Preliminary figures1) for the fiscal year 2019:Telefónica Deutschland starts off the Wireless Decade with strong growth in customers, revenue and earnings

Markus Haas
Telefónica Deutschland has successfully concluded the 2019 financial year and has fully achieved its targets. As forecast, the company grew profitably: Revenue rose by 1.1 percent to 7.4 billion euros, while adjusted operating income (OIBDA) increased by 1 percent on a comparable basis. The significantly improved network quality and the introduction of innovative tariffs, especially at O2, paid off. With almost 1.5 million additional postpaid subscribers, more people switched to the O2 network than ever before since the takeover of E-Plus. This year and next year, the company will invest even more in its network in order to further strengthen its position in both urban and rural areas. For 2020, Telefónica Deutschland expects a flat to slightly positive development in revenue and a broadly stable to slightly positive development in OIBDA adjusted for exceptional effects. "We have kept our promises and confirmed our growth trajectory,” said Markus Haas, CEO of Telefónica Deutschland. "At the beginning of the Wireless Decade, all key figures are pointing in the right direction. Now we want to attract even more customers with our network investment offensive.”
-Almost 1.5 million additional mobile postpaid subscribers in 2019
-Fixed-network business also returns to revenue growth
-Billion-euro investment offensive in cities and rural areas continues at full speed
-Profitable growth expected for 2020

Record growth in postpaid subscribers and mobile data

Credits: Fernanda-Vilela
O2 Tower in Munich: Headquarter of Telefónica Germany
In the past year, Telefónica Deutschland succeeded in winning over many mobile customers. From January to December, the number of wireless postpaid subscribers rose by 1.45 million. In the fourth quarter alone, 456,000 additional postpaid subscribers signed up. The total number of mobile accesses rose to over 46 million2). At the same time, mobile data consumption - driven mainly by O2 tariffs - rose more strongly than ever before: Growth in the fourth quarter was 58 percent. Over the entire year, the O2 network transported around 1 billion gigabytes of mobile data, more than any competitor's network. At the same time, in 2019, 107 billion minutes of calls were made via the O2 mobile network - more than ever before. The increase compared to the previous year was 9.9 percent. The number of broadband lines rose by 6.1 percent in 2019 to 2.21 million, which was mainly due to the strong demand for VDSL connections.

Positive revenue trends in the fixed business as well

The increase in the number of customers and the demand for data services was also reflected in the sales growth of Telefónica Deutschland. Total revenue increased by 1.1 percent to 7.4 billion euros. This means that the company has now been growing again for two years. Excluding regulatory effects, revenue increased by 1.9 percent. Revenue from mobile services increased by 0.6 percent to 5.3 billion euros; adjusted for regulatory effects, the increase was no less than 1.7 percent. The trend in the fixed network reversed in the fourth quarter: Revenues increased by 2 percent to 189 million euros in this period. This is the first annualized increase since the acquisition of E-Plus in 2014. Revenue from mobile devices grew by 5.8 percent to 1.35 billion euros.
Throughout the year, Telefónica Deutschland invested heavily in growth and in the market launch of new products such as O2 my All in One XL, O2 TV or O2 You. The company nevertheless increased its operating income (OIBDA) adjusted for exceptional and regulatory effects. In a year-on-year comparison, the increase amounted to 25 percent to 2.35 billion euros. This leap was mainly due to the accounting change from IAS 17 to IFRS 16, with OIBDA increasing by 1 percent on a comparable basis. The net result for the financial year amounted to minus 212 million euros, after minus 230 million euros in the same period last year. The reason for the negative result continues to be depreciation and amortisation in the course of grid integration. Free cash flow (FCF) according to IFRS 16 amounted to 1.02 billion euros for the 2019 fiscal year. Rent payments, mainly for leased lines and antenna sites, totaled minus 476 million euros. Thus, the FCF "after lease" (IAS 17) for the reporting period amounted to 547 million euros.

Investment offensive in cities and rural areas

Telefónica Germany will continue its network expansion program.
In the new decade, mobile communications will become more and more important for traffic, industrial production, and for the interaction of people in Germany. Telefónica Deutschland plays a decisive role in this. In order to do its part, the company will again significantly increase its network investments. This year and next year, investments are expected to rise to 17 to 18 percent of sales, which means several hundred million euros in additional infrastructure expenditure per year. Telefónica Deutschland will thus press ahead with the expansion of an energy-efficient and high-performance 5G network in cities. At the same time, the LTE network in rural areas will be significantly expanded. The aim is to continue to attract customers in rural areas, gain market share in the business customer segment and step up the sale of product bundles from mobile and fixed communications products. On this basis, Telefónica Deutschland plans to increase its cumulative revenue by at least 5 percent by 2022 compared with the previous year.

Outlook

Telefónica Deutschland expects a stable price environment for the mobile communications market in 2020. The contract customer business and in particular O2 will continue to be the main revenue driver for the company. Furthermore, a migration of customers from the prepaid to the contract customer business is still likely. Telefónica Deutschland expects revenue to be flat to slightly positive as a result. This forecast includes negative regulatory effects of around 20 to 30 million euros resulting from the reduction in termination charges and the new regulation for calls and text messages within the European Union which came into force in May 2019. OIBDA adjusted for special effects is expected to develop broadly stable to slightly positive in the current year. Note: Unless indicated otherwise, all financial KPIs and year-on-year comparisons published in this document are prepared in accordance with IFRS accounting standards as adopted by the European Union. Financial KPIs for 2019 therefore include the effects of the implementation of IFRS 16 as of 1 January 2019. Further detailed information on the financial result is available at https://www.telefonica.de/financial-publications
1) Unless otherwise stated, the financial data and comparative figures published in this document have been prepared in accordance with the International Financial Reporting Standards (IFRS) adopted by the European Union (EU). Accordingly, the key financial figures for 2019 include the effects of IFRS 16 implementation as of January 1, 2019.
2)Includes mobile accesses with an inactivity period of maximum of six months.