SHERIDAN, WYOMING – October 18, 2024 – Deutsche Telekom AG hosted its Capital Markets Day in Bonn, outlining its strategic roadmap and financial ambitions for the period leading up to 2027. The company aims to accelerate growth through the strategic implementation of artificial intelligence (AI), a data-driven business model, and leveraging global economies of scale.
Projected Growth and Financial Targets
Deutsche Telekom anticipates robust growth across key financial metrics, with projected average annual growth rates of approximately 4 percent for both Group revenue and service revenues. Adjusted EBITDA AL is expected to increase by 4 to 6 percent annually. This growth trajectory is projected to be driven by business activities on both sides of the Atlantic. For its European operations, excluding the U.S. business, Deutsche Telekom forecasts an average annual revenue growth of 2.5 to 3 percent in service revenues and 3 to 4 percent in adjusted EBITDA AL.
The company also projects significant growth in adjusted earnings per share, with an anticipated average annual increase of more than 11 percent, reaching approximately 2.50 euros in 2027. Free cash flow AL is expected to reach around 21 billion euros by that time.
"We are igniting the next stage," said Tim Höttges, CEO of Deutsche Telekom. "In recent years, our strategy has made us the undisputed number one in Europe. We have almost always met or even exceeded our targets and are now worth more than all our peers on our home continent combined. In the future, the even stronger use of artificial intelligence, for example, will help us to expand this position."
Attractive Shareholder Remuneration
Deutsche Telekom reaffirmed its commitment to attractive shareholder remuneration. The company plans to continue distributing 40 to 60 percent of its sustainable adjusted earnings per share as dividends. For the 2024 fiscal year, payable in 2025, Deutsche Telekom announced a dividend of 90 cents per share, subject to necessary committee resolutions. In addition, share buybacks of up to 2 billion euros are planned for 2025.
By 2027, Deutsche Telekom plans to generate a total of more than 15 billion euros in addition to investments in the business and dividend payments. Deutsche Telekom intends to use this flexibility either to increase its stake in T-Mobile US or for additional share buybacks, as well as for general strategic flexibility.
Investments and Debt Ratio
Investments in the Group (excluding the U.S.) without expenditures for mobile spectrum are expected to amount to around 21 percent of service revenues in 2027. The debt ratio (net financial liabilities including leasing to adjusted EBITDA) is expected to remain stable at 2.75 or below from 2024 onwards.
Data-Driven Business Model and AI
A key driver of growth will be the further development of the business model. Deutsche Telekom intends to work even more data-driven, automated, and supported by artificial intelligence than it already does. For example, it wants to simplify, better channel, and accelerate processes in customer service through automated identification and documentation, as well as through AI-based retrieval of information. In Germany, the number of complaints has already fallen by around two-thirds compared to 2020. The expansion of self-service offerings via app and AI-supported messenger services is expected to further reduce call volume in the future.
Continued Digitalization and Focus on Software
The Group intends to consistently continue its digitalization and focus on software. Deutsche Telekom is currently valued by Brand Finance as the most valuable brand in the industry worldwide, with an 84 percent increase in brand value compared to 2020. Across all industries, the Magenta T is at the top in Europe and ninth in the world.
Leveraging Global Scale
The Group intends to leverage its global economies of scale with approximately 300 million customers worldwide, realizing scale effects through globally available services and API-based IT platforms in the cloud. Global ICT solutions and partnerships are expected to contribute to leveraging economies of scale.
Continued Expansion of Fiber Optic and Mobile Networks
Telekom continues to invest heavily in fiber optics. In Germany, around 2.5 million new connectable households (homes passed) are expected to be added annually until 2027. The total number of homes passed is expected to increase to around 17.5 million. A utilization rate of more than 20 percent is targeted, compared to around 14 percent currently. In 2027, the number of new FTTH customers is expected to be around one million, compared to an expected 450,000 in the current year. In the European national companies, around one million homes passed are to be added annually. In 2027, the total number is expected to be around 13.5 million.
The expansion of mobile communications is also continuing. 5G network coverage in the European national companies is expected to increase from 78 percent currently to 95 percent in 2027. Deutsche Telekom aims to expand its position as the number one in network quality and transmission speed in mobile communications worldwide. Revenues are expected to increase through continued growth in market share and offerings such as fixed-network replacement, 5G campus solutions, and network slicing.
Building on a Strong Foundation
Deutsche Telekom is building on the strong foundation it has built in Germany and Europe in recent years with Magenta Moments, which had around 3.2 million active users at the end of 2023. This number is expected to grow by 50 to 100 percent by 2027. With additional offerings ranging from payment services and mobile phone insurance services to platforms for payment services and AI offerings for end customers, the Group aims to tap additional revenue potential of around 1.5 billion euros.
Accelerating Growth in the Global B2B Business
In the global B2B business - i.e. with business customers including T-Systems - the company plans to accelerate revenue and earnings growth. Following average revenue growth of 1.9 percent between 2020 and 2024, growth here is expected to increase to 3 percent with improved profitability. Important drivers for this are increasing shares in contract awards from major customers, stronger growth in the public sector and cross-selling, as well as expanding the portfolio in the areas of cloud, security, IoT and AI. As an integral component, T-Systems contributes to differentiation from the competition at the customer level.
Ambitious ESG Goals
The Group is also pursuing ambitious goals in the area of ESG (Environmental, Social, Governance). CO2 emissions (Scope 1-3) are to be reduced by 55 percent by 2030 compared to 2020 and are to reach net zero across the entire value chain by 2040 at the latest. Telekom was the first DAX 40 heavyweight with a science-based net-zero climate target confirmed by the Science Based Targets initiative (SBTi). The Group has defined concrete measures for this in its transition plan. These include, among other things, promoting the recyclability of end devices and technology, for example through longer service life and reuse, as well as recycling of recyclable materials. In the social dimension, the Group will expand its commitment to digital inclusion so that more than 80 million people worldwide will benefit from the measures by the end of 2027.
Efficiency Improvements
Efficiency improvements at all levels will support the increase in earnings over the coming years. The main focus here is on indirect costs in relation to service revenue (Group excluding USA). Telekom aims to achieve a reduction of 3 to 5