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Deutsche Telekom wants investors to sit back and relax

CEO Tim Höttges on Thursday kicked off the sort of capital markets day aimed more at making Deutsche Telekom investors feel more like they were at a spa than a high-level strategy briefing.

It wasn’t just his branded bomber jacket paired with matching magenta trainers that gave off a health club vibe, it was his financial objectives and the means by which the German incumbent aims to reach them that were designed to put investors at ease.

Between 2020 and 2024, the company wants to grow group revenue by 1-2 percent per year, and service revenue by 3-4 percent per year. It has set a target of increasing adjusted EBITDA after special losses by 3-5 percent per year over the same period. Deutsche Telekom also aims to increase annual free cash flow to €18 billion by 2024, up from its current level of €4 billion. As for dividends, the telco has set a floor of €0.60 per share going forward, with the aim of paying out 40-60 percent of earnings per share as dividends between 2021 and 2024.

Nothing outlandish here, and no unwelcome surprises either. Perhaps that’s because Höttges wants Deutsche Telekom to keep executing on its strategy of investing in infrastructure to lay the foundation for superior customer experience and accelerate digitisation of internal functions and the services it offers to both consumers and businesses.

“€85 billion has been invested since I became CEO, which has led to higher quality, and better customer gains,” said Höttges said.

“We need to leverage our success over the last few years; if we don’t, it’s like holding sand in your hand and watching it sift through your fingers,” He said.

Höttges also stressed that Deutsche Telekom is “not going on any adventures,” citing AT&T and Verizon’s costly and ill-fated forays into premium content and targeted advertising. “They paid billions and didn’t make any money.”

Indeed, AT&T earlier this week announced it is spinning of WarnerMedia and merging it with Discovery. While the US telco will hold 71 percent of the new entity, strategically it represents a dramatic departure from its aim of being a vertically-integrated telco and entertainment provider. The announcement came two weeks after Verizon agreed to offload its media assets – which include Yahoo and AOL – to private equity firm Apollo Global Management.

“We are not an Internet giant, and it is not what we want to be,” Höttges said.

Instead, when it comes to inorganic growth, Höttges has got his eye on cashing in on Deutsche Telekom’s Netherlands unit – telling investors on Thursday he has “put it in the shop window.” He also reiterated his aim to monetise the company’s tower assets, and confirmed his ambition to take majority control of T-Mobile US, which he described as “the star in our portfolio.”

Deutsche Telekom’s message seems to have gone over to investors exactly as it intended: shares were changing hands for €16.84 at the time of writing, just above the mid-point of the telco’s 24-hour range. No major swing either way, but heading in the right direction.

Just goes to show what a safe pair of hands – or a pink pair of trainers – can do.


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