- Net revenue up 6.1 percent to 114.4 billion euros
- Adjusted EBITDA AL up 7.7 percent to 40.2 billion euros
- Free cash flow AL up by over 30 percent to 11.5 billion euros
- Adjusted net profit in 2022 up 55 percent
- Further growth in earnings and above all free cash flow planned for 2023
- Germany: strong customer growth
- T-Mobile US: synergies rise further
- Europe: growth despite headwinds
Deutsche Telekom stays on track despite unsteady conditions. Europe’s largest telecommunications group has not only met, but exceeded its guidance for 2022, which it raised multiple times throughout the year. Total revenue increased by 6.1 percent compared with 2021 to 114.4 billion euros. Service revenue increased by 10.6 percent to 91.9 billion euros. Adjusted EBITDA AL was up by 7.7 percent to 40.2 billion euros. Deutsche Telekom posted strong growth in free cash flow AL of 30.2 percent to reach 11.5 billion euros.
Exchange rate effects, mainly from the stronger U.S. dollar year-on-year, had a positive impact on the reported figures. Adjusted for these effects and changes in the composition of the Group, total revenue remained stable on an organic basis. The service revenue relevant for the operating result increased by 3.7 percent in organic terms. Adjusted EBITDA AL was up by 1.7 percent on an organic basis.
“The upheavals in the world, and their consequences, are not without their effects on Deutsche Telekom,” said Tim Höttges, Chairman of the Board of Management. “But by continuing to execute our strategy, we were nevertheless able to meet all of our targets in 2022.”
Net profit almost doubled to 8.0 billion euros. Adjusted for special factors, net profit increased by 54.9 percent year-on-year to 9.1 billion euros. As announced in November, the dividend is expected to increase to 70 eurocents per share.
Under the guidance for 2023, adjusted EBITDA AL is set to grow by 4 percent to reach around 40.8 billion euros. The pro forma figure for 2022 on the basis of the current Group structure was 39.3 billion euros. Free cash flow AL is expected to increase from the pro forma figure of 11.2 billion euros by at least 40 percent to over 16 billion euros.
Deutsche Telekom is thus successfully continuing its growth strategy. At the Capital Markets Day in 2021, the Group set an average annual growth target for adjusted EBITDA AL in the period 2020 through 2024 of 3 to 5 percent. Adjusted for the effects of scaling back the terminal equipment lease business in the United States, the Group exceeded this growth ambition in the first two years.
Germany: Strong customer growth
Growth in mobile continues. In the closing quarter of 2022 alone, Telekom posted 225,000 net branded contract customer additions. Mobile service revenues grew between October and December 2022 by 3.5 percent year-on-year.
The positive trend in the fixed network continued, with 74,000 broadband customer additions between October and December. The MagentaTV customer base grew by 51,000 in the reporting quarter. 12.1 million or 82 percent of broadband consumers are now using fiber-optic infrastructure (FTTH, VDSL/vectoring). Deutsche Telekom met its build-out target for 2022 with the addition of another 2 million FTTH households, bringing the total to 5.4 million.
Our most important financial KPIs likewise developed positively. In the Germany operating segment, adjusted EBITDA AL for the full year increased by 3.2 percent compared with 2021 to 9.8 billion euros. Revenue increased 1.9 percent to 24.5 billion euros, while service revenues grew to 21.5 billion euros.
United States: Synergies rise further
T-Mobile US added 6.4 million new postpaid customers in 2022. A key driver of this trend was the lower churn rate among former Sprint customers. As of the year-end, 2.6 million customers were using the high-speed internet, i.e., wireless internet access. That is 2 million more than one year ago.
T-Mobile US is systematically scaling back the terminal equipment lease business for its customers, which was taken over as part of the business combination with Sprint. This has a reducing effect on total revenue. In the year just ended, the T-Mobile US service revenues relevant for the development of earnings grew by 7.0 percent against 2021 to 61.2 billion U.S. dollars. Adjusted core EBITDA AL – i.e., adjusted for the effects of the reduction in the lease business – grew by 8.4 percent to 25.5 billion U.S. dollars.
For 2023, T-Mobile US expects to unlock synergies from the takeover of Sprint of 7.2 to 7.5 billion U.S. dollars, at least 20 percent more than in the prior year. The decommissioning of the Sprint network after the first half of 2022 also contributes to these synergies. By contrast, the integration costs in the current year are not expected to exceed 1 billion U.S. dollars, down from 5 billion U.S. dollars in 2022. The company expects its postpaid customer base to grow by between 5.0 and 5.5 million.
Europe: Growth despite headwind
Business in the national companies in Europe proved resilient in the face of negative influences in 2022. The closing quarter marked 20 successive quarters of growth in adjusted EBITDA AL on an organic basis. This was achieved despite prevailing headwinds in the form of rising energy prices and the supplementary telecommunications tax imposed in Hungary. For the full year, the increase was 3.1 percent. Revenue increased in organic terms by 3.9 percent in 2022, driven mainly by growth in mobile service revenues.
Customer numbers continued their stable upward trend. The number of mobile contract customers increased by 823,000 in 2022 to 26.5 million. The broadband customer base grew by 308,000 to 6.7 million, while the number of TV customers increased by 112,000 to 4.1 million. The number of customers using fixed-mobile convergence products grew by 741,000 and passed the 7.0 million mark.
Systems Solutions: Annual target met
T-Systems delivered stable financial KPIs for 2022. At 4.0 billion euros, order entry was up 1.1 percent year-on-year in organic terms. Revenue increased on an organic basis by 1.0 percent to 3.8 billion euros. Likewise on an organic basis, adjusted EBITDA AL rose by 0.9 percent in the same period to 284 million euros. Systems Solutions thus met its target for the year.
Group Development: Sale of majority stake in GD Towers completed
In July 2022, Deutsche Telekom agreed to sell a 51 percent stake in GD Towers, the cell tower business in Germany and Austria, to DigitalBridge and Brookfield. The transaction was completed on February 1, 2023. From this date onward, GD Towers will no longer be included in the Group’s figures as a fully consolidated entity. In future, the 49.0 percent share of net profit retained by Deutsche Telekom will be included under profit/loss from financial activities in the consolidated financial statements using the equity method.
In the year just ended, the cell tower business generated revenue of 1.2 billion euros, a 6.1 percent increase in organic terms. As of the year-end, the company was operating 41,500 sites. This includes a total of 1,200 new sites in Germany compared with the prior year.
The Deutsche Telekom Group at a glance
Comments on the table
Accounting change affecting the recording of revenues
In light of the IFRS Interpretations Committee’s agenda decision published in May 2022 on transactions involving the resale of software, Deutsche Telekom has implemented comprehensive changes to its accounting practices with respect to distinguishing between gross and net revenues, effective the start of the third quarter of 2022. The prior-year figures for total revenue, service revenue, and order entry were adjusted retrospectively. The change does not affect the earnings indicators: adjusted EBITDA, adjusted EBITDA AL, and net profit.
The change mainly affects the recognition of revenues from transactions relating to branded digital products (e.g., streaming services, software licenses, cloud-based software as a service) provided by and purchased from third parties and sold to customers as part of Deutsche Telekom’s product portfolio.
a. Cash outflows for investments in property, plant, and equipment, and intangible assets (excluding goodwill).
b. At reporting date.
Operating segments: Development of operations
Comments on the table
Accounting change affecting the recording of revenues
In light of the IFRS Interpretations Committee’s agenda decision published in May 2022 on transactions involving the resale of software, Deutsche Telekom has implemented comprehensive changes to its accounting practices with respect to distinguishing between gross and net revenues, effective the start of the third quarter of 2022. The prior-year figures for total revenue, service revenue, and order entry were adjusted retrospectively. The change does not affect the earnings indicators: adjusted EBITDA, adjusted EBITDA AL, and net profit.
a. Intragroup reassignment of the security business
Effective July 1, 2022, Deutsche Telekom reassigned its subsidiary Deutsche Telekom Security GmbH and the security business in Germany, Austria, Switzerland, Hungary, and Slovakia from the Systems Solutions operating segment to the Germany operating segment. As of the third quarter of 2022, the prior-year comparatives on the development of operations, headcount development, and order entry were adjusted retrospectively in both of the segments affected.
b. Sale of T-Mobile Netherlands (TMNL)
The sale of TMNL was consummated on March 31, 2022. The entity has not been part of the Group since April 1, 2022 (Group Development segment). TMNL’s contributions are included in the full-year figures for the first quarter of 2022 only. Prior-year comparatives were not adjusted.
New partner for the cell tower business
On July 13, 2022, Deutsche Telekom agreed to sell a 51.0 percent stake in GD Towers, comprising its tower assets in Germany and Austria, to DigitalBridge and Brookfield. The transaction was consummated on February 1, 2023. Until this point in time, GD Towers will continue to be included as a fully consolidated entity in the figures of the Group Development operating segment and of the Deutsche Telekom Group.
Operating segments: Development of customer numbers in the fourth quarter of 2022
Comments on the table
a. Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
Operating segments: Development of customer numbers in year-on-year comparison
Comments on the table
a. Sum of all FTTx access lines (e.g., FTTC/VDSL, vectoring, and FTTH/B).
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 AL, 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, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin AL, core EBITDA, adjusted EBIT, EBIT margin, adjusted net profit/loss, adjusted earnings per share, 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.
About Deutsche Telekom: Deutsche Telekom at a glance
