- The Group presents new financial targets through 2027 at Capital Markets Day
- Net revenue to rise by an average of around 4 percent per year, adjusted EBITDA AL by 4 to 6 percent
- Free cash flow AL of around 21 billion euros expected for 2027
- Dividend corridor unchanged at 40 to 60 percent of adjusted earnings per share, which is set to rise to around 2.50 euros by 2027
- Shareholder remuneration including share buy-backs totaling up to 6.4 billion euros planned for the coming year. Dividend for the 2024 financial year to rise to 90 cents per share
- Artificial intelligence, data-driven business model and global economies of scale to further accelerate reliable growth model
Refined strategy to introduce new phase of growth. Deutsche Telekom wants to grow even faster over the next few years. Global economies of scale and the systematic use of artificial intelligence (AI) are to play a key role, as well as a data-driven business model. Specifically, based on the financial figures for 2023, the Group expects average annual growth of around 4 percent in both net revenue and service revenues through 2027. Adjusted EBITDA AL is set to grow by an average of 4 to 6 percent per year. Growth will come from the businesses on both sides of the Atlantic: For the Group excluding the United States, Deutsche Telekom expects service revenues to grow by an average of 2.5 to 3 percent annually, and adjusted EBITDA AL by between 3 and 4 percent.
At the same time, adjusted earnings per share is expected to rise by an average of more than 11 percent per year, reaching around 2.50 euros in 2027. Free cash flow AL is expected to increase to around 21 billion euros by that time.
“We are initiating 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 achieved or even exceeded nearly all of our targets and are now worth more than all our peers on our domestic continent combined. We will build on this position in the future, for example, by further intensifying the use of artificial intelligence.”
At its Capital Markets Day in Bonn, the Group confirmed its attractive shareholder remuneration. 40 to 60 percent of the recurring adjusted earnings per share is to continue to be paid out as dividends in the future. For the 2024 financial year, Deutsche Telekom announced dividend payments of 90 cents per share, to be paid out in 2025. This is subject to approval by the relevant bodies. Added to this, share buy-backs amounting to up to 2 billion euros are set to be carried out in 2025.
By 2027, Deutsche Telekom plans to generate a total of more than 15 billion euros, on top of the investments in the business and the dividend payments. This leeway will give Deutsche Telekom the flexibility to either increase its stake in T-Mobile US, or to buy back additional shares as well as facilitate general strategic flexibility. Investments of the Group (excl. United States) excluding expenses for mobile spectrum are expected to account for around 21 percent of service revenues in 2027. The leverage ratio (net debt including leases to adjusted EBITDA) is expected to remain stable from 2024, at 2.75 or lower.
Growth is to be driven by the enhancement of the business model. Deutsche Telekom wants to be even more data-driven and automated than before and step up its use of artificial intelligence. For example, customer support processes are to be simplified, better channeled, and accelerated through automated identification and documentation and AI-based information requests. In Germany, the number of complaints has already fallen by around two thirds compared with 2020. The call volume will be further reduced by the expansion of app-based self-service offers and AI-supported messenger services. The Group plans to continue to rigorously pursue digitalization and its focus on software.
With brand value being up by 84 percent compared with 2020, Brand Finance places Deutsche Telekom as the industry’s most valuable brand worldwide. Across all industries, the Magenta T tops the table in Europe and ranks number nine globally. The Group wants to better harness global economies of scale with around 300 million customers worldwide, using globally-available services and API-based IT platforms in the cloud. These economies of scale are to be leveraged with the help of global ICT solutions and partnerships.
Deutsche Telekom continues to invest massively in fiber. In Germany, the Group expects to add around 2.5 million new homes passed per year by 2027. This would take the total number of homes passed to around 17.5 million. At the same time, the take-up rate is expected to increase to over 20 percent, up from the current rate of around 14 percent. In 2027, the number of new FTTH customers is expected to reach around one million, up from an anticipated 450,000 this year. The European national companies are expected to add around 1 million homes passed per year. In 2027, the total number of homes passed is expected to stand at around 13.5 million.
Deutsche Telekom also continues to build out its mobile network. The 5G network coverage in the European national companies is set to rise from 78 percent currently to 95 percent in 2027. Deutsche Telekom wants to further expand its leading position as the world’s number one in terms of mobile network quality and transmission speed. It plans to grow its revenues by further increasing market shares and through a portfolio including fixed-network substitution, 5G campus solutions, and network slicing.
Deutsche Telekom is leveraging the strong position it has built up in Germany and Europe over the last few years with Magenta Moments, with around 3.2 million active users as of the end of 2023. This figure is set to grow by between 50 and 100 percent by 2027. With additional products and services ranging from payment services for cell phone insurance services and platforms for payment services through to AI solutions for consumers, the Group wants to tap into additional revenue potential of around 1.5 billion euros.
In the global B2B business – i.e., with business customers including T-Systems – the Company plans to accelerate the development of revenue and earnings. After average revenue growth of 1.9 percent between 2020 and 2024, growth in this area is expected to rise to 3 percent, with a commensurate increase in profitability. The key drivers of this are an increase in the share of contracts awarded by corporate customers, stronger growth in the public sector and cross-selling, and the expansion of the portfolio in the areas of cloud, security, IoT, and AI. T-Systems is an integral component, contributing to differentiation from the competition for customers.
The Group also continues to pursue ambitious targets with regard to ESG topics (Environmental, Social, Governance). Carbon emissions (Scope 1-3) are set to fall by 55 percent by 2030 compared with 2020, and to reach net zero across the entire value chain by 2040. Deutsche Telekom was the first DAX 40 heavyweight with a science-based net-zero climate goal confirmed by the Science Based Targets initiative (SBTi). In its transition plan, the Group has stipulated specific measures for this. These include driving forward the circularity of terminal equipment and technology, for instance through longer useful lives as well as reuse and recycling of materials. Regarding the social dimension, the Group will expand its commitment to digital inclusion such that, by the end of 2027, more than 80 million people worldwide will benefit from the measures. The presenting Board members underscored the embedding of ESG throughout the entire Group. They described the ambitions with which the strategic ESG topics will be managed within their areas of responsibility.
Efficiency improvements at all levels will support earnings growth over the next few years. The relevant metric for this is indirect costs as a percentage of service revenue (Group excl. United States). Deutsche Telekom wants to reduce this figure by 3 to 5 percentage points by 2027. The main levers for this are automation, including the use of AI in customer service, automation in the operation of networks and data centers, improved efficiency in the FTTH rollout in Germany, implementation of a shared operating model in Europe and reduction of shared functions, and efficiency improvements through the use of AI. This particularly applies to expenses for real estate and its use.
Medium-term ambition level for key financials
CAGR – compound annual growth rate
This media information contains forward-looking statements that reflect the current views of Deutsche Telekom management with respect to future events. They are generally identified by the words “expect,” “anticipate,” “believe,” “intend,” “estimate,” “aim,” “goal,” “plan,” “will,” “seek,” “outlook,” or similar expressions and include generally any information that relates to expectations or targets for revenue, adjusted EBITDA AL, or other performance measures. Forward-looking statements are based on current plans, estimates, and projections, and 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. They include, for instance, the progress of Deutsche Telekom’s staff-related restructuring measures and the impact of other significant strategic or business initiatives, including acquisitions, dispositions, and business combinations. In addition, movements in exchange rates and interest rates, regulatory rulings, stronger than expected competition, technological change, litigation and regulatory developments, among other factors, may have a material adverse effect on costs and revenue development. If these or other risks and uncertainties materialize, or if the assumptions underlying any of these statements prove incorrect, Deutsche Telekom’s actual results may be materially different from those expressed or implied by such statements. Deutsche Telekom can offer no assurance that its expectations or targets 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 account for new information or future events or anything else. In addition to figures prepared in accordance with IFRS, Deutsche Telekom presents alternative performance measures, e.g., EBITDA, EBITDA AL, adjusted EBITDA, adjusted EBITDA AL, adjusted EBITDA margin AL, core EBITDA, adjusted EBIT, EBIT margin, adjusted net profit/loss, adjusted earnings per share, free cash flow, free cash flow AL, gross debt, and net debt. These 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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