Deutsche Telekom (DT) CEO Timotheus Höttges was in a bullish mood as he presented “only good news” from the Germany-based operator’s third quarter of 2023.
During the group’s first earnings call on Thursday, Höttges (speaking via an interpreter) particularly hailed the strong growth in customer numbers in Germany, with 350,000 branded mobile contract customer additions between July and September.
DT has also been able to raise its guidance for the third time this year. It is now expecting adjusted earnings before interest, taxes, depreciation, and amortization after leases (EBITDAaL) of around €41.1 billion ($4.39 billion) and free cash flow after leases of over €16.1 billion ($17.25 billion). Both projections are €0.1 billion higher than at the end of June 2023.
In the third quarter, group revenue increased by 0.7% year-on-year in organic terms to €27.6 billion ($29.57 billion) and adjusted EBITDAaL grew 6.2% in organic terms to €10.5 billion ($11.25 billion). The reported net profit rose by 21.9% to €1.9 billion ($2.04 billion). DT is now proposing a higher dividend of €0.77 ($.82) per share and is also planning share buy-backs for 2024 with a volume of up to €2 billion ($2.14 billion).
“I am rarely satisfied, but honestly, even I find little to criticize in these results,” Höttges remarked in the later analyst earnings call.
In terms of network development, DT said its 5G network now covers 95% of the population in Germany. Its fiber-to-the-home (FTTH) network passes 6.9 million households, and the group said it remains on track to pass 10 million premises in 2024. However, FTTH take-up remains relatively sluggish, with 910,000 customers signed up to date and 700,000 on the cusp of being signed up.
In terms of FTTH growth, Höttges observed that “this is not a sprint, this is a marathon,” but he remains convinced that DT will achieve its goals despite the rising cost of materials. He again refuted claims by German altnets that DT is overbuilding the networks of rival fiber providers. “Overbuild by Deutsche Telekom does happen, but only in 2% of the build-out areas,” he reiterated.
Lessons from Asia
Looking ahead, Höttges urged Germany and Europe to keep abreast of technology developments in other parts of the world, especially Asia.
“In terms of competitiveness, I predict challenging times ahead of us. Just recently, I spent two weeks in Asia with a team of managers. We visited South Korea, Japan and China. We met with partners from 50 companies in total. Frankly, I was blown away by their drive to make the digital transformation a reality,” he said.
Citing Asia’s focus on “super apps” and large language models (LLM) for artificial intelligence, Höttges said Europe currently lacks the speed and framework to keep up with Asia’s more dynamic digital ecosystem.
“We are talking about regulation, instead of letting the market forces do their thing and take flight,” he said.
In terms of future growth, Höttges said DT is not currently ready to announce any big M&A deals, but is considering some inorganic options. He pointed to the DT Capital Partners (DTCP) venture arm, which he said is scouting out “good investments in growth areas around our core activities.”
DTCP is a digital Infrastructure and growth equity investment platform with DT as an anchor investor. It also supports DT’s strategic investment activity under T.Capital.
“We are considering allocating up to €2 billion into group development to do smaller acquisitions,” he said. “We are screening the market. We have already done some very small things in this regard. And we want to scale this with the competence of the DT Capital Partners teams … And I think we will soon announce something around this activity.”