GROUP STRUCTURE, STRATEGY, AND MANAGEMENT

Transcription

1 8 GROUP STRUCTURE, STRATEGY, AND MANAGEMENT With regrd to our Group structure, strtegy, nd mngement, plese refer to the notes in the 2016 combined mngement report (2016 Annul Report, pge 26 et seq.). The following chnges were recorded s of the strt of the yer from the Group s point of view: We hve creted the new Bord of Mngement deprtment Technology nd Innovtion, effective s of Jnury 1, 2017, in which we hve pooled our Group s overrching network, innovtion nd IT tsks. This resulted in the following orgniztionl chnges: The Innovtions, Telekom IT, nd Technology units of our Germny, Europe, nd Systems Solutions operting segments hve been trnsferred into seprte Bord deprtment within the Group Hedqurters & Group Services segment. The Technology nd Innovtion Bord deprtment is heded by Cludi Nemt, who ws previously responsible for the Europe nd Technology deprtment. Srini Gopln ws ppointed s the new Bord of Mngement member responsible for the Europe deprtment. Comprtive figures hve been djusted retrospectively. Since Jnury 1, 2017, we hve reported on the new Group Development operting segment. Group Development ctively mnges nd increses the vlue of selected subsidiries nd equity investments of the Group. The following units nd subsidiries hve been included: T-Mobile Netherlnds (previously in the Europe operting segment), Deutsche Funkturm (DFMG, previously in the Germny operting segment), s well s Deutsche Telekom Cpitl Prtners (DTCP) nd the stkes in BT plc, Ströer SE & Co. KGA, s well s Strto, which ws sold in Mrch 2017, nd the stke in Scout24 AG, which ws sold in June 2017 (previously in the Group Hedqurters & Group Services segment). The Group functions of Mergers & Acquisitions nd Strtegic Portfolio Mngement hve lso been ssigned to Group Development. Comprtive figures hve been djusted retrospectively. For more informtion, plese refer to the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45. THE ECONOMIC ENVIRONMENT This section provides dditionl informtion on nd explins recent chnges to the economic sitution s described in the combined mngement report for the 2016 finncil yer, focusing on mcroeconomic developments in the first nine months of 2017, the outlook, the currently previling economic risks, the telecommunictions mrket, nd the regultory environment. The overll economic outlook is subject to the precondition tht there re no mjor unexpected occurrences in the forecst period. MACROECONOMIC DEVELOPMENT The globl economy continued its recovery in the first nine months of In its revised forecst of October 2017, the Interntionl Monetry Fund (IMF) expects globl gross domestic product (GDP) to grow by 3.6 percent in 2017, compred with 3.2 percent in Growth rtes in the economies covered by our business res lso remined positive. The economies continued to profit from stble domestic consumption nd rising exports. Even the Greek economy recorded three successive qurters of growth. OUTLOOK As mrket conditions currently stnd, we expect economic development in our core mrkets to remin stble. OVERALL ECONOMIC RISKS The growth in the globl economy nd politicl developments over the lst few months hve reduced the probbility of recessionry trends, especilly in Europe. Nevertheless, we cnnot rule out politicl risks in our mrkets. The min risk to globl trde t present is n increse in protectionist mesures. Furthermore, geopoliticl crises could lso hve negtive impct on the economies of the countries in which we operte. TELECOMMUNICATIONS MARKET IT security legisltion. In the course of implementing the EU Network nd Informtion Security Directive, number of provisions were dded to the Germn IT Security Act (IT-Sicherheitsgesetz), requiring online mrketplces, serch engine opertors, nd cloud service providers to comply with minimum requirements designed to sfegurd the security of their infrstructures nd to report incidents. On positive note, the legisltor included dditionl powers for telecommunictions providers to enble the detection nd clering of network outges nd security incidents. This mendment lso mrks significnt step forwrd in terms of the necessry inclusion of ll prties involved in the vlue chin. It remins to be seen whether the new Germn government will mke ny further ttempt to ddress the remining deficits in the IT Security Act in terms of the lck of systemtic involvement of hrdwre nd softwre mnufcturers. EU subsidies for Croti. On June 6, 2017, the EU Commission grnted its pprovl for EU subsidies for Croti. The Crotin government plns to use this money to fund stte-owned network opertor. This possibility is lso being discussed in Greece. The development increses the risk of mssive distortion of competition nd of other countries following suit.

2 9 REGULATION Federl Network Agency consulttion on the FTTH/B roll-out. The Federl Network Agency held public consulttion process from Mrch 14, 2017 to April 26, 2017 on proposls for how regultory support could be provided to ccelerte the roll-out of fiber-optic networks (FTTH/B) with view to rtes regultion. All mrket plyers were sked to respond to the consulttion pper. The 17 responses received were published on My 17, The Federl Network Agency sid it will first nlyze these responses, some of which re extensive, before nnouncing ny conclusions. Further vectoring roll-out greed. The Federl Network Agency hs reviewed the specific conditions required for nershore vectoring by wy of reference offer procedure. On August 9, 2017, the Federl Network Agency nnounced the ruling in its officil journl. The dedlines for the three plnned nershore build-out trnches hve thus now been set. A prllel rte pprovl process strted t the Federl Network Agency t the end of Mrch 2017 to set the rtes for nershore ULL substitute product. The Federl Network Agency nnounced ruling in these proceedings t the sme time, finlly giving the green light for our nershore vectoring roll-out. For more informtion, plese refer to the explntions in section The economic environment in the 2016 Annul Report, pge 35 et seq. Regultion of termintion rtes. Following conclusion of phse II investigtion opened s result of serious doubts letter from the Europen Commission, the Federl Network Agency issued its finl rtes pprovl on July 21, The rtes pproved until December 31, 2018 correspond exctly to the provisionl rtes tht hve been in plce since Jnury 1, For more informtion, plese refer to the explntions in section The economic environment in the 2016 Annul Report, pge 35 et seq. Interntionl roming. The new EU Regultion to bolish roming surchrges (commonly referred to s Rom Like t Home) within the Europen Union s well s in Icelnd, Liechtenstein nd Norwy s of June 15, 2017 entered into force in the second qurter of On My 17, 2017, the Europen Council nd Europen Prliment dopted further mended regultions for wholesle roming chrges, significntly reducing regulted price cps t wholesle level. Deutsche Telekom hd previously introduced customer-friendly Rom Like t Home offers on the retil side. AWARDING OF FREQUENCIES The following tble provides n overview of the min spectrum wrds nd uctions s well s license extensions t our interntionl subsidiries. It lso indictes spectrum to be wrded in the ner future in vrious countries. Min spectrum wrds Strt of wrd procedure End of wrd procedure Frequency rnges (MHz) Awrd process Acquired spectrum (MHz) Spectrum investment Albni Q Q Seled bid or uction tbd tbd Germny Q Q ,000/3,400 3,700 Auction (SMRA b ) expected tbd tbd Greece Q Q c 1,800 Seled bid 25 MHz 83.2 million Mcedoni Q Q /1,800/ 3,400 3,800 Seled bid or uction tbd tbd Netherlnds Q Q /1,500/2,100 Auction, detils tbd tbd tbd Austri Q Q ,400 3,800 Auction (CCA b ) (expected) tbd tbd Polnd Q Q ,700 Seled bid No spectrum cquired Polnd Q Q ,500 tbd tbd tbd Romni Q Q /800/1,500/ 2,600/3,500 Auction, detils tbd tbd tbd Slovki Q Q ,700 Auction (SMRA b ) 40 MHz for Brtislv 200 thousnd Czech Republic Q Q ,700 Auction (SMRA b ) No spectrum cquired Czech Republic Q Q /1,800 Extension of licenses (expected) tbd tbd Hungry Q Q /1500/2,100/ 2,300/2,600 und 26,000 Detils tbd tbd tbd United Sttes Q Q Incentive uction e mostly 2x20 MHz $ 7.99 billion Regionl licenses; Submission of n individul bid in seled envelope, in some cses sequentil, in severl wrds. b Simultneous electronic multi-round uction with scending, prllel bids for ll rnges. c End of wrd procedure: October 24, d Combintoril Clock Auction, three-stge, multi-round uction for spectrum from ll frequency rnges. e Quntity nd prices of spectrum to be trded depends on spectrum surrendered by rdio brodcsters.

3 10 DEVELOPMENT OF BUSINESS IN THE GROUP RESULTS OF OPERATIONS OF THE GROUP NET REVENUE In the first nine months of the 2017 finncil yer, we generted net revenue of EUR 55.8 billion, substntil increse of EUR 2.2 billion or 4.2 percent compred with the sme period in the prior yer. The development of business in our United Sttes operting segment contributed substntilly to this positive trend: T-Mobile US successful Un-crrier inititives nd the success of the MetroPCS brnd gve strong boost to the number of new customers nd thus lso to service revenues. Terminl equipment revenues continued to rise, in prt due to the stronger focus on offering terminl equipment under instllment plns. In our Germn home mrket, there ws slight upwrd trend in revenue. This ws prtly due to rise in mobile revenues nd, primrily, growth in non-contrct hndset revenues. The revenue trend in the fixed-network business hd reducing effect. In the Europe operting segment, revenue lso incresed slightly compred with the sme period in the prior yer. Revenue development in our strtegic growth res nd n increse in terminl equipment revenue hd positive effect. By contrst, lower roming chrges in most of the countries in which the ntionl compnies operte nd ongoing intense competition in the telecommunictions footprint mrkets put further pressure on revenue. In the Systems Solutions operting segment, revenue decresed by 2.9 percent ginst the prior-yer period. This decline ws primrily ttributble to the completion in the first qurter of 2016 of the set-up phse for the toll collection system in Belgium. If we exclude this effect, our telecommunictions business posted revenue growth. By contrst, revenue from our trditionl IT business continued to decrese due to the generl downwrd trend in mrket prices nd to decline in order entry, especilly t interntionl level. Revenue generted in our Group Development operting segment decresed by 2.0 percent in the first nine months of the 2017 finncil yer compred with the prior-yer period, which ws lrgely ttributble to the revenue lost s result of the sle of Strto s of Mrch 31, Revenue growth t T-Mobile Netherlnds hd positive impct. Excluding positive exchnge rte effects especilly from the trnsltion of U.S. dollrs to euros nd slightly negtive effects from chnges in the composition of the Group (minly from the sle of Strto) tht on blnce mounted to EUR 0.1 billion, revenue grew by EUR 2.1 billion or 3.9 percent. For detils on the revenue trends in our Germny, United Sttes, Europe, Systems Solutions, nd Group Development operting segments s well s in the Group Hedqurters & Group Services segment, plese refer to the section Development of business in the operting segments, pge 15 et seq. Contribution of the segments to net revenue Q Q Q Q Chnge % Q1 Q Q1 Q Chnge % FY 2016 NET REVENUE 18,646 18,890 18,251 18, % 55,787 53, % 73,095 Germny 5,397 5,371 5,488 5, % 16,256 16, % 21,774 United Sttes 8,982 9,236 8,466 8, % 26,684 24, % 33,738 Europe 2,781 2,860 2,945 2, % 8,587 8, % 11,454 Systems Solutions 1,704 1,688 1,707 1, % 5,099 5,252 (2.9) % 6,993 Group Development (7.3) % 1,702 1,736 (2.0) % 2,347 Group Hedqurters & Group Services (12.2) % 2,268 2,538 (10.6) % 3,467 Intersegment revenue (1,549) (1,614) (1,643) (1,670) 1.6 % (4,809) (4,933) 2.5 % (6,678) Since Jnury 1, 2017, we hve reported on the Group Development operting segment nd within the Group Hedqurters & Group Services segment on the Bord of Mngement deprtment Technology nd Innovtion. Comprtive figures hve been djusted retrospectively. For more informtion, plese refer to the section Group structure, strtegy, nd mngement, pge 8, nd the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45. Brekdown of revenue by regions % Contribution of the segments to net revenue % 0.7 Other countries 18.5 Europe (excluding Germny) 32.7 Germny 2.3 Group Development 7.3 Systems Solutions 14.9 Europe 0.4 Group Hedqurters & Group Services 27.3 Germny 48.1 North Americ 47.8 United Sttes For more informtion on net revenue, plese refer to the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45.

4 11 At 47.8 percent, our United Sttes operting segment gin provided the lrgest contribution to net revenue of the Group. This ws n increse of 2.4 percentge points compred with the prior-yer period, due in prticulr to ongoing strong customer dditions. The proportion of net revenue generted interntionlly incresed yer-on-yer, from 65.8 percent to 67.3 percent. EBITDA, ADJUSTED EBITDA Excluding specil fctors, djusted EBITDA incresed by EUR 1.1 billion or 6.6 percent yer-on-yer to EUR 17.2 billion in the first nine months of This development ws primrily driven by our United Sttes operting segment, which recorded n increse in its djusted EBITDA contribution of EUR 1.1 billion, minly s result of the continued success of the Un-crrier inititives. EBITDA djusted for specil fctors lso grew in our Germny operting segment by 2.2 percent in the first nine months of Adjusted EBITDA generted by our Europe nd Systems Solutions operting segments, by contrst, decresed. Mildly positive exchnge rte effects were lmost completely offset by slightly negtive effects from chnges in the composition of the Group. EBITDA incresed by s much s EUR 1.6 billion yer-on-yer to EUR 19.3 billion. Specil fctors were positive on blnce, incresing by EUR 0.5 billion yer-on-yer to EUR 2.1 billion. These fctors included prtil reversl of impirment losses on spectrum licenses t T-Mobile US, incresing the crrying mount by EUR 1.7 billion s of September 30, Other positive fctors were income from divestitures in connection with the sle of Strto completed s of midnight, Mrch 31, 2017 (EUR 0.5 billion), income from the sle of the remining shres in Scout24 AG (EUR 0.2 billion), nd income from settlement greement concluded with BT in July 2017 (EUR 0.2 billion). Specil fctors in connection with stff-relted mesures nd non-stffrelted restructuring expenses mounted to EUR 0.4 billion, EUR 0.8 billion lower thn the expenses reported in the prior-yer period. Specil fctors in the prior-yer period included income of EUR 2.5 billion from the sle in erly 2016 of our shres in the EE joint venture nd income in the mount of EUR 0.5 billion from trnsctions for the exchnge of spectrum licenses between T-Mobile US nd two telecommunictions compnies. For detiled informtion on the development of EBITDA/djusted EBITDA in our segments, plese refer to the section Development of business in the operting segments, pge 15 et seq. Contribution of the segments to djusted Group EBITDA Q Q Q Q Chnge % Q1 Q Q1 Q Chnge % FY 2016 EBITDA (ADJUSTED FOR SPECIAL FACTORS) IN THE GROUP 5,550 5,944 5,720 5, % 17,215 16, % 21,420 Germny 2,070 2,100 2,190 2, % 6,360 6, % 8,237 United Sttes 2,386 2,640 2,288 2, % 7,313 6, % 8,561 Europe ,007 1,037 (2.9) % 2,843 2,936 (3.2) % 3,866 Systems Solutions (5.8) % (18.8) % 530 Group Development (12.4) % (4.8) % 943 Group Hedqurters & Group Services (128) (90) (115) (141) 18.4 % (333) (377) 11.7 % (670) Reconcilition (1) (25) (1) (2) 50.0 % (25) (40) 37.5 % (47) Since Jnury 1, 2017, we hve reported on the Group Development operting segment nd within the Group Hedqurters & Group Services segment on the Bord of Mngement deprtment Technology nd Innovtion. Comprtive figures hve been djusted retrospectively. For more informtion, plese refer to the section Group structure, strtegy, nd mngement, pge 8, nd the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45. EBIT Group EBIT stood t EUR 8.7 billion, up EUR 0.5 billion ginst the prior-yer period. This chnge ws minly due to the positive effects described under EBITDA. By contrst, the impirment of goodwill recognized in our Systems Solutions operting segment hd negtive impct on EBIT in the mount of EUR 1.2 billion. Deprecition of property, plnt nd equipment nd mortiztion of intngible ssets were slightly lower thn in the prior-yer period. PROFIT BEFORE INCOME TAXES Profit before income txes decresed by EUR 1.7 billion yer-on-yer to EUR 5.0 billion. This substntil decline ws ttributble to the increse of EUR 2.2 billion in loss from finncil ctivities, which ws minly result of the EUR 1.3 billion impirment of our finncil stke in BT recognized in profit nd loss. Negtive remesurement effects from the exercise nd subsequent mesurement of embedded derivtives t T-Mobile US minly relting to the erly repyment of externl finncil libilities lso incresed the loss from finncil ctivities. As in the previous yer, our finncil stke in BT resulted in dividend income of EUR 0.1 billion. In the prior-yer period, other finncil income/expense included finl dividend totling EUR 0.2 billion in connection with the sle of our stke in the former EE joint venture.

5 12 NET PROFIT Net profit decresed yer-on-yer by EUR 2.7 billion to EUR 2.1 billion. The tx expense for the first nine months of 2017 mounted to EUR 1.9 billion, up EUR 0.5 billion yer-on-yer. For further informtion, plese refer to the interim consolidted finncil sttements, pge 42. Profit ttributble to non-controlling interests incresed compred with the prior-yer period by EUR 0.5 billion. In our United Sttes operting segment, the increse in profit ttributble to non-controlling interests ws driven in prticulr by positive business performnce nd by the prtil reversl of impirment losses on spectrum licenses cquired previously. This ws prtilly offset by the forementioned negtive remesurement effect included in the loss from finncil ctivities. Number of employees (t the reporting dte) Sept. 30, 2017 Dec. 31, 2016 Germny 64,388 65,452 United Sttes 44,394 44,820 Europe 47,579 46,808 Systems Solutions 37,596 37,472 Group Development 1,949 2,572 Group Hedqurters & Group Services 20,436 21,216 NUMBER OF EMPLOYEES IN THE GROUP 216, ,341 Of which: civil servnts (in Germny, with n ctive service reltionship) 15,726 15,999 The Group s hedcount decresed by 0.9 percent compred with the end of Mesures to enhnce efficiency, slowdown in recruitment in the operting units, nd the use of socilly responsible instruments reduced the hedcount in the Germny operting segment by 1.6 percent t the September reporting dte. The totl number of employees in our United Sttes operting segment decresed by 1.0 percent t September 30, 2017 compred to December 31, 2016, due to decrese in customer cquisition employees, prtilly offset by n increse in customer support nd network employees. The number of employees in our Europe operting segment grew by 1.6 percent compred with yer-end One fctor contributing to this increse ws new stff recruited t our ntionl compny in Polnd for newly opened brnches. Hedcount in our Systems Solutions operting segment rose by 0.3 percent, lrgely due to the integrtion of Telekom Security stff. The number of employees in the Group Development operting segment decresed by 24.2 percent, primrily due to the divestiture of Strto effective Mrch 31, The number of employees in the Group Hedqurters & Group Services segment ws down 3.7 percent compred with the end of 2016, minly due to the Group-wide bundling of the Telekom Security unit under our Systems Solutions operting segment nd ongoing stff restructuring t Vivento. In the wke of the reorgniztion, this decrese ws offset by the hedcount increse in our Bord of Mngement deprtment Technology nd Innovtion. Since Jnury 1, 2017, we hve reported on the Group Development operting segment nd within the Group Hedqurters & Group Services segment on the Bord of Mngement deprtment Technology nd Innovtion. Comprtive figures hve been djusted retrospectively. For more informtion, plese refer to the section Group structure, strtegy, nd mngement, pge 8, nd the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45. FINANCIAL POSITION OF THE GROUP Structure of the consolidted sttement of finncil position ASSETS LIABILITIES AND SHAREHOLDERS EQUITY 148, ,485 Intngible ssets Property, plnt nd equipment Trde nd other receivbles Other ssets 41 % 32 % 6 % 21 % 139, , % 33 % 7 % 15 % 35 % 6 % 6 % 28 % 7 % 7 % 11 % 6 % 7 % 34 % 10 % 7 % 10 % 26 % Dec. 31, 2016 Sept. 30, 2017 Sept. 30, 2017 Dec. 31, 2016 Non-current finncil libilities Current finncil libilities Provisions for pensions nd other employee benefits Deferred tx libilities Trde nd other pybles Other libilities Shreholders equity Totl ssets mounted to EUR billion, down by EUR 8.6 billion ginst December 31, This ws lrgely due to exchnge rte effects (primrily from the trnsltion of U.S. dollrs into euros) s well s the repyment of finncil libilities nd trde pybles. The totl crrying mounts of intngible ssets nd property, plnt nd equipment were up by EUR 2.3 billion ginst the prior yer. In prticulr, investments in new mobile spectrum licenses by the United Sttes operting segment t the spectrum uction tht ended in April 2017 incresed the crrying mount by EUR 7.2 billion. Investments in our networks, especilly in upgrding the network in our United Sttes operting segment nd building out brodbnd/opticl fiber in our Germny segment, remined high. In ddition, the prtil reversl recognized s of September 30, 2017, of

6 13 impirment losses on spectrum licenses previously cquired by T-Mobile US incresed the crrying mount by EUR 1.7 billion. In the Systems Solutions operting segment, by contrst, the unexpected decline in order entry s of the end of September 2017 prompted impirment testing in the third qurter of the ssets ssigned to this unit. An impirment loss on goodwill of EUR 1.2 billion ws recognized s result. Deprecition nd mor tiztion were down slightly on the prior-yer period. Negtive exchnge rte effects especilly from the trnsltion of U.S. dollrs into euros decresed the crrying mount. Under other ssets, csh nd csh equivlents declined in prticulr ginst December 31, 2016 due in prt to the outflows for the spectrum license purchsed in the United Sttes mounting to EUR 5.2 billion. The decline in other finncil ssets compred with December 31, 2016 is ttributble to the utiliztion of the csh deposit of EUR 2.0 billion plced in June 2016 by our United Sttes operting segment for the spectrum uction. In ddition, the EUR 1.3 billion impirment in the first three qurters of 2017 of our stock exchnge-trded finncil stke in BT, which ws recognized in profit nd loss, long with the exercise of the right of premture cncelltion of bonds issued by T-Mobile US, reduced other finncil ssets. There ws n overll decrese of EUR 6.0 billion in current nd non-current finncil libilities compred with the end of This is primrily the result of the erly repyment of T-Mobile US debt instruments in the mount of EUR 9.5 billion (trnslted into euros) nd regulr repyments of bond libilities of EUR 3.3 billion. New bonds of EUR 9.4 billion (trnslted into euros) were issued. For further informtion, plese refer to the interim consolidted finncil sttements, pge 40 nd 41. Provisions for pensions nd other employee benefits decresed by EUR 0.3 billion, minly due to interest rte djustments tht resulted in n ctu ril gin of EUR 0.3 billion recognized under other comprehensive income. Trde nd other pybles decresed by EUR 1.9 billion. This de cline ws ttributble to the reduction in the portfolio of libilities, especilly in our United Sttes nd Europe operting segments, nd to exchnge rte effects, in prticulr from the trnsltion of U.S. dollrs into euros. Shreholders equity grew slightly, from EUR 38.8 billion t December 31, 2016 to EUR 39.1 billion. Profit fter txes of EUR 3.1 billion hd n incresing effect. Currency trnsltion effects recognized directly in equity of EUR 2.0 billion hd decresing effect. Dividend pyments for the 2016 finncil yer to Deutsche Telekom AG shreholders in the mount of EUR 2.8 billion nd to non-controlling interests in the mount of EUR 0.1 billion reduced shreholders equity. This ws prtilly offset by cpitl increse of EUR 1.4 billion involving the contribution of the dividend entitlements, in connection with the option grnted to our shreholders to hve their dividend entitlements converted into shres. In ddition, EUR 0.2 billion (fter txes) from the remesurement of defined benefit plns nd EUR 0.2 billion from the mesurement of hedging instruments hd positive effect. For further informtion on the sttement of finncil position, plese refer to the interim consolidted finncil sttements, pge 29 et seq. Structure of the consolidted sttement of finncil position 7,300 1, (2,600) ,635 49,959 (4,403) (554) (319) Net debt t Free csh flow Jn. 1, 2017 (before dividend pyments nd spectrum investment) Sle of Strto Sle of Scout24 AG Spectrum cquisition Dividends (including to non-controlling interests) Finnce leses Embedded derivtives (T-Mobile US) Exchnge rte effects Other effects Net debt t Sept. 30, 2017

7 14 Other effects of EUR 0.4 billion include, mong other fctors, finncing options under which the pyments for trde pybles become due t lter point in time by involving bnks in the process, nd libilities for the cquisition of brodcsting rights. For more informtion on net debt, plese refer to the disclosures on the reconcilition of lterntive performnce mesures in the section Additionl informtion, pge 55 et seq. Free csh flow (before dividend pyments nd spectrum investment) Q Q Q Q Chnge % Q1 Q Q1 Q Chnge % FY 2016 CASH GENERATED FROM OPERATIONS 5,280 4,955 5,232 5, % 15,468 14, % 18,116 Interest received (pid) (926) (752) (424) (628) 32.5 % (2,102) (2,211) 4.9 % (2,583) NET CASH FROM OPERATING ACTIVITIES 4,355 4,204 4,808 4, % 13,367 11, % 15,533 Csh outflows for investments in intngible ssets (excluding goodwill nd before spectrum investment) nd property, plnt nd equipment (CASH CAPEX) (3,245) (2,994) (3,002) (2,739) (9.6) % (9,241) (8,234) (12.2) % (10,958) Proceeds from disposl of intngible ssets (excluding goodwill) nd property, plnt nd equipment (22.1) % (6.8) % 364 FREE CASH FLOW (BEFORE DIVIDEND PAYMENTS AND SPECTRUM INVESTMENT) 1,228 1,301 1,873 1,904 (1.6) % 4,403 4, % 4,939 Free csh flow. Free csh flow in the Group before dividend pyments nd spectrum investment incresed by EUR 0.4 billion ginst the prior-yer period to EUR 4.4 billion. Net csh from operting ctivities incresed by EUR 1.4 billion. By contrst, csh outflows for investments in intngible ssets (excluding goodwill nd before spectrum investment) nd property, plnt nd equipment incresed by EUR 1.0 billion. The positive trend in net csh from operting ctivities ws minly ttributble to the good business development of the United Sttes operting segment. Significnt positive effects included in the prior-yer period were offset in the current reporting period by incresed csh inflows. Hence, the positive effects of fctoring greements on net csh from operting ctivities were EUR 0.5 billion lower thn in the prior-yer period. This minly reltes to fc - toring greements in the Germny, Systems Solutions, nd United Sttes operting segments. The dividend pyment received from BT incresed by EUR 0.1 billion yer-on-yer, while in the prior-yer period the former joint venture EE hd remitted dividend pyment totling EUR 0.2 billion. In ddition, csh inflows of EUR 0.3 billion from the cncelltion of interest rte derivtives included in the prior-yer period hd negtive impct on the yer-on-yer comprison. The EUR 0.1 billion decrese in net interest pyments compred with the prior-yer period hd positive effect. The EUR 1.0 billion increse in csh cpex compred with the prior-yer period primrily relted to the United Sttes nd Germny operting segments. In ech cse, the csh outflows were for investments in network build-out nd network moderniztion. For further informtion on the sttement of csh flows, plese refer to the interim consolidted finncil sttements, pge 42 et seq.

8 15 DEVELOPMENT OF BUSINESS IN THE OPERATING SEGMENTS GERMANY For informtion on chnges in the orgniztionl structure, plese refer to the section Group structure, strtegy, nd mngement, pge 8, nd the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45. CUSTOMER DEVELOPMENT thousnds Sept. 30, 2017 June 30, 2017 Chnge June 30, 2017 % Dec. 31, 2016 Chnge Dec. 31, 2016 % Sept. 30, 2016 Chnge Sept. 30, 2016 % TOTAL Mobile customers 42,534 42, % 41, % 41, % Contrct customers 25,452 25, % 25, % 24, % Prepy customers 17,082 16, % 16, % 16, % Fixed-network lines 19,352 19,477 (0.6) % 19,786 (2.2) % 19,873 (2.6) % Of which: retil IP-bsed 11,177 10, % 9, % 8, % Brodbnd lines 13,105 13, % 12, % 12, % Of which: opticl fiber 5,417 5, % 4, % 3, % Television (IPTV, stellite) 3,089 3, % 2, % 2, % Unbundled locl loop lines (ULLs) 6,417 6,723 (4.6) % 7,195 (10.8) % 7,431 (13.6) % Wholesle unbundled lines 5,206 4, % 4, % 3, % Of which: opticl fiber 3,485 3, % 2, % 2, % Wholesle bundled lines (12.8) % 165 (33.9) % 179 (39.1) % As of Jnury 1, 2017, reporting of contrct customers in business customer opertions excludes test crds (minus 41 thousnd). In ddition, there ws one-time effect in business customer opertions from chnge in the wy prepy customers were reported (plus 180 thousnd). Prior-yer figures hve not been djusted. Totl In Germny we continue to be mrket leder both in terms of fixed-network nd mobile revenues. This success is ttributble to our high-performnce networks. We offer best customer experience with multi-wrd-winning network qulity in the fixed network nd in mobile communictions nd with brod product portfolio. So fr, we hve won 3.5 million customers for our integrted product, MgentEINS, comprising fixed-network nd mobile components. In mobile communictions, we won nother 546 thousnd customers in the first three qurters of High demnd for mobile rte plns with included dt volumes resulted in n increse in the number of contrct customers under the Telekom nd congstr brnds. We lso recorded substntil growth in the number of prepy customers. By the end of September 2017, we hd migrted 16.1 million retil nd wholesle lines to IP, which corresponds to migrtion rte of 65 percent. We continue to see strong demnd for our fiber-optic products. The number of lines incresed to 8.9 million overll by the end of September 2017, which mens we connected 2.1 million lines to our fiber-optic network in Germny over the lst nine months. With the progress in fiber-optic roll-out nd innovtive vectoring technology, we lso successfully drove forwrd the mrketing of higher bndwidths. With our contingent model, we crete incentives for the migrtion from trditionl wholesle products such s bundled wholesle lines or unbundled locl loop lines (ULLs) to higher-qulity fiber-optic wholesle lines. Mobile communictions Since the end of 2016, we hve won totl of 493 thousnd contrct customers under the Telekom nd congstr brnds nd t Telekom Deutschlnd Multibrnd GmbH. We lost 221 thousnd customers from contrct customer business with resellers (service providers). The number of prepy customers incresed by 272 thousnd. Fixed network Due to the persistently chllenging development in the fixed-network mrket, primrily owing to ggressive pricing offers of competitors, we re pursuing new pths in mrketing, focusing on integrted offers nd on TV nd fiber-optic lines. As result, the number of brodbnd lines incresed by 183 thousnd in the first three qurters of 2017 compred with the end of 2016 nd the number of TV customers by 210 thousnd. In the trditionl fixed network, the number of lines decresed by 434 thousnd. Our MgentZuhuse rte plns offer comprehensive product portfolio for the fixed network bsed on IP technology nd rte pln-specific bndwidths. MgentZuhuse Hybrid bundles fixed-network nd mobile technology in single router. To dte, 354 thousnd customers primrily in rurl res hve selected this innovtive rte pln. We hve lso connected totl of 191 thousnd prtments to our network through our prtnerships in the housing sector.

9 16 Wholesle At the end of the third qurter of 2017, fiber-optic lines ccounted for 29.7 percent of ll wholesle lines 7.6 percentge points higher thn t the end of The strong growth in our wholesle unbundled lines by 994 thousnd or 23.6 percent compred with the end of 2016 ws primrily ttributble to the strong demnd for our contingent model. By contrst, the number of bundled wholesle lines decresed slightly by 56 thousnd. This trend is likely to continue for the next few yers due to the fct tht our competitors re switching from bundled to unbundled wholesle products with more bndwidth, or to their own infrstructure. The number of unbundled locl loop lines decresed by 778 thousnd or 10.8 percent compred with the end of the prior yer. This is due first to the move to higher-qulity fiber-optic wholesle lines, nd second to retil customers switching to cble opertors. In ddition, wholesle customers re migrting their retil customers to their own fiber-optic lines. The totl number of wholesle lines rose to 11.7 million by the end of September DEVELOPMENT OF OPERATIONS Q Q Q Q Chnge % Q1 Q Q1 Q Chnge % FY 2016 TOTAL REVENUE 5,397 5,371 5,488 5, % 16,256 16, % 21,774 Consumers 2,918 2,878 2,964 2,967 (0.1) % 8,759 8, % 11,739 Business Customers 1,465 1,473 1,486 1,489 (0.2) % 4,430 4, % 5,923 Wholesle % 2,802 2,804 (0.1) % 3,742 Other (5.2) % (0.4) % 370 Profit from opertions (EBIT) 1,086 1,042 1,153 1, % 3,281 2, % 3,624 EBIT mrgin % Deprecition, mortiztion nd impirment losses (935) (953) (963) (912) (5.6) % (2,851) (2,766) (3.1) % (3,703) EBITDA 2,021 1,995 2,116 1, % 6,132 5, % 7,327 Specil fctors ffecting EBITDA (49) (105) (74) (123) 39.8 % (228) (660) 65.5 % (910) EBITDA (ADJUSTED FOR SPECIAL FACTORS) 2,070 2,100 2,190 2, % 6,360 6, % 8,237 EBITDA mrgin (djusted for specil fctors) % CASH CAPEX (1,005) (1,052) (1,052) (1,045) (0.7) % (3,109) (2,803) (10.9) % (4,031) As of July 1, 2017, shre of revenue previously recognized under Other ws ssigned to Business Customers on ccount of reorgniztion. Figures for prior periods were not djusted. Totl revenue Totl revenue incresed slightly yer-on-yer to EUR 16.3 billion s of the end of the third qurter of This ws prtly due to 1.6-percent rise in mobile revenues nd, primrily, growth in non-contrct hndset revenues of 8.4 percent. Incresed IT nd brodbnd revenues lso hd positive impct on fixed-network revenue. This ws not quite sufficient to completely offset the yer-on-yer decline of 1.0 percent in fixed-network revenue. Revenue from Consumers remined stble yer-on-yer. Volume-relted revenue decreses continued to drive the trditionl fixed-network business. By contrst, revenue from brodbnd business incresed by 1.1 percent. In mobile communictions, revenue incresed by 1.4 percent, primrily due to successful terminl equipment sles. Wholesle revenue remined stble in the first three qurters of 2017, or, excluding regultory price effects (from December 1, 2016), recorded positive trend yer-on-yer, primrily due to higher revenue from unbundled lines, minly s result of the contingent model. EBITDA, djusted EBITDA EBITDA mounted to EUR 6.1 billion s of the end of the third qurter of 2017, n increse of 10.2 percent yer-on-yer, due minly to lower specil fctors for expenses in connection with our stff restructuring. At EUR 6.4 billion, EBITDA djusted for specil fctors incresed by 2.2 percent yer-on-yer in the first nine months of 2017, driven minly by efficiency enhncement mesures in ll functions nd slight upwrd revenue trend. Our djusted EBITDA mrgin incresed to 39.1 percent (prior-yer figure: 38.4 percent). Revenue from Business Customers incresed by 1.0 percent. Mobile revenues grew by 2.0 percent yer-on-yer. IT revenues incresed by 17.1 percent. In the fixed network, by contrst, decline ws recorded in trditionl voice telephony, due lrgely to the incresing number of customers moving to flt-rte plns.

10 17 EBIT Profit from opertions incresed by 17.3 percent yer-on-yer to EUR 3.3 billion. The slight increse in deprecition, mortiztion nd impirment losses ws offset by the higher level of EBITDA. Csh cpex Csh cpex incresed by 10.9 percent compred with the first nine months of As prt of our integrted network strtegy, we gin mde significnt investments in the brodbnd nd fiber-optic roll-out, our IP trnsformtion, nd our mobile infrstructure. UNITED STATES CUSTOMER DEVELOPMENT thousnds Sept. 30, 2017 June 30, 2017 Chnge June 30, 2017 % Dec. 31, 2016 Chnge Dec. 31, 2016 % Sept. 30, 2016 Chnge Sept. 30, 2016 % UNITED STATES Mobile customers 70,731 69, % 71,455 (1.0) % 69, % Brnded customers 57,494 56, % 54, % 52, % Brnded postpid 36,975 36, % 34, % 33, % Brnded prepy 20,519 20, % 19, % 19, % Wholesle customers,b 13,237 13, % 17,215 (23.1) % 16,852 (21.5) % On September 1, 2016 T-Mobile US sold its mrketing nd distribution rights to certin of T-Mobile US existing co-brnded customers to current wholesle prtner for nominl considertion (the MVNO Trnsction). Upon the sle, the trnsction resulted in trnsfer of 1,365 thousnd brnded postpid customers nd 326 thousnd brnded prepy customers to wholesle customers. Prospectively from September 1, 2016, net customer dditions for these customers re included within wholesle customers. b T-Mobile US believes current nd future regultory chnges hve mde the Lifeline progrm offered by T-Mobile US wholesle prtners uneconomicl. T-Mobile US will continue to support its wholesle prtners offering the Lifeline progrm, but hs excluded the Lifeline customers from the reported wholesle subscriber bse resulting in the removl of 160 thousnd nd 4,368 thousnd reported wholesle customers s of the beginning of the third qurter of 2017 nd the second qurter of 2017, respectively. No further Lifeline djustments re expected in future periods. At September 30, 2017, the United Sttes operting segment (T-Mobile US) hd 70.7 million customers compred to 71.5 million customers t December 31, Net customer dditions were 3.8 million for the nine months ended September 30, 2017 excluding Lifeline customers compred to 6.1 million net customer dditions for the nine months ended September 30, 2016 due to the fctors described below. Brnded customers. Brnded postpid net customer dditions were 2,548 thou snd for the nine months ended September 30, 2017, compred to 2,900 thousnd brnded postpid net customer dditions for the nine months ended September 30, Brnded postpid net customer dditions for the nine months ended September 30, 2017 were lower compred to the nine months ended September 30, 2016, primrily due to decrese in the number of qulified brnded prepy customers migrting to brnded postpid plns, higher dectivtions from growing customer bse, nd lower gross customer dditions from incresed competitive ctivity in the mrketplce. Wholesle customers. T-Mobile US believes current nd future regultory chnges hve mde the Lifeline progrm offered by T-Mobile US wholesle prtners uneconomicl. T-Mobile US will continue to support its wholesle prtners offering the Lifeline progrm, but hs excluded the Lifeline customers from the reported wholesle subscriber bse resulting in removl of 160 thousnd nd 4,368 thousnd reported wholesle customers s of the beginning of the third qurter of 2017 nd the beginning of the second qurter of 2017, respectively. No further Lifeline djustments re expected in future periods. Tking the forementioned pproch into considertion, wholesle net customer dditions were 550 thousnd for the nine months ended September 30, 2017, compred to wholesle net customer dditions of 1,205 thousnd for the nine months ended September 30, The decrese ws due primrily to lower gross customer dditions, prtilly offset by lower customer dectivtions. Net customer ctivity for Lifeline ws lso excluded beginning in the second qurter of Brnded prepy net customer dditions were 706 thousnd for the nine months ended September 30, 2017, compred to 1,967 thousnd brnded prepy net customer dditions for the nine months ended September 30, The decrese ws due primrily to higher MetroPCS brnd dectivtions from growing customer bse nd incresed competitive ctivity in the mrketplce. Additionl decreses resulted from the optimiztion of T-Mobile US third prty distribution chnnels.

11 18 DEVELOPMENT OF OPERATIONS Q Q Q Q Chnge % Q1 Q Q1 Q Chnge % FY 2016 TOTAL REVENUE 8,982 9,236 8,466 8, % 26,684 24, % 33,738 Profit from opertions (EBIT) 1,003 1,328 2, n.. 5,135 2, % 3,685 EBIT mrgin % Deprecition, mortiztion nd impirment losses (1,387) (1,308) (1,130) (1,315) 14.1 % (3,825) (3,929) 2.6 % (5,282) EBITDA 2,390 2,635 3,934 2, % 8,960 6, % 8,967 Specil fctors ffecting EBITDA 4 (4) 1, n.. 1, n EBITDA (ADJUSTED FOR SPECIAL FACTORS) 2,386 2,640 2,288 2, % 7,313 6, % 8,561 EBITDA mrgin (djusted for specil fctors) % CASH CAPEX (1,442) (8,463) (1,243) (1,671) 25.6 % (11,148) (4,678) n.. (5,855) Totl revenue Totl revenue for the United Sttes operting segment of EUR 26.7 billion in the first nine months of 2017 incresed by 9.8 percent compred to EUR 24.3 billion in the first nine months of In U.S. dollrs, T-Mobile US totl revenues incresed by 9.3 percent yer-on-yer due primrily to service revenue growth resulting from increses in T-Mobile US verge brnded customer bse from strong customer response to T-Mobile US Un-crrier inititives nd success of the MetroPCS brnd. Additionlly, equipment revenues incresed due primrily to higher verge revenue per device sold nd n increse from the purchse of lesed devices t the end of the lese term, prtilly offset by decrese in lese revenues due to T-Mobile US continued focus on equipment instllment pln sles. EBITDA, djusted EBITDA Adjusted EBITDA incresed by 17.3 percent to EUR 7.3 billion in the first nine months of 2017, compred to EUR 6.2 billion in the first nine months of In U.S. dollrs, djusted EBITDA incresed by 16.6 percent in the first nine months of 2017, compred to the first nine months of Adjusted EBITDA incresed due primrily to n increse in brnded postpid nd prepy service revenues resulting from strong customer response to T-Mobile US Un-crrier inititives, the ongoing success of promotionl ctivities, nd the continued strength of the MetroPCS brnd, prtilly offset by higher employeerelted costs, promotionl costs, commissions, higher costs ssocited with network expnsion, nd the negtive impct from hurricnes in Texs, Florid nd Puerto Rico. The negtive impct for the third qurter of 2017 from lost revenue, ssets dmged or destroyed, nd other hurricne relted costs incurred ws pproximtely EUR 0.1 billion. As of September 30, 2017, T-Mobile US loss ssessment is ongoing nd it expects dditionl expenses to be incurred nd customer ctivity to be impcted in the fourth qurter of 2017, primrily relted to T-Mobile US opertions in Puerto Rico. T-Mobile US hs not recognized ny potentil insurnce recoveries relted to those hurricne losses s it continues to ssess the dmge nd hold discussions with its insurnce crriers. The djusted EBITDA mrgin incresed to 27.4 percent in the first nine months of 2017, compred to 25.7 percent in the first nine of 2016 due to the fctors described bove. EBITDA in the first nine months of 2017 included specil fctors of EUR 1.6 billion compred to specil fctors of EUR 0.4 billion in the first nine months of The increse in specil fctors relted to spectrum impirment reversl in the first nine months of Overll, EBITDA incresed to EUR 9.0 billion in the first nine months of 2017, compred to EUR 6.6 billion in the first nine months of 2016 due to the fctors described bove, including the impct of specil fctors. EBIT EBIT incresed to EUR 5.1 billion in the first nine months of 2017, compred to EUR 2.7 billion in the first nine months of 2016 driven by higher EBITDA nd lower deprecition expense relted to devices lesed under T-Mobile US JUMP! On Demnd progrm, prtilly offset by n increse from the continued build-out of T-Mobile US 4G/LTE network. Csh cpex Csh cpex incresed to EUR 11.1 billion in the first nine months of 2017, compred to EUR 4.7 billion in the first nine months of 2016, due primrily to EUR 7.3 billion of spectrum licenses cquired in the first nine months of 2017, compred with EUR 1.2 billion of spectrum licenses cquired in the first nine months of 2016.

12 19 EUROPE CUSTOMER DEVELOPMENT For informtion on chnges in the orgniztionl structure, plese refer to the section Group structure, strtegy, nd mngement, pge 8, nd the disclosures under segment reporting in the interim consolidted finncil sttements, pges 44 nd 45. thousnds Sept. 30, 2017 June 30, 2017 Chnge June 30, 2017 % Dec. 31, 2016 Chnge Dec. 31, 2016 % Sept. 30, 2016 Chnge Sept. 30, 2016 % EUROPE, TOTAL Mobile customers 48,205 47, % 47, % 48,508 (0.6) % Contrct customers 25,119 24, % 24, % 24, % Prepy customers 23,086 22, % 23,637 (2.3) % 24,503 (5.8) % Fixed-network lines 8,422 8,464 (0.5) % 8,531 (1.3) % 8,599 (2.1) % Of which: IP-bsed 5,555 5, % 5, % 4, % Retil brodbnd lines 5,558 5, % 5, % 5, % Television (IPTV, stellite, cble) 4,200 4, % 4, % 4, % Unbundled locl loop lines (ULLs)/ wholesle PSTN 2,261 2,268 (0.3) % 2, % 2, % Wholesle bundled lines % % % Wholesle unbundled lines (2.7) % % % GREECE Mobile customers 7,867 7, % 7, % 7, % Fixed-network lines 2,536 2,539 (0.1) % 2,564 (1.1) % 2,569 (1.3) % Brodbnd lines 1,790 1, % 1, % 1, % ROMANIA Mobile customers 5,231 5,278 (0.9) % 5,722 (8.6) % 5,869 (10.9) % Fixed-network lines 1,894 1,922 (1.5) % 1,969 (3.8) % 1,998 (5.2) % Brodbnd lines 1,187 1,191 (0.3) % 1,194 (0.6) % 1,198 (0.9) % HUNGARY Mobile customers 5,401 5, % 5, % 5, % Fixed-network lines 1,634 1,637 (0.2) % 1, % 1,650 (1.0) % Brodbnd lines 1,094 1, % 1, % 1, % POLAND Mobile customers 10,297 10, % 10,634 (3.2) % 11,221 (8.2) % Fixed-network lines (6.5) % % % Brodbnd lines (5.6) % % % CZECH REPUBLIC Mobile customers 6,176 6, % 6, % 6, % Fixed-network lines % % % Brodbnd lines % % % CROATIA Mobile customers 2,297 2, % 2, % 2,332 (1.5) % Fixed-network lines (1.2) % 1,001 (2.7) % 1,004 (3.0) % Brodbnd lines (0.9) % % % SLOVAKIA Mobile customers 2,245 2, % 2, % 2, % Fixed-network lines % % % Brodbnd lines % % % AUSTRIA Mobile customers 5,201 4, % 4, % 4, % OTHER Mobile customers 3,490 3, % 3, % 3,525 (1.0) % Fixed-network lines (0.9) % 358 (3.6) % 364 (5.2) % Brodbnd lines (1.1) % 279 (1.1) % 284 (2.8) % Other: ntionl compnies of Albni, the F.Y.R.O. Mcedoni, nd Montenegro, s well s the lines of the GTS Centrl Europe group in Romni.

13 20 Totl The mrket environment in which our Europen ntionl compnies operte hs remined intensely competitive over the course of Thnks to our convergent product portfolio MgentOne, we were ble to meet these chllenges successfully, recording growth of round 43.1 percent in our FMC customer bse s of September 30, Our TV business hs estblished itself s consistent revenue growth driver. In the mobile communictions business, we recorded n increse in the number of high-vlue contrct customers to 25.1 million. In the fixed network, we re systemticlly driving forwrd the roll-out of fst, fiber-optic lines (FTTH, FTTB, nd FTTC). As prt of our pn-europen network strtegy, we lso incresed the number of IP lines primrily thnks to the migrtion from trditionl PSTN lines to IP technology. Mobile communictions At the end of the first nine months of 2017, we hd totl mobile customer bse of 48.2 million slight increse compred with the end of 2016; compred with the first hlf of the yer, the growth is more pronounced. The rise compred with 2016 ws ttributble to the positive trend in the high-vlue contrct customer business, especilly t the ntionl compnies in Hungry, Polnd nd the Czech Republic. Overll, we recorded growth in contrct customer business of 3.3 percent, or some 804 thousnd net contrct dditions, thereby successfully continuing the growth trend. At the end of the third qurter of 2017, contrct customers ccounted for 52.1 percent of the totl customer bse. Our customers benefited from the systemtic build-out of our mobile networks with 4G/LTE technology, enjoying better network coverge with fst mobile brodbnd. As of September 30, 2017, we lredy covered 93 percent of the popultion in the countries of our operting segment with LTE, thus reching round 105 million people in totl. Not only the high level of dt volumes used, but lso the sles figures for mobile devices prove tht our customers ctully use these high bndwidths, with smrtphones ccounting for n even higher proportion s of the end of September percent of ll devices sold compred with the prior yer. As result, we entirely offset customer losses in the prepy business. The effects of regultory prepy registrtion requirements in Polnd continued to hve negtive effect on customer development. Compred with the first hlf of the yer, however, the number of prepy customers incresed slightly once gin. Fixed network Our TV nd entertinment services generted positive impetus in the first nine months of The number of TV customers grew by 3.7 percent to 4.2 million compred with the end of 2016, with the mjority of the net customer dditions 151 thousnd t our ntionl compnies in Hungry nd Slovki. Our convergence product portfolio, MgentOne, is vilble to our customers in ll of our integrted countries. By the end of the first nine months of 2017, we hd lredy gined 2.0 million FMC customers in totl, with demnd rising substntilly in Greece in prticulr. We hve lso been incresingly successful in mrketing our MgentOne Business product to business customers. A simplified nd stndrdized network bsed on IP technology provides the technicl underpinnings of FMC products. Overll, we hve lredy converted five of our ntionl compnies to IP technology. Following 10.7-percent increse reltive to December 2016, we now hve portfolio of 5.6 million IPbsed lines, which ccount for round 66.0 percent of ll fixed-network lines. As of September 30, 2017, the number of fixed-network lines in our Europe operting segment totled 8.4 million, slight decrese compred with the end of The number of retil brodbnd lines grew by 3.1 percent in the first nine months of 2017 to rech totl of 5.6 million. Fiber-optic-bsed lines ccounted for the mjority of net customer dditions, once gin growing considerbly fster thn DSL business. Romni nd Hungry were the min contributors to this growth. We continued to increse our overll fiberoptic coverge, with our ntionl compnies reching round 30 percent of households s of the reporting dte. This success bers out our continued investment in forwrd-looking, fiber optic-bsed technologies.