- Strategic focus on leading in customer experience, networks, and business
- Dividend to increase to 65 eurocents per share
- Digital transformation as a growing feature of customer service
- Shareholders’ meeting held in Bonn, where the company has its headquarters, for the first time ever
Deutsche Telekom has underlined its leading role in broadband build-out in Germany. Deutsche Telekom invests more than all of its competitors put together, said CEO Tim Höttges at this year's shareholders' meeting, which was held in Bonn – where the company has its headquarters – for the first time in the company's history. 5.4 billion euros had been spent on networks and new data centers in Germany in the last year, he said. With a market share of 40 percent in the broadband market, Deutsche Telekom will provide some 80 percent of households and companies with high-speed Internet by the end of the year, whether directly or indirectly.
By doing this, Deutsche Telekom was connecting people and companies with the “latest technologies,” said Höttges. This included, for example, access to global knowledge and the optimization of supply chains in industry, but also a reduction in carbon emissions thanks to car sharing and smart traffic control systems.
In terms of broadband build-out, Deutsche Telekom was pursuing a strategy of “billions for millions,” said Höttges. He said that it had been important for the company to ensure that broadband coverage was built out as quickly and as comprehensively as possible, so that “people can make the most of today's Internet, trouble-free.” The targets for the next stage of Deutsche Telekom's broadband strategy are to provide 26 million households with up to 100 Mbit per second, and 15 million households with as much as 250 Mbit per second, by the end of the year.
Tim Höttges also made reference to upload rates, which he said were increasing in importance. “The days when we were all only recipients of data on the Internet are long since gone; now we are also senders. And Deutsche Telekom’s network makes uploading data possible,” the company CEO pointed out. At the same time, Deutsche Telekom had laid the foundations for further build-out of fiber to the home, an aim that Deutsche Telekom was pursuing “resolutely and constantly.” Tim Höttges made reference to current fiber-optic projects, for example, in Bautzen (56,000 households), the Western Pomerania/Rügen area (40,000 households) and Naumburg/Saale (46,000 households).
He called for increased competition in Germany, saying that other companies must also invest in new networks, instead of simply criticizing or “staying cozy in regulated markets.” Höttges said that there should be no more regulation for “new fiber-optic lines,” in order to achieve the goal of nationwide access to gigabit speeds faster.” We are pleased to have competition, at any rate, because if it is fair, then it is good for the customer,” said Höttges.
2017 was a successful financial year for Deutsche Telekom. Revenue increased by 2.5 percent year-on-year to 74.9 billion euros, with adjusted EBITDA rising by 3.8 percent to 22.2 billion euros. Free cash flow was up 11.3 percent to 5.5 billion euros. The Group’s policy is that dividends will track the positive development in free cash flow. The Supervisory Board and the Board of Management are therefore proposing to the shareholders' meeting a dividend of 65 eurocents per share. This corresponds to 30 percent growth in just three years.
The Group wanted to push on with this level of growth, said Höttges. He therefore spoke out in support of “entrepreneurship in Germany,” something that called not only for “playing it safe,” but also for “seizing potential.” He said that Deutsche Telekom had both worked to find, and made the most of, many opportunities in recent years, business in the United States being a prime example. Höttges recalled the situation a few years ago in which the U.S. subsidiary was losing customers, posting weak profits, and a takeover by AT&T had broken down due to resistance from the antitrust authorities. The break-up fee received at the time, comprehensive financial support by Deutsche Telekom for investments in network and spectrum, and the takeover of MetroPCS had helped put T-Mobile US on a new and stronger footing.
The planned merger with the competitor Sprint would create better networks, new jobs, increased growth, and stronger competition in the United States. “I personally have spent seven years working to make this merger happen. There have been many ups and downs, but there is no opportunity without risks – risks that must be taken if we are to open up new horizons. I am convinced that this business combination is the best thing for the U.S. market and for Deutsche Telekom – and that goes for the long term,” said Tim Höttges.
He said that the Deutsche Telekom share offered a “unique growth profile,” with the Group growing in 95 percent of its operations, i.e., in the German domestic market, in the rest of Europe, and in the United States. In Europe, Deutsche Telekom had developed into a leading provider for combined fixed-line and mobile rate plans, with planned acquisitions in Austria and the Netherlands, as well as a Letter of Intent in Poland, contributing to this. Höttges said that it was therefore likely that Deutsche Telekom would be able to offer “one connectivity” in these countries as well in the future, which meant further growth opportunities.
He said that Deutsche Telekom was also making progress in service. The number of complaints had dropped by 17 percent in 2017 alone. At the same time, service would never fully meet the company’s exacting standards and instead must be constantly improved. Höttges pointed out that Deutsche Telekom was making the most of the opportunities offered by digitalization in this regard. “As of the end of this year, we will begin deploying voice biometrics on our customer service hotlines. That means we will identify our customers quite simply by the sound of their voices. No more time wasted searching for your customer number – a real time-saver. And the procedure is one of the most secure available.”
Höttges also sees opportunity for growth in regard to the Internet of Things: Deutsche Telekom has already rolled out a network of machines and sensors in eight European countries, plus the United States. He said that it was the next-generation 5G network that would really “bring the Internet of Things to life.” 5G was therefore also of particular strategic importance for Europe, and the necessary investments for network build-out must be taken into account in upcoming spectrum auctions. In addition, he said that spectrum should be awarded “uniformly throughout Europe.”
Deutsche Telekom will provide more details on medium-term planning at its Capital Markets Day (May 24/25, live stream at www.telekom.com).
This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. These forward-looking statements include statements with regard to the expected development of revenue, earnings, profits from operations, depreciation and amortization, cash flows, and personnel-related measures. They should therefore be considered with caution. Such statements are subject to risks and uncertainties, most of which are difficult to predict and are generally beyond Deutsche Telekom's control. Among the factors that might influence Deutsche Telekom's ability to achieve its objectives are the progress of its staff restructuring initiatives and other cost-saving measures, and the impact of other significant strategic, labor, or business initiatives, including acquisitions, dispositions, business combinations, and network upgrade and build-out initiatives. In addition, stronger than expected competition, technological change, legal proceedings, and regulatory developments, among other factors, may have a material adverse effect on cost and revenue development. Further, an economic downturn in the markets, and changes in interest and currency exchange rates, may also have an impact on Deutsche Telekom's business development and the availability of financing on favorable conditions. Changes to Deutsche Telekom's expectations concerning future cash flows may lead to impairment write downs of assets carried at historical cost, which may materially affect the results at the Group and operating segment levels. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, the actual performance may materially differ from the performance expressed or implied by forward-looking statements. There is no assurance that the estimates or expectations will be achieved. Without prejudice to existing obligations under capital market law, Deutsche Telekom does not assume any obligation to update forward-looking statements to take new information or future events into account or otherwise.
In addition to figures prepared in accordance with IFRS, Deutsche Telekom also presents alternative performance measures, including, among others, EBITDA, EBITDA margin, adjusted EBITDA, adjusted EBITDA margin, adjusted EBIT, adjusted net profit, free cash flow, gross debt, and net debt. These performance measures should be considered in addition to, but not as a substitute for, the information prepared in accordance with IFRS. Alternative performance measures are not subject to IFRS or any other generally accepted accounting principles. Other companies may define these terms in different ways.
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