Telefonica Deutschland has given a strategy update at its annual analyst meeting. Just over a year after saying it was lowering the dividend to invest in its network, the company promised to increase the dividend again for 2020. In addition, the company announced new agreements with Deutsche Telekom and Vodafone for network sharing to cover so-called "grey spots".
The new bilateral active sharing agreements are expected to cover around 1,200 sites where currently only one operator is active. In November 2019, the three operators signed a passive sharing agreement to fulfill coverage obligations of the 2019 spectrum auction and committed to building 6,000 sites in 'white spots', which have no 4G coverage.
Telefonica provided an update on its strategy based on three pillars, namely growing its mobile market share in rural areas and reinforcing its position in urban areas; focusing on smart bundling, mobile and fixed and mobile products; and B2B market opportunities particularly in terms of small and middle-sized firms. It has confirmed its outlook for the fiscal year 2020 and maintained its investment plan to deliver revenue growth of at least 5 percent over the three-year period 2020-22. The company added that OIBDA adjusted for exceptional effects and excluding Covid-19 effects will benefit from the growth in revenues.
Telefonica Deutschland intends to propose an increased dividend of EUR 0.18 per share for the fiscal year 2020, compared to EUR 0.17 per share last year, at the AGM in May. This also will be the minimum dividend for the years 2021 to 2023.
The company said it remains committed to an attractive shareholder remuneration, targeting a high pay-out of free cash flow after leases. The sale of more infrastructure to Telxius last year provided it with additional financial flexibility and the debt ratio of 1.6x remains well below Telefonica's target.
In the past year, Telefonica has expanded its 4G network to cover 98 percent of households nationwide and a minimum of 97 percent of households in each of the sixteen federal states. It plans to switch off its 3G network earlier than expected, by the end of this year, and shift investments from 4G to 5G. This will support its capex goals, with spending expected to peak at 17-18 percent of revenue in 2021 and start to normalise from the end of 2022.
Last year, it also announced an agreement with Allianz to create a joint venture to build a FTTH network in Germany. The new company plans to invest up to EUR 5 billion over a period of six years to deploy fibre for more than 2 million households in rural and semi-rural areas. It will operate as a neutral wholesale company under the name Unsere Gruene Glasfaser.
