Deutsche Telekom has outlined its growth plans for 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 per cent in both net revenue and service revenues through 2027. Adjusted EBITDA AL is set to grow by an average of 4 to 6 per cent per year. Growth will come from the businesses on both sides of the Atlantic: For the Group excluding the US, Deutsche Telekom expects service revenues to grow by an average of 2.5 to 3 per cent annually, and adjusted EBITDA AL by between 3 and 4 per cent.

At the same time, adjusted earnings per share is expected to rise by an average of more than 11 per cent per year, reaching around €2.50 in 2027. Free cash flow AL is expected to increase to around €21 billion 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 shareholder remuneration; 40 to 60 per cent 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 are set to be carried out in 2025.

By 2027, Deutsche Telekom plans to generate a total of more than €15 billion, 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. US) excluding expenses for mobile spectrum are expected to account for around 21 per cent of service revenues in 2027.

Deutsche Telekom plans to be even more data-driven and automated than before and step up its use of AI. 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 pursue digitalisation and its focus on software.

Deutsche Telekom continues to invest massively in fibre. 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 per cent, 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. By 2027, 5G network coverage in Germany is expected to rise to around 99 per cent. The plan is for around 90 pe rcent of the sites to have download speeds of more than 1 Gbit/s. The 5G network coverage in the European national companies is set to rise from 78 per cent currently to 95 per cent in 2027. Deutsche Telekom wants to further expand its leading position 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 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 per cent by 2027. With additional products and services ranging from payment services for 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.

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 per cent between 2020 and 2024, growth in this area is expected to rise to 3 per cent, 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 per cent 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.

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. US). 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.

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Tags: AI, Deutsche Telekom