Results of operations of the Group

Net revenue

In the first quarter of 2019, we generated net revenue of EUR 19.5 billion, which was up EUR 1.6 billion or 8.7 percent year-on-year. Even adjusted for positive net exchange rate effects of EUR 0.7 billion – mainly from the translation of U.S. dollars into euros – as well as positive effects of changes in the composition of the Group in the amount of EUR 0.2 billion resulting from the acquisitions of UPC Austria and Tele2 Netherlands, revenue increased by EUR 0.7 billion or 3.5 percent.

Our United States operating segment in particular contributed to the positive revenue trend with an increase of 15.9 percent – or, adjusted for exchange rate effects, of a substantial 7.0 percent. This increase was due primarily to higher from the rise in the average branded customer base, triggered in particular by the continued growth in existing and greenfield markets, the growing success in new customer segments, along with low customer churn. Revenue in our home market of Germany was up slightly on the prior-year level, due in particular to the strong performance in mobile business and higher IT and broadband revenues from fixed-network business. In our Europe operating segment, revenue was up by 2.8 percent year-on-year; adjusted for exchange rate effects and without the inclusion of UPC Austria, it increased marginally by 0.4 percent. Higher revenue from business customers had a positive effect, and even fixed-network revenues in the core business were slightly higher than in the prior-year period. In the Systems Solutions operating segment, revenue came in below the figure for the prior-year period. While revenues in our growth areas developed positively, revenues in the traditional IT and telecommunications businesses declined as expected. Revenue in our Group Development operating segment increased significantly year-on-year, mainly due to the revenue contributions from Tele2 Netherlands taken into account since the beginning of 2019.

For detailed 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

millions of €

 

 

 

 

 

 

Q1 2019

Q1 2018

Change

Change %

FY 2018

NET REVENUE

19,488

17,924

1,564

8.7

75,656

Germany

5,357

5,325

32

0.6

21,700

United States

9,796

8,455

1,341

15.9

36,522

Europe

2,891

2,811

80

2.8

11,885

Systems Solutions

1,630

1,665

(35)

(2.1)

6,936

Group Development

682

528

154

29.2

2,185

Group Headquarters & Group Services

651

651

0

0.0

2,735

Intersegment revenue

(1,520)

(1,511)

(9)

(0.6)

(6,307)

Contribution of the segments to net revenuea

%

Contribution of the segments to net revenue (pie chart)

a For more information on net revenue, please refer to the disclosures under segment reporting in the interim consolidated financial statements.

Breakdown of revenue by region

%

Breakdown of revenue by region (pie chart)

At 50.3 percent, our United States operating segment again provided the largest contribution to net revenue of the Group and was up 3.1 percentage points above the level in the prior-year period. The proportion of net revenue generated internationally increased from 66.6 percent to 69.0 percent.

EBITDA AL, adjusted EBITDA AL

Excluding special factors, adjusted EBITDA AL increased year-on-year by EUR 0.5 billion or 8.3 percent to EUR 5.9 billion in the first quarter of 2019; this increase was attributable to positive net exchange rate effects of EUR 0.2 billion and slightly positive effects of changes in the composition of the Group. Excluding these effects, adjusted EBITDA AL increased by EUR 0.2 billion or 3.9 percent. All operating segments made a positive contribution to this development: Adjusted EBITDA AL of our United States operating segment had a noticeably positive effect on the back of the higher revenue. Our Germany operating segment contributed to this result thanks to slightly higher revenues and the successful implementation of further efficiency and digitalization measures with a 2.4 percent increase in adjusted EBITDA AL. Adjusted EBITDA AL in our Europe operating segment increased by 5.2 percent; even excluding UPC Austria and assuming constant exchange rates, an increase of 1.5 percent was recorded. Successfully implemented efficiency enhancement measures are taking effect in our Systems Solutions operating segment in the form of significantly higher adjusted EBITDA AL. The increase in adjusted EBITDA AL in our Group Development operating segment was driven by revenue growth as well as by the earnings contributions from Tele2 Netherlands, acquired in early 2019.

EBITDA AL increased by EUR 0.3 billion or 5.6 percent year-on-year to EUR 5.5 billion, with special factors decreasing from EUR -0.3 billion to EUR -0.4 billion. At EUR 0.3 billion, expenses incurred in connection with staff-related measures and non-staff-related restructuring expenses were more or less level with the prior-year figure. In addition, expenses incurred in connection with the agreement on the business combination of T-Mobile US and Sprint were recorded as special factors.

For detailed information on the development of EBITDA AL/adjusted EBITDA AL in our segments, please refer to the section “Development of business in the operating segments.”

Contribution of the segments to adjusted Group EBITDA AL

millions of €

 

 

 

 

 

 

Q1 2019

Q1 2018

Change

Change %

FY 2018

a

Prior-year comparatives were calculated on a pro-forma basis for the redefined key performance indicators resulting from the introduction of the IFRS 16 accounting standard.

EBITDA AL (ADJUSTED FOR SPECIAL FACTORS) IN THE GROUPa

5,940

5,487

453

8.3

23,074

Germany

2,108

2,058

50

2.4

8,516

United States

2,679

2,331

348

14.9

10,084

Europe

945

898

47

5.2

3,813

Systems Solutions

92

60

32

53.3

442

Group Development

255

225

30

13.3

892

Group Headquarters & Group Services

(137)

(92)

(45)

(48.9)

(601)

Reconciliation

(2)

7

(9)

n.a.

(72)

EBIT

Group EBIT stood at EUR 2.3 billion, up EUR 0.1 billion or 4.0 percent against the prior-year period. This increase is partly due to the effects described under EBITDA AL. At EUR 4.2 billion, depreciation, amortization and impairment losses were EUR 1.1 billion higher than in the prior-year period, due in particular to the depreciation charge for right-of-use assets required to be recognized for the first time in accordance with IFRS 16. In the prior-year period, expenses had been recognized in EBITDA in connection with operating leases. Depreciation of property, plant and equipment and amortization of intangible assets were EUR 0.2 billion higher than in the prior year, mainly due to the consistently high investment volume in past years.

Profit before income taxes

At EUR 1.9 billion, profit before income taxes was EUR 0.1 billion higher than in the first quarter of 2018. Loss from financial activities remained at the prior-year level of EUR 0.4 billion. While the finance cost increased by EUR 0.2 billion to EUR 0.6 billion, due in particular to increased lease liabilities since the application of IFRS 16, other financial income/expense increased by EUR 0.2 billion, mainly due to positive measurement effects from embedded derivatives at T-Mobile US. In the prior-year period, these had a negative effect of EUR 0.1 billion on other financial income/expense.

Net profit, adjusted net profit

Net profit decreased year-on-year by EUR 0.1 billion to EUR 0.9 billion. Tax expense in the first quarter of 2019 was flat on the prior-year period at EUR 0.5 billion. For further information, please refer to the interim consolidated financial statements. Profit attributable to non-controlling interests increased from EUR 0.3 billion to EUR 0.4 billion, mainly in our United States operating segment. Excluding special factors, which had an effect of EUR 0.3 billion on net profit, adjusted net profit in the first quarter of 2019 amounted to EUR 1.2 billion.

millions of €

 

 

 

 

 

 

Q1 2019

Q1 2018

Change

Change %

FY 2018

NET PROFIT (LOSS)

900

992

(92)

(9.3)

2,166

Special factors affecting EBITDA

(440)

(280)

(160)

(57.1)

(1,497)

Staff-related measures

(290)

(270)

(20)

(7.4)

(1,159)

Non-staff-related restructuring

(19)

(21)

2

9.5

(109)

Effects of deconsolidation, disposals, and acquisitions

(111)

28

(139)

n.a.

(223)

Other

(20)

(17)

(3)

(17.6)

(6)

Special factors affecting net profit

158

82

76

92.7

(882)

Impairment losses

0

0

0

0.0

(707)

Profit (loss) from financial activities

0

2

(2)

n.a.

(757)

Income taxes

122

90

32

35.6

401

Non-controlling interests

36

(10)

46

n.a.

181

TOTAL SPECIAL FACTORS

(282)

(198)

(84)

(42.4)

(2,379)

ADJUSTED NET PROFIT (LOSS)

1,183

1,190

(7)

(0.6)

4,545

Adjusted earnings per share

From the 2019 financial year onward, the dividend amount is to reflect the relative growth of adjusted earnings per share. Adjusted earnings per share is calculated as the profit attributable to the owners of the parent adjusted for special factors divided by the adjusted weighted average number of ordinary shares outstanding which totaled 4,742 million as of March 31, 2019. With adjusted net profit attributable to the owners of the parent in the amount of EUR 1.2 billion, this gives adjusted earnings per share of EUR 0.25. Adjusted earnings per share in the first quarter of 2018 likewise amounted to EUR 0.25.

Employees

Headcount development

 

 

 

 

 

Mar. 31, 2019

Dec. 31, 2018

Change %

NUMBER OF FTEs IN THE GROUP

214,609

215,675

(0.5)

Of which: civil servants (in Germany, with an active service relationship)

13,135

13,507

(2.8)

Germany

62,358

62,621

(0.4)

United States

45,786

46,871

(2.3)

Europe

47,191

48,133

(2.0)

Systems Solutions

38,036

37,467

1.5

Group Development

2,795

1,976

41.4

Group Headquarters & Group Services

18,442

18,606

(0.9)

The Group’s headcount decreased by 0.5 percent compared with the end of 2018. In our Germany operating segment, the total number of employees had decreased by 0.4 percent at the end of the first quarter of 2019 as a result of efficiency enhancement measures and the take-up of socially responsible instruments in connection with the staff restructuring. The total number of employees in our United States operating segment decreased by 2.3 percent at March 31, 2019 compared with December 31, 2018, primarily due to seasonal effects. In our Europe operating segment, the headcount was down 2.0 percent compared with the end of the prior year. Our national companies in Hungary and Romania in particular contributed to this development. The number of employees in our Systems Solutions operating segment increased by 1.5 percent compared with the end of 2018, mainly due to the first-time inclusion and expansion of a service unit in India. The remaining headcount in this segment decreased by 1.2 percent on account of restructuring measures. In our Group Development operating segment, the number of employees rose by 41.4 percent compared with the end of 2018. The substantial increase is attributable to the inclusion of Tele2 Netherlands in the Netherlands. The headcount in the Group Headquarters & Group Services segment was down 0.9 percent compared with the end of 2018, mainly due to the ongoing staff restructuring at Vivento and the lower headcount in the Technology and Innovation unit.

Service revenues
Revenues generated with mobile customers from services (i.e., revenues from voice services – incoming and outgoing calls – and data services), plus roaming revenues, monthly charges, and visitor revenues.