Results of operations of the Group

Net revenue, service revenue

In 2021, we generated net revenue of EUR 108.8 billion, which was 7.7 % or EUR 7.8 billion up on the prior-year level. In organic terms, i.e., assuming a comparable composition of the Group in the prior year and excluding exchange rate effects, revenue developed positively, with growth of EUR 4.7 billion or 4.5 %. For a comparison on an organic basis, net revenue in the prior-year period was raised by EUR 5.5 billion to account for effects of changes in the composition of the Group – primarily from the acquisition of Sprint, the disposal of Sprint’s prepaid business to DISH and the acquisition of Shentel in the United States operating segment – and net exchange rate effects of EUR ‑2.3 billion were taken into account. Service revenue in the Group increased by EUR 5.2 billion or 6.5 % year-on-year to EUR 84.1 billion.

Our United States operating segment in particular contributed to the positive revenue trend with an increase of 11.7 %. In organic terms, i.e., in particular assuming the inclusion of Sprint for the full year in the prior year and constant exchange rates, revenue increased by 5.8 % year-on-year due to both higher service revenues and higher terminal equipment revenues. Revenue in our home market of Germany was up on the prior-year level, increasing by 1.6 %. This was mainly driven by an increase in revenue in the fixed-network core business, primarily due to broadband business, and in mobile service revenues. Our Europe operating segment recorded revenue growth of 0.4 %. In organic terms, i.e., in particular adjusted for the sale of the Romanian fixed-network business and assuming constant exchange rates, revenue increased by 2.4 %. Organic growth was mainly driven by the strong performance of the mobile business, especially the increase in mobile service revenues with higher margins, slight increases in roaming and visitor revenues, and higher revenues from terminal equipment sales. Fixed-network service revenues developed slightly better. Revenue in our Systems Solutions operating segment was down 3.4 % year-on-year. This decrease was mainly driven by the expected decline in traditional IT infrastructure business, due in part to deliberate business decisions such as the reduction in end-user services. By contrast, our growth areas grew significantly, especially public cloud, digital solutions, and road charging. Revenue in our Group Development operating segment increased by 9.8 %. In organic terms, i.e., adjusted for the sale of the Dutch cell tower business, the transfer of the Austrian cell tower business, as well as the acquisition of the Dutch MVNO and SIM provider Simpel, revenue increased by 4.6 %. This revenue increase resulted from the operational and structural growth of our two business units T‑Mobile Netherlands and GD Towers, which includes DFMG and the Austrian cell tower business.

For further information on revenue development in our segments, please refer to the section “Development of business in the operating segments.”

Contribution of the segments to net revenue^a

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Breakdown of revenue by region

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Breakdown of revenue by region

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At 62.8 %, our United States operating segment provided by far the largest contribution to net revenue of the Group and in particular thanks to the acquisition of Sprint was up 2.2 percentage points above the level in the prior year. In this connection, the proportion of net revenue generated internationally also increased significantly from 75.5 % to 77.0 %.

Adjusted EBITDA AL, EBITDA AL

Adjusted EBITDA AL increased year-on-year by EUR 2.3 billion or 6.6 % to EUR 37.3 billion in 2021. In organic terms, adjusted EBITDA AL increased by EUR 0.7 billion or 1.9 %. For a comparison on an organic basis, adjusted EBITDA AL in the prior-year period was raised by EUR 2.5 billion to account for effects of changes in the composition of the Group – primarily from the acquisition of Sprint and the disposal of Sprint’s prepaid business to DISH in the United States operating segment – and net exchange rate effects of EUR ‑0.9 billion were taken into account. Adjusted core EBITDA AL, which is distinguished by excluding revenue from terminal equipment leases in the United States from adjusted EBITDA AL, thereby presenting operational development undistorted by the withdrawal from the terminal equipment lease business, increased by EUR 3.2 billion or 10.1 % to EUR 34.5 billion.

All operating segments made a positive contribution to this development. Adjusted EBITDA AL of our United States operating segment increased significantly as a result of the business combination of T‑Mobile US and Sprint, among other factors. In organic terms, i.e., adjusted for the effect of the acquisition of Sprint and assuming constant exchange rates, adjusted EBITDA AL stood at the prior-year level. The aforementioned higher service and equipment revenues had a positive effect. This was offset by negative effects of the planned withdrawal from the terminal equipment lease model in the United States and higher operational expenses – primarily in connection with the acquisition of Sprint. Adjusted core EBITDA AL, i.e., the earnings measure undistorted by the withdrawal from the terminal equipment lease business, increased by EUR 2.5 billion or 14.7 % to EUR 19.9 billion. Our Germany operating segment contributed to the increase thanks to high-value revenue growth and improved cost efficiency with 3.6 % higher adjusted EBITDA AL. Adjusted EBITDA AL in our Europe operating segment increased by 2.5 %. In organic terms, i.e., adjusted for the sale of the Romanian fixed-network business and the transfer of the Austrian cell tower business, and assuming constant exchange rates, adjusted EBITDA AL increased by 5.4 %. In addition to the positive revenue effects, savings in indirect costs also contributed to this development. Adjusted EBITDA AL in our Systems Solutions operating segment also increased by 2.7 %. Efficiency effects from our transformation program and effects from increased revenue in our growth areas exceeded the decline in earnings in the traditional IT infrastructure business. Adjusted EBITDA AL in our Group Development operating segment increased by 18.7 % year-on-year; in organic terms, it grew by 13.5 %. This growth was attributable to the positive revenue trend at T‑Mobile Netherlands, the acquisition of Simpel, and efficient cost management at T‑Mobile Netherlands. The GD Towers business posted consistent growth on the back of rising volumes and was further strengthened by the transfer of the Austrian cell tower business.

EBITDA AL increased by EUR 0.7 billion or 2.2 % year-on-year to EUR 33.9 billion, with special factors changing from EUR ‑1.8 billion to EUR ‑3.4 billion. Expenses incurred in connection with staff-related measures decreased from EUR 1.3 billion in the prior-year period by EUR 0.6 billion to EUR 0.7 billion. Part of this decrease was attributable to the reversal of other provisions for personnel costs, which had been recognized by OTE in 2010 and 2011 in connection with an additional payment to the Greek social insurance fund, as a result of proceedings concluded in September 2021. Net expenses of EUR 2.5 billion were recorded as special factors under effects of deconsolidations, disposals, and acquisitions. EUR 2.6 billion of the expenses mainly related to acquisition and integration costs as well as restructuring costs to realize cost efficiencies from the business combination of T‑Mobile US and Sprint. In this context, EUR 0.8 billion related to a reduction in the useful life of leased network technology for cell sites in the United States. In the prior year, net expenses of EUR 1.7 billion had been recorded as special factors under effects of deconsolidations, disposals, and acquisitions. EUR 1.5 billion of these also mainly related to the business combination with Sprint. In addition, in the Group Development operating segment, EBITDA AL was influenced by net positive special factors of EUR 0.2 billion, which related to the gain on deconsolidation due to the sale of the Dutch cell tower business. Reversals of impairment losses of EUR 1.7 billion had been recognized in the prior year and mainly related to the partial reversal of impairment losses on spectrum licenses at T‑Mobile US, which increased the carrying amount. Other special factors affecting EBITDA AL in the prior year amounted to EUR 0.5 billion and mainly related to expenses incurred in the United States operating segment in connection with the coronavirus pandemic.

For further information on the development of (adjusted) EBITDA AL in the segments, please refer to the section “Development of business in the operating segments.”

A reconciliation of the definition of EBITDA with the “after leases” indicator (EBITDA AL) can be found in the following table:

EBIT

Group EBIT increased from EUR 12.8 billion to EUR 13.1 billion, up EUR 0.3 billion or 2.0 % against the prior year. This increase is partly due to the effects described under adjusted EBITDA AL and EBITDA AL. At EUR 27.5 billion, depreciation, amortization and impairment losses were EUR 1.7 billion higher than in the prior year. This increase is attributable, among other factors, to the first-time inclusion of Sprint for the full year. Furthermore, in the United States operating segment, a reduction in the useful life of leased network technology for cell sites following the business combination of T‑Mobile US and Sprint increased depreciation of the corresponding right-of-use assets by EUR 0.8 billion. Impairment losses decreased from EUR 0.8 billion to EUR 0.3 billion. Of the prior-year figure, a total of EUR 0.5 billion had related to the Systems Solutions operating segment and the Group Headquarters & Group Services segment, and EUR 0.2 billion to the Europe operating segment. Of the impairment losses recognized in the reporting year, EUR 0.2 billion related to the Systems Solutions operating segment and the Group Headquarters & Group Services segment. This was a consequence of several factors, including the ad hoc impairment testing carried out in the Systems Solutions cash-generating unit in the prior year. In addition, despite the marginal improvement in the business outlook, the increase in the cost of capital in the reporting year prompted further impairment losses to be recognized on non-current assets in the Systems Solutions cash-generating unit at the end of 2021.

For further information on depreciation, amortization and impairment losses, please refer to Note 27 “Depreciation, amortization and impairment losses” in the notes to the consolidated financial statements.

Profit before income taxes

Profit before income taxes decreased by EUR 0.8 billion or 8.7 % to EUR 7.9 billion. Loss from financial activities increased from EUR 4.1 billion to EUR 5.1 billion, with finance costs increasing by EUR 0.4 billion to EUR 4.6 billion, mainly due to the financial liabilities assumed in connection with the acquisition of Sprint and the related restructuring and increase in financing. In this connection, between April 2020 and the end of 2021, existing T‑Mobile US bonds were repaid prematurely and new bonds were issued in their place at more favorable terms and conditions. Other financial income/expense decreased by EUR 0.5 billion year-on-year, resulting in other financial expense of EUR 0.4 billion. On the one hand, gains/losses from financial instruments decreased by EUR 1.2 billion to a loss of EUR 0.6 billion, due in part to negative measurement effects resulting, among other factors, from embedded derivatives at T‑Mobile US and from a forward transaction to hedge the price of acquiring T‑Mobile US shares in the future. By contrast, net positive measurement effects resulted from the amortization and subsequent measurement of the stock options received from SoftBank in June 2020 to purchase shares in T‑Mobile US. On the other hand, the interest component from the measurement of provisions and liabilities increased, in particular in the Group Headquarters & Group Services segment, by EUR 0.7 billion.

Net profit, adjusted net profit

At EUR 4.2 billion, net profit remained at the prior-year level. Tax expense decreased by EUR 0.1 billion to EUR 1.8 billion. Profit attributable to non-controlling interests decreased from EUR 2.6 billion to EUR 1.9 billion. This mainly relates to our United States operating segment. Excluding special factors, which had a negative overall effect of EUR 1.7 billion on net profit, adjusted net profit amounted to EUR 5.9 billion, up 2.6 % against the prior year.

The following table presents the reconciliation of net profit to the figures adjusted for special factors:

Earnings per share, adjusted earnings per share

Earnings per share is calculated as net profit divided by the adjusted weighted average number of ordinary shares outstanding, which totaled 4,813 million as of December 31, 2021. This resulted in earnings per share of EUR 0.87, compared with EUR 0.88 in the prior year. Adjusted earnings per share, adjusted for special factors affecting net profit, amounted to EUR 1.22 compared with EUR 1.20 in the prior year.

Special factors

The following table presents a reconciliation of EBITDA AL, EBIT, and net profit to the respective figures adjusted for special factors: