prepay customers 16,861 16,893 (0.2) 17,182 (1.9) 17,071 (1.2)
Unbundled local loop lines (ULLs) 9,453 9,582 (1.3) 9,598 (1.5) 9,570 (1.2)
Wholesale unbundled lines 1,283 1,267 1.3 1,222 5.0 1,198 7.1
Wholesale bundled lines 562 617 (8.9) 704 (20.2) 757 (25.8)
Of which: consumers              
Fixed-network lines 18,004 18,250 (1.3) 18,763 (4.0) 19,030 (5.4)
Retail broadband linesa 10,037 10,027 0.1 9,959 0.8 9,902 1.4
TV (including satellite) 1,748 1,678 4.2 1,434 21.9 1,269 37.7
Mobile customers 29,586 29,203 1.3 29,333 0.9 29,061 1.8
Contract customersa 13,650 13,159 3.7 12,874 6.0 12,560 8.7
Prepay customers 15,936 16,044 (0.7) 16,459 (3.2) 16,500 (3.4)
Of which: business customers              
Fixed-network lines 3,527 3,548 (0.6) 3,505 0.6 3,543 (0.5)
Retail broadband lines 2,058 2,055 0.1 1,973 4.3 1,968 4.6
TV (including satellite) 157 151 4.0 117 34.2 106 48.1
Mobile customers 6,397 6,267 2.1 6,070 5.4 5,844 9.5
Contract customersa 5,483 5,419 1.2 5,347 2.5 5,274 4.0
Prepay customers (M2M)b 925 848 9.1 723 27.9 570 62.3
 
Total.
In our Germany operating segment, we held our own in both the mobile and the fixed-network markets in the prevailing regulatory and competitive environment by focusing on high-value business and marketing new and innovative products. By the end of the third quarter of 2012, 97 thousand customers had already used our Call & Surf Comfort via Funk product, which was launched in the second quarter of 2011. This wireless technology enables fast Internet surfing even in areas without DSLInfoVDSLInfo (Very High Speed Digital Subscriber Line): Transmission technology
that allows very high bandwidths (up to 50 Mbit/s downstream, up to
10 Mbit/s upstream) on short copper access lines with a maximum length
of 500 meters.">Info
coverage.
Fixed network.
Telephony, Internet and TV. Line losses in traditional fixed network telephony were down on the prior-year level. Customers switched in particular to cable operators, but increasingly also to mobile wholesale products.
Our share of the German broadband market stood at around 45 percent in the first three quarters of the year. The number of broadband lines increased by 159 thousand to 12.4 million in the reporting period compared with December 31, 2011. Of these customers, 805 thousand opted for VDSLInfo lines. As of September 30, 2012, a total of 1.9 million customers were using our television service Entertain of which 268 thousand were using Entertain via Sat which was launched in September 2011. We were able to connect more than 2,400 customers with optical fiber for the first time in the third quarter.
Mobile communications.
Mobile telephony and data services. In mobile communications, we stepped up our measures to attract and win back customers, in particular by improving existing rate plans and introducing new ones for both contract and prepay customers.
The number of mobile customers at the end of the first three quarters of 2012 totaled 36.0 million; this corresponds to an increase of 1.7 percent compared with December 31, 2011. The development was positive on the whole thanks to the good performance regarding high-value contract customers (both branded customers and service providers), machine-to-machine communication, congstar and Call & Surf Comfort via Funk. Customer migration to another service provider in the first quarter of 2012 was compensated for the most part in the third quarter by the growth in business with resellers serving customer groups who mainly call their home countries.
In the first three quarters of 2012, the number of smartphones sold (mainly Android handsets and iPhones) rose to 2.7 million compared with 2.3 million as of September 30, 2011. They thus accounted for 70 percent of all mobile phones sold in the first three quarters of 2012.
Consumers.
Connected life across all screens. Line losses in traditional fixed-network telephony decreased year-on-year in the first three quarters of 2012. In the intensely contested broadband market, we continued to grow in line with the market. For our television service Entertain, we further increased the rate of pay TV packages, e.g., LIGA total!, Big TV and HD.
The number of contract customers in the mobile communications portfolio increased by 6.0 percent in the first three quarters of 2012 compared with December 31, 2011. In particular, rate packages with integrated data flat rates for the mobile Internet (Call & Surf Mobil, Complete Mobil, and Mobile Data), especially the promotional rates included, sold well. Through these packages we migrated a large number of customers from pure voice rates to higher-value data rate plans. In the area of text messaging, we were even more successful in marketing our “SMS Flat all net” rate option in the first three quarters of 2012.
The decrease in the number of prepay customers compared with December 31, 2011 is largely attributable to the deactivation of inactive cards. This decline was partly compensated by measures including the positioning of congstar in our Telekom shops for the first time.
Business Customers.
Connected work with innovative solutions. The number of fixed-network lines in the Business Customer area remained virtually unchanged compared with year-end 2011 at 3.5 million. In Internet usage, customers are increasingly opting for plans with higher bandwidths such as Business Complete.
Products in the area of connected work developed positively. Accordingly, we recorded a growth trend in our CompanyConnect dedicated Internet connections. In the field of data communications, we significantly increased the number of networks and connections with Internet-based data networks (IP VPNs) and high-bandwidth location networking.
With a clear focus on rate plans with integrated data flat rates for the mobile Internet, the new set of mobile plans we introduced in February 2011 helped to increase subscriber numbers compared with the prior year.
Total subscriber numbers rose by a further 5.4 percent compared with the year-end 2011 in the area of machine-to-machine mobile communications as well as among contract customers, due not least to the marketing kick-off of new, attractive mobile rate plans for business customers.
In the first three quarters of 2012, we won (back) a number of business customers for our mobile services, such as BMW, Heidelberger Druck and Schwäbisch Hall.
Wholesale.
Unbundled wholesale lines increased by 61 thousand, whereas the number of bundled wholesale lines declined by 142 thousand. This trend is expected to continue in 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 145 thousand compared with year-end 2011.
Development of operations.
  Q1
2012
millions
of €
Q2
2012
millions
of €
Q3
2012
millions
of €
Q3
2011
millions
of €
Change


%
Q1 – Q3
2012
millions
of €
Q1 – Q3
2011
millions
of €
Change


%
FY
2011
millions
of €
 
Total revenue 5,659 5,610 5,736 5,810 (1.3) 17,005 17,396 (2.2) 23,206
Consumers 2,997 2,999 3,097 3,137 (1.3) 9,093 9,359 (2.8) 12,497
Business Customers 1,418 1,404 1,416 1,401 1.1 4,238 4,206 0.8 5,615
Wholesale 1,034 1,005 1,021 1,048 (2.6) 3,060 3,178 (3.7) 4,209
Value-Added Services 98 92 87 106 (17.9) 277 317 (12.6) 425
Other 112 110 115 118 (2.5) 337 336 0.3 460
Profit from operations (EBIT) 965 1,187 1,302 1,356 (4.0) 3,454 3,494 (1.1) 4,520
EBIT margin % 17.1 21.2 22.7 23.3   20.3 20.1   19.5
Depreciation, amortization and impairment losses (1,099) (1,104) (1,083) (1,089) 0.6 (3,286) (3,208) (2.4) (4,344)
EBITDA 2,064 2,291 2,385 2,445 (2.5) 6,740 6,702 0.6 8,864
Special factors affecting EBITDA (279) (57) (16) (18) 11.1 (352) (557) 36.8 (689)
EBITDA (adjusted for special factors) 2,343 2,348 2,401 2,463 (2.5) 7,092 7,259 (2.3) 9,553
EBITDA margin (adjusted for special factors) % 41.4 41.9 41.9 42.4   41.7 41.7   41.1
Cash capex (903) (819) (677) (1,080) 37.3 (2,399) (2,590) 7.4 (3,506)
 
Total revenue.
We took measures to ensure continued value-enhancing growth in our core markets, i.e., the broadband fixed network and mobile communications. Revenue in the first three quarters of 2012 was down 2.2 percent year-on-year, which was mainly attributable to the downward trend in voice telephony, both in mobile and fixed-network business. This trend was partly offset by increasing demand for complete packages comprising mobile data or TV rate plans.
Revenue growth in the fixed network was a result of the successful marketing of Entertain and add-on options. However, this positive trend was not sufficient to offset the negative effects on revenue. Added to this were price effects resulting from regulatory decisions – for example, the reduction in interconnection rates in July 2011.
Mobile revenues in the first three quarters of the year remained unchanged against the prior-year period. The growth in data revenues due to the sale of smartphones with new data rate plans as well as the positive trend in terminal equipment revenues offset the decline in voice telephony with favorable rate plans including flat-rate components. Roaming price reductions imposed by the regulatory authorities as of July 1, 2012 for voice rates as well as data rates for the first time had a negative impact on revenue.
The main reason for the decline in the Consumers area was the downward trend in voice telephony business, in particular in the fixed network. The decrease was partially offset by growth in TV revenue (up 30.6 percent) and revenue from terminal equipment (up 31.7 percent). The growth in mobile data revenues (up 22.2 percent) largely succeeded in compensating for the decline in revenue, in particular in traditional voice telephony.
In the Business Customers area, total revenue remained stable. Growth in revenue from mobile data, broadband, IT products, and mobile devices fully offset the decline in revenue from traditional fixed-network voice telephony and mobile communications.
The decline in Wholesale revenue – down 3.7 percent to EUR 3.1 billion – was primarily attributable to the following factors: regulatory price cuts for interconnection calls in particular (from July 1, 2011) and the declining use of interconnection as well as a volume- and price-related decrease in revenue due to migration to state-of-the-art infrastructure platforms.
Declining revenues from Value-Added Services resulted from a weaker use of premium rate call numbers such as directory assistance services and of public telephones.
EBITDA, adjusted EBITDA.
Cumulative EBITDA adjusted for special factors decreased by 2.3 percent year-on-year to EUR 7.1 billion for the first three quarters. Since we made higher investments in the market in order to acquire high-value customers and were unable to reduce our service costs to the same extent as in previous years, our cost savings did not fully compensate for the decline in revenue. At the same time, mobile interconnection costs increased due to the continuous offering of more valuable calling plans, e.g., through packages with minute buckets and text messages. The adjusted EBITDA margin remained stable at 41.7 percent, in particular due to our efficient cost management. Fewer negative effects from special factors, in particular expenses for early retirement arrangements, improved EBITDA compared with the prior-year period.
EBIT.
Profit from operations (EBIT) for our Germany operating segment remained more or less stable at EUR 3.5 billion. The positive EBITDA trend was offset by higher depreciation, amortization and impairment losses, mainly resulting from the capitalization of the LTE license in the previous year.
Cash capexInfo.
We have the best mobile network and invest in the networks of the future. Although we reported a year-on-year decrease in cash capex in the first three quarters of 2012 regarding traditional transmission paths (for example as a result of the completed migration to modern infrastructure platforms), we also stepped up investment in our strategic focus areas such as the LTE and fiber optic roll-out as well as in All IP migration. Cash capex was still 7.4 percent lower than in the previous year.