Preliminary figures for the first half year 2019:Telefónica Deutschland grows and invests heavily in network expansion and new products

Markus Haas
Telefónica Deutschland continues to grow. Revenues from January to June rose by 1.1 percent compared to the previous year. This was driven by sustained high demand for mobile handsets and a strong development in mobile service revenue in the second quarter. In the first half of the year, the company was able to gain a net 607,000 mobile subscriptions and expanded its DSL customer base. Telefónica Deutschland continues to invest in growth and recently launched innovative products such as O2 TV. Adjusted operating income (OIBDA) increased by 0.7 percent on a comparable basis in the first six months. With the acquisition of 5G frequencies and exclusive access to Vodafone's nationwide cable network, Telefónica Deutschland has achieved an excellent competitive position for the coming years.1) "Our significant investments in our network and in attractive products are being rewarded with growth," said Markus Haas, CEO of Telefónica Deutschland. "At the same time, we have successfully laid the foundations for a strong position both in 5G and in the fixed market.”
-Revenues increase by 1.1 percent in the first half of the year
-Turnaround in mobile service revenue achieved
-Number of mobile contracts grows by 607,000 from January to June
-Company positions itself strongly for 5G and fixed business

Strong demand in both mobile and fixed businesses

Demand for wireless services and fixed-network products remained strong in the first half of the year: with 607,000 additional mobile postpaid accesses, the pace of growth was even higher than last year. This was mainly due to the unabated demand for O2 Free tariffs and the strong partner business. Mobile data usage continued to show strong growth, increasing by 51 percent between January and June. With 420,000 terabytes, the total usage of the year 2017 was already exceeded after only six months. The positive trend is also continuing in the fixed-network business. Compared to mid-2018, the number of broadband connections increased by 5.5 percent. This was mainly due to demand for fast VDSL connections. The total number of accesses at the end of June was 49.6 million2), of which wireless communications accounted for 45.3 million2). No mobile service provider in Germany connects more people than Telefónica Deutschland. These positive developments on the customer side were also reflected in sales: Telefónica Deutschland is growing. Revenues rose by 1.1 percent to 3.56 billion euros in the first half of the year. In addition to the continued strong handset business, the driver behind this increase was mobile communications service revenue. It grew by 0.6 percent in the second quarter, the first increase in four years. Adjusted for regulatory effects, growth amounted to 1.5 percent. In the first half of the year, mobile service revenue rose by 0.1 percent to EUR 2.60 billion. In the fixed-network segment, the recovery of the broadband business – following the exit from the Group's DSL wholesale activities – also made itself felt in terms of revenue: Compared with the previous quarter, revenue rose by 1.7 percent – the first increase in almost three years.

Investments in profitable growth and the digital transformation

To seize opportunities for profitable growth and to position the company well for the coming quarters, Telefónica Deutschland invested heavily in new offerings and the digital transformation of processes and services. At the same time, the company continued to benefit from synergy effects from the merger with E-Plus and from efficiency gains which were the result of leaner digital processes. Adjusted for exceptional and regulatory effects, operating profit before depreciation and amortization (OIBDA) increased by 25 percent from January to June. This steep increase was mainly due to changes from IAS 17 to IFRS 16 bookkeeping requirements. On a comparable basis, the increase was 0.7 percent. With a view to the annual targets, the company is thus well on track. The expansion of the network, above all the area rollout with LTE, made very good progress in the first half of the year. This year alone, Telefónica Deutschland was able to equip or upgrade 4,400 broadcasting locations with LTE – more than any other provider in the German market. Capital expenditure (CapEx) rose as a result by 17 percent to 496 million euros. In 2019, the company plans to set up around 10,000 LTE stations nationwide – a figure unparalleled in Europe for a 12-month period. Net income for the first half year amounted to minus 156 million euros in the first half of the year, compared with minus 93 million euros in the same period of the previous year. The reason for this development was shortened depreciation periods in the course of the completion of grid integration. Free cash flow amounted to minus 481 million euros, compared to minus 689 million euros. This figure was also affected by the change in accounting rules from IAS 17 to IFRS 16.
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 can be found at https://www.telefonica.de/investor-relations-en/publications/financial-publications.html
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 phone accesses with a maximum inactivity period of six months.