of financial year 2018
In the 2018 financial year, the German mobile market environment remained dynamic across all segments, yet rational, with a clear focus on profitable growth through increased data usage by customers and the monetarisation of plans with a large data volume. To support and promote this, we expanded our portfolio to include the new O2 Free plans with Boost option to double the data volume and the unique O2 Connect function for up to 10 devices, as well as adding various Unlimited plans for residential and business customers.
By the end of the 2018 financial year, we had largely completed network integration; the network test results confirm the positive impact. For example, the Telefónica Deutschland network achieved a clear improvement in its score on the CHIP test and the connect network test, among others. In parallel with the finalisation of network integration, we pushed ahead with the expansion of LTE nationwide and made our network more dense with additional LTE elements in almost all cities in Germany. In addition to the LTE expansion along major transport infrastructure, we also connected additional communities to our network in sparsely populated areas. In 2018, this meant that our network gained a total of more than 6,700 LTE sites. To ensure cooperation with the other network operators, we signed the National Mobile Services Pact as well as the Mobile Services Pacts in Bavaria and Hesse in the 2018 financial year. We also entered into agreements with Deutsche Telekom, NGN FIBER NETWORK, GasLINE and Unitymedia to connect our mobile communications sites to their fibre optic infrastructure. In preparation for the introduction of the 5G mobile standard, we plan to connect around 70 percent of our sites with fibre optic by 2022 and are driving forward innovative projects with a range of partners. These include the “5G Connected Mobility Project” with Ericsson, development of the joint test network “Early 5G Innovation Cluster” with Nokia and the testing of “Fixed Wireless Access (FWA)” connections in cooperation with Samsung. All in all, our extensive network projects will create a fully integrated, modern and more powerful network for our customers, as well as an ideal basis for future network technologies such as 5G.
This puts us on the right track to become Germany's “Mobile Customer & Digital Champion”. Our transformation programme “Digital4Growth”, which was presented at our first Capital Markets Day in February 2018, consistently focuses on customer needs and the user experience in the digital age. By doing so, we are creating the basis for further profitable growth.
As of the end of December 2018, the number of customer lines operated by the Telefónica Deutschland Group amounted to 47.1 million, a decrease of 1.1 percent compared with the same period in the previous year. Mobile accesses fell to 42.8 million, down 0.8 percent year-on-year. This was mainly due to the decline of the customer base in the mobile prepaid segment, which is attributable to changes in the regulatory environment (identity check and European Roaming Regulation). Mobile post paid business continued to post a positive trend, with around 1,002,000 new accesses (net).
Revenues in the 2018 financial year amounted to EUR 7,320 million, an increase of 0.3 percent year-on-year (-0.1 percent compared with the previous year at EUR 7,290 million in accordance with IAS 18). Adjusted for negative regulatory losses of EUR 44 million for the year as a whole (mainly in connection with the European Roaming Regulation), revenues in the 2018 financial year amounted to EUR 7,364 million, an increase of 0.9 percent (to EUR 7,334 million, an increase of 0.5 percent according to IAS 18) year-on-year.
OIBDA before exceptional and regulatory items rose by +5.3 percent to EUR 1,938 million in the 2018 financial year (+3.4 percent to EUR 1,903 million year-on-year according to IAS 18). Exceptional items amounted to EUR 87 million and were mainly related to network consolidation. The impact of usage elasticity in the context of European roaming legislation was the main reason for the negative regulatory losses of EUR 54 million. The additional savings from OIBDA-related integration activities totalled around EUR 100 million for the 2018 financial year. The good progress in network consolidation enabled us to bring forward savings of ~EUR 20 million from 2019 to 2018 over the year as a whole. On this basis, the OIBDA margin before exceptional items and regulatory effects1 rose by 1.1 percentage points year-on-year to 26.3 percent.
Capital expenditure (CapEx)2 rose by EUR 16 million year-on-year to EUR 966 million due to the massive network consolidation and simultaneous LTE expansion, with additional CapEx synergies of around EUR 50 million being realised.
Consolidated net financial debt3 fell to EUR 1,129 million as of the end of December 2018 as a result of the typical trend in free cash flow during the year. The debt ratio was 0.6x, i.e. it remained within our target debt ratio of a maximum of 1.0x.
Please refer to the Group Management Report for a more detailed presentation of the financial outlook for 2019.
1 Exceptional items in the period from January to December 2018 included restructuring expenses of EUR 84 million and acquisition-related consultancy fees of EUR 2 million; the regulatory effects for the period from January to December 2018 amounted to EUR 54 million
2 Including additions from capitalised finance leases and excluding capitalised borrowing costs for investments in spectrum licences
3 Net financial debt includes current and non-current interest-bearing financial assets and interest-bearing liabilities as well as cash and cash equivalents, although no payments for mobile radio frequencies