Deutsche Telekom CEO: “Billions for millions”

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Deutsche Telekom has underlined its leading role in broadband build-out in Germany. Deutsche Telekom invests more than all of its competitors put together, said CEO Tim Höttges at this year’s shareholders’ meeting, which was held in Bonn – where the company has its headquarters – for the first time in the company’s history. €5.4 billion had been spent on networks and new data centres in Germany in the last year, he said.

With a market share of 40 per cent in the broadband market, Deutsche Telekom will provide some 80 per cent of households and companies with high-speed Internet by the end of the year, whether directly or indirectly.

By doing this, Deutsche Telekom was connecting people and companies with the “latest technologies,” said Höttges. This included, for example, access to global knowledge and the optimisation of supply chains in industry, but also a reduction in carbon emissions thanks to car sharing and smart traffic control systems.

In terms of broadband build-out, Deutsche Telekom was pursuing a strategy of “billions for millions”. Höttges said that it had been important for the company to ensure that broadband coverage was built out as quickly and as comprehensively as possible, so that “people can make the most of today’s Internet, trouble-free.” The targets for the next stage of Deutsche Telekom’s broadband strategy are to provide 26 million households with up to 100 Mbit per second, and 15 million households with as much as 250 Mbit per second, by the end of the year.

Höttges also referred to upload rates, which he said were increasing in importance. “The days when we were all only recipients of data on the Internet are long since gone; now we are also senders. And Deutsche Telekom’s network makes uploading data possible,” the company CEO pointed out. At the same time, Deutsche Telekom had laid the foundations for further build-out of fibre to the home, an aim that Deutsche Telekom was pursuing “resolutely and constantly.” Tim Höttges referred to current fibre-optic projects, for example, in Bautzen (56,000 households), the Western Pomerania/Rügen area (40,000 households) and Naumburg/Saale (46,000 households).

He called for increased competition in Germany, saying that other companies must also invest in new networks, instead of simply criticizing or “staying cosy in regulated markets.” Höttges said that there should be no more regulation for “new fibre-optic lines,” in order to achieve the goal of nationwide access to gigabit speeds faster.” We are pleased to have competition, at any rate, because if it is fair, then it is good for the customer,” said Höttges.

2017 was a successful financial year for Deutsche Telekom. Revenue increased by 2.5 per cent year-on-year to €74.9 billion, with adjusted EBITDA rising by 3.8 per cent to €22.2 billion. Free cash flow was up 11.3 per cent to €5.5 billion. The Group’s policy is that dividends will track the positive development in free cash flow. The Supervisory Board and the Board of Management are therefore proposing to the shareholders’ meeting a dividend of 65 eurocents per share. This corresponds to 30 per cent growth in just three years.

The Group wanted to push on with this level of growth, said Höttges. He therefore spoke out in support of “entrepreneurship in Germany,” something that called not only for “playing it safe,” but also for “seizing potential.” He said that Deutsche Telekom had both worked to find, and made the most of, many opportunities in recent years, business in the US being a prime example. Höttges recalled the situation a few years ago in which the US subsidiary was losing customers, posting weak profits, and a takeover by AT&T had broken down due to resistance from the antitrust authorities. The break-up fee received at the time, comprehensive financial support by Deutsche Telekom for investments in network and spectrum, and the takeover of MetroPCS had helped put T-Mobile US on a new and stronger footing.

The planned merger with the competitor Sprint would create better networks, new jobs, increased growth, and stronger competition in the US. “I personally have spent seven years working to make this merger happen. There have been many ups and downs, but there is no opportunity without risks – risks that must be taken if we are to open up new horizons. I am convinced that this business combination is the best thing for the US market and for Deutsche Telekom – and that goes for the long term,” said Höttges.

He said that the Deutsche Telekom share offered a “unique growth profile,” with the Group growing in 95 per cent of its operations, i.e., in the German domestic market, in the rest of Europe, and in the US. In Europe, Deutsche Telekom had developed into a leading provider for combined fixed-line and mobile rate plans, with planned acquisitions in Austria and the Netherlands, as well as a Letter of Intent in Poland, contributing to this. Höttges said that it was therefore likely that Deutsche Telekom would be able to offer “one connectivity” in these countries as well in the future, which meant further growth opportunities.

He said that Deutsche Telekom was also making progress in service. The number of complaints had dropped by 17 per cent in 2017 alone. At the same time, service would never fully meet the company’s exacting standards and instead must be constantly improved. Höttges pointed out that Deutsche Telekom was making the most of the opportunities offered by digitalisation in this regard. “As of the end of this year, we will begin deploying voice biometrics on our customer service hotlines. That means we will identify our customers quite simply by the sound of their voices. No more time wasted searching for your customer number – a real time-saver. And the procedure is one of the most secure available.”

Höttges also sees opportunity for growth in regard to the Internet of Things: Deutsche Telekom has already rolled out a network of machines and sensors in eight European countries, plus the US. He said that it was the next-generation 5G network that would really “bring the Internet of Things to life.” 5G was therefore also of particular strategic importance for Europe, and the necessary investments for network build-out must be considered in upcoming spectrum auctions. In addition, he said that spectrum should be awarded “uniformly throughout Europe.”


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