Deutsche Telekom has set new strategic growth targets for the medium-term up to 2024. 5G and fibre, but also sustainability and a pronounced presence in the B2B market, will drive growth in the coming years. Telekom aims to reach average annual growth in adjusted EBITDA of 3-5 percent and revenue of 1-2 percent, it said at its annual capital markets day.
Free cash flow AL is expected to grow to over EUR 18 billion by 2024 compared with EUR 6.3 billion in the past financial year. Dividends will be based on a pay-out of 40-60 percent of EPS, with the latter expected to grow to at least EUR 1.75 in 2024 from EUR 1.20 last year. The floor for the dividend remains at EUR 0.60 per share, as set in 2019.
The announcement comes after "a flying start" to this year, with net revenue in the first quarter rising 32.3 percent to EUR 26.4 billion and adjusted EBITDA AL jumping 41.3 percent to EUR 9.2 billion, driven mainly by the acquisition of Sprint in the US. For 2021, Telekom expects adjusted EBITDA AL for the full year of over EUR 37 billion and free cash flow AL of more than EUR 8 billion.
Telekom will focus on five main areas to drive growth until 2024, namely customer experience, B2B market, sustainability, 5G and fibre, and digitization. It wants to grow the number of households with packages combining fixed and mobile communications in Germany, Europe and the Netherlands to over 10 million. T-Mobile US also will continue to grow its customer base.
In the B2B market, Telekom plans to offer software solutions to grow the number of business customers by an average rate of around 2 percent to 2024. In addition, T-Mobile US wants to double its share of the business customer market in the US.
In terms of sustainability, Telekom aims to become climate neutral for its Scope 1 and 2 emissions by 2025. Climate neutrality will apply to the entire value chain from 2040, 10 years earlier than planned.
In addition, the operator aims to build over 2.5 million FTTH lines per year from 2024 and to cover 97 percent of the German population with 5G by 2024. By 2030, 60 percent of German lines should be able to receive FTTH, compared to 5 percent now.
The growth in earnings will be supported by cost reductions, as Deutsche Telekom works to digitize its business at all levels. This will fundamentally transform areas such as network technology, IT, and operations, the company said. The group expects that 30 percent of purchases by customers in Germany will be done through electronic channels by 2024.
After the Sprint merger in the US last year, M&A activity appears likely to be more muted. T-Mobile Netherlands and the group's towers portfolio, both of which remain in the 'corporate development' division, are the main elements up for review - "in both cases, without preconceived views as to an outcome and with no time pressure," Telekom said.
