Deutsche Telekom has announced a reduction in its dividend in the coming years, as it steps up investment in new broadband networks. At its capital markets day, the German operator said it will pay a dividend of EUR 0.50 per share for 2013 and 2014, down from EUR 0.70 last year. Free cash flow is expected to fall to EUR 5 billion next year, from an estimated EUR 6 billion in 2012. It should recover to EUR 6 billion in 2015. Capex is forecast to increase to EUR 9-10 billion per year in 2013-15, from EUR 8.4 billion last year.
Adjusted EBITDA is expected to drop to EUR 17.4 billion in 2013, from EUR 18 billion this year, although including MetroPCS on a pro forma basis, the figure is estimated at EUR 18.4 billion in 2013. The company targets a return to EBITDA and revenue growth from 2014.
Much of the extra capex will go to Germany, where the company plans to spend EUR 4.1-4.5 billion per year in 2013-15, versus an average EUR 3.6 billion in the three preceding years. Targets include increasing LTE coverage to 85 percent of the population at 150Mbps by 2015 and bringing FTTC to 65 percent of the population in the same time. Assuming a favourable regulatory environment, with passage of the EU's proposed liberal regulation of new networks, DT will also role out VDSL vectoring to offer speeds up to 100Mbps. It aims to offer a new box combining vectoring and LTE that can offer consumers download speeds up to 200Mbps and upload speeds up to 90Mbps.
The aim in Germany is to halt the revenue decline by the end of 2014 and bring the adjusted EBITDA margin to around 40 percent. Deutsche Telekom targets the market lead both in terms of mobile service revenues and the number of broadband lines, with market shares of 35 percent and 43 percent, respectively.
T-Mobile USA will also increase investments, to around USD 4.7 billion in 2013 and USD 3 billion in each of the two subsequent years. That compares to an average USD 2.7 billion per year in 2010-12. The roll-out of the LTE network will account for USD 4 billion alone in the coming period. DT said it still expects to complete the merger with MetroPCS in the first half of 2013. It has also struck a deal for T-Mobile USA to finally offer Apple products from next year; it was the last of the four major operators in the US to not have the iPhone.
In Europe, DT will continue to target cost savings through greater collaboration and shared functions across its different operating companies. It targets a return to organic revenue growth from 2014, excluding any impact from regulation, forex or special taxes. Growth is expected to come increasingly from the business/ICT market, TV and mobile data services. The operator will also pursue more network-sharing partnerships. It will also consider an IPO for its UK joint venture with Orange, Everything Everywhere, and is looking at strategic alternatives for its unit Scout.
In terms of balance sheet targets, the operator aims to keep net debt at 2.0-2.5 times annual adjusted EBITDA, maintain liquidity to cover debt maturities up to two years ahead and keep its credit rating at A-/BBB in order to ensure unrestricted access to capital markets. It will consider the shareholder remuneration policy again from 2015 and plans to offer shareholders a choice of dividend in cash or shares.
